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CNBC covers Web Summit, live from Lisbon on Tuesday and Wednesday. Big Tech names including Meta, Qualcomm and Microsoft are set to take center stage.
The S&P 500 declined 1.6% last week as weak jobs data and high valuations triggered a reassessment of bullish sentiment. Tech and high-beta stocks led the market lower, while investors rotated into value, yield, and defensive sectors like Consumer Staples and Utilities.
The S&P 500 declined 1.6% last week as weak jobs data and high valuations triggered a reassessment of bullish sentiment. Tech and high-beta stocks led the market lower, while investors rotated into value, yield, and defensive sectors like Consumer Staples and Utilities.
The S&P 500 declined 1.6% last week as weak jobs data and high valuations triggered a reassessment of bullish sentiment. Tech and high-beta stocks led the market lower, while investors rotated into value, yield, and defensive sectors like Consumer Staples and Utilities.
The S&P 500 declined 1.6% last week as weak jobs data and high valuations triggered a reassessment of bullish sentiment. Tech and high-beta stocks led the market lower, while investors rotated into value, yield, and defensive sectors like Consumer Staples and Utilities.
The S&P 500 declined 1.6% last week as weak jobs data and high valuations triggered a reassessment of bullish sentiment. Tech and high-beta stocks led the market lower, while investors rotated into value, yield, and defensive sectors like Consumer Staples and Utilities.
The S&P 500 declined 1.6% last week as weak jobs data and high valuations triggered a reassessment of bullish sentiment. Tech and high-beta stocks led the market lower, while investors rotated into value, yield, and defensive sectors like Consumer Staples and Utilities.
Consumer price index reading for October was 0.2%, compared with analysts' expectations of zero. China's exports in October unexpectedly contracted, with shipments to the U.S. falling 25%.
Consumer price index reading for October was 0.2%, compared with analysts' expectations of zero. China's exports in October unexpectedly contracted, with shipments to the U.S. falling 25%.
Consumer price index reading for October was 0.2%, compared with analysts' expectations of zero. China's exports in October unexpectedly contracted, with shipments to the U.S. falling 25%.
Consumer price index reading for October was 0.2%, compared with analysts' expectations of zero. China's exports in October unexpectedly contracted, with shipments to the U.S. falling 25%.
Consumer price index reading for October was 0.2%, compared with analysts' expectations of zero. China's exports in October unexpectedly contracted, with shipments to the U.S. falling 25%.
Consumer price index reading for October was 0.2%, compared with analysts' expectations of zero. China's exports in October unexpectedly contracted, with shipments to the U.S. falling 25%.
Many articles are promoting the idea that the stock market gains and the house price rises are producing economic strength and preventing a recession. Therefore, the reasoning goes, ignore the drop in consumer sentiment and the weakness in many consumer-oriented companies.
Many articles are promoting the idea that the stock market gains and the house price rises are producing economic strength and preventing a recession. Therefore, the reasoning goes, ignore the drop in consumer sentiment and the weakness in many consumer-oriented companies.
Operator: Good morning, and welcome to the Euronext Third Quarter 2025 Results Conference Call. On today's call, we have Stephane Boujnah, CEO and Chairman of the Managing Board; and Giorgio Modica, CFO. Please note this conference is being recorded. [Operator Instructions] I will now hand over to your host, Stephane Boujnah, to begin today's conference. Please go ahead, sir. Stéphane Boujnah: [Audio Gap] quarter 2025 results call. I'm Stephane Boujnah, CEO and Chairman of the Managing Board of Euronext, and I will start with the highlights of this quarter of the year. Giorgio Modica, the Euronext CFO, will then develop the main business and financial highlights of the quarter. As an introduction, I would like to highlight three points. First, Q3 2025 is Euronext's sixth consecutive quarter of double-digit top line growth. This quarter, our revenue and income grew by 10% plus 6% (sic) [ plus 10.6% ] compared to Q3 2024 to EUR 438.1 million. Our adjusted EBITDA margin increased also double -- increased by 1.2 points to 63.2%. This strong performance was driven by the expansion of non-volume-related business, driven also by resilient trading and clearing revenues and also driven by continued cost discipline. Second, during this quarter, we were very proud to announce the inclusion of Euronext within the CAC 40 Index. This milestone demonstrates that when Europeans decide to succeed together, they can transform European capital markets and the financial infrastructure landscape. And this inclusion in the French blue-chip index will have a positive impact on the liquidity of our stock. Third, we are at a cornerstone moment for the development of the group in terms of industrial developments. All the Euronext teams are fully engaged to deliver the ambitious targets of the Innovate for Growth 2027 strategic plan. Progress accelerates with all our clients and partners to achieve these objectives and to create more competition in the European market. We recently launched the first fully integrated European marketplace for ETFs with substantial efficiency gains for the entire value chain, including issuers, market makers, distributors, custodians and investors. To boost retail participation, we have introduced the first ever mini-sized cash-settled futures on main European government bonds, and we were pleased to see that they have been trading from day 1. We are providing the innovative and competitive post-trade solutions that the European market needs. This is reflected in the growing momentum with clients that actively commit to support our CSD expansion program, a key requisite for the success of this initiative. Let me give you now a quick overview of the Q3 2025 highlights on Slide 4. As I said earlier, Euronext delivered double-digit revenue growth in Q3 2025 for the sixth quarter in a row. This quarter, revenue and income grew by plus 10.6% year-on-year up to EUR 438.1 million. So first, our non-volume revenue reached 60% of total revenue and income and posted a strong performance overall. This plus 12% increase of non-volume-related revenue year-on-year was driven by sustainable growth in custody and settlement and the first full quarter contribution of Admincontrol. This quarter, we reached a new record level of EUR 7.5 trillion in assets under custody, driven by growth in equities and bonds. And that tells a lot about the strength and the growth of our post-trade business. Second, volume-related business was fueled by double-digit growth in fixed income and commodities trading and clearing. Euronext continues to record robust volumes and revenue capture in cash equity trading and clearing, driving revenue up plus 11.5% year-on-year. Our underlying expenses, excluding D&A, were EUR 161.4 million, up plus 7.3% compared to Q3 2024. And this increase reflects our consistent growth, investments in innovation and human capital and the impact of acquisitions. But in February this year, we announced an underlying cost guidance of EUR 670 million for 2025. Thanks to this continuous rigorous cost discipline on recurring expenses, Euronext today upgrades its underlying operating cost guidance for 2025 to EUR 660 million. As a reminder, this guidance does not include Admincontrol. Our Q3 2025 adjusted EBITDA grew by plus 12.6% compared to last year, reaching EUR 276.7 million. Euronext's adjusted EBITDA margin increased by 1.2 points to 63.2%, reflecting strong top line growth and cost discipline. Adjusted net income was EUR 169 million. Reported EPS was EUR 1.49 per share and adjusted EPS was EUR 1.68 per share. As a reminder, and this is quite important for comparison purpose, last year, Euronext received a dividend of EUR 23.4 million in Q3. This year, this dividend was received in Q2. Therefore, net income and EPS are not really comparable year-on-year. In our continued commitment towards deleveraging, net debt to last 12 months adjusted EBITDA was 1.5x at the end of September 2025 from 1.8x at the end of June 2025. The large decrease compared to Q3 2024 reflects our strong operating leverage and ability to generate cash flow. The leverage is in line with our target range between 1 and 2x announced as part of the Innovate for Growth 2027 plan. On the basis of this strong financial position and in line with our capital allocation principles, I am pleased to announce the launch of a EUR 250 million share repurchase program to be executed from the 18th of November until the end of Q1 2026. Today -- moving to Slide 5. Today, Euronext is ready to contribute to the next level of consolidation of markets in Europe. Our offer for ATHEX Group is a step towards this consolidation of European market infrastructure to support European listings and economic growth and create even deeper liquidity pool in Europe. Euronext expects to deliver significant synergies from the integration of ATHEX into its European market infrastructure, into its single liquidity pool, single order book, single technology platform. And we expect EUR 12 million of annual cash synergies to be targeted and delivered by the end of '28. This combination is fully aligned with our investment criteria to have a return on capital employed above the WACC of the company in year 3 to 5 after the closing of the transaction and post synergies. The transaction is expected to be accretive for shareholders following the delivery of synergies from year 1. The deal provides major benefits for the Greek market, which is going to become much more integrated into European flows and into global flows. This transaction is clearly a sign of confidence in the recovery of the Greek economy. I now give the floor to Giorgio for the business and financial review of Q3 2025. Giorgio Modica: Thank you very much, Stephane, and good morning, everyone. Let's now have a look together the strong financial performance recorded in the third quarter of 2025. I'm now on Slide 7. I like this slide because it shows how we have truly increased the share of our revenue that is not related to volumes. Capital Markets and Data Solutions are today the largest contributor to our top line and a sustainable source of recurring revenue growth. This is also the case for Securities Services, driven by another quarter of double-digit growth of custody and settlement. Total revenue and income in the third quarter 2025 reached EUR 438.1 million, up 10.6% compared to last year. Today, non-volume-related revenue represents 60% of our top line and covers 162% of underlying operating expenses, excluding D&A. Let's take a closer look at the key drivers behind this performance, beginning with non-volume-related revenue and income and move together to Slide 8. Starting with Securities Services. Revenue was at EUR 77.3 million, marking a solid 6% increase compared to the third quarter of 2024. Custody and Settlement revenue reached EUR 70.6 million, an 11.8% increase compared to the third quarter of 2024. The strong performance was driven by the growth in assets under custody that reached another record at EUR 7.5 trillion. This double-digit growth was also supported by resilient settlement activity and continued growth of value-added services. Other Post Trade revenue declined 32% compared to the third quarter of 2024 to EUR 6.7 million. This, as discussed in previous quarters, stems from the migration of derivative clearing from LCH SA to Euronext Clearing and the internalization of the related treasury income into the net treasury income line of our P&L. Net Treasury Income was up 23.8% compared to the third quarter of 2024, benefiting from the expansion of Euronext Clearing that I just mentioned. As announced during the previous results, we have successfully migrated Italian markets to a harmonized clearing framework at the end of June 2025. These important milestones offer Euronext clearing clients material risk management benefits and operational efficiency and helps them to optimize their total trading cost. This optimized clearing system provides clients with resilient, stable and efficient infrastructure. It will serve as the pillar of all new product and services Euronext Clearing is developing, notably for our repo expansion initiative. Turning to Capital Markets and Data Solutions. I'm now on Slide 9. Revenue reached EUR 168.4 million, reflecting a 13.9% increase compared to the third quarter of 2024. Primary Markets generated EUR 46.2 million of revenue, up 3%. Euronext maintained its leading position for equity listing in Europe with a solid rebound in the third quarter, recording 20 new listings. Advanced Data Solutions revenue grew to EUR 66.2 million, up 6.5% compared to the same quarter last year. This good performance was driven by steady growth in our data solutions, thanks to rising demand for diversified data sets and increasing interest from our retail clients. Corporate and Investor Solutions and Technology Services reported EUR 56 million of revenue in the third quarter of 2025, up 37.3%. This outstanding performance reflects the full quarter contribution of Admincontrol, alongside the growth of Investor Solutions and colocation services. Moving to our volume-related activities. I'm now on Slide 10. Revenue of FICC Markets reached EUR 81.9 million, marking an 11% increase compared to 2024. Revenue for FICC Markets include fixed income trading and clearing, whose revenue grew 14.7% to EUR 46.8 million, driven by the continued strong volumes. In particular, MTS Cash average daily volume was up 29.5% year-on-year at EUR 44.8 billion (sic) [ EUR 48.8 billion ]. MTS Repo term adjusted average daily volume reached EUR 585.6 billion, up 23%. The strong performance was also supported by the expansion of our D2C segment and the growing volumes outside of Italy with significant growth in Portugal and Spain. Commodity trading and clearing revenue increased 11.3% to EUR 27.6 million in the third quarter of 2025. This reflects record intraday power volumes and the recovery of volumes on agricultural commodities trading and clearing. FX trading revenue reached EUR 7.5 million, down 8.3% compared to the same quarter last year. This reflects lower volatility and the negative currency impact on the U.S. dollar. Like-for-like revenue decreased only 2.5% despite an 11.8% decrease in volume, thanks to proactive revenue capture management. Continuing with our review of volume-related revenue, I'm now on Slide 11. Equity Markets revenue saw a 6.6% increase compared to the third quarter 2024, reaching EUR 93.7 million. Cash equity trading and clearing revenue grew 11.5% compared to 2024, reaching EUR 82.5 million. This reflects a 14.8% increase in average daily volume traded to EUR 11 billion. This quarter, Euronext reached solid average revenue capture on cash trading at 0.53 basis points. Lastly, financial derivatives trading and clearing revenue was at EUR 11.2 million, a 19.4% decline compared to 2024. This performance mostly reflects lower volatility. Following clearing migration, certain clearing fees are now reported in the Other Post Trade revenue, and as such, is not fully comparable with the third quarter of 2024. Now I move to Slide 13 with the EBITDA bridge. Euronext's reported EBITDA for the quarter grew 13.9% to EUR 275.2 million, mainly thanks to EUR 29.5 million of additional revenues at constant perimeter and EUR 13.2 million of additional revenue generated through acquisitions. This was offset by EUR 4.3 million of additional cost at constant perimeter and EUR 7.1 million of additional cost coming from the change of scope. Non-underlying expenses, excluding depreciation and amortization, were at EUR 1.5 million. This is slightly lower than the third quarter of 2024 due to the completion of the Borsa Italiana Group integration last year. Euronext's adjusted EBITDA for the quarter grew 12.6% to EUR 276.7 million with an adjusted EBITDA margin of 63.2%, up 1.2 points compared to 2024. The underlying operating expenses, excluding depreciation and amortization, increased 7.3% compared to 2024, mostly related to the growth investment for the delivery of our strategic plan and acquisitions. In parallel, we remain highly disciplined in managing our recurring expenses. I'm now moving on Slide 14. Adjusted net income this quarter reached EUR 169 million. Please note, as Stephane already reminded that the Euroclear dividend was received in the second quarter this year and not in the third quarter as last year. Depreciation and amortization accounted for EUR 49.3 million, up 4.4% versus the third quarter of 2024. PPA related to the acquired businesses accounted for EUR 19.7 million. Euronext reported net financing expense of EUR 6.8 million in the third quarter of 2024 compared to EUR 2.9 million of net financing income in 2024. The variation reflects decreasing interest rate, lower cash position after the redemption of our EUR 500 million bond and the impact of currency variations. Please note that it also recognizes noncash interest expenses related to the convertible bonds. Income tax for the third quarter of 2025 was EUR 58.5 million. This translated into an effective tax rate of 26.7% for the quarter compared to 23.8% in the third quarter 2024. As a reminder, in the third quarter of 2024, the tax rate was positively impacted by the tax exempt EUR 23.4 million dividend received from Euroclear. Share of noncontrolling interest amounted to EUR 11 million correlated to the resilient performance of MTS and Nord Pool mainly. As a result, the reported net income share of parent company reached EUR 149.7 million. Moreover, adjusted EPS was at EUR 1.68 per share this quarter compared to EUR 1.74 per share in the third quarter of 2024. And reported EPS was EUR 1.49 per share. I continue with cash flow generation and leverage. I'm now on Slide 15. In the third quarter of 2025, Euronext reported a solid net cash flow from operating activities of EUR 401 million compared to EUR 237.4 million in the third quarter of 2024. This increase mainly reflects higher working capital from Euronext Clearing and Nord Pool CCP activities this quarter. Excluding the impact of such a change in working capital, the net cash flow from operating activities accounted for 99.9% of EBITDA this quarter. As Stephane already reminded us, net debt to adjusted EBITDA ratio was at 1.5x at the end of the quarter, right in the middle of our long-term target range. I'm now on Slide 16, and I wanted to say that at our Investor Day last year, we have announced that we would have proactively assessed special shareholder returns according to the -- our capital allocation principles. In line with this principle, Euronext has decided to launch a share repurchase program of a maximum of EUR 250 million, which represents around 2% of Euronext outstanding share capital. The share repurchase will start on 18 November and is expected to be completed by the end of the first quarter of next year. This program underlines the strong confidence in the growth prospect of the group and will not impact our strategic flexibility to invest and capture market opportunity. This concludes my presentation. And with this, I give back the floor to Stephane. Stéphane Boujnah: Thank you, Giorgio. And to round things off, we have delivered a very strong third quarter financial results. This quarter's results reflect the strength of our diversified business model with increasing diversification, both in volume-related revenues and in non-volume-related revenues, and our ability to collaborate effectively with our clients, with our partners on their evolving priorities in order to create new offerings and in order to create more competition. Since the beginning of the year, we have demonstrated a sharp focus on the execution of our strategic plan. We are today in an ideal position to deliver our Innovate for Growth 2027 targets. We are confident in our ability to achieve our strategic objectives and to deliver sustainable long-term growth. Our unique integrated value chain has once again proven its strength. We are very pleased to share that we have kicked off the last quarter of the year on an even stronger note. Our assets under custody reached another record at the end of October 2025. And across the business, we continue to benefit from elevated volatility and long-term structural growth drivers as we speak. Our ongoing offer for ATHEX further reinforces our position as the consolidator of European capital markets and creates further attractive growth prospects for the group. Thank you for your attention, and we are now ready to take your questions with Giorgio Modica and Anthony Attia. Operator: [Operator Instructions] The first question come from the line of Michael Werner of UBS. Michael Werner: Congrats on the results. Two questions from me, please. In terms of the Q3 costs, they were certainly below, I think, consensus expectations. You brought down your guidance for costs for the full year. I was just wondering, is this a scenario where you maybe you pushed out some of the investment spend that you had anticipated just because of changing dynamics in the marketplace? Or is this something more sustainable? This is the first question. And then the second question, I think, Stephane, you mentioned at the beginning in terms of the consolidation of the post-trade space that there's a growing list of clients that are supporting this effort. Is it possible to kind of give us an indication as to the number of potential custodians you have signed up or what other signposts we should be looking for when it comes to measuring the progress of the CSD opportunity? Stéphane Boujnah: Thank you for those two questions. Giorgio will answer the question on cost. I will answer the question on the CSD expansion. And let me be a bit blunt. I mean we are implementing an industrial project, which has a certain time line and a certain pace of execution, and we talk once every 3 months about the financial results. Now there is sometimes a disconnect between the pace of financial results every quarter and the pace of delivery of those industrial projects. And let me be a bit more specific. The go-live will happen in September '26. We are in the process of signing all sorts of market participants, custodians, issuers, other critical people in the project. And at the moment, the process of cementing those and signing those -- this support is ongoing. So our intention is to share with the market an interim status update whenever it's ready, let's say, within the next few months, irrespective of the timing of the quarterly results -- financial results announcement. I can't be more specific. And if you want me to be roughly correct or precisely wrong, I would tell you that things are going in the right direction. We are in the process of signing the relevant people. Before sharing with the market where we are, we want to have a sort of critical mass of homogenous signing to be shared and to be communicated. Unfortunately, I can't be more specific at this current moment. Giorgio Modica: Yes. On cost for the third quarter, the message is that this does not come at the expense of investments. We are going full speed to deliver things as quickly as we can. There are three elements that I would like to highlight just to give you a sense of what has happened in the third quarter. So there is an element you are all aware, which is the seasonality in the third quarter, where we record lower salary expenses linked to the holiday season. This is something that you are aware of. The second element that I would like to highlight because it's meaningful and not necessarily -- what we've seen is that what we have recorded in the third quarter is a reduction of the social contribution related to our long-term incentive plan which is driven by the share price performance. So we have recorded extremely high increases in the share price in the first and second quarter and more muted dynamic in the third quarter, which has resulted in a less steep increase of that line of cost. And the last element I would like to highlight is that our cost base, as you know, is largely fixed, but it's not entirely fixed. So there is a small component of cost of sales and as the cost of the third quarter -- sorry, the revenues of the third quarter were lower than the previous quarter, then we record some savings. So to make a long story short, this performance is sustainable, point one, does not come at the expense of investment, and is explained mainly by the element that I just mentioned. Operator: The next question comes from Enrico Bolzoni calling from JPMorgan. Enrico Bolzoni: So one question on MTS volumes. They seem to have plateaued a little bit. I was looking at the statistics for October as well. I just wanted to ask you, what should happen for volume growth to be picking up again basically? And related to that, do you think that the current situation in France with the political instability and clearly, the yields having gone up increases a bit the probability of French debt being migrated near term to MTS? So that's my first question. And the second question is on technology. There's been a bit of rumors, a bit of conversation around the potential disruption that blockchain could bring to post-trade services, for example, by making instantaneous settlement of trades or accelerating the velocity of collateral within clearing houses. Can you just give us some color what are your thoughts there? Is something that worries you, something you're investing into to protect the business? Or you think these fears are a bit inflated and actually nothing will materialize anytime soon? Stéphane Boujnah: Thank you. So Anthony will answer your question on technology impact of the post-trade. Giorgio will answer your question on MTS volumes, and I'm going to answer your question on the French dynamics around the way the French Republic is managing the liquidity and the trading and the secondary trading of its sovereign debt. On that particular point, we have an ongoing dialogue with the French debt management office and with the relevant ministers in charge to demonstrate the benefits of the MTS solution to increase liquidity and to reduce spreads on the French sovereign debt. For the time being, the French Republic is still focusing on the primary dealers only type of structure. But we have a dialogue. But where you have a point is that things have changed significantly. One year ago, well, at least last summer, the 10-year for France was more expensive than Germany, but cheaper than the one of Portugal, Spain, Greece and Italy. The 10-year for France is now more expensive than Greece, Portugal, Spain and Italy. And there is an ongoing analysis within the French Ministry of Finance about what can be done in this new environment, which is fundamentally different from what the situation was 18 months ago. When they will agree to migrate to a form of MTS solution, whether they will do it, how it will be implemented, I can't be specific because I can tell you that there is a dialogue, but -- and that clearly, the more French debt, French sovereign debt looks like the Italian sovereign debt and the numbers are at least in terms of 10-year costs are clear. The more the situation is similar, the better the chances that things will move. But at this current moment, there is no decision taken. Giorgio on the MTS volumes and then Anthony on the impact of technology on post-trading? Giorgio Modica: Yes, absolutely. What I can say is that if I look at the current trading, I see that quarter-to-date, we are above 30% up with respect to where we were last year. If I look at the month-to-date, the increase in excess of 50%, and I now have the statistic of the 5th of November, where the volume traded on MTS were EUR 65 billion. So what I'm trying to say is that the volume remains extremely elevated. And what I can comment is the fact that the market conditions remain highly constructive going forward, and we don't see any reason for a change in the short to midterm. Then elaborating more on what are going to be the volume first quarter next year and the trend is difficult. But again, the message is that the performance remain very strong and the market condition highly constructive. Anthony Attia: This is Anthony. Thank you for your question on the impact of DLT on post-trade and in particular, on clearing houses. Look, to make a short answer, we believe that the impact is neutral to positive with some opportunities. But the longer answer is we need to look at the impact of DLT by asset class. So the role of the clearing house is to provide guarantee and manage potential default. The fact that we have some market demand, some market trend to tokenize collateral is actually a positive thing, and at Euronext, we are working with the market to look at that specific technology change and test it. It is positive, sorry, because it would create some fluidity in the way collateral is allocated and in the way margins are called. So that's the positive part. Now this is true for derivative market, OTC clearing -- OTC cleared market. Now if you move to cash equity, the move towards T+1 gets us closer to a form of a same-day settlement or some would say, instantaneous one. We're not there yet in terms of real-time settlement because we would lose the netting effect. And so some less liquid asset class could benefit from DLT nuclear settlement, if you wish. But in the market that we operate, where it's highly liquid asset classes, the market still benefit from netting effect. So I don't believe there is a negative effect there. Operator: The next question comes from the line of Hubert Lam calling from Bank of America. Hubert Lam: I've got three of them. Firstly, on European exchange consolidation, which has now been brought up by Chancellor Merz, how realistic do you think this is for further and broader consolidation within Europe, including Germany? Second question is on costs. As you said, you improved your cost guidance for this year while you continue to invest. How should we think about cost growth now into next year? Should we expect cost growth to be slower just given a lot of investments assumed are kind of front loaded? And lastly, on -- question on ATHEX. If I look at the implied offer price today, it's close to the spot price. Just wondering if you would consider increasing your offer? And if not, how confident are you in terms of getting the required take-up for your offer? Stéphane Boujnah: Okay. So I will answer your question on ATHEX and your question on the European exchange consolidation and Giorgio will answer your question on cost. On ATHEX, let me reiterate that we do not intend to change the price of the offer and that we will communicate on this offer in accordance with appropriate requirements under Greek law. But we do not intend to change the price of the offer. As you know, the offer is open until the 17th of November. We are intensively communicating and sharing views with all the relevant group of shareholders in order to convince them that the premium we are offering is very attractive and to make sure that they understand the value proposition of making ATHEX business, the Greek capital markets part of an integrated European project. And so far, the dialogue is very constructive. But as I said, the offer is open until the 17th of November, and we will communicate the results of this tender offer on the 19th of November. On the European exchange consolidation, three remarks. We welcome the comments or the aspirations expressed by the German Chancellor that echoed with the ones of Mrs. Christine Lagarde, the President of the European Central Bank. And we share that vision, and we are available to contribute to the next phase of potential consolidation within Europe. Euronext today is the backbone of the Capital Markets Union, is the backbone of the integrated equity markets because as many of you know, the aggregate market capitalization of the companies listed and traded on Euronext amounts to approximately EUR 6.5 trillion, which is more than twice the aggregate market capitalization of companies listed on the London equity market and which is more than 3x, almost 4x the size of the Frankfurt equity market. This is just because we have focused for years on the equity markets, even if at group level, equity trading represents within Euronext 17% of our top line, it's still a multiple of what the other places in Europe, the large players in Europe are doing. And one of the reasons why this vision makes sense is that for all sorts of good historical and corporate reasons, we have found ourselves as focusing historically on equity markets and in fixing the equity financing ambitions of local stakeholders, whereas other players have been focusing in diversifying away from equity markets, sometimes in a very intense way. And by the way, this difference of focus on equity markets is also reflected in the difference of valuation multiples historically because markets tended for long to value diversification away from equity markets more than focus on equity markets. But this is a difference between investors' preferences and stakeholders' aspirations. So we are in a situation where we have been able to build Europe platform that raised 25% of the equities within Europe, which is probably the backbone of any future consolidation because we have the federal governance which is available, we have the integrated processes that are available, we have the strategic focus which is available. We have the operational performance, which is available to be what Mr. Merz and Mrs. Lagarde want to happen. Now why it is not taking place and why it may or may not take place is that because when you do M&A, you operate into a consenting added game. To do an M&A transaction, you need a willing buyer or willing consolidator and Euronext is a willing buyer and is a willing consolidator, but you need also a willing seller. And for the moment, there is just no willing seller. So I think you should not ask us whether we are available. You should ask Deutsche Borse whether they are willing to enter into this type of conversations. And as always in Germany, what the Chancellor says in Berlin is interesting, but what is decided in Frankfurt by Deutsche Borse and in [ Eschborn ] by the government of the land of [ Essen ], which is the supervisor of Deutsche Borse is much more relevant to deliver the output. So that's where we are for the German situation. So we are available, but the answer is in the hands of decision-makers. Giorgio Modica: Yes. On the cost, what I can say is that we will follow the usual time line for cost guidance, which means that we will share with you cost for next year in February next year. And the reason is simple and is the fact that we have not concluded the budget process, which will be approved in December. So it would be a little bit complex to share and commit with you before having secured approval from our governments. Operator: The next question comes from Ian White from Autonomous Research. Ian White: Three from my side as well, please. Just a follow-up on this consolidation or M&A topic. Can you just say a bit about your openness or otherwise to innovative structures or partnerships to boost scale and liquidity in European equity markets? I know there was a proposed joint project with Vitura, I think, a couple of years ago. Would you revisit something like that? Or are you clear that sort of consolidation of European markets in Euronext's own business is the only option you're really sort of thinking about, please? That's question one. Secondly, can I just ask a follow-up as well on the drivers of the performance at MPS? And in terms of the growth, how much is coming from sort of more trading of Italian govies and how much is coming from new pockets, maybe products outside of Italy, B2C, sort of new trading user types, the algo-focused traders that I think you talked about at the Capital Markets Day last year, a bit more detail on that would be helpful, please. And finally, ESMA has issued some new proposals regarding commercial practices with respect to selling market data and particularly with respect to pricing of data across different types of user and restrictions around auditing practices by the exchanges. What's your view on those proposals at this stage? And what impact do you think that might be for Euronext, please? Stéphane Boujnah: So I'll take your question on consolidation, and Giorgio will take your question on MTS and the dynamic on our market data business. On consolidation, when it comes to equity trading, which is the core of the discussion for the moment because the motivation of the German Chancellor was to secure a proper downstream for the liquidity of all the great companies that are developing in Germany that look for exiting public markets. For equities, consolidation is needed to deliver a single liquidity pool because if you want a single liquidity pool, you need to have a single order book, and to enable a single order book, you need a single technology platform. So -- and you need to have processes, harmonized rule book and consolidation is necessary to create scale. Hybrid model and IDs have been very creative. They have not really delivered not because people were not acting in good faith or were not positive and enthusiastic, because it just doesn't fit with what is needed to create a deep, low latency, large liquidity pool. So we are happy to consider all sorts of cooperation when it comes to, let's say, indices, when it comes to listing initiatives, when it comes to facilitating or using tools that facilitate the retail onboarding in public markets. But when you want to create impact, you need more liquidity, and to create more liquidity, you need a bigger order book. And to have a bigger book, you need a solid, robust centralized integrated technology platform. And that's why this is a prerequisite. Giorgio Modica: Okay. Yes. So let's start with MTS. You're absolutely right. One of the ambition of the project is to grow platforms which are different from the traditional dealer-to-dealer and shift more in the dealer to clients. This is -- this platform is something that is performing extremely well, and we can see volumes on that platform growing, I would say, exponentially with growth rate exceeding 50% year-on-year. But still is not a huge proportion of the overall revenues, but the direction of travel is very strong. And the other interesting feature is that we are expanding into the three key segments of the space of the dealer to clients. So we are seeing very good traction in rates, the beginning of an activity in credit, and we are developing the swap. So the results so far are good. The partnership with dealers is performing well, but clearly, this is just the beginning. Then when it comes to the traditional dealer-to-dealer, Italy remains the largest contributor to the pool. However, as I have highlighted during the presentation, we have seen very good growth coming from countries outside of Italy, namely Spain and Portugal. When it comes to market data, we are a recipient of regulation. We are adjusting ourselves. It's difficult to comment at this stage because the game is not over, which means that we are still analyzing the situation. What I can comment is that we are going to see what is going to be the outcome and whether -- who's going to be the actual beneficiary of the change, whether are going to be the large resellers of data or the smaller players in the market. Operator: The next question comes from the line of Arnaud Giblat calling from Exane BNP. Arnaud Giblat: I've got two quick follow-up questions, please. Firstly, on the potential movement of OAT on MTS. I'm just wondering, I heard your comments. I'm just wondering in terms of potential competition, who are you facing up to and how well are you positioned to win that business if it eventually comes over? And my second question is, again, a follow-up on Euronext Securities. I'm just wondering if you can report any progress on getting issuers moved to Italy. Stéphane Boujnah: Your second question, sorry, Arnaud? Arnaud Giblat: Yes. I think so far, it's just Euronext and Exor that have shifted their issuance to Euronext Securities. Are they -- are you seeing any progress with any other issuers? Stéphane Boujnah: Okay. So on the second question, which is basically the pace of CSD expansion. So as I said a few minutes ago, following question of one of your colleagues, we are trying to find the right moment to wrap up what is the precise status of onboarding. As you know, for making that project impactful, we need to have a combination of conditions. One avenue is to go one by one to migrate each individual issuers as it was the case of Stellantis or [indiscernible] company, et cetera, and we are working with others. This will be also filled with some new IPOs that have the possibility to decide their full post-trade chain. So that's one avenue. The other avenue is the custodians and in general, beyond the custodians, all the players who are intermediating issuers with the post-trade chain. So we are working on it. And I hope that soon, and I can't be more specific, we will be in a position to share status of that. But as I said, you have to understand that industrial projects do not have necessarily the same pace and timing as our quarterly meetings. We have in March, the go-live of the power derivatives market that will happen after our full year results, but this is a very important step. We had the ETF moment and European ETF listing trading platform that took place in September, at the end of September. So these things happen when they are ready, and we communicate when they are ready because the go-live for the CSD expansion as a whole is September '26. We need to share with you where we are. We will be in a position to do so soon, but it is not now. On the competition for the French OAT, for the French 10-year, I don't know. I think the MTS situation -- platform is quite unique. It's a European design. It's European-proved. It's a good platform to combine the sort of European primary dealers' culture and practices together with an electronic platform that provides transparency and that has ultimately an impact on spreads. I think as much as the French OAT was perceived as being massively different from the Italian liquidity problems back in the days, just even back in the days means even 15 months ago. Now the facts are that French sovereign debt belongs to the same league as the Italian sovereign debt. And therefore, we believe that there is an opportunity to continue this dialogue. I know you are asking a question you want, but systematically, we continue to explain to [indiscernible]. I must -- my conviction is that the more there is a sort of normalization of French sovereign debt around the debt of Italy and countries that have been through similar type of environments, the stronger the likelihood of all solution being considered and then implemented alongside the traditional primary dealers scheme. Operator: The next questions comes from the line of Herve Drouet calling from CIC Market Solutions. Herve Drouet: The first one is, could you share with us what is the percentage of your cost which is externalized in terms of operation? And could the seasonality we've seen in third quarter be reflected by the fact some of your external costs, either on development, on operations, which are externalized, tends to be lower during that period of time? And the second question is on ATHEX as well. Is there something you can share with us in terms of already what you have secured in terms of acceptance for your open offer for exchange of equity, if there are any you can communicate at this stage? Stéphane Boujnah: I'll take the question on ATHEX and Giorgio will take your question on cost. We will not communicate any interim acceptance level in accordance with applicable laws and regulations. We will communicate the result of the offer on the 19th of November. As you can imagine, we have a close dialogue with the three different constituencies that are owning shares in ATHEX, the local Greek institutions, the international asset managers or the international investors that own shares in ATHEX. And the third group is the local retail investors that interact through their brokers. So we have a very intense, continuous and precise and updated dialogue with those three constituencies. But in accordance with appropriate rules and relevant laws and regulations, we will communicate the outcome of the offer on the 19th of November. Giorgio Modica: With respect to your first question, the percentage of activity which is outsourced is inexistent or absolutely negligible. Our business model is based on the fact that we operate what we do. And the synergies of the transaction we do are exactly based on that, which means that we take care of others' operation and not the other way around. When it comes to the seasonality in our P&L, this is more simply, it's the full-time employees of Euronext. When they go to holidays, we do not record part of the cost in our P&L, and this gives the seasonality. But it has nothing to do with outsourcing. It's an accounting treatment for holidays across the different countries. So what you will see is that there is -- in Nordic countries, this is more June, July. In the rest of Europe, it is more July, August. And this is the reason why it has an impact which is stronger in the third quarter. Nothing more to highlight. Operator: The last question comes from the line of Reg Watson calling from ING. I don't think we have more questions at this time. I will now hand back to our speakers for their closing remarks. Thank you. Stéphane Boujnah: So if there are no further questions, I thank you very much for your attention and for your time, and I wish you a very good day.
Robin John Harries: Good morning, everyone, and welcome to our Q3 earnings call. I'm very pleased with the development of our last quarter and with the opportunities ahead of us both in mobile and with waipu.tv. In mobile, we see strong opportunities for efficient customer growth through optimized marketing mix, through optimized web shops, through a reduction in churn and through the acquisition of mobilezone. And with waipu.tv we also believe that there is huge potential for further customer growth and even more profitability. I'm very excited about the final sprint of The Year and an initiative-rich '26, which will mark our transformation into an AI-first telco. There's a lot to do, and we are on it and looking forward to it. I would like to thank our entire team for their hard work and their courage to discover new paths. I'm truly enjoying this. And I'm -- and we are just getting started. I also want to thank our CFO, Ingo Arnold, working with him is a real pleasure. We have rolled up our sleeves and he has been a tremendous support. Let's dive into the presentation and our key messages. We can confirm our '25 guidance. We are on track. We can show strong key financials. Our most important postpaid and TV service revenues are growing and our adjusted EBITDA grew nicely 1.6% for the first 9 months and for the last quarter, even 4%, Waipu.tv IPTV has been a driver in our EBITDA, contributes nicely. It's a fantastic product, not only growing in terms of customers but also getting more and more profitable. Our free cash flow in the first 9 months is growing nicely with 2.8%. And yes, so we are on track in Q3, impacted by the communicated tax one-off, but fully on track. We are also very pleased with our customer growth. Postpaid net adds even exceeded our expectations. Waipu.tv growth recovers, and we are here on a strong path, and we will continue. freenet TV is declining, but this was also expected. We are focusing on waipu.tv by continuing to monetize our user base at freenet TV. We can confirm our '25 guidance. And when you look into our strategic initiatives in the Mobile segment for our organic growth, we are focusing on 3 pillars. It's optimization of our marketing mix and optimization of our web shops and reducing churn. In terms of marketing mix, we are shifting budgets. We look at the return on ad spend. We don't do just pure brand marketing. We always connect it with direct performance impact, clear messages. And yes, so we improved the transparency of our campaigns. We improved the reporting. We really put the money where we see a direct impact. Conversion rates, I mentioned it last time, the conversion rates on our web shops, they are not there yet where we want to have them. They're not great yet, but we are getting better and better, and we see strong improvements in the last quarter. The page speed improved drastically. We have a better user experience. We create kind of urgencies on our website. All of this helps. And there's still a lot of stuff to do, but we can already see that it's working. And the third pillar is that we are working on churn reduction. If you look at the top 2 reasons why users change their mobile provider, it's either they get a better offer somewhere or because they are not happy about the network connection. So this does not make sense when you look at freenet because we are really offering great deals. We are able to match the most aggressive offers, and we provide all networks. So there's obviously no reason for users to leave us. And so therefore, we are working on it. We see a huge potential in reducing our churn. We have created more than or developed more than 50 initiatives to reduce the churn to bring it down, and we are working on it. And yes, so this is, I think, one of our drivers -- success drivers also for next year. When we look into our customer value management, we also try to use AI wherever we can use it. So whether we look at the customer service, if you look at telesales, if you look at smart pricing, so we try to apply it everywhere, do smart tests, don't do crazy things, but there's -- we believe there's huge potential and we are on it. And besides all of these 3 pillars, of course, we are also constantly trying to improve our other channels. We are very happy about our stable retail business with our almost 500 stores, our strong online and off-line partners, and we are optimizing this as well. In September, we started our first performance-based brand marketing campaign with klarmobil. So we produced a new TV spot. We changed the website, improved the UX. And there was a clear message. So when you look at the TV spot, you can see that there was clear branding, but also clear messaging, a clear offer, and this was reflected in the successful numbers. We could increase the visits significantly and also the conversions and sales. This was a very successful campaign. We have the next campaign in October. We see and also the team see that it's working. It's driving sales on one hand. And on the other hand, it will also create more brand awareness. And klarmobil is one of our top brands. Together with freenet, it's important that we increase the unaided brand awareness and performance-based marketing campaigns will help to reach this goal. We are very happy about the mobile subscriber growth in the first 9 months and also the last quarter. Within the first 9 months, we could increase our customer base, 190,000 postpaid customers. If you look at our historic data numbers, you can see that this is quite a lot, also the last quarter, very successful also when you compare it to last year. So we can see that the initiatives, the things that we changed that they are working. We also are very happy about the renewal of our -- about the 5-year renewal of our strong partnership with the MediaMarktSaturn, it's important channel for us. And yes, next steps, so we will keep doing what we have started in the last quarter, looks promising. And besides this, there's also one big thing that's coming at the moment when you look at our -- I mean, the strongest brand that we have is freenet and we do advertising with freenet. So there, you can see our strongest product, mobile phones, mobile plans. But at the moment, it's on the domain freenet-mobilfunk.de. And if you, for example, go to freenet.de, you can find the news and e-mail portal. So -- and this is not ideal, yes. So you cannot do marketing efficiently with freenet if people or if users then search on Google and end up on freenet.de where they don't find the offers that you do advertising for. So this is something that we changed, we made the decision to change it, and this will be in place beginning of next year. And then we will do advertising for mobile phones and mobile plans on freenet.de. And then we will also start marketing campaigns, performance-based marketing campaigns for freenet.de. So this will increase the conversion. This will be much more efficient than in the past. And so then we believe that this will be a nice potential for the next year to really increase numbers for freenet and increase the unaided brand awareness for freenet as well. And besides this, one big thing is you heard about it, we already disclosed it, we bought mobilezone. This is a strategic acquisition. mobilezone, it's a really strong company. It's a sales machine. So they -- every year, they generate over -- they close over 1 million contracts. It's one of our strongest competitors. They are very successful, they have many nice brands like sparhandy, deinhandy. And yes, so we acquired them. Yesterday, there was also news that the antitrust approved the acquisition. So we are in the process of closing the deal. And this will give us much more -- even more sales power. So consolidation in the market, I think it's healthy, makes a lot of sense if you look at allocating resources about the offerings, so makes us even stronger. We'll -- and I think it's also good for the entire industry, for our partners. We have really healthy relationships to Vodafone, Telefonica, Telecom also to 1&1. And so we believe that this makes us even stronger and that will enable us to further support them. Waipu.tv, I mentioned it. We believe it's a fantastic company. We could show in Q3 subscriber growth again and also nice profitability. It's -- for us, it's important that we have a company that's not only growing, but also getting more and more profitable. I think we proved both of this with waipu.tv, very happy about it, it's developing as expected. So -- and we also believe that in Q4, we will see even stronger growth and that we are on track to reach our guidance for '25. Waipu.tv has started -- has just started a new campaign which is promising it's -- they offer a start-up package with a TV stick and a no-frills product for just not so much money. It's an entry product and which will help to -- for people to experience IPTV and this great product. And so afterwards, we believe that there will be upselling opportunities. And besides this, we also started to do marketing with bundles where we bundle mobile plans together with waipu. And all of this, we believe, is really is -- makes a lot of sense and will bring us or leads us into the right direction. Yes, with this, I hand over to Ingo. Ingo Arnold: Thank you, Robin. So I start as normal with the group financials. I think we are -- and Robin already commented, I think from my side, there's nothing to add. We are really, really happy with what we generated during the first 9 months of the year 2025. We are totally on track to reach our guidance. So in terms of revenues, you see in the quarter, a slight decrease of revenues, I think, main reason, and we will -- I think you will hear the name of the company, The Cloud more often than in the years when we owned the company today. But I think it is important to show the deviations what we do have in -- on the group level, but also on the mobile level. So here, I think what we lost here in revenues with the sale of The Cloud is something like EUR 10 million. So without it, also in Q3, there would be a small increase of revenues. So all in, it's a confirmation of the guidance where we promised moderate growth for the gross profit. I think, much more positive than the revenue development. We see an increase of the gross profit in the quarter by even 7% on a 9-year base, 4.3%. It is definitely driven by the IPTV. I think we are so happy that this is the first year where we do not only generate growth in the base of waipu.tv but where it is also possible to make the business much, much more profitable. And you see the effect here even on a group level. Moving to the adjusted EBITDA, strong quarter, 130 -- nearly EUR 138 million, which brings us to EUR 395 million up to the end of September. And I think I did the calculation in August. I do the calculation again what is necessary to reach the full year guidance. I think it is relatively clear that from EUR 395 million you need a quarter and you need an EBITDA of something between EUR 125 million and EUR 145 million to reach the guidance. And compared to the performance in the third quarter, I think this looks totally doable. And I'm even more convinced now than I was in August to reach it. So moving to the Mobile business. I think, yes, definitely, the revenue looks a little bit disappointing. But on the one hand, again here, there is the reason from the missing revenues of The Cloud in the full quarter. And if you would add the EUR 10.3 million, the difference would be much smaller. On the other hand, we -- and this is something what we already commented in after Q2, we had some no-frills, some prepaid revenues where we could not generate any profit. And to make administration easier, we cut some -- we terminated some of these contracts. This makes a lot of sense from our side. It has a few negative effects on revenue. But as you see, moving to gross profit, this does not have any profit effect. The gross profit in Q3 slightly decreasing. Also here, it was something like EUR 3.5 million, which was missing from The Cloud. If you would add it, I would say it is something like a stable development, Q3 to Q3 and the Q3 '24 was a strong one. So all in, there is an increase in gross profit to nearly EUR 527 million. Moving to the adjusted EBITDA. Also here, we are near to what we had last year. It's a stable development and making the same math, what I did on the group level, what we can see here is that we need an EBITDA of something like between EUR 100 million to EUR 120 million in the fourth quarter, and then we would reach the guidance. Maybe a small comment to marketing spending because we discussed it intensively after the second quarter. And the good news is that even with all the campaigns, what Robin was talking about and all the action and the big growth in the customer base, it was possible to decrease the marketing spending in Q3. So I think in the first half of the year, we spent something like EUR 6 million more in '25 than in '24. But in Q3, we spent less than last year. I think we have some long-running contracts with some brand marketing partners, which does not make that much sense. But I think it is not easy to terminate these contracts. Some of them are still running. So I think there will be a full saving effect from stopping these contracts in 2026 but also in Q3 and in Q4, we will see something comparable. Marketing spendings are down. And I think the results are still affected from the negative first half spending what we saw. Moving to some KPIs of the -- in the mobile business. Yes, Robin already commented. I'm really surprised how strong we are in terms of postpaid net adds. I think we discussed during the year to reach something like 200,000 net adds for the full year time. I think definitely, it will be far above 200,000, what we will reach I think it is still a surprising quarter as ever, the fourth quarter because of Black Week and so on. But I think we are more than on track here to grow the postpaid customer base. Well, we are not that good on track, but I think this is a market problem what the whole market does have is still that the ARPU is decreasing. So what we see at the moment with the growth, what we generate, it is possible to overcompensate the ARPU effect and I'm positive and optimistic that this will also continue in the next quarters. But I think it is a pity and it is market driven. I think we discussed it already in the other quarters. It's not a freenet problem. The market is slightly aggressive. Still, we hope we can come back to a rational, a more rational behavior in the mobile market here. So we are not that unhappy that there will be a CEO change at Telefonica because we saw them very aggressive in the last quarter. So I think this could help to repair the market here. So we are basically optimistic for the following quarters, but -- and this is clearly shown on this chart here. At the moment, the negative trend for the ARPU is continuing. But clear message service revenues are slightly increasing. So it's possible for us to compensate it. Digital Lifestyle revenues, the last picture here on this chart, I think you all know that we were behind plans at the beginning of the year. We could close the gap now. So we are totally on track compared to last year. And yes, I'm even positive for the fourth quarter to see a slight increase here. Moving to the successful TV business, revenues and all financials are mainly driven by the positive waipu.tv developments. What we do see in revenues is in the quarter and even an increase by 10% for the full year, it increased by 7.5%. I think the fourth quarter was a little bit influenced by a media barter deal. What is a media barter deal? It is that we have these deals, these contracts with the private channels. And therefore, we get on a -- at the end of the day, we get some marketing to place -- some channel plays there for free but we have to show it in our figures. So on the one hand, you see it on the revenue. But on the other hand, you see it on the marketing cost. So at the end of the day, these marketing campaigns are for free. But you show it on every level here. And so therefore, we made it clear or we try to make it clear and we wanted to make it clear because especially the development in revenues and in gross profit is slightly exaggerated from these deals, and we want to have positive figures, but we want to have honest figures. And therefore, we mentioned it here that there is an effect of EUR 5 million even in revenues and in gross profit. On the adjusted EBITDA level, you see that we have an increase compared to last year. Waipu.tv EBITDA year-to-date is something like EUR 25 million. So it's a perfect confirmation that the business cannot only grow but that the business can also generate EBITDA. And I think this is -- I think we discussed it earlier times that we expect something between EUR 30 million and EUR 35 million of EBITDA from the business. And I think we are totally on track here. We have lower marketing spending. This is something what we discussed earlier together. This definitely helps in the fourth quarter. Yes, I think we need some marketing campaigns. We need and we want to generate some growth in the fourth quarter. But I think we are also on an EBITDA level, we are very optimistic to reach the goals what we do have. Last page from my side is the free cash flow bridge. I think -- most of you should not be surprised that we have the negative tax effect. I think we -- to be honest, we expect it for years. And now we really got it. So we had to pay something like EUR 20 million for the period 2015 to 2018. I think we are not at the end of the road here because we also took legal action because we -- I think we had a -- we built provision years ago, and -- but we took legal action now. And -- but the legal proceedings will take years to find an end, but we paid the EUR 20 million now because we have high interest rates to pay here in the meantime. And I think there are good chances to win the case. But for now, we paid the EUR 20 million. And I think let's wait and see. I think I do not expect a decision as long as I am here, as CFO. So -- that could be quite open. But there is a good chance to get the money back. But for now, the tax expenses are higher as expected. On the other hand, change in net working capital. It is a negative of EUR 32 million. I think those of you who are familiar with our working capital figures, know that EUR 26 million out of it is a liability or a reduction of a liability where we have to pay a monthly fee to Media Saturn. So out of it, it is more or less stable. Then the CapEx figure, EUR 26.8 million. It's near to what we saw last year. Lease payments. It's easy to calculate EUR 45 million now. So no surprises and interest payments, EUR 15 million. So I'm quite fine here. I'm also fine with the free cash flow for the guidance for the full year because what do I expect from change in net working capital, maybe some more investments in the fourth quarter into the business. So I expect something like EUR 45 million for the full year. I expect EUR 60 million for taxes, EUR 35 million for CapEx. Lease is easy to calculate, something like EUR 60 million and interest payments nearly to EUR 20 million. So this is also in -- the sum is the same what we expected or what we forecasted at the beginning of the year. And so I think at the end of the day, no surprises for all of us. And therefore, I think the guidance could be reached. So therefore, the overview from my side for the financials. So I would hand over to the operator again to start the Q&A session. Operator: [Operator Instructions] And the first question comes from Sofija Rakicevic, Goldman Sachs. Sofija Rakicevic: I have 3 questions, please. The first one is on the guidance. What are the main 4Q drivers that could push results to the low or high end of the guided range? The second one is on mobile. Can you please give us more color on your net adds mix? How many come from the lower end of the market? And how do you perceive quality of your customer base in general? And the last one is on the marketing. So I'm just wondering, can you compete effectively in 4Q without a big marketing increase for both waipu.tv and mobile because we are heading towards Black Friday and Christmas. Ingo Arnold: Yes, Sofija. Thanks for your questions. From my side for the guidance. I think if I would have a clear plan where we would end, I would already have told you. I think there is good chances to end on an EBITDA level between EUR 520 million and EUR 540 million. I think it is correct that we have to look, and it's -- I think the question to the guidance is linked to your last question about the marketing spending. I think we want to grow the business. And therefore, if we see chances, especially during Black Week to increase our customer base in both segments, then we would -- then we have to decide what we would like to invest. So it's difficult to say from today's point of view. So I cannot -- and this is something I think we have not published a guidance which is -- which narrow band because it is still open. I think we will watch the market. And if there will be chances to grow and to have a profitable growth, we will use the chances. And -- but I think this is the main reason why we are not more concrete on the guidance now because as typical during Black Week and during Christmas business, there could be so many chances. And we do not want to miss chances and opportunities. And therefore, I think it is still open. But basically, I would not expect a big increase in marketing expenses compared to last year because also last year, we had the Black Week and we had a Christmas business where we were. And last year, we were very aggressive. So I would even expect that even with a strong and growth-oriented philosophy in the fourth quarter, I would expect marketing expenses to be lower than last year. Robin John Harries: And related to your question regarding the mix, we have different brands. We have brands like Mega SIM, Dr. SIM, Happy SIM, where we have aggressive offers and then we have klarmobil, it's something in between. And then we have our premium brand, which is freenet. And at the moment, we -- freenet is not ready yet. I mentioned this. It does not make too much sense to do advertising with freenet if it's not on the freenet.de domain, yes. So therefore, we don't invest into brand marketing campaigns, we rather focus our activities on the other brands like klarmobil and the other brands where we have better conversions. So this is what we are doing at the moment. And so therefore, the -- it will be, I think, relatively similar to the last quarter. But if we look into the next year, I mentioned it that we want to scale the performance based brand marketing investments for freenet as well, and this is an opportunity for us because with freenet, this is our premium brand. We will be able to also sell for more -- for healthier prices with higher ARPUs. We will focus on mobile phones. We will position freenet as a premium brand. And I think this is a nice opportunity for us next year. And then ideally, we have a freenet as our premium brand for mobile phones with nice brand marketing campaigns but based on performance, so we want to sell. Then we have klarmobil our brand for mobile plans for good prices that make a lot of sense. And then we still have our -- where we -- more aggressive brands like Dr. SIM, Happy SIM, Mega SIM where we try to get users in a more aggressive environment and compete against those brands who think they can be more aggressive. Operator: And the next question is from Ulrich Rathe, Bernstein. Ulrich Rathe: I have 2 questions, please, if I may. The first one is on the service revenue situation. I think you highlighted that this is owing to the market backdrop at this point in time and that is not necessarily a big concern from a managerial perspective at this point. Could you talk about how you see this unfold. I mean what's your base case here for the market backdrop and the service revenue performance in 2026. And related to that, this sort of slight compression on the service revenues, how does this affect your gross margin? I mean that's ultimately a question how the cost to the MNO hosts scales with service revenue performance? And my second question is on the Media Saturn renewal economics. That's more technicality, I suppose. But you talked about this EUR 5 million incremental barter deal in -- sorry, in the third quarter. Is that related to the renewal, should we add that to the renewal? And have you agreed to a different cost compared to the prior contract with a multiyear contract with Media Saturn in the current renewal which explain the economics of that another EUR 5 million sort of fits into this. Robin John Harries: This is Robin. Thanks for the question. Regarding the service revenue, as you -- I mean when you look into the Q3 numbers, you can see the ARPU, but you can also see strong mobile growth. Overall, the effect of both is positive, and we expect that also, if we look into the future, we -- as I just said, we want to also more marketing with freenet. We believe there's a fair chance to sell products with higher prices to increase the ARPU, this might have a positive effect as well. Yes, that -- I mean the market is -- the competition in the market was tough in the last month. I think, is what's driven by Telefonica. So there are some changes. There were -- they announced that there will be some changes. Hopefully, this will be healthy for the market, for the industry, but we are prepared. We have many opportunities to grow our subscribers -- our marketing channels through our website, through performance marketing, through performance-based marketing, to not lose so many users by optimizing our churn. So there's really a lot of potential for us to grow. And so therefore, it also will put us in a situation that we will hopefully also be able to sell for better prices, which are more healthy for us. So therefore, we are quite confident. Ingo Arnold: Yes. From my side, Ulrich, I think you also asked what effect does the service revenue has on our MNO contract. And yes, definitely, this is very relevant. I think in earlier times, when I started in the business, all were only focused on growth of customers, but this changed during the year. So the contracts, what we do have with the MNOs are mainly based on revenue, on service revenue. And so yes, it is important to generate service revenues, but I can only confirm what Robin said. I think that there are -- and I work in this company for a long time, I never saw so many initiatives here to increase the number of customers. And therefore, if we could combine it with a stabilization of the ARPU, I think, and you asked about '26, I have no -- I'm not afraid of '26. I think -- I'm more afraid of the fourth quarter now because this will be difficult to -- and this is what we saw during the year. But with all the initiatives, what we saw -- what we see and what we have here, we are much, much more optimistic for '26 in terms of service revenue than based on '25. Then you asked about the Media-Saturn one-off of EUR 5 million, I think this is, is it linked to the contract? Or it is not linked to the contract? My official answer is not linked to the contract. But I think it's definitely only -- it's only a one-off and it is not by accident that the one-off happens in the same year when we renewed the contract. So -- but this is something that will not happen again in the next years. And what happened -- what has not happened again in the last years. So therefore, it's a typical one-off. It is not typical. I think we have other payments what we do pay -- what we do grant to Media Saturn, but this is definitely a one-off. Ulrich Rathe: Ingo, can I just sort of follow on this comment, which you put into a sub-clause that maybe you're afraid of Q4. Could you just for clarity, explain what you meant by your afraid of Q4? Ingo Arnold: Yes. I think what we see at the moment that is that the service revenues are growing, and we are happy that they are growing, but they are only growing by small euro effect. And so -- can I be 100% sure that in the fourth quarter, it is plus EUR 3 million or minus EUR 3 million? No, I cannot be 100% sure because the effect, the positive effect is not that big that I do have a lot of headroom. So -- and this is the -- I do expect stable service revenue for the fourth quarter to make it very clear here and to clarify it. So thanks for your question. But what I do expect for '26 is that we are not only see a stable service revenue but a growing service revenue. Operator: And the next question is Siyi He from Citi. Siyi He: I just have a question on this redefinition that you put through on the adjusted EBITDA. I think now your adjusted EBITDA is including [indiscernible] sales and restructuring. I'm wondering if you can talk us through the thinking behind that. And also, it seems that the adjustments led to around EUR 10 million uplift on your 2014 EBITDA, but you decided to not change the full year guidance of '25. I want to understand the thinking behind that as well. And finally, just on the free cash flow bridge, you have kept the free cash flow guidance unchanged. But it seems that the CapEx guidance is now reduced from EUR 55 million to EUR 35 million. I want to check if that is a sustainable reduction on CapEx. Ingo Arnold: Yes. So thanks for your questions. I think the -- what is the reason why we started to report an adjusted EBITDA at the beginning of '25 or -- in '24. What we saw were from the sale of the IP addresses. We saw a very positive effect, and it was the idea to show an adjusted EBITDA, which is really based on the ongoing business. So then this year, we had a similar effect from the sale of these IP accounts. And in addition, we had the sale of The Cloud. And so this was also a positive effect in the EBITDA, which we wanted to correct. So I think we were -- we were very open here, and we were very transparent and corrected the EUR 25 million of positive effects this year. On the other hand, what we saw were that, and you all know that we reduced the number of board members here. And we saw a -- and the restructuring, the amount of EUR 6 million is more or less only the payments, the severance payments, what we had to do to the leaving Board members here. So this is definitely also a one-off. And in the thinking, what I was describing before to only show the ongoing business. Therefore, we decided that we use the adjusted EBITDA to correct the EBITDA by the effects in both directions. And so therefore, I think we changed it. Then you had a question about the full year guidance. And yes, you are correct that there was a -- that with starting putting all the effects in the -- on the adjustment list we had also to adjust the year 2024. And you asked if, therefore, the guidance should be increased. My answer is that we do not guide a delta to the year before. What we guide is an absolute EBITDA amount for the year, and we calculated the EBITDA for the year, which was from the beginning, something between EUR 520 million and EUR 540 million. So with a change of EUR 24 million, we do not change our guidance. Your question to the cash flow bridge. Yes, you are correct. To reach the full amount of the bridge and to have a comparable amount to what we forecasted at the beginning of the year, we had to reduce the CapEx compared to what we forecasted at the beginning of the year. I think we expect, especially from the radio business -- from the digital radio business we expected more spending during the year. This has not happened. It is not -- it was not necessary during the year, and it will not be possible to catch up here in the fourth quarter. So from my point of view, the EUR 35 million, what I said is I think this is a strong figure, and I do not see any big risks here. Operator: The next question is from Florian Treisch, Kepler Cheuvreux. Florian Treisch: I have 2 questions. The first one is for Robin, I mean in the Q2 -- sorry. In the Q2 call, you made very clear that you want to change the marketing strategy, the customer journey. I mean, this is what you have underpinned today with the presentation. So my question would be a bit when do you really expect, let's call it, first tangible impact. I mean you mentioned in the presentation that they are first positive signs. But to really make a difference, is it fair to assume that this will only happen over the course of '26 and how relevant is the closing of the mobilezone transaction to support that journey. The second question is on waipu.tv. I mean you have seen an improving momentum in Q3. So the first question would be how much of that is driven by lower headwinds from the O2 shift. And you flagged high confidence in a good finish to the year. Can you also quantify your expectations here? And do you expect this momentum to stay as strong as in Q4 entering 2026? Robin John Harries: Yes. Thanks for your question. Regarding the impact, so we could already experience the impact in Q3. So far, in Q3, we only did 1 campaign. It was a short campaign, was 2 weeks brand campaign. So I mean, it's just like 1 month out of 3 months. So therefore, the impact is not so big. But if you just isolate this campaign, and if you look at the visit uplift, it was very strong. The conversion rates were very strong. We improved the user experience on the website for klarmobil and also the sales numbers. This was a very successful campaign. And we just started the second test in October. And also, again, a small test. That's how we do it. Yes. First, we shoot with bullets. And then with cannonball balls. At the moment, we are still in the stage of shooting with bullets. So we do small tests, but they are already very promising. And yes, so also for the plan for next year, we then scale their investments, but they are performance based. That means that it's not that we are burning money. If we scale the investments, this will be also lead directly to more sales, so positive impact. And at the moment, we just do the first test with klarmobil. As I mentioned, we are preparing the freenet.de domain, will be done beginning of next year. And then we will also scale and freenet together with klarmobil. So most of the impact will come next year and also this year, but also for Q4, we are -- I mean, if you improve the conversion rates on the website, you'll see directly a positive impact because visits are rather going up. End of the year, we have some nice campaigns. And then it's -- at the moment, it's a little bit, but most of it, you will see in the -- over the course of next year. This was your first question then you asked for mobilezone. I mean, mobilezone, they -- it's still not closed. I haven't checked their conversion rates. And so their return on ad spend, how they do it. If you look at top line numbers, you can see that they are very successful. They have strong brands, Sparhandy is a strong brand, Deinhandy is a strong brand. They -- I think they do a very good job. They have good -- they have a good performance. And yes, after closing, we will look into how we can benefit from it. I'm sure that there are synergies. If you look at allocating resources, if you look at positioning of brands and all that stuff, this will be, I think, healthy for us and for the market. Regarding waipu.tv, there was -- still impacted by the end of the partnership with O2, yes -- old O2 users are churning. But even though we are growing and if you look into Q4, we anticipate that there will be a much stronger growth than in Q3. This will, I think, a strong quarter. There is -- I mentioned that they just started campaign for the strong starter package, then we have some campaigns where we bundle it together with mobile plans. This also makes a lot of sense. Then there's a Black Week. We are quite confident that we will see a nice subscriber uplift in Q4. Operator: And for the moment, the last question is from Simon Stippig, Warburg Research. Simon Stippig: First one would be, I wonder about your long-term guidance, 2028 or your long-term aspiration in 2028. Because certainly, by your acquisition of mobilezone and Germany segment, you should get a bump in growth. And you also mentioned the marketing contracts. Longer term, you could cancel in 2026 as I understood it. And then additionally, you expect from your campaigns quite some growth in the next year and beyond, hopefully. But on your presentation, you kept your longer-term aspiration in 2028 unchanged. So can we deduct anything from that? Or will you review that in due course? And then secondly, tied to that is the financing of the transaction. You mentioned you will or you will debt finance it and you have a bridge loan in place. But then you will receive around EUR 150 million in H1 2026 from the CECONOMY sale of your stake. And will you then lever up a little bit from your 0.5x net debt to EBITDA currently? Or do you intend to use that cash for financing the transaction. And lastly, I saw until the end of October, you bought back EUR 60 million in shares. Will you continue to buy back shares until the end of the year and then you stop or will you continue to purchase back shares until you have fulfilled the full volume of your EUR 100 million. Ingo Arnold: Yes. Thanks a lot for your questions. I think, yes, I think maybe in all levels, the long-term guidance could be different, and this is normal during the years. But I think what is important for us at the moment is that we stick to the whole amount to the EUR 600 million of EBITDA, for example. So we stick to the guidance 2028. I think we -- earlier or later, yes, we have to recalculate the levels and have to decide if it could be even more than EUR 600 million or if there could be changes between the levels and between the effects. But from our point of view, the most important thing is at the moment that we stick to the guidance. And yes, definitely, we will recalculate it during 2026. And then we -- maybe I think we have not decided when we give an update to the guidance 2028, but I do expect it for 2026, whenever in 2026. And then I think we -- all your points are correct. But I think this does not change the big picture for now or this does not make it less probable that we reach the guidance, it makes it even more easier to reach the guidance. So therefore, I think during 2026, we have to think about it internally. We have to -- have our discussions and then we will come back to you and to the market definitely. Then you asked about financing of the transaction. We use a bridge loan, which has a duration of 12 plus 6 plus 6 months. So we are not in the hurry to refinance it at the moment. But we do also have some promissory notes due in November. So what I would expect for the first quarter is a transaction with promissory notes where we refinance our debt. And yes, there's the chance that we partly repay the debt by the EUR 150 million. What we could get from CECONOMY, and we hope that we will get it during the first half of the year, and this will only change the volume of promissory notes, what we would do. So at the end of the day, there will be a slight up on the leverage. This is what I would expect. If we spend EUR 230 million on the one hand and if we do get EUR 150 million on the other, there is a slight increase, but I think this will not change the world. Concerning the share buyback, yes, you are correct. We spent something like EUR 59 million at the moment. So nearly EUR 60 million. And we announced during the year that we will pay at least the EUR 60 million, which was the cash overhang from 2024. So we spend it now. I think we will look into the cash flow development during -- until the end of the year. If there will be some room then we would invest more. If there is no room, then we would stop the program at EUR 60 million. But I think this is not clear. We have no final decision. We will decide based on the cash development in the fourth quarter. But I think we have done the EUR 60 million. So from today's point of view, I would not expect any additional share buybacks during the year. Simon Stippig: Okay. Great. And maybe if I can one follow-up on the bridge loan. Could you tell me the conditions of the bridge loan, like what you're paying there and interest costs? Ingo Arnold: I think they are relatively lower than what we pay in other instruments at the moment, but this is -- it is difficult to say what the margin on a bridge loan is because I think this is typical for a bridge loan that in the first 6 months, you pay much lower rate than an average market rate. And if you use it for longer, then it's getting more expensive. So I think the main information is that at the moment, it's much cheaper than what we pay on our outstanding promissory notes. Operator: And the last question is from Dhruva Shah, UBS. Dhruva Shah: Just a couple on waipu.tv. So it's clear that you expect an acceleration into Q4 of around 180,000 net adds to meet the EUR 2.2 million guidance for the end of the year. But one bigger picture question is just how do you see the competitive environment in the IPTV market? And then perhaps more specifically, if a large part of the growth you expect is going to be driven by the lower ARPU entry-level products or the bundling with klarmobil, how do you weigh up the balance between financials or ARPUs and volume in that unit going forward? Robin John Harries: Thanks for your question. And the competitive environment, so we believe that the product is superior. So when you look into ratings, reviews, when you test the product, it's really a fantastic product that makes a lot of sense, yes. And I think it's one of the best, maybe the best product in the market. Also, when you look at growth rates, I think it's outgrowing competition. It's really strong, yes. So therefore, I'm not afraid of any competition in the German market. I believe if we do our job, so there is no reason why we should not grow. And in terms of -- the offers at the moment is a start-up package. So -- but there is also a clear path for upselling. That means that we want to make it easier for people to switch from the old world to the new world, to experience the product, make it easy. And so therefore, it's also a product where you don't have or the channels is something where you can get to know the product. And then later, after a certain time, we will show you the -- like the entire world, the entire product you can experience it. And if you like it, you would have to pay more. So -- and I mean, I think it's normal for advertising for and promotions that you go out with reduced pricing. That's the same in the mobile world, but then you need smart upselling. I think we are quite good in it. And then there are also convincing arguments why you should do the upselling. So therefore, yes, it's -- and this is something that we have been doing throughout the year. There were always promotions and campaigns. Nevertheless, you can see that profitability went up quite nicely. And this is something that we are -- that we believe will also happen during the course of next year. We will further grow the customer base. We will further grow profitability and generate more EBITDA. So there, we are fully on track and absolutely convinced about the product and don't fear any competition in the market. Operator: And if there are no further questions from the audience, I would like to hand back for closing remarks. Robin John Harries: Yes. Thanks for attending our earnings call. So as we've said, we are very pleased about the quarter. We are confident about the outlook for '25. We are excited about '26, many, many initiatives. We have a very motivated team, open mindset. They show a lot of courage, they want to explore new opportunities. It's really -- it's a lot of fun. It's a very good vibe, good spirit here. And I'm very confident that we will keep delivering. So therefore, thanks for your time and looking forward to the next call.
Operator: Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the third quarter of 2025. We would like to inform that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. [Operator Instructions]. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation. João Fernandez de Abreu: Hi, everyone. Thank you for attending our third quarter call results. Let me start with the highlights of the quarter, which most of the figures was quite aligned with what we planned for the quarter. But I'd like to highlight a couple of things. The first one, it's send to the team in Pine Bluff, our congratulation for the process of turning around the business. So as you saw, we have the first positive EBITDA result for the quarter for Pine Bluff, and I think this is the new trend for the business. So the team over there is doing a great job. So we are very glad about what we have achieved at this time. And -- but the most important one here regarding the highlights is the cash cost. So we are glad to having the chance to keep the trend of reducing our cash cost. This is something that we're going to keep working, of course, not only for the next quarter, but also for the next couple of years, so we still see opportunities to keep gaining efficiency to gaining productivity. And this is an area that is under our control, and this will be in the next 2 years, our main focus. So reducing the total operational disbursement, it's absolutely key and will be the first priority for the organization here in the next 2 years. So this is something that is under our control, and we understand that we don't need to expect or to live a different cycle of price to do the job that we have been doing. We must anticipate ourselves to make sure that we bring to the organization any kind of opportunity to give -- to keep efficiency and productivity in our business. The consequence of that, it's, of course, deleveraging the company, which is absolutely a priority for us. So having the chance to deleverage the company even on a low cycle of price, it's something that we believe and that we want to keep doing, and not waiting, do you know, different cycles in terms of price to focus on deleveraging the company. We believe that we can do that even on scenarios as the one that we are living right now, okay? So that's my highlight. That's the main message. So now I will hand over to Fabio that will cover the Paper and Packaging business. Fabio Almeida Oliveira: Thanks, Beto. Good morning, everyone. Please let's turn to the next page of the presentation. Our third quarter results were highlighted by strong sales volumes in all markets in our first quarterly positive EBITDA for Suzano Packaging. We have had stable operations in all our mills with lower cash costs versus previous quarter in Brazil and also in the United States, with lack of annual planned shutdowns. Our third quarter volume marks the highest quarterly volume for our Paper and Packaging business unit in history, even faced very challenging paper market conditions. Print and write demand, including imports in the Brazilian market according to IBA, declined by 7% in the first 2 months of the third quarter compared to the same period of last year. However, domestic producers outperformed imports with a more moderate 4% decline and a 29% drop in imported volumes. The overall contraction in demand was primarily driven by the coated paper segment, which had benefited from additional demand during the 2024 election period. Demand for cut size and uncoated papers remained relatively stable. Turning to the international markets served by the company. We see that despite the structural reduction for print and write in mature markets, uncoated paper grades, our main export product performs better than the other grades. On the negative side, there are continued negative effects of economic headwinds and uncertainties related to the ongoing trade war. In Europe, demand has been more sensitive to those trends, reducing 6% on the year-to-date, while in North America and LatAm, demand for uncoated wood-free continue to be stable. Now looking at paperboard demand. In Brazil, we saw a 4% demand decrease in the first 2 months of the Q3 compared to the same period of last year. Sales from domestic producers dropped only 1%, while imports shrunk minus 14% in the same comparison period. In the U.S. market, data from the American Forest and Paper Association show SBS shipments have grown 5.9% on a year-over-year basis, while inventories have grown 17% on the same basis. This is mainly due to the ramp-up of a new SBS machine in the second quarter of the year. Yet, according to FP&A, our operating rate for SBS producers grew 3.4 percentage points versus Q2, reaching 86.5% albeit below historical levels. Looking at Suzano figures, our sales volumes were higher on a quarter-over-quarter and year-over-year basis. Our export volumes in Brazil remained strong in the period. Better sales performance in Brazil quarter-over-quarter reflect demand for uncoated and cut size while on the year-over-year reduction in Brazilian sales is led by the coated paper segment. Suzano packaging volumes recovered from the maintenance outage and increased 7% versus the previous quarter. In terms of pricing, prices from sales in Brazil reduced 2% on a quarter-over-quarter due to seasonality and product mix, but were 2% higher on a year-over-year basis. Prices on other external markets suffered by our Brazilian operations, reduced 6% quarter-over-quarter and 10% year-over-year, reflecting challenging market conditions across all regions as well as FX effects. Prices in dollars for Suzano packaging grew 2% quarter-over-quarter, reducing 1% in reais due to FX effects. Our EBITDA has reached BRL 542 million in the quarter, an 11% increase quarter-over-quarter and a 10% decrease year-over-year. On a quarter-over-quarter basis, we have had improvements in our cash costs in Brazil and also in the U.S., higher sales volumes and on the down side, lower prices in our export markets and unfavorable exchange rate. On a year-over-year basis, the decrease in EBITDA is mainly due to lower export prices and exchange rate. This is our first positive quarterly EBITDA for Suzano packaging. Looking ahead to Suzano's Paper and Packaging business performance, we have planned maintenance outages in Limeira and Suzano mills in Q4, which would have an impact on costs. During the Limeira outage, we will finalize the implementation of a series of improvements at the mill, which will upgrade the site's sustainability attributes and reduce its pulp and paper cash costs moving forward. Ex outage, we expect costs to be stable in the next quarter for all our paper operations and sales volumes should increase in line with the historical seasonality for the period. We expect a stable sales prices in Q4 and better regional mix due to higher sales volume in the Brazilian domestic market. Suzano Packaging EBITDA will continue to improve in Q4 and beyond. Now I'll hand over to Leo, who will be presenting our pulp business results. Leonardo Grimaldi: Thanks, Fabio, and good morning, everyone. Let's now turn to our pulp business unit, where I'd like to share some highlights for the third quarter. The early July announcement of potential 50% tariffs from Brazilian pulp exports to the U.S., which could compromise the midterm continuity of pulp flows into this market and its customers introduced an unprecedented short-term turbulence in the market. This uncertainty affected logistics streams and reduced visibility for market participants regarding near-term dynamics, which contributed to a deterioration in sentiment and triggering a further drop in pulp prices in China to sub-500 levels. Prices in Europe and North America follow the same downward price trend with the usual lag. As the quarter evolved, when Brazilian pulp was included in the U.S. exemption list, the restored tariff-free access allowed operations to stabilize and ease commercial risk. It's worth noting that although the potential new U.S. tariffs on Brazilian pulp would likely be neutralized over the medium term given the tendency of global pulp markets to rebalance through interconnected trade flows, the initial reaction from pulp and paper participants underscored market sensitivity to trade policy signals. As usual, in pulp cycles, the sub-500 price point triggered a strong buying activity from Chinese customers, including integrated paper producers who also secured significant pulp volumes during the quarter. Our order intake levels in China were abnormally high throughout the quarter, generating backlogs of deliveries, which persist to this day as our sales to the other regions in the world were executed as previously planned for the quarter. We have effectively sold all our production volumes during Q3, keeping our inventory stable in line with our commercial strategy. Our invoice volumes were, however, impacted by our announced production curtailment, which started in July in the last 12 months. We have announced 3 rounds of price increases for all markets starting August, which are being implemented as we speak, but still not yet reflected in our third quarter's invoiced prices due to the carryover effect on our higher-than-usual backlog, as well as the lagging effect in Europe and North America. Looking to the right side of the slide, despite strong volumes, a combination of lower prices in U.S. dollar terms and a less favorable FX resulted in a BRL 4.5 billion EBITDA for our pulp business unit, equivalent to 49% EBITDA margin. Now looking forward, I would like to highlight the following points. In China, following our strong sales performance in the previous quarter, October order intake also reached high levels with all of our customers confirming purchases with a new $10 price hike, including integrated paper producers who keep buying market pulp. As these orders were received or closed in the last days of October, you probably saw that, that's already reflected on today's index publication. Since September, paper and board production in China has continued to grow, driven by seasonally higher demand during this time of the year and supported by exports of coated paper, tissue and carton board that exceeded levels seen in the same period of 2024. In China, price increases were announced by paper and paperboard producers for November across most grades. Although this is still in the process of being implemented, these moves may indicate a turning point in paper pricing dynamics. Still on the outlook for paper pricing and pulp demand, September brought yet another shift for Chinese producers. Stricter regulations on imported recycled grades, which represent over 3 million tons of furnishing to this market, prompted domestic pulp producers to fill the gap using unbleached BCTMP and other mechanical pulp grades made from local hardwood, which has consequently driven up demand for local wood. In addition, wood chip demand in China is being fueled by the ramp-up of new integrated capacities launched since late 2024 as well as the restart of some of Chenming's operations. Despite uncertainties around local wood prices and its full market impact, these developments are expected to intensify demand in the coming months and further pressure wood chip prices. We continue to monitor wood cost dynamics in the region as rising demand for Chinese wood chips also supported by tighter recycled fiber imports points to a more favorable paper pricing environment and higher cash costs for Chinese market pulp and integrated paper producers. All considered, we expect that pulp prices will continue to move up from the current levels. During the next months, we will seek the implementation of the remaining part of our price increase announcement, meaning $20 on a net basis, which were still not implemented. Volume-wise, as we progress through the fourth quarter, we continue to allocate our targeted volumes across all regions with full confidence in closing 2025 as planned. On the supply side of the equation, it's important to notice that hardwood pulp prices have remained below the estimated cash cost of roughly $600 per ton for 13 consecutive months. According to a leading consultancy in our sector, over 15% of global hardwood market pulp production today is operating underwater, and softwood pulp producers are facing an even greater pressure. Zooming into Europe, producers have now enjoyed 1 year below breakeven levels considered their regional sales only, and we estimate that more than 25% of European capacity is currently unprofitable, all based on local delivery costs and the European price index net of rebates. As I have stated in multiple occasions, I view this scenario as completely unsustainable and believe that more significant supply side adjustments are likely to take place going forward. Still on the supply side, just this week, a major Brazilian competitor has announced further capacity swings to dissolving pulp, taking approximately 600,000 tons of paper grid pulp out of the market in '26 when compared to 2025, which should improve the S&D fundamentals for the upcoming months. With that said, I would now like to invite Aires to address our cash cost performance for the past quarter. Aires Galhardo: Okay, Leo. Thank you very much. Moving to next slide. The cash costs, excluding downtime in the third quarter came in at BRL 801 per ton, making a 4% decrease compared to the second quarter. The most significant driver of this reduction was the lower cost, the lower wood cost mainly due to improved wood quality, resulting in a lower specific consumption and operational efficiencies in harvesting and logistics. Additional contributing factors included lower consumption and price of key inputs such as caustic soda, chlorine dioxide and lime, reduced energy costs, especially for natural gas, driven by the decline in the Brent price and FX appreciation, which lowered the cost of dollar-denominated foods in local currency. When we compare to our cash cost to the third quarter in '24, the cash cost decreased 7%, reflecting gains from operational efficiencies, input cost reductions and scale. The key highlight was the broad contribution of Ribas units, which supported improvements across all cash cost components. The highlights of improved performance were wood costs, which saw the most significant reduction driven by shorter average ratios, better performance on the field and a lower diesel price, which scale gains also helping dilute indirect costs and lower input consumption, especially caustic soda and fuel oil, supported by operational improvements and fuel to gas conversion in the lime kilns at the Ribas and Imperatriz mills. Looking ahead, we are pleased to share that the cash cost production ex downtime, is already running below the BRL 800 per ton mark. This solid performance give us confidence that we will deliver in the fourth quarter '24-'25. The most competitive quarterly cash cost of the year, while also supporting a full year average close to the level recorded in fourth quarter '24. Now I hand over to Marcos to continue the presentation. Marcos Assumpcao: Thank you, Aires. Good morning, everyone. So I'll start with the leverage. Our leverage in dollar terms ticked up to 3.3x. Despite our net debt remained stable in the quarter, our EBITDA last 12 months declined mainly because of lower pulp prices. In terms of our net debt, as I mentioned, it remained stable on a quarter-on-quarter basis, and I would like to highlight that we continue to generate positive free cash flow throughout the quarter, and that we saw some nonrecurring events impacting our liquidity and leverage in the quarter, namely the wood deal that we did with Eldorado and also the premium we paid for the repurchase of the bonds of 2026 and 2027. These events totaled close to BRL 1 billion. In terms of liability management, we did a lot of different transactions with a highlight of the issuance in September of $1 billion new 10-year bond for Suzano issued at the lowest corporate spread ever for the company, and we also repurchased the bonds maturing in the short term, 2026 and 2027. The result of that is that we were able to reduce our short-term maturity risk, and we also were able to increase our average terms of our debt from 74 months to 80 months without changing the average cost of our debt, which remains stable at 5%. Moving to Slide #8. We highlight the healthy hedge portfolio that we have at this point with a put option of BRL 564 and a call option above BRL 650. Our total portfolio is at $6 billion. And if we were to -- if the BRL remains stable at BRL 532, which was the level of the closing of the third quarter, we would have a positive cash impact of nearly BRL 2.5 billion in the upcoming 2 years, including the fourth quarter, with the impact of positive BRL 800 million in 2026. Moving to the next Slide #9. We would like to reinforce our guidance for CapEx for 2025 at BRL 13.3 billion, which implies a CapEx of BRL 2.9 billion in the last quarter of the year. Now I would like to hand over to Beto for his final remarks. João Fernandez de Abreu: Thank you very much, Marcos. A couple of things that we understand that it's absolutely key to send as a final message regarding the next couple of quarters. So looking ahead, as I said, we will keep focusing the whole team in the cash production cost, not only for the fourth quarter, but we understand that, that must be attendance in the way that we manage the business, and this is dealing with something that we control to be prepared for any kind of scenario in the long term. So that's the first thing. The second one is that we have a couple of investments that we made in the last, mainly a couple of 2 years. As I mentioned, Suzano Packaging. There's a new tissue mill in Aracruz that just start up and also keep working in the progress to the closing of the JV with K-C. So this is an investment that we have made that we must keep working to gradually improve performance in packaging, in Aracruz, but make sure that we will extract the values and the efficiency that we mentioned when we signed a JV with K-C. So having said that, the focus is extracting value from the investment that we have made already and not putting other initiatives on the table. So how to summarize this is, focus on what we control. We keep reducing cash cost and also making sure that we will extract the value from the investment that we have been making. Having said that, I will open for the questions. Operator: [Operator Instructions] Our first question comes from Caio Ribeiro with Bank of America. Caio Ribeiro: So I wanted to dive into a little bit more detail on your view on the dynamics of wood chips and softwood in the Chinese market specifically. So first of all, I wanted to ask you if you've noted any meaningful changes in terms of the prices of domestic wood chips in China as a result of all of the supply additions that we've been seeing coming from Huatai, Nine Dragons, and in particular, Chenming's announced resumption, right? And whether that has had any meaningful impact in your perception on the marginal cost of production of pulp in China? And then secondly, in terms of softwood, right, clearly, the dynamics for that fiber have been weaker in comparison to hardwood with prices dropping, while hardwood has been on a recovery track. And our perception is that this has largely to do with an abundance of this type of fiber, right, softwood in Chinese markets as a result of higher domestic production. So I wanted to ask whether you've seen any meaningful changes there in terms of domestic producers in China perhaps reducing softwood output as a result of the recent drop in softwood prices, and whether that incentive from customers to switch from softwood into hardwood is still present, or if there have been any changes there given that reduction in the spread between both fibers? Leonardo Grimaldi: Caio, this is Leo here. Thank you for your questions. Regarding wood chips, yes, we have seen an uptick in the prices, not only of the Chinese wood chips, but also of imported wood chips in this last 2, 3 months. Imported wood chips on a BDMT basis have increased almost $10, which would generate roughly an effect of $20 in the cash cost of bleached hardwood production, while Chinese wood chip prices as per our monitoring has increased from $25 and in some cases, $40, and that's always a double effect, approximately on the cash cost of production. So your assumption is aligned with ours that yes, this will create an effect in an increasing cash cost of Chinese producers, both of market pulp and also integrated paper and packaging producers, which we are seeing that are now and more intensely pushing for paper price increases. I believe obviously, this is a consequence of higher costs in their season, and that should support the S&D fundamentals for hardwood for the upcoming months. Regarding softwood, yes, indeed, it's weaker. It seems to be trending in the opposite direction than hardwood for the past months, especially in China. I think there are 2 effects. First is the availability of the unforeseen softwood chips at a very competitive price, in some cases, at the same price as hardwood chips since the beginning of this year due to the infected wood and the policy to try to cut and use this wood as soon as possible. We believe that this wood will last more 2 to 3 quarters in the market. And that is putting pressure on softwood both by some integrated players, now producing softwood in their system, and they used to buy it, but also having less -- putting -- leaving less space for softwood pulp. And the second factor, which I would like to call your attention is the fiber-to-fiber movement. Obviously, even with the gap that has reduced from over $200 to roughly $150, $160, it's a huge incentive still for fiber substitution. We see a lot of traction, a lot of action in China, many, many customers interested in seeking our support in this journey. So in terms of how can they be less and less dependent on softwood and more and more dependent on hardwood fibers like ours. So I think it's a double effect that is making the scenario for software producers a bit worse than what we see in hardwood today. Operator: Our next question comes from Daniel Sasson with Itau BBA. Daniel Sasson: My first question goes to Aires. Aires, if you could comment a little bit about your cash costs. You mentioned that you're running already below BRL 800 per tonne in the fourth quarter. But considering the deal you announced with Eldorado that -- and the TOD and that you are not that far from your expected cash cost level in 2027, according to our TOD, if there is room for additional improvements or lower cash costs in the medium term? I'm thinking more specifically about 2027, not to anticipate what -- any revisions you might make to your TOD, but to think if this cost-cutting trajectory is going to be somewhat linear throughout 2026 and 2027 or if you have specific events that we should see maybe in 2027 so as to drive your costs down? And my second question to Grimaldi. Thank you so much for the comprehensive backdrop that you viewed for pulp prices. Grimaldi, if you could just discuss a little bit about your expectations for the main topics to be discussed in 2 weeks at the London Pulp Week or in 1 week at the London Pulp Week -- last week, Chenming's stoppage was maybe the most important topic. And exactly, you mentioned in your speech that you're thinking -- that you are still hopeful or optimistic about price increases going through. Is there anything that changed over the past couple of weeks, so as to give you or to leave you more optimistic given that the industry was not able to absorb the price increase attempts in September and October, right? Is there anything that changed at all? Or if you could explain why you are optimistic or more optimistic now than you were in the past maybe 2 months? Aires Galhardo: Daniel, thank you for your question, Aires speaking. Considering the deal with Eldorado, we start to supply our facilities in Mato Grosso do Sul with this wood probably in January. Then we do not suffer any impact, just probably reschedule the sequence that we receive at the facility in the fourth quarter to rebalance consider this new volumes. But the main reason of this deal that give you our rationale to do this was that our reduced -- our consumption per ton of wood, consumption wood per tonne in the coming years. When we compare with your previous analysis, we are considering in the business case and with the first samples that we have of this wood, a reduction of around 4% the necessity of wood per ton in Mato Grosso do Sul. If you consider that we will supply on an average, 18 million cubic meters per year, we will need 4% and less for the coming years to produce the same amount of pulp. That's the rationale that you have to do this deal. We'll try to explain better in the Suzano days in the next month. Then the rationale to next year and the other one is to running always below 800 tonnes per quarter. Of course, we can be affected with some sched off downtimes that will affect in a specific quarter. But the idea that we have in our plans that our average will be below 800 tonnes per year. Leonardo Grimaldi: Okay. And Daniel, now it's Leo here. I'm going to answer the second part of your question regarding expectations for London Pulp Week. I think first, expectation, which is more and more clear is that this market scenario is completely unsustainable. And as we are going to a market that is a core of production of softwood, I think this tonne is even higher than what we see or sense when we're talking about South American pulp production. It's completely unsustainable, even if we consider European cash costs and sales into the European market. Again, as I stated in my speech, as per our calculations, more than a year already bleeding 25% of the local hardwood production. So this is unsustainable and the fact that the market is unsustainable as is, I think, will be one of the main factors being discussed during London Pulp Week. I also think that what will be a topic is the rhythm of unexpected closures. As I mentioned during the last call, we saw a very low level of unexpected closures in the first half of this year. And our line of thought is that all the instabilities around the world and geopolitical issues made some decisions not to be taken in the short term as many were on the wait-and-see mode to try to see what could be the scenario after there was a clear view on tariffs. As this is now clear, we see that the addition of this unsustainable scenario with a clarity in terms of tariffs will speed up the amount of unexpected closures, commercial downtimes that we see in the market. And in fact, as per our controls according to consultancies numbers, if we compare the unexpected closures of beach chemical pulp in the first half of the year, and just the 4 months of the second half of the year, meaning until October, there is already a 40% increase on disclosed unexpected closures. So our thoughts or our line of thought seems to be executing or seems to be happening as we speak. And we again believe much more has to happen under this very depressed pricing scenario. Now regarding your question on my optimism a quarter ago and today, I think my optimism level is slightly better now despite I was optimistic in the last quarter. Thus, the reason we have announced a sequence of 3 price increases. And the reason why we did that is because, obviously, we were monitoring order inflows in all markets and in China, more deeply even with the purchasing patterns of integrated paper producers, the amount of capacity on the water in the world as we speak, and this feeling of optimism now has been a bit upgraded, if I could put it this way, due to the fact that we're seeing a reversion in the cost of wood chips to Chinese producers. As I mentioned to Caio previously, we have seen this $25 to $40-ish increase on the prices of BDMT, meaning an impact of anywhere from $50 to $80 in the cash cost of Chinese producers who are using Chinese wood. And this obviously put pressures in the whole system and establishes a new grown for what they can accept or base their decisions in terms of timing that they buy market pulp rather than consume local wood as well. So it's my optimism increased a bit, I would say, due to the effect of this new scenario regarding regulations on recycled fiber, as I mentioned, and wood increase. It is, however, important to say that my optimism is somehow limited. We see gradual price increases, but under this oversupply scenario, unless something major happens on the supply side of the equation, my optimism is not as big as you can imagine. So I would just like to point this out. João Fernandez de Abreu: I'm sorry, just complementing the first question regarding the TOD that you asked. Just a remark here, we are completely committed with the guidance that we shared with the market regarding what we have to deliver by 2027 and confident that we're going to be able to deliver, okay? Operator: Our next question comes from Rafael Barcellos with Bradesco BBI. Rafael Barcellos: Beto, I wanted to use one of your highlights during your speech. I mean, congratulations for the results in your U.S. Packaging business. It's good to see that you are on track to keep delivering in this new business. And my first question is exactly about it. I mean, what can we expect in the coming quarters? Or do you have any sense of EBITDA contribution from this business for next year? And ultimately, what is the full potential in the long term for the business? And the second question, Beto. The second question is about Lenzing. If I'm not wrong, you can already exercise the option to acquire an additional stake in the company. So could you -- could you please share with us your overall thoughts on the investment? I mean, other than that, after roughly a year, I mean, what has changed in terms of how do you see Lenzing as part of your portfolio? João Fernandez de Abreu: Thank you very much. Yes, since October, we already have the option to execute if we want, as you know. We are not considering to use this coal in the short term. We're still with the team, analyzing all the trends, all the investment in further capacity in the business, mainly on dissolving pulp globally. This is a market that it's also facing a business environment in terms of competition, mainly in Asia, which we should further analyze. So I'd say that the best answer for Lenzing now is we will keep as it is with the 15% and keep analyzing the business and keep this study. There is no plan for using the coal in the short term. Regarding Suzano Packaging, as I mentioned, we are very glad to be anticipating, I would say, the business plan. Firstly, in terms of positive EBITDA after taking a business that used to have a negative EBITDA. A lot of initiatives have been implemented on the commercial side, on the procurement side, on the logistics side. On the logistics side, we have been able to take the advantage that we have a strong logistic operation in U.S. that's led by Leo's team in U.S. and there's our synergy on those negotiations to do all the logistics for the business. We were able also to adjust the team for the reality that we have in the company and in the market. I would say that it's still a lot to come. Fabio has a clear plan for the next 2 years, not only for generating positive EBITDA, but also generating the amount of cash that we are expecting for the business. It's a small business, as you know, but it's helping us a lot to understand the market, of course, to extract value from the unit, but also to understand what is for a company moving abroad. Having the chance to implement our principles in terms of management in a different future. I think we are also learning a lot in Pine Bluff that will help us on the K-C JV in the future. So I cannot disclose a number in terms of next figures, but I would say that we are very glad regarding what we have delivered so far. Operator: Our next question comes from Caio Greiner with UBS. Caio Greiner: My first question on pulp. I wanted to go back to that discussion on the long-term fundamentals that Suzano discussed during the Investor Day. I mean we've seen a significant amount of capacity additions in China in 2026, but pulp production in China still seems to be growing only gradually. Still, I guess, the market in general and investors have been really concerned about this idea of China becoming the dominant player in the industry. And again, I know you provided a deep dive on this during our Investor Day in 2024. So I just wanted to understand if there are any updates on that structural view being that maybe a tighter wood chip market as we already discussed, anti-involution ideas in China. So I guess the question is, since last year, have you become more or less concerned at the margin regarding the structural fundamentals for pulp? The second question on Kimberly-Clark and following up on this last topic. Just maybe Beto or Fabio, if you guys can give us an update of how the asset is performing. How -- if you have been able to dig a bit deeper into each asset that you're acquiring, if there's more clarity on the synergy potential, fiber-to-fiber potential? Or maybe if you got the chance to understand if there are any assets that don't really fit quite well into the portfolio that are likely to be sold. Anything that you could comment here would be really helpful. Leonardo Grimaldi: Caio, this is Leo here. I try to answer your question, not taking color out of our Suzano Day 2025 as we are planning to update completely the scenario that we presented last year, bringing insights on the verticalization effect of Chinese production in our hardwood market. And again, it's important to say that as we have local market intel teams in most major markets, China included, this anticipation of view of trend makes us, I guess, more prepared for any kind of reaction or action that we need to take in terms of what's coming ahead of us. So our view, I would say, is quite neutral at this time. I think the same trend that I have presented to you and to all of you during our last investors call is maintained. We see -- we still see this verticalization affecting our market. But as you mentioned, we are not seeing this pulp production yet growing. Obviously, when you put all these projects in a time line, still a lot of them, I think the effect we are going to see on a bit more short to midterm, the next 4 quarters, which has 2 ways of looking at this, right? The negative way is impacting, obviously, market fundamentals. And the positive way is a much bigger demand for local wood chips and a pressure that this could further pose on wood chip prices. And again, we have to monitor that. And as we speak and see what's going on is that this market prices that we still see, which are low, despite they're going slightly up from the 494 valley a few months ago, still is incentivizing many, many Chinese producers, paper producers, integrated paper producers to buy market pulp. And this is the reason why we see that pulp production is yet not growing or is not growing, while imports of pulp are booming in the market. You probably saw that hardwood pulp is -- the imports of hardwood pulp is growing more than 11% year-to-date to China. However, I would say that our view remains cautious, right? We are in a cautious mode, which obviously will depend on how we interact and see these moving parts in the wood chip prices in China. And also, as I mentioned, this completely unsustainable pricing scenario and how it correlates to cash costs around the world and will depend on supply side adjustments in the near term. João Fernandez de Abreu: Luis, do you want to jump in and I can complement? Luis Renato Bueno: Okay, Beto. Caio, this is Luis speaking. As we have already disclosed before, during the phase pre-signing, we have visited all the mills around the globe, and we were very positively impressed at that time with the conditions of the plants and also housekeeping and everything. So at this stage, we have received more information and have been talking to KC given the constraints that the process requires. And we are more positive with the initial estimates that we had. And as time goes by, we will have more time to fine-tune the estimates and to build a business plan for closing. So our idea is when we close the deal, we will have already a business plan for the coming 2 years with the right level of detail on which are the levers to generate value on the deal. João Fernandez de Abreu: Just to complement on that, we see the value creation in the business that we mentioned. It's very clear for us the elements that we have analyzed before the deal and maybe further elements that we will find, and we are already discovering. I would say that our main concern is not regarding the assets. If there's opportunity to optimize the asset, we will do it. If there's opportunity to optimize geographies, we will do it. This is something that usually is not in the agenda of a big multi-national, but we will consider portfolio management as if necessary. I would say that the main elements that we should take into account against not the assets, it's not the carve-out that we have to do, which is difficult. But it's putting 2 cultures to walk together with the same values, but having the ability to extract the best of each one. That's the main challenge that this organization have in this process. Operator: Our next question comes from Yuri Pereira with Santander. Yuri Pereira: I'd like to ask maybe if you have any information about the floods in Southeast Asia, if you see any impact -- any further impacts on wood prices in China, if you have any information, please? And regarding dissolving pulp, do you see more shifts like Bracell's one for the next year? If you can recap for us what's going on in the dissolving pulp market to result in this shift or if it's only low hardwood prices per se? Leonardo Grimaldi: Yuri, this is Leo here. I'm going to answer both questions. Obviously, floods have influenced also wood chip prices in the short term. I didn't mention it because obviously, this is very, very punctual and short-term-ish, first in the southern part of China. And now as you probably saw in Vietnam 2, 3 days ago where the daily rainfall was a record all-time high. But, yes, obviously, this is also influencing wood chip price and its dynamics. In terms of dissolving pulp, what we see is that today, prices in DWP is trending higher than the historic average of delta between hardwood and DWP over $250, and that's incentivizing this flex capacity to swing in that direction. So in this case, yes, we expect that possible new flex capacity moving or shifting from hardwood, which, as I mentioned, is unsustainable to dissolving is possible. Operator: Our next question comes from Lucas Laghi with XP. Lucas Laghi: I just have one, I mean, on CapEx. But could you please provide us an update on -- specifically on expansion CapEx. I mean, if we exclude the BRL 935 million expected from your 3 main projects, I mean, according to your latest presentation deck and considering the BRL 1.6 billion in the guidance for 2025. I mean, is it reasonable to expect that this line should reduce in the next year proportionally to this reduction on the 3 main projects that you guys are concluding this year? Or I mean should we expect Suzano to continue to approve new competitive projects like those ones already in 2026? And if you could also link your rationale for this -- the approval of this competitive related projects in terms of market conditions. I mean, it would be important as well for us to better understand how to think of this expansion CapEx line going forward? Marcos Assumpcao: Lucas, Marcos here. We will update the market with our guidance for 2026 CapEx by the end of this month. But I will try to give you a little bit of a trend, what we see in terms of CapEx. As you mentioned, we still had in 2025 disbursements for the Cerrado project. And we also had the conclusion of some growth projects that we undertook in 2025, namely the Fluff project at Limeira mill, which will start up in the fourth quarter. Also the additional capacity in tissue at Aracruz Mill and the new biomass boiler at Aracruz as well. So going forward, we should expect a declining trend in terms of CapEx for next year as we will have lower disbursements and also we'll have less projects in our pipeline. Operator: Our next question comes from Henrique Marques with Goldman Sachs. Henrique Tavian Marques: So just regarding pulp prices, I mean, Leo, you mentioned that pulp price situation is unsustainable. But at the same time, the pulp price cycle has been -- the hikes have been very gradual, right? So I think this is the main difference from what we've seen in other cycles. At the same time, we have APP OKI entering the first half of next year alongside other projects in China. So just to get a sense of where exactly do you see pulp price cycles in the future? Like do you think we are seeing a derating of this range of prices? Like in the past, I mean, we would usually see prices going above $700 per tonne in both cycles. And now the -- I think it's hard to think that we'll see prices reaching $700 again. So just wanted to get your sense on what exactly do you see these price ranges going forward? Leonardo Grimaldi: Hi, Henrique, thank you for this question. It's a tricky one to answer as obviously, it has several parts that are connected to our commercial strategy and are very sensitive in that case. But let me try -- and I'm going to give a lot of color in terms of how we are seeing the variables that can change this game in the short term and looking forward during our Investors Day. But in principle, they all originate from the fact that we have now been living a scenario where for several, several months the industry is bleeding, right? And several things could happen to change this scenario. First is, again, reintensifying of permanent closures. We have seen a decline in permanent closures in BCP during this year. Again, we suppose that a lot of that has to do with the uncertainties that the geopolitical and tariffs have created in the decision-making process of this extremely high cost and unsustainable producers that we see in the Northern Hemisphere. Second is the unexpected downtime rhythm going forward. Even though I mentioned that we see an uptick already in the 4 months of the second semester, compared to the first semester of this year, it's still low compared to previous years. For the same, we expect or we suppose for the same reasons of the one that I mentioned regarding permanent closures and all the uncertainties during these tariffs and geopolitical timing. This, again, is unsustainable and something should or could happen in that direction. Third point that could change these dynamics is the timing of the new projects being implemented. Today, we have official news regarding OKI, which are the same as you have. But obviously, all of this more challenging scenarios can stimulate different actions in terms of time to market of new projects. And in the same token, time to market of the verticalized projects in China or their ramp-up curves, right? So that is a variable that we have to follow very closely and could change completely the game as we look forward. And fourth and very important as we talk about verticalization in China and the impact it has on reducing demand for hardwood pulp. But there is a huge opportunity, which is what we see on the Western world. More than -- or 2/3 of the pulp produce in the world is integrated into paper and packaging production. Many, many old sites, old mills, which were the origin of paper production and board production are in Europe and in North America and persisting this trend or this pricing trend, we believe that these mills are unviable or unsustainable. So we believe a lot in the thesis of deep verticalization in the western part of the world as a consequence of what we're seeing in China as we speak. Operator: Our next question comes from Eugenia Cavalheiro with Morgan Stanley. Eugenia Cavalheiro: I wanted to explore a bit more what you're seeing as growth opportunities in the paper market in the U.S. And also on the profitability side, where do you feel like -- what level you feel like it's reasonable for the company to achieve? And how far are you from that right now? Fabio Almeida Oliveira: Eugenia, it's Fabio here. Beto, I can take that about the U.S. We're still a very small player here in the American market. We have 45% of the SDS market. So still plenty of rooms to grow. At the moment, what we are doing here, Eugenia, is focusing on our growth in foodservice. It's trying to diversify a little bit from the liquid packaging board market that we are concentrated, and it's doing well. Regarding business moving forward and our profitability moving forward, we cannot provide any color on that, but I would like to say that there's still lots of opportunities for us to improve in terms of costs here, and we're going to be addressing that in the next quarters and moving in the next year. João Fernandez de Abreu: Thank you, Fabio. Absolutely aligned with what we said in the beginning, which is focus on efficiency. So as Fabio said, a lot of -- still a lot of opportunity to improve portfolio and cost in the current facility that we have in U.S. And Eugenia, there is no further, let's say, inorganically alternative for U.S. in the short term at this time. So we are again completely focused on extracting the value from those assets that we have a prior already. We finalize the call here. And I want to remember that we have the Suzano Investor Day 2025 on December 11. So we will be great to have all of you with us. So thank you for attending the call. And the RI team is always available to clarify any further questions. Thank you very much. Operator: The Suzano S.A. third quarter of the 2025 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.
Helen Hickman: Good morning, everyone, and welcome to Global Fashion Group's Q3 2025 Results Presentation. I'm Helen Hickman, CFO of GFG, and I'm here today with our CEO, Christoph Barchewitz, who will join us for Q&A. Today, I'll provide an overview of our third quarter results and full year guidance. After that, we'll open it up for questions. Starting with a summary of our Q3 performance. Our NMV was broadly stable year-on-year with 0.4% decrease on a constant currency basis. Our gross margin improved by 1.3 percentage points year-over-year to reach 46.1%. Our adjusted EBITDA margin benefited from the gross margin expansion and disciplined cost management to deliver a strong 4.4 percentage point improvement year-over-year to a positive 1.6%. This marks our first positive adjusted EBITDA on a last 12-month basis for our current footprint. Let's take a closer look at our group KPIs. For over a year now, we gradually slowed the rate of active customer decline each quarter. In Q3, active customers declined 2.3% year-over-year to 7.4 million, driven by fewer churn customers in all regions. Order frequency increased 0.4% year-over-year to 2.3x, marking the first increase since Q1 '23. In Q3, we generated EUR 239 million of NMV, which is broadly flat from last year on a constant currency basis. The group's marketplace participation increased 2 percentage points to 39%, supported by ANZ's fulfilled by offering. Average order value rose by 1%, primarily due to price inflation, which was partially offset by reduced items per order. Orders declined by 1.4% year-over-year. We continue to experience FX headwinds this quarter from a significant impact of the Australian dollar remaining weak, down 8% year-on-year against the euro. This means we had a lower euro reported value for NMV, and average order value earned in Australia, our largest market. Moving on to revenue and margins. Our revenue decreased by 1.5% on a constant currency basis year-on-year. Our continued gross margin improvement resulted mainly from a higher share of marketplace and platform services across all regions. This flowed through to improved our adjusted EBITDA margin, and combined with cost reductions led to a strong 4.4 percentage point improvement year-over-year. Our robust year-to-date performance has resulted in an adjusted EBITDA loss of EUR 7 million, representing a significant EUR 20 million improvement versus last year. Importantly, we achieved a major milestone for GFG by reaching an adjusted EBITDA profit of EUR 2.4 million on a last 12-month basis. Now let's turn to our regional performance. Both ANZ and LatAm have continued their positive trends by delivering top line growth each quarter this year. ANZ NMV grew by 4.9% and LatAm by 3.8% year-over-year on a constant currency basis. LatAm also made return to active customer growth in the quarter. SEA remains challenged and a focus area for us to stabilize and turn around business. All regions delivered year-on-year improvement in gross margin. Now let's move to our cash flow for the quarter. Our normalized free cash flow improved to EUR 11 million year-on-year as it benefited from a EUR 7 million improvement in adjusted EBITDA and a EUR 6 million CapEx reduction in part to the completion of our 2024 OWMS project investment. We had EUR 6 million working capital outflow, which was elevated versus last year due to payables timing differences. Normalized free cash flow for Q3 was negative EUR 15 million. Looking ahead, Q4 is our largest quarter along where we seasonally generate strong positive cash flow. We continue to have a solid liquidity position with EUR 136 million of pro forma cash and EUR 85 million of pro forma net cash at the end of Q3. Pro forma net cash excludes our outstanding convertible bond liability and other smaller loans. Since the Q3 close, we repurchased EUR 6.7 million more of the bond at a discount. We remain open to considering all opportunities to strengthen our liquidity, including potential debt financing and repurchases of the remaining EUR 40.9 million of outstanding bonds. Now looking to the rest of the year. We have delivered on our expectations to be year-to-date. We are now narrowing our NMV expectation for negative 5% to positive 5% to negative 2% to positive 2% on a constant currency basis. This equates to around EUR 1.01 billion to EUR 1.06 billion. Given our positive trajectory on adjusted EBITDA and considering Q4 is our most important trading quarter, we expect to achieve our breakeven target and deliver single-digit euro million results of adjusted EBITDA for the full year. Our full year expectations that leases, working capital and CapEx remain unchanged. We will share our expectations for 2026 at our Q4 and full year results presentation in early March. We'll now open the call to your questions. If you'd like to submit a written question, please take on the speech bubble at the bottom of the screen. Thank you. Operator: [Operator Instructions] We will now take our first question from Anne Critchlow of Berenberg. Anne Critchlow: I've got a few questions, so I'll ask them one by one. First of all, on the level of inventories at the end of Q3. I just wondered how those compared to last year? And also, if you could comment on the composition of those inventories in terms of aged stock and stock being in the right place and the right time and so on. Helen Hickman: Yes, of course. So our stock in quarter 3 this year is broadly flat with where we were this time last year. With regards to quality, we are confident in the quality as we are heading into obviously our busiest trading season across all of our regions. And our aging profile is broadly the same as we disclosed at the H2 results on our aged inventory and for us, we define that as over 180 days being about 14% of our total stock. Anne Critchlow: 14%. And I guess, much depends on Q4. But with regard to normalized free cash flow for the full year, where would you expect to be compared to last year's EUR 42 million outflow at this point? Helen Hickman: So obviously, yes, I think you hit the nail on the head, because obviously, a lot depends on the coming couple of months with regard to that being our seasonal peak. But if we sort of go through the component parts, we obviously are guiding into a breakeven to single-digit positive adjusted EBITDA so that will give us a significant improvement year-on-year on our profit flowing through to cash. Last year, we did have significant inflow sort of over EUR 30 million on working capital. And we're saying that this year, that will definitely be muted and closer to sort of a breakeven. And then we've also given an indication with regards of what our leases will remain broadly constant year-on-year and our CapEx is running at about EUR 15 million. So all of those will then give us constituent parts to normalize free cash flow. Obviously, the quantum of the profit is the key moving items in there and the delivery of where we have over the next couple of months will define that. Anne Critchlow: That's very helpful. I've got a question on CapEx outlook for next year as well. So I understand that various systems investments have been completed now. Do you have a sense of where CapEx could come down to next year, please? Helen Hickman: I mean we'll obviously provide all of our next year guidance when we announce Q4 and full year in March. But I think it's safe to say we have no significant infrastructure projects on the horizon in the short to medium term. So our CapEx will definitely be concentrated around our internal technology CapEx, which again makes up the majority of the EUR 15 million this year. Anne Critchlow: Very helpful. I understand the new -- a question on Southeast Asia. The new Chief Executive has started only in September. But I think previously, you talked about focusing on the top 30 brands in Southeast Asia. So I just wondered if you have a sense of early thoughts on what the potential strategy might be first impressions and possible turnaround. Christoph Barchewitz: Yes. Thanks, Anne. I'll take that. So we -- as you say, we have our new CEO for the region in the seat since September. So it's obviously early days for him. But what his mandate is and the objective obviously is to continue the turnaround actions we initiated already quite a while back. The activities we focused on both on the commercial side, so you mentioned the top 30 brands and really curating the assortment more narrowly around the 4 categories and the most relevant brands. That is continuing, and it's also yielding results. So we see better results in the bigger brands than we see in the longer tail, and that's obviously part of the deliberate strategy of discontinuing along the long-tail assortment. And then also on the marketing side, we're seeing some progress in terms of both our efficiency, which protects our bottom line to some degree in this turnaround as well. So I think we're broadly on track with the turnaround action. We don't expect the significant change in direction. And from all I know we -- I would definitely be very confident in the leadership team in place now there, which is driving all of these actions. So I think, as always, these things take a little bit of time to come through. The one that has the longest kind of period is obviously the buying activity since we have quite a bit of forward commitments. We don't think we're in any way overcommitted, and we've brought down our commitments for this year relative to where we were at the beginning of the year quite substantially. And we're taking a cautious approach for our retail buying and concentrating that on the largest brands for 2026. And I think as you know, we have a very large share, over 50% of our business in the region coming from marketplace. And so from a balance sheet and risk management perspective, we are in a quite favorable position there, and that will also protect cash and help us manage profitability overall. Anne Critchlow: That's pretty helpful. So you mentioned the share of marketplace giving you some protection. Does that confirm your sort of view in patience in turning this around? And how many years do you think you would give it until you might consider an exit from that region? Christoph Barchewitz: Yes. I think -- I mean the -- while we're obviously not pleased with the top line trends and the double-digit declines we've not seen for quite a number of quarters is not where we want to be in and there's many factors that we've also covered in the past calls that affirm that. But I think we see definitely a core base of the customer and a core assortment that is very relevant and that is an attractive business to pursue. One thing we don't talk about as much that I think is also very important is we have a quite sizable B2B business in the region, which helps us on the overall financial profile. And so when you look at the last disclosed regional EBITDA we have is LTM for June this year, and that was under EUR 1 million negative on EBITDA. So it's not like despite all the challenges on the top line we are improving on the gross margin side, and we are managing costs, be it marketing investments and other variable costs, but also the fixed cost base very, very carefully to make sure that the overall, let's say, financial burden on a group is within a manageable range. And we expect that to continue in that way and then obviously improve in the course of '26 and '27. Anne Critchlow: Just got 3 more questions, but I wondered if anybody else wanted to have a go. Operator: And we will now take our next question from Russell Pointon of Edison. Russell Pointon: A couple of questions, if that's okay. First of all, great to see the narrowing of the guidance range for the NMV. That implies obviously -- some good things are not coming quite through as quickly and perhaps there's less negative on some side. So could you just talk about what is a little bit better, what is a little bit worse to narrow that range? Interesting that ANZ and LatAm, the revenue -- the annual revenue growth will decline in Q2. And the second question was in terms of the gross margin, it's mainly mix, which is driving that improvement in gross margin. So therefore, retail margin is flat. So could you just talk about some of the drivers to that retail margin, please? Helen Hickman: Yes. So let me take your first question, Russell, with regards to guidance. So we have been broadly consistent throughout the year and considering we are hitting at that midpoint. So if you think about Q4, we're minus 0.4% and year-to-date, the group we're 0.1%. So given some of it is actually more mathematical in the fact that we've now only got a quarter of trade left. And whilst it's our largest trade to then be reaching the extremities of potentially plus 5 and minus 5, we've been over a quarter worth of trade would have actually made the quarter performance beyond aspiration and terribly bad on the other end. So the narrowing is a reflection of the passage of time and to the fact that to date, where we are at 0. And actually, we still within the quarter, have a relatively large range even to hit the plus 2 for the year minus 2 for the year. And we wanted to maintain that breadth because as you know, it is our most critical, it's also hugely competitive time of the year. So we need to see ourselves to manage that. You're right with regards we've continued to see the growth in LatAm and ANZ. LatAm has come off a little bit compared to where we were at quarter 2. Some of that has been driven by the sort of the change in season and it being seasonally very cold when we're not -- traditionally, it would have been much hotter in Brazil. So some of our winter inventory running out. But on the flip of that, that whilst we're still disappointed with it, obviously, we're seeing a reduction in the decline in Southeast Asia. So hopefully, that covers the way around the top line. With regards to margins, so yes, with regard to our 1.3 increase, again, there's a variety of components. But we're seeing trading margin increase predominantly in LatAm and Southeast and -- LatAm and Australia and some of that driven by actually reduced discounts on a year-on-year basis. This year -- this quarter, sorry, marketplace participation has had a key driver in that 1.3% increase as we've increased our overall participation by 2 percentage points and also was still relatively small. We've also seen a year-on-year increase in our platform services, which has also contributed quite strongly to the gross margin increase in the quarter. Operator: We'll now take our next questing from Antonio, NuWays. Antonio Perez: Could you provide us a little more color on the main cost drivers of the improvement in adjusted EBITDA, please? Helen Hickman: Yes. Of course, Antonio. So they're in line with some of the cost drivers that we've spoken about. So looking around fulfillment efficiencies and capability around picking, scheduling, batching, we've done a lot of work with regards to delivery and improving some of our -- times of our delivery carriers. We have had a continued review of our organizational structures, which we've been speaking about for many quarters, so sort of year-on-year, we're about 10% down in total headcount as a result of organizational design and restructuring. We've even reviewed all of our tech contracts, so it's really a mixture of efficiencies in our fulfillment, cost savings with regards to people and structure, all of our sort of G&A contracts, whether that be tech or more general G&A and also being disciplined around reviewing our leases and we've come out of a couple of more expensive sites, office sites, et cetera. So it's very holistic both operationally and more sort of G&A focused. Antonio Perez: That's super helpful. I have two more questions, if that's okay. What's the short-term plan to turn around Southeast Asia? Is there anything in particular you have in mind that could have a good impact? And also, is there -- maybe this was also asked before, but do you have a time horizon in mind? Or maybe is there a certain point, a certain decision point in which divestment could become an option? Christoph Barchewitz: Yes. Thanks, Antonio. I'll try to address that. So I mean there isn't a silver bullet, obviously, in these types of turnarounds in terms of one activity that would drive all the financial profile we'd like to see. So the challenges that we're facing, we see as really at the core of the activities of the business. So on the one hand, that is the commercial side, the assortment that we're offering, the level of relevance, exclusivity and competitiveness of the assortment. We've had a very broad assortment to cater to different price points, very different audiences across the region. Obviously, between Singapore customers and Indonesian customers, there's many, many differences in their interest, their spending power, their fashion trends, et cetera. But what we're trying to do and have already executed quite a bit on in the course of this year is to really sharpen and focus on the big brands that resonate basically across the region and generally with our global brands as well. So if you look at the side of the app, you will see very familiar global brands has been highlighted as the most relevant assortment. I think Helen has also talked about the freshness of our inventory. We have had -- because of the historical performance sometimes challenges with just too much aged stock. And obviously, that impacts the relevancy to the customer. So bringing in as much newness as possible on the retail side where we do the buying, but also working very closely with the marketplace partners to make sure that the stock that is available for sale on the marketplace side is of the current season, most relevant stock, which has not always been the case. So that's the supply side, if you want where there's much more to be done where we're making some good progress relative to where we were a year ago. And then the other side, on the demand side, what we're trying to move to is a much stronger focus on higher-value loyal customers and really growing share of wallet with those customers. So what that will eventually mean is that we will have a shrinking customer base, but hopefully, a higher spend per customer for the remaining base due to higher frequency and partially also higher price points that those customers are buying. And so we've adjusted our CRM, our VIP program and other things to really focus on that customer side and that demand side. So also, I would say of the two sides of the equation that we're focused on, our operations are very efficient and work well, and we don't have significant issues. There's always room for improvement, but it's not a substantial issue. And our tech is also stable and reliable and not a significant issue in this turnaround. And then the last point I'll add to this is the B2B business where we are serving brands to support sales on the dot-com, and that is something that we will continue to focus on and try to also broaden the customer or the partner base to have a larger number of meaningful partners that can also then leverage the spare capacity we have in the fulfillment centers in the region in a better way. So while we want to turn around the top line of the B2C business, getting a bit more volume from the partners on the B2B business can help with the overall financial profile. And so at this point, we don't have any intention of divestment or anything like that. As always, in any business, we will always reconsider and look at options that present themselves, but fundamentally, we want to improve the core dynamics of the business, and we are confident that we can do that with the team in place, the learnings over the years and also our track record of growing the business in ANZ and LatAm after some challenging periods in those markets post-COVID as well. So I hope that gives you a bit of context of where we're going here. Antonio Perez: This is super helpful. If there's still room for one question, I would like to ask you, in terms of seasonality we -- or I know that Q3 is usually weaker compared to the high peak quarters due to Ramadan or to the holiday season in Q4. But it was this Q3 a normalized weaker Q3, so to say, as usual? Or it was more pronounced or even better? What did you see? What were the trends for the quarter? Christoph Barchewitz: Yes, that's a good question. So you're completely right on the seasonality, and I think one thing always to call out that the holiday period and Black Friday, 11/11 are fixed in the calendar, although even there the day of the week that these events fall on, we see as usually a bit of an impact on how a year turns out or a simple trading period turns out. Obviously, on a Ramadan season, we have a change in the calendar every year. And so it moves earlier in the year, every year. So that seasonality we've obviously seen this year in particular, that the cutoff between Q1 and Q2 in Southeast Asia having an impact. Coming back to Q3 in your question, we have had no abnormalities on a year-on-year basis or any hard or soft comps that would be material. Yes, there's always some details around certain actions, certain events in the market when exactly did a certain campaign fall in the calendar, but big picture, I would say this is a fairly normal quarter that we've seen. Antonio Perez: Maybe just thinking about your last answer to the strategy in Asia. You told us that the continuous focus is to target the core customer base, the loyal, high-value customer base. But we've seen that the, for example, the turnaround efforts in customer numbers in LatAm and Australia and New Zealand have paid off with successful marketing campaigns. Can we expect as well a significant marketing effort to drive or to reconnect or to capture this or engage better with this core customer base? Or will it be more on the price side or the offer side? Christoph Barchewitz: Yes. Thank you. Great question, actually. So we definitely see an opportunity and a need to reinvest into our brands in Southeast Asia. We have very high brand awareness. But I think we clearly need a refresh of what the brand stands for, for the customer. From a timing perspective, we only want to do that when we feel like we have all of our capabilities and our assortment lined up to exactly deliver that. So simply speaking, if we're still going through clearing a lot of a stock it's probably not the right moment to go with a brand campaign that is focused on business, exclusivity, the best global brands, et cetera. So we need to bring that in balance. And that is definitely something that is on the horizon for 2026. And we have seen, in particular, with the "Got You Looking" campaign in Australia that, that can really make both existing customers perceive the brand in a new and different way and also bring back a lot of churn customers or bring new customers to the platform and certainly as a business that's now 12, 13 years old, 14 in some markets, we have had continuous need of reinvigorating the brand and articulating to customers of what the brand stands for. And so this is on the cards for 2026. Don't expect a big one-off investment that goes materially beyond our existing marketing budget or so, but we may have some quarters in which we put some extra marketing investment in and that may delay some profitability improvements by the business. Operator: We'll now take the follow-up question from Anne Critchlow of Berenberg. Anne Critchlow: I've got about 5 questions, please, if that's all right. So just a follow-up on Southeast Asia for background understanding, Do you target different products between the different country sites? So Singapore versus Indonesia, for example, or do you put everything on all of the sites and basically let the customers filter it down themselves? Christoph Barchewitz: Yes. Thanks, Anne, that's a really good question. So this is part of the complexity of Southeast Asia because it is not fully up to us. So the principle we try to apply is all brands, all assortments across all markets. That's the ambition level. But then when you go into the next level of detail, we run into the brands very often having different setups. So a given brand may have a distributor in Indonesia, have a subsidiary in Philippines and have no presence in Malaysia. And so in Philippines, we may be able to have trade on marketplace; in Indonesia, we have the distributor trade on marketplace. But for Malaysia, we need to buy in the stock. So these complexities are a big driver of challenges in the region. If you word it more positively, when you build those capabilities of actually operating across multiple geographies, multiple business models and multiple partners for the same brands, that is a moat that is not that easy to crack and to replicate in the market. So we have the ambition of having all stock and all products available, but we run into the degree of restrictions and preferences of the brands that make it different. And then from a consumer perspective, we obviously have different preferences. And even within the same brands, different products, different price points may resonate. So to give you an example, as you know, the big sports brands will be in our top brands, they may be contributing significantly to sales in all markets, but when you double-click into what products are selling, there may be slightly lower price points in Indonesia and in Philippines and higher price points, for example, in Singapore, in terms of what the customer is actually buying, and we need to obviously reflect that in the assortment that we offer. So there's definitely a significant degree of complexity around that, which we think has some structural impact on all players around gross margins and inventory efficiency in the region, but we're not trying to use that as an excuse. We definitely want to do better in how we manage our commercial activity. I hope that gives you some context. Anne Critchlow: It does. But just to be clear, in a particular country, for example, a brand may say that you mustn't show the customer's product for that brand. Is that correct? Or do you just put everything on all of the websites? Christoph Barchewitz: No, it depends on the relationship and the contractual agreement with the brand. So the brand will say, okay, if you're buying this from us, this is only for sale in Malaysia because in another country, we have a local distributor who has an exclusive right to that market. And so you need to work with that distributor in that market to have new products on the platform. So there are these restrictions, and we -- as you can imagine, we're always pushing against those or can trying to partner to kind of maximize sales for our brand partners across the region, and we will be much more comfortable taking inventory risk when we can settle the product across the market. On balance, the vast majority of our assortment is regional. But when you go into the nuances of what sells and the restrictions behind it and the business model of how it is implemented, it is not only a regional assortment. Anne Critchlow: Understood. That's really helpful. I've got a question about social media, but also now agentic commerce. So from the two channels that, in theory, threaten online aggregators, but also two channels that you can work with. So I just wondered what your approach was here? And where you think this is headed for the industry? Christoph Barchewitz: Yes, very exciting topic. I think we -- so one of the big benefits here is we've been at this for many years, and we've seen evolutions of both for the customers they are -- in terms of the platforms they're using, what type of engagement they have. You were obviously trying to be in sync with the customers. And so that has led us to be more active on TikTok, et cetera, et cetera. So in terms of the platforms, we're obviously agnostic, and we're going where the customers are and that's very important. From an agentic perspective, this is emerging, and it's going to be very exciting and interesting. I think we are very well positioned given that we have a long history of making sure that our assortment, the brands we carry, the content that is on our platform is very visible historically on SEO with especially Google. Perhaps, the same kind of applies in this new world. So obviously, we're learning, there are many things where it's a bit foggy and it's not clear where that lands. But I think we feel very, very comfortable that we can adopt this. And again, one benefit we have with our footprint is that by and large, a lot of these things play out first in other geographies. So if you think about the rollout of certain features in some of the global AI platforms, they usually start in the U.S. and then kind of roll out abroad in some cases in China and then roll out into other geographies. And so we can get the insight of what the impacts are and how to work with it and then give an early adopter in our geography. So we feel pretty comfortable that on balance, this is upside for us and not downside. Anne Critchlow: Really interesting. And I've got a question on tariffs, of course. And just an update on tariff impacts, if you would, either in the supply chain or from the consumer perspective. Helen Hickman: Thanks, Anne. We've been consistent in talking about this in previous questions that we're not seeing anything of significance, we haven't in the past, and there's nothing to note now across our relationships with our suppliers or customer sentiment in our region. So obviously, it's an ongoing dialogue with our suppliers, but there's nothing to note on and nothing that -- nothing of wide concern. Anne Critchlow: So second to last question on the competitive environment in various regions, just wondering how that's trending with regard to, say, Shein. And also perhaps the growing importance of secondhand, how does that affect your markets? And then any insight into consumer behavior and sentiment generally would be interesting. Christoph Barchewitz: So yes, Anne, I'll try to cover that. That's a very broad question. But I think -- so on Shein and the broader, let's say, low price on fast fashion side, there isn't really any significant new development. We've moved our assortment upwards quite substantially, and we're definitely seeing more the competition playing out between the different platforms being fashion specific or general merchandise that are offering those lower price point, largely unbranded products. So there's very, very intense competition in Brazil around this, also in Southeast Asia, obviously. So in that sense, nothing new for us, and we don't see any change in the impact to us from that side. Sorry, what was the second part of your question? Anne Critchlow: Just if you could give an insight into consumer behavior generally ANZ versus LatAm, for example? Christoph Barchewitz: Yes. So ANZ's consumer sentiment is reasonably okay. I think we see people focused on big campaigns and big events and maybe sometimes rolling back a little bit in between. So the promotional activity and the competitive intensity around that is quite high. But as you can see from the gross margin, we're able to manage that and very healthy position around our inventory. We know from some of our competition that they may have a bit more overhang on the inventory side and then that obviously drives the pricing behavior. The big campaigns or seasonal sales is just underway at kind of kicking off these days. So we'll see how that plays out over the 4 to 6 weeks. But generally, I would say the consumer is there, but knows there's going to be deals and is kind of looking for those deals, and I think that's fairly consistent. Obviously, we always try to push further on our exclusive product with our own brands and also exclusive third-party brands or lines from third-party brands and kind of differentiated that way our loyalty program is now fully launched in the region, and that's very exciting, and we think this is going to be a driver of getting more of the wallet share from our higher value customers and really getting people who maybe currently are buying, let's say, 4, 5 times a year to give us another 1, 2 or 3 purchases every year. So that's a big focus to feel pretty good about that. And then LatAm, I mean, some of the headline indicators recently have been more negative in terms of consumer sentiment. But then at the same time, when we look at the industry more broadly, we do see some growth. So it may not be clearest of pictures there and the reporting season for Q3 that gives us better visibility on some of the fashion players is underway right now. So I think we see that and maybe to comment on Colombia, that has been in the news from a geopolitical perspective a lot. And certainly, that has a degree of influence on what's happening in the market, but we've been executing very well on that market. And I think as we highlighted also at the Q2, Colombia is growing better or in line with Brazil. So very pleased with that performance in particular. Anne Critchlow: Very helpful. And then the final question from me is just on fulfilled by. If you could talk a bit about the margin structure? And how that basically benefits the gross margin? Because I think as many players fulfilled by is largely logistics and really quite low margin. So just wondering how that works and also how it's progressing? Helen Hickman: Thanks, Anne. So fulfilled by obviously is part of our wider marketplace offering with our marketplace partners, so as you would imagine, we have a higher commission rate with those partners to actually be able to manage their inventory and delivery and fulfillment within our existing infrastructure. So where we see the benefit is obviously we are firstly utilizing some potential excess capacity within our fulfillment center. We then obviously get many more benefits for our customer with regards to more seamless deliveries, especially if they're ordering maybe a retail product and marketplace product, actually, that's the pick and packing delivered at the same time. There's also the efficiency with that with regards packaging. With regards to our sort of profile. So we're most advanced in our Southeast Asia region with regards to fulfilled by offering. It's now very much a growth engine in Australia. The implementation of our OWMS system at the back end of last year actually opened up and facilitated fulfilled by to make it much more easy for our connect business and our brand partners in Australia and whilst it's on our pipeline in Latin America, it's relatively nascent but again, a growth engine for '26 and beyond. Operator: We have no further questions in queue. I'll now hand over for webcast questions. Helen Hickman: So two questions from Dan Curtis on the webcast. First, Netflix recently said Brazil, CIDE tax had a big impact on their results? Does the [indiscernible] face similar learn exposures to that 10% tax on overseas payments? Yes. I mean what I'd say is [indiscernible] has got quite different exposure to Netflix with regards to our mix of payments et cetera, is different compare something like the Netflix licensing where that licensing content from offshore. So it's not something that high on our radar, but we're super confident that all of our cross-border supplier payments are managed within existing intercompany and transfer pricing rules and obviously, we're compliant with all taxable countries. The next question, how do you see an increase in referral traffic from customers via AI chatbots? And if so, do those convert materially better than traditional SEO traffic? Christoph Barchewitz: Yes, that's a good question. And I think we've touched on that briefly earlier. It's still a very small share of our traffic. I think what is very important is that our ambition, especially for our core existing customers is that the starting point for engaging with fashion is our app. And we obviously have now very high app share across the group. And so we want people really to start from the app either because they get a notification from us or they may get an e-mail from us that kind of pique their interest or because the natural go to place is the app. And then obviously, within the app, we want to drive a better and better discovery journey, leveraging AI and letting the customer engage in a somewhat similar but more relevant way than they would be on a generalist AI platform like chatGPT. So I think that's a focus area for us in particular. Then when it comes to acquiring outside traffic and new customers, certainly, this channel will play an important role, and we do see that it is a high intent channel relative to some others. But I think it's very early to say. And I think we also can't obviously tell at this point, what the types of customers are that are coming through this channel, generally, we would expect it to be early adopters probably a little bit more affluent than the typical customer, et cetera. So there will be some bias in that data. So we're monitoring that fully. Helen Hickman: Next we have some questions on M&A. To summarize, are we planning to pursue any external growth opportunities via M&A and what are our debt financing plans? Christoph Barchewitz: Yes. So we're not looking at any acquisitions or anything, at least not of any meaningful size in the context of the group. So -- and that's not a focus area for us. We're very focused on delivering, obviously, this year, profitable EBITDA and then continued improvement next year and improving cash flow situation as well within the balance sheet that we have. And I think we've been very clear around our financing that, obviously, we've managed the convertible liability very proactively over the last few years, given the change in circumstances for the group. And I think captured a very significant discount for our shareholders, and we will continue to manage all of our debt, including some of the smaller facilities we use for working capital bank guarantees and those types of things. And so there's no bigger plans here, but we always look at how we optimize our balance sheet and in particular, manage the seasonality in our business, which, as you all know, is quite strong with significant cash out in Q1 and significant cash in, in Q4. Helen Hickman: That is all the questions. Thank you all for joining today. If you have any further questions, please reach out to the Investor Relations team directly.
Operator: Good day, everyone. And welcome to the TELUS 2025 Q3 Earnings Conference Call. I would like to introduce your speaker, Robert Mitchell. Please go ahead. Robert Mitchell: Good morning, everyone. Thank you for joining us today. Our third quarter 2025 results news release, MD&A, financial statements and detailed supplemental investor information were posted on our website earlier this morning. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zainul, Navin, Jason, Tobias, Hesham. Briefly prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the U.S., including in our third quarter 2025 and our annual 2024 MD&A. With that, over to you, Darren. Darren Entwistle: Thank you, Robbie, and hello, everyone. In the third quarter of 2025, TELUS delivered another period of strong customer growth and financial performance, powered by our team's relentless focus on operational excellence. Our results showcase the compelling value of our comprehensive bundled services across mobile and home solutions, and we're doing that in a complementary fashion with the strategic rollout of TELUS PureFibre connectivity to homes and businesses nationwide. We're delivering far more than connectivity. We're empowering Canadians with transformative digital experiences, including AI-powered smart home energy solutions, including cutting-edge tech-enabled health care and well-being services and as well comprehensive security offerings at the dispositions of our client. These offerings are revolutionizing productivity and enhancing quality of life for our customers. Indeed, this quarter, we achieved an industry best 288,000 total mobile and fixed customer additions. Our close to 21 million customer connections reflects an industry-leading 5% growth as compared to the same period a year ago. Furthermore, our sustained focus on delivering exceptional client experiences continues to drive leading customer loyalty metrics. This was demonstrated by our industry best postpaid mobile phone churn of 0.91% this quarter as we progress through our 12th consecutive year below the 1% level, truly a hallmark of this organization and our culture. Looking at our financial results, we achieved solid and resilient TTech EBITDA growth of 3%. In mobile, we drove healthy phone net additions of 82,000 and leading connected device net additions of 169,000. These results were supported by our ongoing focus on profitable margin-accretive customer growth. This is once again evidenced by our consistent industry-leading customer lifetime revenue, underpinned by our industry best churn result, which remains clearly the hallmark of the TELUS organization and the financial results that we derive from it. Let's turn now and take a look at wireline. TELUS delivered another quarter of industry-leading total fixed customer additions. Indeed, we have consistently delivered positive wireline net additions every year since the third quarter of 2010. This is a remarkable 15-year track record in that regard. This included an industry best 40,000 Internet net additions underpinned by our leading PureFibre offering. Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis continues to differentiate us from the competition in a way that is relevant to customers. Turning to TELUS Health. We continue to execute against our global growth strategy, generating revenue and adjusted EBITDA growth of 18% and 24%, respectively. Moreover, we've now extended our reach to over 160 million lives covered on a worldwide basis. This global scale of our TELUS Health footprint stems from a variety of factors, including smart, targeted strategic investments. It comes from continuous product innovation with a digital and AI thesis. It comes from broadening our sales channels with strong cross-selling execution that is paying off for us, and it comes from disciplined cost optimization through technology integration and synergy realization. Importantly, these factors are all solidly anchored in our customers' first promise. Our LifeWorks integration has now delivered $417 million in combined annualized synergies, $329 million from cost efficiencies and $88 million from successful cross-selling strategies. Notably, this is nearly 3x above our initial target of $150 million that we set when we first acquired LifeWorks in September of 2022. Across our B2B portfolio, we have a potent story of differentiation and diversification. We are the market leader in Canada in respect of IoT, private wireless networking and 5G solutions. Moreover, we have a leading cybersecurity practice that is at the forefront of how AI is changing the cyber threat and cyber protection landscape. Over the years, through a thoughtful and cohesive data-centric strategy, we have significantly and successfully built high-value diversified lines of business. These global business verticals include TELUS Health, TELUS Agriculture & Consumer Goods and of course, TELUS Digital. This has enabled business resiliency through the diversified portfolio approach whilst providing global scale and diverse sources of revenue and EBITDA. Notably, at the end of October, we completed the acquisition of TELUS Digital, making a significant upward move on our data and AI competency set, and this marks a significant milestone in the strategic evolution of our organization. We expect this integration to generate approximately $150 million to $200 million in annualized cash synergies and will deliver the $150 million within the 2026 financial year, and that will be driven predominantly through operational efficiencies. Let's make sure we can do here what we did on the LifeWorks synergy realization front. The synergies coming from the privatization of TELUS Digital include accelerated digital and AI transformation. They include smart business simplification strategies, and they include strategic cross-promotion of our industry-leading product portfolio and services. This will further strengthen our financial performance and yield significant shareholder value creation. Our well-established AI-enabling capabilities across TELUS will continue to be an integral part of our business and increasingly critical to our success. These capabilities are driving materially better outcomes within our organization. And in turn, TELUS can be leveraged as an innovation lab as a product creator, as a testimonial to commercialize these capabilities to support our external customers on their own AI journey to win in their respective markets. Indeed, the opportunity at TELUS is substantial. Combined across TELUS, our AI-enabling capabilities are approaching $800 million in revenue in 2025. This is expected to increase to approximately $2 billion by 2028, representing an annualized growth rate north of 30%. Notably, this is composed of solely external client revenue, and it excludes other parts of our global B2B portfolio such as health and agriculture and consumer goods. Supporting this growth are 4,000 dedicated professionals and AI engineers delivering digital products and solutions that help clients transform their businesses and to do that transformation at scale. One component of this growth is our September launch of Canada's first sovereign AI factory. This firmly establishes TELUS' leadership position in this space as we have ready today, the infrastructure and compute ecosystem to help Canadian businesses broadly deploy AI. We are the first North American service provider to become an official NVIDIA cloud partner, utilizing our state-of-the-art data centers to support customers and partners such as OpenText, League, EY, Accenture and Railtown, to name but a few, who immediately benefit from our sovereign AI compute solutions. TELUS is providing the secure sovereign foundation our country needs to create made in Canada solutions to accelerate growth and to advance our competitiveness in the global digital economy for generations to come. To wrap up, our Q3 performance reflects the strength of our core operations and the power of our differentiated strategy. The reliability of our results demonstrates our team's dedication to delivering superior customer experiences across our industry-leading wireless and PureFibre broadband infrastructure and technology. Our substantial network investments enable positive social and economic outcomes for Canadian communities nationwide whilst continuously enhancing our operational performance, our financial results and our customer satisfaction. Moreover, these network investments are powering Canada's digital sovereignty through our pioneering and leading AI infrastructure and technology. And as we look ahead, we are positioned for sustained success, underpinned by ongoing EBITDA expansion and disciplined capital deployment that together generate substantial free cash flow growth for our organization and our investors. Our strong financial foundation supports our industry-leading dividend growth program where today, we increased our quarterly dividend at a moderated rate of 4% to $0.4184. This is reflective of our ongoing commitment to delivering sustainable shareholder returns. Furthermore, we continue to progress considerable deleveraging initiatives. Notably, we remain on track to achieve our leverage target of 3x by 2027, whilst at the same time, stepping down and importantly, eliminating our discount dividend reinvestment plan. In September, we closed our transaction with La Caisse establishing Terrion as Canada's largest dedicated wireless tower operator. This unique partnership will enhance wireless connectivity for Canadians whilst unlocking significant value for TELUS shareholders by strengthening our balance sheet, accelerating our deleveraging program and providing another growth vector for TELUS to leverage. The team is working hard to quickly operationalize Terrion, which already has 3,000 wireless sites across the country. Moreover, it's begun construction of its first multi-carrier tower in the Nanaimo, BC with more planned in the months to come. Finally, in closing, with Remembrance Day approaching, I would like to offer on behalf of the entire TELUS organization, my heartfelt gratitude to our veterans here in Canada and around the globe. These brave individuals, including my own father, Desmond, who served with the Royal Canadian Navy in the Second World War, demonstrate immense courage to preserve the rights and freedoms of all Canadians. I hope you join me in wearing a poppy as we pay tribute to those who serve and who continue to serve so that we and our future generations can enjoy a better life. And on that note, I'll turn the call over to Uncle Doug. Doug French: Thank you, Darren, and hello, everyone. Mobile network decreased slightly, consistent with the second quarter at 0.6%. This performance reflects mobile phone and connected device subscriber growth and 9% increase in IoT revenue, offset by lower mobile home revenue -- or ARPU, sorry. ARPU continues to improve, declining 2.8% in the quarter, a 50 basis point improvement sequentially. We continue to see improvements quarter-over-quarter across new activations, rate plan changes and customer renewals, reflecting our ongoing efforts to mitigate network revenue pressures. Fixed data revenue grew 1% year-over-year, making us the only provider to report positive growth and making our 19th quarter of that positive -- positivity. Within Consumer, data revenue increased by 4%, driven by a 6% increase in residential Internet revenue, reflecting continued customer growth and higher ARPU alongside higher security and automation revenue. In business, fixed data declined with variability from year-over-year events and customer contract changes. This was primarily offset -- this was partially offset by continued small -- growth in small and medium businesses, leveraging our differentiated and diversified portfolio of solutions. TTech adjusted EBITDA, excluding Health increased by 2% alongside a margin expansion of 210 basis points to 43.4%. These results were driven by our consistent emphasis on profitable growth alongside our ongoing focus on cost reduction and our increased adoption of TELUS Digital solutions, resulting in meaningful competitive benefits. In Telus Health, operating revenues and adjusted EBITDA grew by 18% and 24%. This growth was driven by global business acquisitions, including Workplace Options as well as organic growth in payer and provider solutions, reflecting strong performance in collaborative health records and recurring revenue in electronic medical records and virtual pharmacy solutions. TELUS Health adjusted EBITDA margin expanded 60 basis points to 17.1%, slightly lower than Q2 as we begin post-acquisition and integration work associated with Workplace Options. Looking at TELUS Digital segment, operating revenue grew 5% with solid performance across many industry verticals. Across the service lines, we continue to see strong performance in our AI and digital solutions. However, pressures on TELUS Digital's profitability persist with adjusted EBITDA margin at 11.1% for the third quarter. We remain focused on mitigating the operating margin pressures while making targeted investments in customer quality and planned initiatives to transform our operations through tech enablement and greater efficiencies globally. Near-term synergies of the TELUS Digital privatization include the elimination of public company costs, lowering borrowing costs as we leverage TELUS' stronger credit position and the operational efficiencies as referred by Darren. These digital -- TELUS Digital remain a segment presented in our financial statements to the end of 2025. We'll review TELUS Digital as a segment and provide more update when we release our Q2 results in February of 2026. On a consolidated basis, net income in the quarter of $431 million and EPS of $0.32 were higher by 68%, primarily driven by the gain on the purchase of long-term debt in respect of our tender process that closed in July 2025. On an adjusted basis, net income of $370 million decreased by 10%, while EPS of $0.24 was down 14%. Capital expenditures, excluding real estate declined by $16 million or 2%, driven primarily by the elimination of certain -- by the completion of certain projects for wireless and fiber networks, in addition to our continued investments in AI. Overall, capital intensity was 12%. That was an improvement from 13% in the prior year and continues to lead the industry. Free cash flow of $611 million increased by 8% compared to the same period a year ago, driven by TTech EBITDA growth, lower capital expenditures and lower contracted wireless volumes. Looking at our guidance for 2025, our target for TTech operating revenue, including our Health segment, is expected to be at the lower end of our target range of 2% to 4% with variability on mobile handset equipment revenue as we go into a high-volume fourth quarter. Importantly, all other targets remain unchanged. These targets demonstrate the resilience of our business and the effectiveness of our operational execution. Following TELUS Digital's completion of privatization, we begin to execute our integration plan. The guidance that we previously issued for TELUS Digital will no longer be relevant and will not be updated for the rest of the year. Turning to our balance sheet. The average term to maturity of our long-term debt stands a little over 13 years, and our weighted average cost of capital is 4.61%. Our leverage ratio has improved to 3.5x, a decrease of 20 basis points sequentially from the second quarter of 2025. The improvement was driven by the cash received as a result of our partner, on Terrion, and as we -- and we did the repayment of the TELUS Digital credit facility in the third quarter. We anticipate leverage in the fourth quarter to increase slightly as we pay for the TELUS digitization -- TELUS Digital privatization. We remain on track to deliver our leverage ratio of approximately 3x by the end of 2027, while thoughtfully stepping down our discount on our dividend reinvestment program beginning in 2026 with a full removal by the end of '27. Our financial position will continue to strengthen and we will continue to drive shareholder value throughout 2025 and beyond. We'll continue to focus on EBITDA growth, moderating capital intensity as we progress to our target of 10% robust free cash flow generation and our active asset monetization program, including securing partners when appropriate for TELUS Health and TELUS Agriculture. With that, Robert, back to you. Robert Mitchell: Thanks, Doug. Karl, we are ready for questions, please. Operator: [Operator Instructions] The first question is from Maher Yaghi from Scotia. Maher Yaghi: Great. Maybe a first question on wireless and the second one on Terrion. So Doug, you mentioned in your prepared remarks how ARPU has improved a little bit sequentially. But can you give us maybe an overview of what you think will need to happen to return to growth on the ARPU front. And maybe just some views on the outlook for churn. You're running at a low churn, but it's starting to -- we saw a slight increase in the quarter. Maybe just what's driving that behavior just on the wireless. And the second question on Terrion is how should we think about the capital needs for the business going forward? Are you looking to transact and acquire towers. Or it's just going to be building new colocation towers in different parts in Canada. And maybe the accounting of how we'll see the cash flows from that business flowing into your free cash flow calculation? Darren Entwistle: All right, Doug. Go ahead. Second on the last one, you're the Chair of Terrion. So we'll do Terrion on and then maybe pass to Zainul for ARPU. No, I think you should do it all. Go ahead. Doug French: All right. So on Terrion, I think the best way to describe it is, yes, we are looking at acquiring towers where appropriate to do so, and that could be either outright purchases and/or partnerships on bringing more partners into our overall partnership. We will continue to build, and we have a densification of our network and building our capacity, as even Darren highlighted, some of the new ones that we've already started. Cash flow out of the gate, any of the build costs are coming out of Terrion. And so any distributions that would be coming out of Terrion would be net of that CapEx. And so as we consolidate Terrion into our books, you will see 100% of the CapEx and then you'll see a lower distribution. And as we define our free cash flow definition into the future, we will make sure that, that is very clear on the ins and outs as you see that in both pieces. So I think that will be very clear and it will be transparent when you see anything of materiality. Terrion has only been in play for 2 months, so there has been a minimal impact this quarter. On ARPU growth, I think it's going to be the continued hard work that we see from the team on step-ups and the prices that we're seeing on new acquisitions as well. We've seen a little bit better on device subsidy as well. But as we get into the fourth quarter and you see Black Friday and back -- Christmas, specials that will come in, in any -- and say, aggressive specials could obviously slow that down. But I think it's momentum. Once it's through your base, it's going to be slow and steady back on the way out. And so, so far, good momentum, but I think it's to be determined that if that holds or not as we move into the fourth quarter. And so I think that would be my best assessment. Darren Entwistle: Just 2 top-ups on that. Given that we don't entirely control our own destiny on the ARPU front, I think it's important that we continue to improve our profile on unit cost to serve. So you've seen us make some good progress there getting into the double digits on the cost reduction front. I think we need to keep going down that particular path and lower our unit cost to serve. And that's one of the attractive aspects of having TELUS Digital now fully in the fold so that we can leverage AI technology to really drive down unit cost to serve within our consumer and our B2B wireless operations. And then the other thing that is a great antidote to ARPU pressure as we hope for better days ahead is product bundling. We've got the best product portfolio in the industry to the extent to which we can increase our product intensity in our customer relationships through progressive bundling, that's going to give us a holistic outcome with the client in terms of overall economics that's extremely appealing. Maher Yaghi: And just to be clear, Doug, on free cash flow, any distribution that Terrion is going to be making to its equity shareholders will be deducted from your free cash flow calculation? Doug French: We're going through that as we speak, but it will be transparent of where it is. But it will be how we assess the capital item because when you think through the capital item as well, we're not paying for 100% of the capital. We have to consolidate it. So I need to make sure that, that is very clear on both the capital that we're accountable for and then the distribution, but we'll make sure you see the net on both. Operator: The next question is from Jerome Dubreuil from Desjardins. Jerome Dubreuil: The first one is on the partner build model. If you can please discuss the implications from a financial standpoint. Maybe I'm just throwing ideas out there, but maybe the margin profile is going more toward a wholesale model, but lower CapEx. Is this the right way to think about it. And if you can discuss the different return profile of owners' economics versus the partner build, please. Doug French: So just on the fiber side, I assume that's the partnership you're referring to. The economics are that we would end up either signing a lease for, call it, a dark fiber lease and/or we take a community as it's built, and it's our initiative to ramp up and scale it. And so the economics are based on I would say, similar to what you would see on any third-party fiber lease or fiber wholesale arrangement. And the third party is making their money just as we would if we were wholesaling our fiber to someone else. So it's a very similar structure. And we just have a couple of different scenarios out there of how we lease, but it would be a fair market value for what a lease arrangement would be on any kind of fiber transaction. Zainul Mawji: And overall, our goal is to ensure that when we're leasing or when we're renting fiber on a wholesale basis, the return, the total economic return is equal to or better than the economic return that we derived historically from our own fiber build in Western Canada. And the reason why we've set that Axiom and think that it's doable is clearly we have much greater scale today on the fiber front. So we should be better positioned to seize those economies of scale. We have better technology deployed than what we had historically during the fiber build time in the West from 2014 to 2020 that improves both operational efficiency and operational execution. And we have far more products. When we started to build fiber in the West, the revenue returns were very much around Internet and TV. Now our business still has the Internet and TV components, but we have the security component. We have smart home automation. We have smart home energy services, so on and so forth. So again, leveraging the limitless bandwidth of fiber. We're also looking to secure economies of scope by creating new services over that rented fiber and getting a better return than what we did originally on our own build activities. Jerome Dubreuil: Second one for me is, can you please provide clarity on the, I think you call it AI-enabled revenue going from $800 million to $2 billion. If you can discuss maybe what are those lines of business? Is this replacing other existing revenue? Or is there kind of a direct line of revenue here that's going to be going from $800 million to S2 billion. Darren Entwistle: Okay. Let me tackle that. And then if you want to have a follow-up for additional detail, we can go there. Looking at the base right now at the $800 million level. That base in terms of the question that you're asking is comprised of a variety of revenue sources. They include SaaS solutions that we're providing. They include our cloud solutions. They include the myriad of Gen AI applications that we have developed both within TELUS proper as well as within TELUS Digital. They include our data annotation business, and they will include -- it's very minor right now, but it will grow to be major prospectively our sovereign AI GPU compute solutions. We like the position that we're in here because we are extremely unique in that TELUS controls the entirety of the AI compute ecosystem. And that is significantly differentiated from our North American peer group. So it's all in-house at TELUS, whether you're talking about AI inferences, whether you're talking about AI models or whether you're talking about AI training. And we would believe in terms of what supports our revenue going forward that our holistic in-house solution aided and embedded by our partnership with NVIDIA creates a series of superior attributes that's going to drive the revenue model progressively in terms of getting from that $800 million to $2 billion. And so when you look at these components, number one, I think we are fairly unique in that we explicitly qualify in terms of a desired Made in Canada sovereign AI solution consistent with the white paper that the federal government has just published. And I got to believe that, that is deeply relevant. I also believe it's important in terms of revenue generation as to where the government is going to place their business be it at a federal, provincial or municipal level because that's going to be the qualifier on the RFP. The other thing that I think is distinct about us and our relationship with NVIDIA and our strategy of going from $800 million to $1 billion is that we're taking a modular build approach. You can look in the papers this morning and then look back historically. There's an Oklahoma land race to build infrastructure. And then 2 weeks later, people are worrying, "oh, this is going to be a bubble, and we're going to have overinvestment and too much infrastructure, and we're not going to be able to move the inventory." And it's oscillated back and forth in that regard. We think whilst the supply and demand component is still getting figured out. Our modular build approach is the right way to address the market opportunity, but do it from a responsible CapEx investment point of view. The other advantage of the modular build rather than big bang is that we can continuously take advantage of improvements in chip technology, leveraging again our NVIDIA relationship. And as the chips continue to get better, we're not locked in on a bulk basis with last-gen technology. We can leverage next-gen technology. And that makes a difference on compute power, but it also gives us advantages in areas like power consumption and cooling, which are, of course, nontrivial as it relates to their importance. And because we control the entirety of this ecosystem, I would imagine your next question is, well, if you're going to go from $800 million to $2 billion, what's the margin? Well, I'll tell you, the margins are, a, attractive and they're more attractive to the organizations that control the totality of the compute ecosystem from inferences, models all the way through to the training capability component. And so that's an exceedingly attractive aspect for us. And we don't have to share our economics with a myriad of partners that have to buttress our solution because of our capabilities to do it in-house, aided and embedded by TELUS Digital. From a specificity point of view and going from $800 million to $2 billion across those product lines that I've just articulated from SaaS all the way through to the sovereign AI component. As it relates to the sovereign AI component, we're forecasting that by 2028, we will be circa 25,000 GPUs supported by 50 megawatts of power. And our model will be a cluster as a service model. It's a rental model on a per GU basis within the cluster construct with a dollar charge on a per hour basis. I'm not going to get into pricing on this call, but you can work through the economics as to how big that will be on a revenue basis and how attractive it can be on a margin basis given the control of our ecosystem. And then the other big area that we see contributing to the $2 billion that I think, again, is entirely unique to TELUS, almost fortuitously so, if you will, but we will lead the world in the combination of customer experience and AI. We will lead the world in the fusion of AI with CX on the client experience front. And we will be developing AI capabilities from bots to specific copilots for lines of business to both help TELUS and our external clients leveraging the developments on the back of TELUS in terms of humans in the loop, aided and embedded by copilot capabilities across specific lines of business that drive better selling outcomes, better service outcomes along with lower churn, better agent training outcomes that really support a superior client experience in terms of growth, service as well as the economics because of the AI contribution to the human performance factor and will drive this contribution right through to the agentic level as well. And we expect that to be a big source of growth on a go-forward basis because we already have a huge client base, a legacy CX client base within the TELUS Digital organization where we have well over 650 clients, some of the world's largest organizations that are crying out for a CX AI transformation strategy and for us to help them along that particular journey. And so that's the color on the $2 billion in terms of specificity and where it's coming from. Operator: The next question is from Vince Valentini from TD Cowen. Vince Valentini: Darren, great answer. And you're right, you would have predicted that the next question may have been margins, but close after that would be CapEx to achieve the $2 billion, especially when it comes to the sovereign AI factories. Can you talk a little bit about how much you have to invest and clarify to us that this definitely still fits within the 10% CI target that you have? Doug French: So yes, it would still fit into our bucket. Based on the module approach that we talked about, we see this as a very digestible but strategic and well laid out plan over the next few years. And I think because we already have the land, we already have the data center infrastructure set up in both the East and the West, it will allow us for that easier transition. Zainul Mawji: And I think the other attractive aspect of the modular build approach as it relates, Vince, to your question on cash flow, we'll be able to recycle the attractive margins that we make on GPU utilization and recycle that back into the funding of the next module and bringing new GPUs online. And so it's a philosophy or a mentality that we will eat what we kill, leveraging off the progress that we're making and the inventories that we're building. Vince Valentini: Okay. Sorry, did you say earlier that there's potentially partners involved with the build as well too, though, so it may not be all on your balance sheet. Maybe I misheard you in your opening remarks. Doug French: We're looking at partnerships as well as our own data centers. So looking at opportunities that would allow for even further expansion as required. And so I would say, yes, we are looking at partnerships where applicable, and it would go well beyond our just our Kamloops and our Rimouski data centers. Vince Valentini: Okay. And if I can ask one other follow-up, just to clarify something. Your lease costs -- or lease principal payments came down 20% year-over-year. It's nice to see. But can you explain, Doug, like how that happened? And is there any way that that's related to Terrion and leases for towers moving to a different subsidiary or something? Doug French: No. It was just -- and we can get more detail after, but it's -- we've restructured some of the leases, and it's actually under the benefit of free cash flow. So we're trying to manage our cash flow more effectively, and that was the whole move. Operator: The next question is from Drew McReynolds from RBC. Drew McReynolds: Maybe one question on sovereign AI from my perspective. Are we going to see this ramp-up in revenue here through the fixed data services line? Does it kind of spread out through other lines just in your financials, just so we can kind of understand the moving parts there? And then secondly and separately, can you just speak to some of your success you're getting on Internet and the broader kind of product portfolio in Eastern Canada. Do you see any differences in terms of what you're able to do in the West versus what you can in the East. And just maybe an update on where you're getting more success on the product intensity portfolio and where there's more wood to chop in terms of commercialization? Zainul Mawji: Maybe I'll kick it off and hand over to you, Doug. Where you can look for the manifestation of the revenue created on our sovereign AI factories is twofold. You'll see it within our TELUS Business Solutions organization, and you'll also see it within TELUS Digital. And we would intend in February to give additional guidance on how we'll report TELUS Digital as a business segment. On top of that, we will provide additional ad hoc disclosure, so you'll be able to assess the process that we are following and the yield that we're getting off the sovereign AI factory and the GPU investment. So we'll give you clarity into that specifically. Doug French: And within some of the product reporting between fixed data and others, you'll get even more insights as well of where that's showing up. On East-West, on loading. We've seen good loading across the board, and it's both East, both West and then business within the small business area is contributing to those Internet loads. And on a bundled basis, we are seeing obviously a little bit more bundling still in the West, but gaining momentum in the East. Operator: The next question is from Stephanie Price from CIBC World Markets. Stephanie Price: I was hoping you could talk a little bit about your strategy on device financing and how that's flowing through to the TTech service revenue? And maybe more broadly, how you think about TELUS' positioning in the wireless market at this point? Doug French: I couldn't hear the first part, what was it. Darren Entwistle: Device financing. Doug French: Device financing. So device financing is really the flow-through on the balance sheet. So you'll see it build up over that 2-year period. Where the -- how it hits your P&L will be depending on how much of a handset subsidy you give. And the handset subsidy then is prorated between upfront hit and an impact on your ARPU based on an allocation from the accounting rules. So it takes the fair market value of the handset, the fair market value of the monthly recurring revenue and allocates it to both. And so you'll see from a cash flow perspective, lower handset financing, obviously, is impacting positively on cash flow. And then what goes through your P&L is really only impacted by whether you give a subsidy or whether you make a margin. And that's what you would see in our financials on any quarterly basis. Stephanie Price: Okay. And then just as a follow-up, TELUS has announced they're an MVNO partner for Cogeco's wireless launch and BC recently announced a fiber expansion into Alberta and BC. I understand financial details aren't disclosed, but hoping you can give some color on the financial profile versus the TTech segment? And what kind of impact we can expect to see from this over time. Darren Entwistle: Take it away. Doug French: Yes. So on the Cogeco one, it's all going to be based on roaming. So we will get that through roaming revenue, and it will build as their volume grows, and it'd be at a wholesale rate, a commercially driven wholesale rate. I think on the Bell side of reselling in the West, I think the -- as we've highlighted, we are obviously supportive of competition. And the wholesale revenue that you get comes at a higher margin, and you don't have the success-based capital, but you don't get the product intensity. So you would have a fast payback, you'd be earning margin and really good margin right upfront. And then you would not have that success-based capital, so it would take pressure off the capital number concurrently. And there's a good chance these are customers that we would not have gotten, so it is a net benefit to us. So over time, you could build up a base just like wholesale and wireless, and it is high margin, and it's contributing, obviously, to our P&L. But from a customer experience perspective, we still want to obviously win in retail and our bundling and our product superiority will continue to compete well there. Robert Mitchell: Thanks, Stephanie. Karl, we have time for 1 more question, please. Operator: The final question is from Matthew Griffiths from Bank of America. Matthew Griffiths: I was wondering if you could maybe just talk a little bit about the outlook for health. I know the growth has been strong this past quarter, partially helped by the acquisition. But just if you could make some comments on like the underlying performance that we could assume going forward, just help on the modeling front. And then on the comments about -- you gave a lot of information on the AI topic. So I don't really want to open that up too much. But you made the comment about government versus enterprise and that government seem well positioned given their position paper that they would be buyers. I mean is your starting assumption in that $2 billion revenue target sort of heavily weighted towards government adoption of these services with maybe a lag to enterprise? Or are you assuming sort of just an equal adoption across the kind of those main buckets of customers? Darren Entwistle: Yes. So the answer is the latter, a wider distribution, not anchored on the government front. It would include government, but equally or even more broadly, enterprises would include start-up organizations that would want to be able to leverage the compute access that we can provide. You could think about research opportunities. It really is a broadly distributed portfolio of customers that we would be going after. And there's aspects of exploration as well. We've got the capability. Let's see how it develops related to market need along the way. And because we've done it on a modular basis, we can be agile and responsive. But the answer is no, it's not anchored on government. Navin, do you want to maybe speak a little bit about the view on health prospectively from a growth point of view? Navin Arora: Yes, I'd be happy to. Thanks, Darren, and thanks for the question, Matthew. I would say we're seeing good acceleration in the health business in terms of operating revenue. So we saw that improve to 18% in Q3, and that obviously was helped by a full quarter of Workplace Options this quarter. And when I look ahead, I see some strong organic growth in the business, both in the employer and Payvider business, and we're seeing that because of strong churn performance and as well as really strong sales bookings. So as an example, the employer business, sales bookings are up 72%. Clinics are also up 44% and the Payvider business is up 18% all year-over-year. And so that bodes well for that revenue coming online in the future. And when we think about the WPO integration, not only are we seeing good organic revenue growth from that part of the business, what we're also seeing is their really strong operating model is driving EBITDA margin expansion as we migrate more and more of our former TELUS Health operations onto the WPO case management system. And so we're expecting even further improved churn, improved stickiness through customer experience, the opportunity to really drive improved product intensity tied to that improved experience. And then as I said, improved margin contribution from that business. And then also prospectively, we really like the global footprint that we've developed and the markets that we're playing in have very strong growth opportunity. And as products like EAP, employer well-being services, employer well-being platform, capabilities and the gamification of well-being, mental health capabilities, as those capabilities continue to improve in terms of importance in those markets, we're going to ride that market growth wave tied to that. So feeling very good about that. And then maybe the last thing I'll close with is on the Payvider side, we've seen some very good organic growth coming from deals tied to Platform as a Service, our data capabilities and our ability to monetize the analytics coming from the data, and we're starting to see strong growth there. We also sold our largest pharmacy management system deal recently. So feeling very good about the prospects of continued growth in the health space. So with that, I'll pass it back to you, Darren. Darren Entwistle: Okay, Robert. Robert Mitchell: Okay. Thank you, Matt, and thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups. And with that, back to you, Karl. Operator: This concludes the TELUS 2025 Q3 Earnings Conference Call. Thank you for your participation. Have a nice day.