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Ryan Schaffer: Welcome to the Expensify Q3 2025 Earnings. I'm CFO, Ryan Schaffer. And with me, I have our Founder and CEO, David Barrett. And now I'm going to hand it over to Niki for the legal lease. Niki Wallroth: Please note that all the information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. Please refer to today's press release and our filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management will refer to certain non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release or the investor presentation for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. Ryan Schaffer: Thanks, Niki. Now let's dive into the Q3 financials. Revenue was $35.1 million. Average paid members were 642,000 and total interchange was $5.4 million. Our operating cash flow was $4.2 million. Our free cash flow was $1.2 million. Net loss was $2.3 million. Our non-GAAP net income was $4.3 million, and our adjusted EBITDA was $6.5 million. Q3 free cash flow was a little less than in prior quarters. That's mostly due to seasonal timing of some annual payments. We also reiterate our fiscal year 2025 free cash flow guidance of $19 million to $23 million. As always, here's our Q4 flash numbers for our paid members in October, up from the Q3 average, which we always like to see, 653,000. And now to jump to some business highlights for Q3. We had some great marquee customer wins. We are now the Official Travel and Expense partner of the Brooklyn Nets, who is a long-time customer of our expense product, and they have adopted Expensify Travel that shows just the power of the platform and the fact that customers are really excited about this. So we're very happy to have the Brooklyn Nets as a new Expensify Travel customer. On the topic of travel, bookings continue to climb, growing 36% from Q2 and 95% since Q1. So Expensify Travel continues to be a bright spot in the business and something both us internally and our customers are very excited about. We also repurchased 1.5 million in [ change ] shares of our Class A common stock, and that totaled approximately $3 million. And now I will hand it over to David for a product update. David Barrett: Great. It has been an extremely exciting quarter when it comes to the product side. First off, talking about migration. As you know, everything hinges upon our ability to move existing customers over to New Expensify. That's what triggers and we think everything in the business is recovery and growth and so forth. And so we've made incredible progress on that. At this point, we would say we're targeting what we call 90% feature parity [ beating ]. We want to support essentially 90% of the functionality of Classic on New Expensify. We're very close to that right now. We, of course, will always maintain Classic for existing customers as long as they need it. But the main thing right now is that New Expensify is largely complete when it comes to the functionality of Classic. We've also migrated basically the data of nearly all customers to New Expensify, meaning that customers can switch back and forth between New and Classic as they like, which is a huge accomplishment. So we're to the point where essentially New Expensify is essentially done from a feature perspective. And now we're just carefully what we call nudging customers over, meaning that we will make them sign into New Expensify the next time they sign in, but then they can optionally switch back to Classic. We've nudged all of our collect customers over. Now to be clear, we have basically 2 plans, Collect and Control. And so our Collect customers are smaller, simpler customers. We've migrated nearly all of them over to New Expensify, and the vast majority choose to stay on New Expensify rather than going back to Classic. And so this is a huge testament to the power of New Expensify. Additionally, and I'd say this is one of the most exciting things, now we're closing all new customers on New Expensify, meaning that we will start every sales conversation on New Expensify, and we'll still switch back to Classic if there's some long-tail features, some esoteric integration or something like this that they might need. But we start every new conversation on New Expensify. And so that's been really, really powerful, especially at the conferences, especially as we roll out the new leads. So it's been great, great progress when it talks about migrating existing customers from Classic to New. Additionally, it's been very exciting on the Concierge side. So we've been talking about this for a while. If you've been paying attention, AI is kind of a big deal. And so we've been talking about AI for a long time because new Expensify's entire design anticipates basically modern AI. And the way that we view it is AI is incredible, but it's also not foolproof. And so whereas some sort of -- some people really focus on AI [ in absolute ]. We view AI as a great feature for certain levels of functionality, and we would take the AI as far as it can and then have humans take it the rest of the way. And so our design, which is very unique is a hybrid system. When you talk to Concierge, if it's a simple, common question or even just something very detailed about the product and sort of like from a help page, whatever it might be, the AI is really great at handling that question. It can do it better than the human, honestly. But if you get to a super complicated topic for diagnosis or if you have more kind of an emotional issue, that's where we bring in our human agents. Now we can seamlessly switch back and forth between AI and humans sort of imperceptibly to the customer. And so to the customer, all they get is just an incredible chat support experience. But on our side, it's handled using AI or human seamlessly depending on who's best for the job. Likewise, this is a contextual AI, meaning that it's built into the product rather than sort of on top of the product. I think you've seen a lot of AI solutions, which are kind of like Windows 95 Clippy where basically it's just something kind of stuck on top. It's very clearly not designed around the product. Ours is different. With Concierge, it's built into the product in every place. And so wherever it's natural for you to talk about -- talk to the AI, whether -- either you're talking directly to concierge or maybe you're inside of an expense report or even commenting on a particular expense. Our AI appears everywhere, so you can basically talk to it naturally in the context of that. Additionally, we're building more, what I would call a general intelligence. I think there's a lot of different approaches towards this. And the most straightforward approach that people start with is they'll have kind of a collection of very purpose-built agents. And so maybe a specific agent will reach out to you in a particular narrow context and talk about one topic. It makes sense. That's a very easy place to start, and I think that's kind of where everyone starts. Our design is going for more of a general intelligence, meaning that we've built a singular AI that can operate in a multimodal fashion. So you can talk to the same AI and you can ask it to scan receipt, categorize an expense. You can ask it very complex questions about how to configure Expensify. And so the same AI can do all of these different functions. What's nice about that is it really supports our contextual design. So it's not like you have to have 10 different AIs hanging out in every single context and then you have to choose the right one based upon the question that you have. Rather, you can send any question to Concierge and it will always be able to answer it. This works especially well across platforms. So you can talk to our Concierge sort of like single general intelligence over chat, obviously, but you can just e-mail it at concierge@expensify.com or just text it at 47777. And because it's a single general intelligence, you can ask it any questions in any of those. And so you can ask it to create expenses, ask it about your expenses, about your workspace, whatever it might be. This is a really powerful platform that we think is unique and novel in the market. We don't think anyone else has this level of sort of general purpose financial AI out there. And so -- and this is just a start. To give some examples of kind of how this works in practice. So there's some basic stuff, of course, obviously, detecting not just whether the expense from like the merchant and amount is out of policy, but looking into the receipt itself, making assessments about what type of merchant it is and so forth. And so we can do a more detailed prohibitive expense detection. Likewise, it's all the raise these days, AI is a big deal for not just the admins, but also for the employees. And so we detect AI-generated receipts and flag them. We have a feature that they call conversational corrections, meaning, of course, whenever you swipe the card or scan a receipt, we will categorize to the best of our ability based upon the information just on the receipt and merchant itself. But every company is different and sometimes it's ambiguity as to the correct way to categorize it. So we'll narrow it down to a short list of the most likely options and just ask you which one is it? If you're in the app, you can just do it in one tap. If you're responding via text or e-mail, you can just respond with a number or whatever. And you don't have to pick some these options. You can also just say something else entirely. This is the advantage of a general AI, where if it asks you a question, you're not trapped into whatever conversation it wants you to do. You could actually just switch the script and ask me like, well, what are all the categories available or what's the last time that I did this, whatever it might be. And so this general intelligence allows for a much more natural ability to correct and sort of categorize information. And as mentioned, this is a truly universal agent. You can have the same conversation in a wide variety of context, whether it's chat, e-mail, SMS and so forth. So this is a major release for Concierge AI, but it's really just the start. We think this is an incredibly powerful foundation that we've ironed out the kinks for, and you're going to see more and more incredibly powerful functionality being built across it over the quarters to come. So just to kind of summarize everything at a high level, we've increasingly and continued selling in a very successful fashion travel and card to existing customers, which has been great. We've been putting our free cash flow to work, which is great. And despite all of this, beside all the chaos of everything, we've really stayed focused on investing in an AI-first design. And I think this is a big deal because obviously, everyone thinks a lot about AI. But I think that everyone's kind of gotten through the first wave, a lot of the easy stuff. Here's where it starts to get much harder going on now. And so we think that chat is -- it's the UI for AI. If you can't talk to it, how smart can it really be? And so our design is to bring a chat-first design everywhere into the product such that it makes our entire product into an AI-first design. It's a very, very different design. I'd encourage you to check it out. And I think you'll see a glimpse of the future because we think everyone is going to be designing something like this over time. Likewise, our New Expensify migration is on track, and we've got really great customer reception. This puts everyone into a position to talk with their AI in a much better way than they could with their previous product. And at the end of the day, it's really about anything that you can do via the UI, you should be able to do via AI. And so building a truly AI-first product where you can talk to the AI in a primary mechanism as opposed to just as a sort of secondary flow. Anyway, we're going to have lots more to talk about in the quarters to come. But for now, let's take any questions we can. Niki Wallroth: Perfect. Let's get started with Citi. I believe, George, you're on the line. George Michael Kurosawa: I'm on for Steve Enders. Maybe just on this point about chat as the UI for AI. This is something that you guys have been early to -- it's interesting from our perspective to watch other people kind of catch up to where you guys are in terms of building in natural language-driven UI into other software apps. I'm just curious from that head start that you've had, what have been some of the big like learnings or capabilities you've incorporated into the platform that when you watch others, you can see maybe them making missteps or where you feel like you have an advantage there? David Barrett: That's a great question. And I think it really comes back to this idea of being built in versus built on to the product in that expense of that design is that you can go into any context and inside that context, you can talk with AI about that particular thing. That is kind of a nuanced point. But Imagine, for example, you're texting with an AI in a general context and you want to change yesterday's expense. You want to basically categorize it or you want to highlight that actually that was an accident. They didn't mean to submit that, whatever it might be. Referencing that outside of the context is actually quite hard. You have to remember the merchant to date, the amount or some key indication of how to do it. And it's a really impractical thing that's going to drive you back to the UI. Now if you're talking to your assistant, you would just say, hey, that thing that I did yesterday or whatever it might be, and you give a kind of a relative reference, and it would be able to figure it out based upon the contextual clues of the conversation. And so I think that our UI is about trying to infuse the AI throughout the entire product such that you can use it in whatever context you're already in. You don't have to leave your context to use the AI. It's already there. This makes a very different UI design. You can see it's a very chat-centric design. In many ways, it looks like a kind of ChatGPT interface. I mean I think that it's hard to argue your business is an AI-first product if it looks like Concur. I think that it has to look a lot more like ChatGPT to really credibly say that this is an AI-based thing. It's kind of like what makes an AI intelligent isn't that it just has a bunch of kind of like AI branding on a bunch of algorithms. I think you need to be able to talk to it. You have to be able to ask questions, whatever you want. You have to explain why it did what it did, and it has to be able to learn from mistakes. I think that the idea that you can have automation in place and that you can't talk to it and figure it out, it doesn't seem very smart. Like let's say, you had -- you hired some sort of an accountant and they said that they approved a report, and you asked them, why did you approve the report? And it's like, I don't know, you wouldn't be like this is a genius. You'd be like this is pretty stupid. I think a lot of sort of algorithmic automation is very powerful, but it's not intelligent in an AI sense. I think intelligence is about getting into a place where you can ask questions, get answers and make changes all through natural language, and I think our design is really optimized for that. Ryan Schaffer: I also think it's important that you're unlocking a new use case. Making charts with AI is not interesting, but that's a very common use case. People have been making charts for a long time and doesn't require AI. That's not a good use of AI. So I think the fact that we're able to do new things, new functionality, offer new value to the user because we're using AI is what sets us apart versus replacing code with AI that the customer doesn't care about that. David Barrett: Yes, yes, I get that. George Michael Kurosawa: Super interesting. I appreciate the detailed answer there. Maybe something more tactical. The government shutdowns in the news, it seems like maybe there might be some impact on travel, I can appreciate that probably if there is any impact to you guys, it would basically be a timing risk. But just any thoughts there from shutdowns in the past or just general scenario analysis you guys maybe have thought through there? Ryan Schaffer: So I think it's -- I guess it depends on -- to the extent it impacts travelers, right? If you're stuck somewhere, you're probably going to actually end up spending more because you have extra hotel nights because you're stuck in New York or something. But in terms of -- is it going to keep people from using Expensify Travel less or something because they're worried of being stuck. I think that's probably a realistic risk. It depends on whether people are going to change their travel plans or just risk it basically, I think. David Barrett: Yes, I don't think uncertainty is good for anyone's business. Ryan Schaffer: Yes. Niki Wallroth: Great. Let's see. JMP, I believe Aaron, you're on the line. Aaron Kimson: I want to dig in on migrations from Expensify Classic to New Expensify, including what percentage of revenue today is on New Expensify after migrating your Collect customers and the time frame over which you expect to get your Control customers that I think are a substantial majority of your revenue on New Expensify. Ryan Schaffer: That's a good question. I don't think we know the -- it's less than 50% of revenue. So we're not over the 50% hump in terms of revenue yet, but that's the huge priority right now is moving people over. David Barrett: Yes. I mean we're -- as I mentioned earlier, we're aiming to have New Expensify match Classic from a functionality perspective by end of the year. And I think we're very good on that target. Now the real question is how fast can we migrate everyone over. We control the time line here. There's no sense migrating them over faster than they're comfortable with. And so we're going at the fastest rate that they're comfortable with. I think we're really hoping to have a significant progress on that, if not completion or near completion by the end of the year, but I don't think we can control -- we don't know exactly yet because we don't know what we don't know. Ryan Schaffer: Yes. I think it's -- we're also listening to the feedback of customers nudged and iterating very quickly because it's people who are new to Expensify and they come in, they love it, right, because they -- it's all they know, it works great. It's very cool. Someone switching from who's used Classic for maybe 5 years, 10 years to New, it's -- that's a different audience, and they have a different reaction. It's not negative, but they have a different set of feedback than what we've gotten just from new customers coming in. So we've been a little slow moving people over and really focusing on those user sessions and getting feedback and making small changes quickly and iterating. And I think it's a flywheel where it goes faster and faster. But the existing customers are an interesting source of feedback compared to net new because they say different things. So we're just working through that. David Barrett: Actually, it's a great point. The bottom of the slide that talks about the major goal we had was to make sure every new customer conversation started on New Expensify. And so that has been the priority. That's done. And so now the priority is getting existing customers over. Aaron Kimson: That makes sense. And then the follow-up here, are you seeing any incremental monetization from the customers that have migrated to New Expensify? Or is that more TBD? And I assume the more relevant piece of this question at this time is what type of internal cost savings do you anticipate from the Concierge agent once you get everyone migrated over to New Expensify? Ryan Schaffer: That's a great question. So the support cost should be definitely less when we get everyone over because New Expensify handles everything better than Classic. A lot of the problems -- not problems. But there are some complaints with Classic that we have solved with New Expensify. So in general, it should be less of a support burden. Also, just the fact of maintaining 2 platforms at once is expensive and like a split brain problem. So it will be -- we're really looking forward to solving that. In terms of increased monetization, I think it's much easier to issue new cards, manage everything, get into travel. There's a lot of travel functionality that only exists on New Expensify. So using Expensify Travel with New Expensify is a better experience than Classic. So I do think that it's a net positive. Everyone that we move over is a net positive on the business. So that's why it's a huge focus for us right now. Niki Wallroth: All right. We were double booked with some of our other analysts, so we will talk to them offline. That's everybody for now. Ryan Schaffer: Great. All right. Thank you all, and we'll see you next quarter. David Barrett: Thanks, everyone.
Operator: Ladies and gentlemen, welcome to the Aperam Third Quarter 2025 Results Conference Call. I am George the Chorus Call operator. The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Timoteo Di Maulo, CEO. Please go ahead. Timoteo Di Maulo: Hello, everybody, and thank you very much for joining our conference call today. All our comments were contained in the podcast that we published this morning, which you know supports our quarterly financial reporting and where applicable, our disclosure of regulatory information. We also save more time for your partner question during this call. As you know, this is my last quarterly conference call as CEO of Aperam. I'm proud of the work we have done to the stronger resilient pattern during the last 11 years. Just like in the podcast, my colleagues, Sud Sivaji and Nicolas Changeur are here, and together, we are working forward to answering your questions. Let's start straight away with the Q&A, please. Operator: [Operator Instructions] Our first question comes from Tristan Gresser with BNP Paribas. Tristan Gresser: I have two, the first one, in your outlook presentation, you mentioned some price pressure from imports in Brazil. Can you discuss a little bit the situation there. I thought that you had received recently a renewal of the antidumping duties from China and Taiwan on CRC. Is that enough? Do you need more? Usually, we talk a bit more about Europe input pressure and not so much Brazil. So has anything changed recently? Sudhakar Sivaji: Tristan, Sud here. So because it's Brazil, let me answer, and I think it's important, and your understanding is correct. There is price pressure is not on our stainless product portfolio. It's actually the non-stainless part, specifically the commodity electrical steel grades, which is the NGO part and some carbon steel part, so to speak. We just mentioned that just to be clear what are the different moving factors for your model, so to speak. It has nothing to do with stainless. And there, your understanding is correct. There is a proposed antidumping revision, and we are waiting for the results of that one on stainless. This is just the non-stainless part. And the effect is not very significant, but still the effect is there. And the reason we wanted to mention that is because, as you know, Brazil goes into a summer quarter in Q4, and it has been our most profitable contributor compared to Europe, which is positive but slightly positive. So when volumes disappear, smaller changes become visible, and that's the reason we gave that guidance. So it's no concern on the stainless market. Demand remains stable margins have not unchanged. The import pressure has not changed to post the minus in stainless in Brazil. Tristan Gresser: Okay. That's very clear and helpful. And my second question is on CBAM. So in the presentation, you mentioned that CBAM is on track. Can you mention a little bit the details of what you expect from the policy would be a good outcome, a more neutral outcome and a more negative outcome? Do you firmly believe that Scope 3 on NPI will stay? Can Scope 2 be included? And does that even matter? Do you think the commission will be able to assign a carbon intensity by company or by country? And finally, if you have a view on the benchmark, I believe there are differences depending on the grades of scale less steel you look at. So any color there would be greatly appreciated. Timoteo Di Maulo: Okay. It's a complex question, knowing that not everything is clear today and because the commission has not decided seems like the benchmark deal value, which has an impact in term of numbers. Now what is clear as of today is first the application from the first of January. The second thing that is clear is that for stainless steel, there will be the inclusion of the precursor. Precursor, meaning the raw material, the most important arrays that are in the scope of stainless steel like ferronickel, pure nickel or nickel pig iron or ferrochrome. The third point, it is clear and that you have mentioned is that Scope 2 is not considered. Okay, I will not be considered the application of the CBAM for the time being. The other point, which is clear is that CBAM will have a progressive ramp-up. This has been already disclosed many times. And so it will start in January 2026 and will have the full effect in the next 7 years. This is what is clear today. Another part that is clear is that considering the very high level of CO2 of the producer, which are the most competitive because they have a [nickel pig iron, this will have a big impact on all producers, which are used on nicely. The other part, which is also clear is that the commission is putting in place the melt report just to avoid the non-traceability or improve the traceability. All this is positive. The numbers are not yet communicated and in particular, all as you mentioned, all the management and the default values are not for the moment known. Operator: The next question comes from Maxime Kogge with ODDO. Maxime Kogge: Two questions on my side. The first is on volumes, actually and the bridge from Q3 to Q4. So reading between the lines, I understand that you expect volumes to increase in Europe in line with your seasonality, which I equities in contrast what has been guided by your two main competitors. And in Brazil, this would be lower, but in line with seasonality. Can you confirm that? And perhaps a bit more color on the trends you're seeing. Timoteo Di Maulo: No, no, I fully confirm that. The seasonal effect in Europe and in Brazil, plus months. The Europe will increase their volumes because in Europe typically in the month of August is very low because of the closure of all this out of Europe or France, et cetera. And then for Brazil, you start this summer. And so there will be a summer in Q4. So all in all, I confirm that Europe will be a increase of volumes and Brazil will be some decrease in volume, but in line with the seasonality. Maxime Kogge: Okay. Very clear. And second question is on the aerospace end market, which has actually quite soft, like your initial expectations. So perhaps can you shed more light there on your customer portfolio, your exposure between the market and new equipment or kind of information that can be useful to appreciate the potential of upside in 2026. Timoteo Di Maulo: Okay. So fundamentally, we are exposed to aerospace in universal and a little bit in some activity of recycling but these are minor compared to nines our exposed to aerospace. What has been here in aerospace, and we have discussed in previous cold is that there has been a long phase of destocking in which we are still now. What is clear also in aerospace is as a market, the market is very solid and the order book of all the producers that we are addressed producer, which are the typical Boeing, et cetera, but all the supply chain of this producer with motors with landing gears, et cetera, they have a very solid order book. Now once we'll be stocking is finished and we see that this is going to the end in the next few months, the market will go back to the performance that they have shown in 2024 and the beginning of 2025. It's clear that this market is a bit different from the commodity market that we address with the standard steel where the stock and inventory are between 2 to 3 months, 4 months. Here, we are discussing of inventories, which are along the supply chain of many, many more months and we are at 12, 15 months. And so whenever there is a disturbance in the demand, this has a very long, let's say, consequence and this is what we are experiencing. On top, we have had some maintenance during Q3. But as I repeat, we are very confident on 2026. Operator: The next question comes from Tom Zhang with Barclays. Tom Zhang: Just one for me, actually. On the CBAM, I think we discussed before, there's clearly a lot of potential loopholes and specific issues of sales, whether that's different grades, whether that's sort of default values? And is the global market these as a quite smart guys are going to try and slide ways around it. So in my mind, with CBAM, it's not just about getting the policy right. It's about being very quick to react to examples of circumvention and changing the policy, which is why I think the delays that we're going to have in even if there's something like benchmark and default values has made a bit of a concern. From your discussions in Brussels, is there anything that gives you confidence the commission is going to be more flexible and a particular to react to adjust the CBAM in the future, try and shut out circumvention? Sort of any thoughts to go around that would be interesting. Timoteo Di Maulo: For sure, they have I see you are very well informed. So for sure, they have fully understood about the benchmark and they know personally the story of the grade, and they have bonded us that this will be fully considered because not only the grades are sent end of CO2. And so typically, the highest content of CO2 is in austenetics, which represent 75% of the market. So they are fully aware and they are supportive on this point. We look also that you are referring are they well known they are on the capacity sharing and this circumvention. And all this has an answer, which is the melt and pour and the implementation of both melt and pour, the benchmark and the default values is part of what the commission is working on, knowing that it miles a very clear view on what are the loopholes and the possible measure, at least we have given them all the possibility to put in place leisure with our totally satisfactory. Tom Zhang: Okay. Maybe if I can just wish you slightly. I mean, we've had some stories of Asian producers basically melting slab and then immediately scrapping that slab and remelting it and basically just calling it scrap as one way of circumventing CBAM. Maybe this is a very small scale, but just give us an example. I guess the question is more, once bans in place, do you think the commission is going to faster going forward in the tour do you think it's still going to be quite a slow European process when we see circumvention, maybe it's going to take 1, 2, 3 years for them to go out and pick it. Timoteo Di Maulo: I don't think you can change dramatically the speed of Europe. Now what is clear is that all what is described here is very well known and it is not discovered tomorrow mony they will not start to work on all these problems from more and more, okay? On top of the question, the question is also the fact that you have let's say, refer to things which are relatively heroic. So scrapping a sub and then remelting this lab is something which has a cost the end you have a very low interest to the debt. So I'm confident that progressively, the CBAM will be a strong support for a level playing field. Then we will see. Operator: [Operator Instructions] Our next question comes from Bastian Synagowitz with Deutsche Bank. Bastian Synagowitz: My first one is also coming back on the plan policy changes. I guess as a starting point, no one at the moment is really making any money in Europe this way easily EUR 100 away from what used to be previous mid-cycle margins. would you be confident enough to say that with what is coming in, what planned, we should be going back to mid-level margin levels before demand rebound, which we've been waiting for, for some time, I guess, which we can't really think on? That would be my first question. Timoteo Di Maulo: Yes. The answer is clear, yes. Now the answer is not if we are confident or not to make this will level. The question can be in which month, we will see the effect because it's a question of months. We don't know exactly when the commission will put in place. We have asked the first of January a lot of member states are supporting the first of January. But at the end, when the level of the imports will be reduced at a sustainable level, which was the level of 2012, 2013, when the utilization rates of the plants in Europe will be let's say, much better in close to the 80%, 85%, yes, the market will be different. Then and this will be different even in a moment where the final demand is still lagging behind because as you have seen also in our podcast for the moment, the markets are not yet recovering. So we can expect a double effect. Which is on one side, the full, let's say, ramp-up of the circuit and the other side, the fact that some policy like the German plan, will enter in effect and the demand will be stimulated and go back to a more normal level. Now as I repeat and as to be clear to everybody, it's a question of months. Not a question on years, not question quarters. I think it is a question of months, can be 1 or 4, I don't know. But it will come. Bastian Synagowitz: That's been very clear. Then my next question is on alloys. Can you maybe help us understand how, I guess, the former business pre-Universal is doing? And are you still confident we'll be hitting the EUR 100 million EBITDA target this year? Or has this become out of reach. I guess you obviously have the maintenance situation here, which is constraining you a little bit. And then maybe also give us a bit more color on how much Universal is contributing relative to the, I guess, previous EUR 60 million pre-synergy earnings aspiration level is used to have. Those are my questions on alloys. Sudhakar Sivaji: So on the question, Yes. So we've given you two points, which is that we have this temporary weakness in the oil and gas market, which I'm sure the entire industry is going through, right? And based on that, on an annual run rate level, the previous alloys business would be awarded about 10% less level, so to speak. So that's an upside, and we still stick to the EUR 100 million goal for the previous alloys business. And the Universal business, if you remember, we are actually only taking this year, and that's something we kept in mind only 11 months, right? So the first one was before. Just to keep run rate in mind. We had guided close to EUR 60 million for the year in a steady-state run rate. And the weaknesses, which Tim has explained in the market and the maintenance issues between alloys before Universal will traditionally bring Universal probably to around 50%, 60% of that number this year, so to peak. So this is the broad level we expect this year. Starting next year, it should be full run rate for Universal because we'll have it 12 months in our portfolio and alloys as well and then synergies have to start kicking in Remember, we guided to 27 million synergies also. So because this is a year of ramp-up of synergies, so there should be a run rate of the first year of the ramp-up, which we promised this split across the next 4 years, should also start flowing in, just to give you alloys. Bastian Synagowitz: That's great color. Just briefly on , are you seeing any same signs that this is now starting to come back for the next year, I guess, in terms of earlier call-off rates and indications? Or is it just too early to say? Sudhakar Sivaji: It's too early to say because also there's a lot of year-end-related store loan, a lot of equipments, which get called off end of the year, as you know. It is not just simply a Brent price compared to the investments or calculation. So it's too early to say. Bastian Synagowitz: Okay. Great. My last question is on your financing line, which was slightly higher this year. Can you maybe just quickly update us on how much of the financing costs were related to things like advisory and also hedging and what would be an assumption here for, I guess, the recurring run rate. You mentioned EUR 50 million cash cost in the report, but what can we use as a P&L item for the next quarter? Nicolas Changeur: Nicolas speaking, so for the interest rate, you can use for your model, EUR 15 million basically per quarter. The rest of the cost is indeed the derivatives. We are looking here at a timing effect, and this effect would be neutral over a period of time. Bastian Synagowitz: Okay. So EUR 60 million annualized is basically the financing line in the current situation with the balance sheet and financing costs as it is? Sudhakar Sivaji: For this year, Bastian if I can jump in. But I think the broader guidance is look at our debt, and we have the 4% to 5% rate plus you add a few utilization fees and everything. So you have to understand, you've announced this time refinancing of $790 million. So that refinancing, obviously, the older lines were probably at 3% to 4% because they came in from 5 years ago, right? So that will probably have a smaller hit a very, very, let's say, high single digit or low double digit, and I'm talking now 10 million or 11 million ] to that number starting next year, if you want to look at long-term ones. Operator: Ladies and gentlemen, this was our last question. I would now like to turn the conference back over to Timoteo Di Maulo for any closing remarks. Timoteo Di Maulo: Okay. Thank you very much for attending and participating to our Q3 call today. As I opened, this is my last quarter conference call as the CEO of Aperam. However, you know that I will remain close connected to Aperam, not only as a shareholder, but also as a future member of the Board of Directors. I also intend to continue supporting Aperam and will continue as a strategic adviser on public affairs for Europe, for example, so that we can build a clean steel industry in Europe. I am confident that our open transparent dialogue with the capital market will continue, thanks to my successor. And that you will continue to have confidence on the fact that the headwinds that we have faced in the last quarters are going to be partially sold or totally sold in the next future. So thank you both on the corporation and CEO and have a fantastic start to the Christmas and holiday season. Bye-bye to all of you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, and thank you for attending the Kinetik Third Quarter 2025 Results Call. My name is Elissa, and I will be your moderator today. [Operator Instructions] I would now like to pass the call to your host, Alex Durkee, Investor Relations. Please go ahead. Alex Durkee: Thank you. Good morning, and welcome to Kinetik's Third Quarter 2025 Earnings Conference Call. Our speakers today are Jamie Welch, President and Chief Executive Officer, and Trevor Howard, Senior Vice President and Chief Financial Officer. Other members of our senior management team are also inattendance for this morning's call. The press release we issued yesterday, the slide presentation, and access to the webcast for today's call are available at www.kinetiks.com. Before we begin, I would like to remind all listeners that our remarks, including the question-and-answer section, will provide forward-looking statements, and actual results could differ from what is described in these statements. These statements are not guarantees of future performance and involve a number of risks and assumptions. We may also provide certain performance measures that do not conform to U.S. GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. After our prepared remarks, we'll open the call to Q&A. With that, I'll turn the call over to Jamie. Jamie Welch: Thank you, Alex. Good morning, everyone. We appreciate you joining us today. Kinetiks' third quarter results reflect a combination of strong execution across key strategic initiatives and the realities of a challenging commodity price environment, particularly in September. While we exited the quarter in line with our operational expectations, the path to get there was not without its complexities. Through it all, our team remained focused and disciplined, executing on what we can control and continuing to advance our long-term strategy. I'll begin with an update on our strategic initiatives, and then I'll turn it over to Trevor to walk through our financial results and guidance updates in more detail. Starting with our strategic projects, I am incredibly proud of our team's work to bring Kings Landing to full commercial service in September, adding organic processing capacity in New Mexico. The start-up of Kings Landing presented as we navigated taking over the project post design, engineering, and procurement preconstruction. And our team worked tirelessly to keep the project on track. We now have a well-constructed plant at a site that will allow for processing capacity expansions with much fewer challenges to contend with. Kings Landing represents a significant step for our Delaware North customers. Even with Waha natural gas price-related shut-ins and a slower return of previously curtailed volumes, we are consistently flowing over 100 million cubic feet per day, which is in line with our original expectations. Over the remainder of the year, we will continue to perform gathering system modifications to segregate sweet gas and direct it to Kings Landing while keeping the sour gas flowing to Dagger Draw and Maljamar. We look forward to the return of shut-in PDP and bringing on the remaining curtailed volumes. We also look forward to enabling our customers to resume development of new wells after more than 2 years of curtailments and minimal activity. We also made quite a bit of construction progress on the ECCC pipeline that connects our Delaware North to our Delaware South system. We expect ECCC to be in service during the second quarter of 2026. Beyond the projects currently underway, we have reached FID on the acid gas injection project at King's Landing. We expect to receive the project's permit from New Mexico regulators before year-end 2025, and the project has an expected in-service of late 2026. This will enable Kinetik to take high levels of H2S and CO2 gas at all of our Delaware North processing complexes, and meaningfully increase our total asset gas capacity. From conversations with many of our producer customers in New Mexico, we knew that we needed to build confidence in our service offering and capabilities. Bringing King's Landing online was a huge first step. The conversations have now shifted to centering on additional processing capacity and sour gas treating capabilities to support future development plans that optimize capital deployment and drilling efficiency for producers, allowing them to drill multiple benches at once, which also eliminates potential parent-child well challenges. We're meaningfully advancing those discussions, and we believe that the ATI project will strengthen our competitive position and enable us to soon announce the processing capacity expansion at King's Landing. Kinetik is well-positioned to capitalize on the growing power generation opportunity in the Permian Basin and is actively pursuing innovative, scalable solutions to participate meaningfully in this evolving energy landscape. We're excited to announce a new opportunity that further demonstrates our ability to unlock value through strategic partnerships. Kinetik finalized an agreement with Competitive Power Ventures, or CPV, to connect our owned and operated residue gas pipeline network to the 1,350-megawatt CPV Basin Ranch Energy Center in Ward County, Texas, which will be used as one of the primary sources of supply for the plant. This connection will be made at no capital cost to Kinetik, creating another highly efficient and accretive pipeline outlet for our residue gas. This arrangement also supports new large-scale in-basin power generation to meet growing electricity demand in the region. Importantly, this project serves as a blueprint for future collaborations. It showcases how we can leverage our infrastructure and relationships to create scalable capital-light solutions that support our long-term value proposition. As part of our broader strategy to enhance market access and deliver value to our customers, we have made significant progress in continuing to support Permian residue gas takeaway. We executed a 5-year European LNG pricing agreement with INEOS at Port Arthur LNG beginning in early 2027. Under this agreement, we will deliver residue gas at a designated interconnect on the Permian Highway pipeline, representing the MMBtu equivalent of approximately 0.5 million tons per annum. The gas will be priced monthly based on the European TTF index, providing our customers with diversified exposure to international pricing. This agreement underscores our differentiated service offering and commitment to delivering innovative and value-added solutions in the Permian Basin. Additionally, we've expanded our takeaway capabilities by securing additional firm transport capacity to the U.S. Gulf Coast commencing in 2028. This incremental capacity will significantly enhance our customers' access to premium markets and reflects our continued efforts to address critical takeaway constraints at the Waha Hub. Together, these commercial arrangements strengthen our ability to support producer growth, improve premium pricing optionality, and reinforce our position as a reliable and best-in-class midstream partner. Before I turn over the call to Trevor, I'd like to touch on our financial performance versus expectations for the past 4 quarters. For almost 3 years, this management team has done a very good job of being able to execute our strategy, fill our residual cryo processing space with new dedications and commitments, and beat and outperform our financial expectations and guidance. Over the past 4 quarters, we have stumbled, and we recognize that we need to do better. We have had some challenges as we've integrated the Delaware North system into our business, such as the delays for King's Landing to reach service. Meanwhile, we've endured challenging and turbulent macro commodity and inflationary headwinds this year. These are not excuses. These are just facts. The buck stops with us. And as the largest individual owner of this company who has never sold 1 share, we will absolutely do better, and I will not rest until we do. We are forensically analyzing and improving our forecasting assumptions, including evaluating the use of AI tools and machine learning to do so. We will challenge ourselves on direct and indirect risks and how to mitigate them. And we will aggressively reduce our controllable costs in all segments. Our reputations and credibility are in question, and we will respond with relentless grit, purpose, and resolve to address and rectify the situation. Looking ahead, we're executing on a robust multiyear organic investment strategy that positions Kinetik for long-term success from advancing strategic infrastructure projects like Kings Landing and the ECCC pipeline to developing scalable solutions in sour gas treating and gas supply for large-scale new market-based power generation in Texas. Our focus remains on delivering differentiated services and unlocking value across our footprint. These efforts, combined with our commitment to disciplined execution and enhanced forecasting, reinforce our long-term value proposition and our role as a trusted partner in the Permian Basin. Now I'll turn the call over to Trevor to discuss third-quarter results in more detail and our outlook for the remainder of the year. Trevor Howard: Thanks, Jamie. In the third quarter, we reported adjusted EBITDA of $243 million. We generated a distributable cash flow of $158 million, and free cash flow was $51 million. Looking at our segment results, our Midstream Logistics segment generated an adjusted EBITDA of $151 million in the quarter, down 13% year-over-year. The decrease was largely driven by lower commodity prices, lower Kinetik marketing contributions, higher cost of goods sold, and higher operating expenses, partially offset by increased volumes across both our Delaware North and South assets. Shifting to our Pipeline Transportation segment, we generated an adjusted EBITDA of $95 million. Total capital expenditures for the quarter were $154 million. As we disclosed in our earnings release yesterday, volume-related headwinds combined with producer-directed actions from commodity price volatility, the timing of the Kings Landing start-up, and the EPIC crude sale closing have led us to update our full-year adjusted EBITDA guidance range to $965 million to $1.005 billion. I will walk through several key factors behind our revised expectations. First, as Jamie discussed earlier, the timing to reach full commercial in service at Kings Landing was slower than anticipated in September. While we exited the quarter at our expected operational run rate, the timing and the pace of those volume contributions and the associated margin fell short of our initial expectations. The delay in bringing King's Landing fully online versus our original assumption of July 1 reduced full-year earnings by approximately $20 million. Second, we've continued to navigate sustained commodity price volatility and macroeconomic uncertainty throughout much of 2025. Our updated outlook now reflects market forward pricing as of October 31, which represents over a 2% decline from the commodity strip used to revise guidance in August and a 12% decline versus our original assumptions in February. Notably, Waha natural gas pricing, which is not included in the figures I just stated, has declined by over 50% since our February assumptions. Together, this has negatively impacted full-year adjusted EBITDA expectations by nearly $30 million versus our original guidance, excluding Gulf Coast marketing impacts. These lower average commodity prices have had both direct and indirect impacts on our business. Directly, they affect the pricing of our commodity contracts and change our plant's product mix, thereby potentially further impacting margin contributions. Indirectly, we have seen volatility impact producer decision-making with near-term development delays and broader existing production shut-ins due to lower prompt-month crude pricing and significantly negative Waha natural gas prices. It is a confluence of multiple factors that has led to this unexpected situation. In October, there were days when approximately 20% of volumes were curtailed, of which roughly half were from our oil-focused producers, a dynamic that we haven't seen since May of 2020, when the WTI crude oil futures contract final settlement price was negative $38 per barrel. We estimate that full-year earnings are negatively impacted by curtailments by approximately $20 million. While Waha prices are expected to remain an issue, takeaway constraints should begin to alleviate by this time next year. Specifically, the industry is set to bring online over 5 billion cubic feet per day of new takeaway capacity in 2026 and in early 2027 through the following projects: the GCX compression expansion, the Blackcomb pipeline, and the Hugh Brinson Pipeline. Kinetik's marketing entity reserved transportation capacity to the Gulf Coast in 2025 and 2026 to insulate itself from curtailment-related lost gross margin. However, the curtailments were more severe as we saw oil-focused producers shut in production. Turning back to commodity prices, indirect influence on our business, we estimate that lower crude and natural gas liquids pricing, as well as negative in-basin natural gas pricing, have deferred or changed our customers' development plans across our system, negatively impacting full-year 2025 EBITDA by approximately $30 million. While the Permian Basin continues to demonstrate resilience amid broader commodity price and macroeconomic pressures, it is not immune to the current headwinds. Since the beginning of the year, the Delaware Basin rig count has declined by nearly 20%, reflecting a more cautious stance from our producers. This shift in behavior is also being reflected in industry forecasts. For example, the EIA now projects Permian Basin natural gas volumes to be flat from 2025 to 2026 on an exit-to-exit basis compared to approximately 3% growth in 2025 exit to exit and approximately 9% growth in 2025 on a year-over-year basis. Lastly, our guidance assumed a full year of adjusted EBITDA contribution from EPIC Crude. However, with the divestiture closing in October, Kinetik won't receive the benefit for our pro rata EBITDA for the full fourth quarter. And of course, this will have some impact on our full-year results. We received over $500 million in cash proceeds from that sale and have used those proceeds to pay down debt, reducing our leverage ratio by approximately 1/4 of a ton. Over time, we will use some of those proceeds to redeploy into new opportunities such as the acid gas injection well that we FID-ed today. Taken together, these impacts led us to revise 2025 adjusted EBITDA guidance to $985 million at the midpoint versus our previous guidance in August. Despite the numerous factors impacting 2025 results and near-term estimates expectations, we remain confident in our long-term strategy and the value creation potential of our organic growth initiatives. Turning to capital guidance. We are tightening our full-year range to $485 million to $515 million, given our heightened visibility with 2 months of the year remaining and the FID of our Kings Landing acid gas injection project. Before we open the line for Q&A, let me briefly touch on our capital allocation priorities. Our strategy remains firmly anchored in creating long-term shareholder value while maintaining flexibility for disciplined capital deployment. Since Kinetik's inception in February 2022, we've delivered double-digit adjusted EBITDA and free cash flow growth, meaningfully delevered the balance sheet, and returned nearly $1.8 billion to shareholders since the merger. Today, we're building on that momentum with one of the largest processing footprints in the Delaware Basin and advancing strategic projects like the ECCC pipeline, sour gas treating, and capital-light reinvestment opportunities, all at attractive mid-single-digit setup multiples. These initiatives, combined with our current total shareholder yield of nearly 11%, underscore our commitment to delivering both near-term results and long-term value. Looking ahead, we see a clear path to long-term value creation through our short-cycle strategic project backlog, supported by a conservatively leveraged balance sheet and continued shareholder returns via dividend growth and share repurchases. This disciplined approach positions Kinetik for sustainable growth and a compelling long-term value proposition. And with that, we can now open up the line for Q&A. Operator: [Operator Instructions] We will now take our first question from the line of Brandon Bingham with Scotiabank. Brandon Bingham: I wanted to just start on the producer delays, if we could. In the release, it sounds like they are shorter-term in nature. Just trying to gauge maybe the impact on next year. Are these kinds of early '26 POPs that you expect? Do you think they're incremental to '26 development schedules, or maybe they're replacing some POPs that got pushed into '27 as knock-on impacts? Just trying to get a sense as to where '26 might be headed from a producer development standpoint. Jamie Welch: Brandon, it's Jamie. Thanks for the question. So let's deal with what we outlined in both prepared remarks and in our press release. So we're talking about delays as it relates to expected turn-in-line activity during the fourth quarter of this year. So we have seen things move from September now into late November, which is now past the expected maintenance season and into December. So we've probably seen maybe one move into early 2026, but not really that significant relative to, I think, things we've told you previously. So it's more about moving things within the quarter, which obviously has a knock-on impact. If you move something 30 days, you've moved 1/3 of your quarter. If you move it 60 days, you've moved to 2/3 of your quarter. If everyone is going to look at an annualized $1.2 billion and say, okay, that's $300 million for a quarter, but now we've moved our turn-in-line activity, that obviously has an impact. That's the easiest way to think about it. So just to clarify, it sounds like it's not necessarily moving things into '26. It's just delayed within the quarter. So most of the benefit happens in '26. Yes. Brandon Bingham: And then just one more question. I heard or read some articles recently that one of your larger customers up in the Durango system area was having a lot of success in the Yazo formation. And I was just curious what you're hearing or seeing up there, and just the development expectations outside of the commodity price volatility. It just sounds like some of those formations are stronger than maybe most would anticipate. Kris Kindrick: Brandon, this is Kris. Thanks for the question. Look, the Northwest Shelf is an exciting area for our producers up there. The geology is good. Given the price environment, there's still activity in that area. And so what I would say is we see activity. We have the capabilities to provide sour gas takeaway, which is critical in that area. And we're excited to continue to grow with our producers on the Northwest Shelf. Trevor Howard: The other thing that I would add, just following on Kris' comments, is we've seen pretty robust E&P M&A activity up there, which generally portends development once the E&P gets their hands around the specific asset. So that's one dynamic that we're seeing on the Northwest Shelf. Another dynamic that we're seeing is that some of the management teams or private equity companies that had flipped in '23 and '24 have returned, and they're beginning to push the frontier of the Delaware Basin up on the shelf right into our asset footprint. So nothing to report just yet. It's early days, but some nice green shoots for incremental development that we were not expecting 15 months ago when we acquired the asset. Jamie Welch: Brandon, it's Jamie. Not that this was exactly the question or the response to your question, but this is one of the reasons why the AGI for us was so important. Sequencing is everything for Northern Delaware. And we looked at this, and we said, okay, now we have this wonderful new Kings Landing plant. It can deal with sweet gas. It's got a 600 GPM unit on the GPM amine unit, but it's limited as to what it can take. What we really need and what we really see is the need for sour gas and our ability to basically treat it and process it. And that obviously brought about the advent of bringing forward the AGI even ahead of King's Landing, too. Operator: The next question is from the line of Gabe Moreen with Mizuho. Gabriel Moreen: If I can ask, Jamie, maybe just staying on 2026, bigger picture. Clearly, you laid out some long-term targets for growth over the next couple of years. I'm just wondering how you're viewing 2026 sitting within that context, given the push and pull here, the commodity backdrop, and producer plans. So maybe if you can just maybe talk about that a little bit. Jamie Welch: Yes, sure. Gabe, and thanks for the question. Look, I think like everybody in the context of both our peer group and our producers, we're all going through the planning and budgeting phase right now as to 2026. No one quite has a crystal ball on exactly how this is all going to look forward as it relates to commodity prices and sort of geopolitical impacts. Obviously, I think if I look at my dear friend, Kees Van Hoff's most recent stockholder letter, he gauges it as a yellow right now on a traffic light system. And I think that's right. So '26 is, for us, we are trying to discern exactly the level of activity. And obviously, we'll report back with our guidance in February. Most importantly, the framework that we obviously had historically articulated, Kings Landing, is now online. So if you just tick through the important elements, and then I'm going to give you the qualifier. King's Landing online for a full year. ECCC will be online for 8 months, 9 months, something in that sort of ZIP code. You have NGL contract expirations, of which there are 2. You will have, obviously, cost reductions. The negatives will be that you will no longer have EPIC, and you will have this question mark on the level of activity in the context of overall development and drill plans for producers. That's the way to think about it. There are both good and there's elements, which are EPIC is an unknown, and then there is the question mark with respect to producer activity. Gabriel Moreen: And maybe if I can just ask a little bit of a multipart follow-up on the natural gas moves you've made. First, on getting capacity on the Permian egress pipe in '28. Is that a question of alleviating Waha exposure since you're getting an increase from your producers? And did you think about taking an equity stake in the pipe like you've traditionally done with some other investments? And on the LNG strategy, I'm just curious whether that is something you've been reverse-inquired about from the part of customers? Or is that something that you really just see as allowing you to compete better for additional packages of gas as they come up here? Jamie Welch: Great series of questions. So let me just deal with the first. We're simply a contract counterparty on this particular pipeline, and it's expected to be in service in '28. We have now today, when we look at our Delaware South system for most or many of our customers, we have been able to offer them egress with Gulf Coast pricing. As we have moved north with Durango or Delaware North, as we obviously now call it, and obviously, with King's Landing coming online, we are now offering that opportunity for those customers. There is a lot of interest in taking incremental capacity. So you look at how much capacity you have, and you realize we actually need some more because the overall demand is so high. So Kendrick and the commercial team went and secured some more additional capacity, which we know is needed. On the LNG side, it has been a topic of conversation around our leadership team for some time. If you go from a Waha to a Houston Ship Channel price point, clearly, we can see the overall premium step up. And we have seen it in the early days, when it was not as attractive. And obviously, the last couple of years, it has been highly attractive. A further step out has obviously been on the LNG side. And we have always talked about, okay, the issues on the LNG side, Gabe, I think, are twofold. How do you do something that is manageable as far as size, and two, that you don't have to take a 20-year contract? Something that is manageable in duration that you can say, and it's close at hand. So again, I give Kris and the commercial guys a lot of credit; they scoured the earth. They found a counterparty that had available capacity. We're talking about 16, 18 months from now. I mean, that's like a game-changer in the LNG. And when we went to our customers, they were like, Wow, this is really good. Short term, near term, I start getting this price point. I get my arms around it, and it's a really interesting, I think, step out for us, which I think we're going to continue. We'll learn a lot over the course of this, and we expect that we may have other customers who will be very intrigued about using this as one of their pricing diversification. Operator: The next question is from the line of Jackie Koletas with Goldman Sachs. Jacqueline Koletas: First, I just wanted to start, commodity exposure has been a major headwind this year. It sounds like some of the project agreements you announced could help hedge that exposure. What is your hedging strategy just throughout the remainder of the year? And how do you expect to mitigate that commodity exposure prior to that firm takeaway agreement in '28? Trevor Howard: Thanks for the question, Jackie. This is Trevor. I would say that for 2025, we're relatively well hedged across most products between C1 through C5 and WTI. As we look forward into 2026, we've talked about this in the past, being between 40% to 80% of our equity volumes being hedged on a rolling 12-month basis. I would say that we are within those targets, just where we sit with Waha today, and then with WTI, which has skewed us towards the lower end of that range. But what I would say is that we're still well within the range that we have been executing on for several years now. Jacqueline Koletas: And then with the FID of the AGI well expected for the end of '26, how do you expect volumes to ramp from here on King's Landing 1, and when we should kind of see that uptick? And how does that impact the timing for the King's Landing 2 announcement? Trevor Howard: Yes. So, as Jamie had mentioned, as we think about 2026 and providing explicit directional guidance right now, it's just a little bit too early. What I would say is that we included this in our prepared remarks. The plant is running more than half full right now. We have several packages of gas that are coming online next week and then in December as well, and into 2026. As we think about planning for Kings Landing 2, that is potentially a 24-month endeavor. And so it's not necessarily how does 2026 shake out, but it's more as we look forward in a multiyear plan with our producer customers and also what Kris and the commercial team are doing with signing new packages of gas that really makes us lean over kind of the edge of when we FID that Kings Landing 2 plant. But given the long lead items there, it's not really a question of what does the next 6 months look like, but how do we think about '27 as well? Kris Kindrick: Jackie, I would say, look, this comes back to my earlier comment about the AGI. There are 2 elements in the context of the way we think about the North business. Today, the gas going into Kings Landing is pretty much sweet. We have a 600 GPM amine unit, but that's it. So we're not dealing with sour anything like what we do with Maljamar and Dagger Draw. We have ECCC, which is, in fact, a large-diameter sweet gas conduit that can move gas south. So when we think about this and the overall likely development activity, which is predominantly sour, we intend to evacuate gas that right now, you would think about at Kings Landing, it will go down ECCC. You get the AGI in place, you will now convert Kings Landing 1 into a sour gas plant. And that's the way to think about the balancing mechanism from a barbell as you look at how you optimize. I think Trevor has always said ECCC, particularly as it relates to sweet gas, gives us the ability to, in fact, be very strategic on the timing for Kings Landing 2. And one thing that I would add is as Jamie's comment just about development activity being primarily sour. I think that comment more pertains to in and around Kings Landing. With respect to suite development, we're seeing substantial suite development along ECCC. And to Jamie's comment, that once ECCC is online in the second quarter of '26, we will reroute that gas south in order to free up capacity up north. Operator: The next question is from the line of Jeremy Tonet with JPMorgan. Jeremy Tonet: Just wanted to follow up on some of the questions that have been asked so far. I think there was a run rate of $1.2 billion EBITDA for exit '25 that was expected at some point in the past. A lot of moving pieces for '26, as you said, but do you still expect to hit that $1.2 billion at some point run rate during '26? Kris Kindrick: Sorry, during 2026? Jeremy Tonet: Yes. That $1.2 billion EBITDA run rate, if not hitting it year-end '25, do you expect to hit it during '26? Kris Kindrick: Well, I think what we said, Jeremy, is let's just park for one second, 2026. I'm happy to sort of articulate some of the challenges in the context of 2025 and how you get from $300 million to the midpoint where you have the revised guide today. But I think primarily, if you're going to think about it in just easy terms between the shut-ins and the delayed and turn-in-line activity and Epic, you're well over 60% of your difference. Jeremy Tonet: And then I guess, just any other thoughts you might be able to share, I guess, there's give and takes as you lined up there for '26. But just how do you think about the earnings power of the business, the growth profile over time, when all these variables normalize, settle out, or just from a baseline post that, how do you think about the EBITDA growth potential for the base business? Kris Kindrick: Look, I think the overall EBITDA growth potential for the business remains very strong, conditioned on we have continuing activity in the context of the development side. And that's, I think, really the question right now we're all grappling with. And as we look forward. Obviously, I don't anticipate, and I think you heard it in remarks from Trevor earlier, that we haven't seen oil-directed PDP shut in since COVID. This was something that none of us would say on the risk equation, we were otherwise anticipating. We have lived with Apache in the context of knowing that, obviously, when Waha goes negative, they shut in. Got it. We knew that. Rins repeat, we play forward. But this one was a completely new world for us to basically have to try to reconcile. And as Trevor indicated in his remarks, on some days during October, almost 20% of our overall existing production was actually shut in across the board, of which it was split between the oil, gas, and the oil-directed production, and obviously, Apache on Alpine High. So it was a really strange situation for October. And obviously, we've continued to see it bleed into November. Yesterday, minus $1.10 on Waha. Today is obviously still negative. I mean, this isn't building a lot of confidence. And that being said, October of next year, 5 Bcf a day of egress comes online, just go look at the forwards. Trevor and I were looking at this this morning. It's like a step change relative to what we see as far as current natural gas pricing. So I think there are a lot of things that the market is probably telling us, one of which is that we do expect softer activity. We do. And I think that's allowed us, and that is what has prompted us to think about a fundamental reset. One of your colleagues said, rip the Band-Aid off. Well, we looked at this and said, okay, this was our chance to basically go and really take a really tough look at the overall elements of our forecast and how we forecast it so that we can come out and not continue to perpetuate the last 4 quarters, which have been pretty rough and obviously, something that we're not pleased or happy with. Jeremy Tonet: Just last one, if I could, with regards to thoughts on using the buyback in the future. What type of cadence or framework at this point, given volatility in the stock? Just wondering any more thoughts you could share there? Kris Kindrick: Look, I think on the buyback, the buyback fits within the capital allocation bucket. The capital allocation bucket has 3 masters that, in fact, could satisfy. Buyback, dividend growth, and capital allocation for organic projects. All of the above. And we have to look and see where, in fact, we think from a fundamental value standpoint, where we think and what we truly believe to be in the best interest of all stakeholders. And so we look at that and we sort of make the decision. And obviously, Trevor will do that as we go forward, and we'll look at the buyback. We'll be looking at the dividend every quarter. We will be looking at, obviously, ongoing investment in our organic project program. Operator: The next question is from the line of Keith Stanley with Wolfe Research. Keith Stanley: I wanted to dig a little into the implied Q4 EBITDA in the new guidance. It's $250 million at the midpoint. Can you say what does that assume about King's Landing volumes? I assume there's no Alpine High in there. And then beyond the shut-ins, were there any adverse impacts from the extreme Waha pricing in October as it relates to gas price exposure in that Q4 number? Trevor Howard: Thanks, Keith. This is Trevor. As Jamie had mentioned, when you include just customer volumes, that assumes our gas-focused shut-in volume as well as our oil-focused producers shut-in volume, as well as timing delays with respect to -- given the fact that Waha in certain days in October was minus $9, that caused several producers to push development, as Jamie had commented earlier into later in the quarter. When you couple that with the EPIC sale, that represented over 60% of the revision, lower. What I would say is that there's that element. And then yes, there is an element of pricing. As you know, a portion of our equity volumes on C1 is priced in basin locally. And that did have a negative impact as we looked at the fourth quarter forecast versus where we were 3 months ago. So that certainly had an element to it. I wouldn't necessarily say that, that was nearly the impact that we saw in just the lost gross margin from curtailments across the system. Jamie Welch: As far as the overall run rate into King's Landing, King's Landing is now at that point where we're turning around individual compressor stations and basically bringing on gas that has, to this point, been curtailed. So there is more to happen. I think there are another couple, if I'm not mistaken, or at least one over the course of the next 4 to 6 weeks, that's likely to happen. So that will bring more volume on. And then it's going to be a question of, okay, do the oil-focused producers, both in the North and in the South, we've had shut-in production from both categories. And therefore, the question is, okay, are they going to return? And if so, what's that timing look like? Keith Stanley: And to confirm that when you say over 60% is explained by those factors, the difference between the new guidance and the $300 million quarterly rate? Trevor Howard: Yes, exactly. That's right. Exactly. Keith Stanley: Second question, how are you thinking about recontracting on TNF in light of recent industry developments? You have Speedway being built, Energy Transfer saying last night, they might convert an NGL pipe to gas service. Does it make sense to try and recontract some of your expirations now and do shorter-term deals? Or would you wait until they actually expire? Jamie Welch: Keith, it's Jamie. I think the following. 2026 is the first time that we get to the point where we've got expirations. And we are obviously very much aware of the current market dynamics. I think, yes, even with whether you do a conversion, you're obviously adding Speedway, obviously, I think there's an expectation that there will be less production. So I think still the overall bias for T&F rates will be in favor of the seller. And there's a lot of infrastructure that is being built that will need to be filled up. So I think from our vantage point, we don't see any changes to, look, we will deal with this over the passage of 2026 as we get to it. And as I said, I think our viewpoint is that the market dynamic will not change between now and then, and we still see this being a very attractive opportunity for us. Operator: The next question is from the line of Michael Blum with Wells Fargo. Michael Blum: I wanted to go back to the Waha issue for a second. Just more of a clarification, I think, for me. So you've secured some additional capacity to the Gulf Coast in 2028. So what exactly are you doing to manage your exposure between now and then? Kris Kindrick: So we have our existing capacity today. We have more capacity next year. And then we have this new tranche of capacity, which comes on for 2028. So we have always been actively managing it, and we are looking forward in the context of how we look at the overall needs of our customers and what that overall expected growth rate is as far as the amount of volume that wants to be settled at a Gulf Coast price. So, we've got capacity, as you know, and we've said that repeatedly. And so we manage it, and this will just be another tranche that we will basically add to our overall portfolio. Michael Blum: And then maybe on a related item, and you hinted at this in your prepared remarks, I think. But you had talked in the past about an in-basin power project with some of your producer customers as a way to manage some of this Waha exposure. Can you give us an update on where that stands today? Kris Kindrick: Sure. So we have continued to obviously talk to our upstream customers. I think it wouldn't surprise anyone to think that in the current environment, where capital is, I think, being heavily scrutinized, that this is a nice-to-have for them versus a need to have. I think we look at it and say this is very important for us to, in fact, help us address controllable costs. Obviously, electricity for us has been a rising cost over the course and passage of 2025. And so we continue to evaluate it. I think, look, more to come. I think we should show it in our presentation materials that it's active development. We're getting all of the equipment organized. I think there will be more to communicate to everybody over the passage of the next short time period. Operator: The next question is from the line of Samya Jain with UBS. Unknown Analyst: Could you provide more color on the data center-related infrastructure investments you might be seeing across the New Mexico border and how Kinetik might be positioned to capture that market? I know we recently saw Oracle and OpenAI announce a data center campus planned in Southern New Mexico, and that will probably use Permian gas. So how might Kinetik's current footprint facilitate that sort of project? And how could sour gas come into play? Trevor Howard: Samya, thanks for the question. I think I would look at the data center opportunity for us as being one where we have the ability to connect a residue gas pipeline network into a power generation source dedicated to a potential data center or large demand side customer. Obviously, there are a lot of projects, as many of you know, in the TEF, the Texas Energy Fund, that obviously are looking to get to FID. One project was obviously the CPV project. We provide one of the main gateways for gas to go to a 1,350-megawatt plant that is now broken ground, FID-ed, and expected to be in service in 2029. We believe that there will be other opportunities for us like that, that will then not only provide us connectivity because we'll be building out our pipeline network, but also provide us the opportunity to deliver and supply gas, whether it's in the form of us as Kinetik or our customers that may sit behind our plant or our processing facilities. So I do think there is a lot of interesting. Stay tuned. There'll be a lot more discussion on these particular topics. But this one was sort of the most immediate. We just got it completed. We've been working on this for 2 years or something. So it's been a long time coming, but I think there are some pretty interesting opportunities, and we get approached by many. There are many people who are approaching us on the power gen side who want to do large-scale gas by CCGTs. Kris Kindrick: Samya, this is Kris. A lot of our residue gas infrastructure that's owned and operated is in the Southern Delaware. We've been talking to many parties. One of them, which was publicly announced recently, the Landbridge NRG deal is adjacent to Delaware Link. So we're having conversations there. So again, we'll see which ones completely make FID, but we are having conversations with a number of folks, like Jamie alluded to. Unknown Analyst: And then I understand that many of the customers you gained from the Durango acquisition are private. So, how have you seen drilling activity in the Permian vary between private and public producers? And as you develop your footprint in Delaware North, what sort of customers are you seeing more traction with down the line? Trevor Howard: Thanks for the question, Samya. This is Trevor. What I would say is that the private producers that we've seen have been, I'd say, a little bit more price sensitive, particularly in this current environment, than some of the publics. They're not putting out multiyear production targets. And so they tend to be, again, a little bit more volatile with respect to the ups and the downs. However, what we have seen just with experience, we saw this during COVID, is that as crude lifted off the bottom, they were the first to pick the rigs back up and be very aggressive, particularly one of our customers, large customers up there. So I would say that is just a general macro comment that we're seeing. With respect to what we're seeing from customers up north, I'd say it's a nice mix of both the private equity-backed and private companies that are aggressively moving up there to expand the play and also seek inventory, given that it's pretty competitive. It's extremely competitive down towards the state line for someone to go pick up inventory. The other thing that we're seeing is that we're seeing some of the publics that have historically been more focused on the state line or in Texas push further north, just given what they're seeing from well results across all formations. So it's a pretty attractive and it's part of our thesis that we have with Durango. It's a pretty attractive development that we're seeing right now. And it's a multiyear strategy that we have here in order to continue to build this beachhead position and capture a lot of market share as the play continues to move further north, east, and west. Kris Kindrick: And Samya, this is Kris. We're still seeing the dynamic, too. You asked about Northern Delaware. You go to the Southern Delaware, where if there's acreage that some of the public don't want to drill, we're seeing some of the private farm that out and pick that up and drill that. So there's still that dynamic going on. So there's a good mix of development we're seeing activity from private. So that's continued to happen on our system. Operator: This will conclude the question-and-answer portion of today's call. I would now like to turn the call back to Jamie Welch for any additional comments. Jamie Welch: Thank you, everyone, for your time this morning, and we look forward to continuing our dialogue and engagement with you over the coming days, weeks, and months. Thanks. Operator: This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. I am Jota, your Chorus Call operator. Welcome, and thank you for joining the Alpha Bank conference call to present and discuss the 9 months 2025 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Alpha Bank management. Gentlemen, you may now proceed. Iason Kepaptsoglou: Hello, everyone, and welcome to the presentation of our third quarter results. I'm Iason Kepaptsoglou, Alpha Bank's Head of Investor Relations. Our CEO, Vassilios Psaltis, will lead the call with the usual summary and a few updates. Our CFO, Vassilios Kosmas, will then go through this quarter's numbers in some detail. Q&A will come at the end, and we should wrap up within the hour. Vassili, over to you. Vasilis Psaltis: Good morning, everyone, and thank you for joining our call. Let's start with the usual overview of financial results on Slide 4, please. As you can see, reported profits for the 9 months stood at EUR 704 million, already more than what we have made in the preceding fiscal years. Earnings per share of EUR 0.27 are 73% of the target we have set for the year. This translates into a 13.9% normalized return on tangible equity. We've also accrued EUR 352 million for distributions so far this year, already more than the distributions out of 2024 profits, and we intend to distribute circa EUR 111 million as an interim cash dividend in about a month's time. The main pillars of our performance remain the same. We have defended against the fall of the interest rates, seeing the second quarter of sequential NII growth. We recognize that the decline in interest rates will come less relevant in the coming quarters, but our ability to prudently position the balance sheet to maximize the value we can extract will remain relevant, be it on policy rates or spreads. We see structural tailwinds to our fee income line coming from Asset and Wealth Management, alongside lending and transaction banking. Fee income growth is the product of the initiatives we have taken that are now bearing fruit, both from the corporate as well as the affluent side of the business. We continue to position the business to maximize the recurring value we can create for our stakeholders in a sustainable way. Now allow me to spend some time on the strategic outlook, starting with Slide 5. Our strategic partnership with UniCredit continues to be a cornerstone of our transformation and growth agenda. As of last week, UniCredit has increased its stake in Alpha Bank to circa 30%, reinforcing the depth and commitment of our partnership. This is not just a financial investment. As UniCredit CEO, Andrea Orcel repeatedly stated, it's a strategic partnership, delivering tangible commercial, operational and systemic benefits for both institutions. We've cooperated closely and successfully combined our Romanian subsidiaries in a record time frame on footprint and unlocking synergies in cross-border operations. Furthermore, our clients now benefit from UniCredit's European network across 13 countries. This uniquely positions Alpha Bank as a gateway to Europe and the bank of choice for over 5,000 wholesale clients in Greece. In Wealth and Asset Management, the launch and expansion of the OneMarket funds suite has been a major success with close to EUR 900 million distributed to our customers. In Wholesale Banking, we have collat over EUR 300 million in letters of credit and guarantees through our transaction banking business and approved circa EUR 0.5 billion in international syndicated lending since the partnership began. Additionally, bilateral FX payment volumes have reached EUR 650 million year-to-date, reflecting strong transactional momentum. In Capital Markets and Advisory, the integration of our investment banking platform is progressing well. Together with UniCredit's advisory franchise, we're targeting joint deal origination across various sectors. Lastly, beyond commercial gains, we are also leveraging UniCredit's expertise in customer experience, process simplification, upskilling and reskilling programs, compliance and operational resilience, areas that are crucial to our long-term sustainability. This partnership aligns with Europe's vision for cross-border integration and financial stability. It supports the capital market union and enhances systemic resilience across Europe. Looking ahead, we aim to scale further our syndicated lending, transaction banking and cross-border advisory and broaden the distribution of asset management products across UniCredit's network. Our partnership with UniCredit gives us a competitive advantage that differentiates us from the rest of the pack, one that we aim to fully utilize to enhance the value that we can create for the benefit of all of our stakeholders. Our story remains intact, as you can see on Slide 6. Our strategic actions alongside our balance sheet tactical positioning will allow us to maintain an upward trajectory to our bottom line. Our defensive net interest income profile is now evident as we are amongst the first commercial banks in Europe to see growth in their net interest income line. We continue to dynamically manage our balance sheet, capturing the tailwinds of loan growth. The structural growth potential of the regions where we operate will allow us to maintain a pace of net credit expansion above the EUR 2 billion mark. We are stepping up our efforts for incremental fee income generation. Our franchise is strongly positioned to benefit from the long-term uplift in the penetration of fee-generating services. And as mentioned above, we are leveraging the partnership with UniCredit to accrue tangible benefits quarter after quarter. Our profitability is on an upward path, and we see earnings growing by 12% beyond 2025, still notwithstanding the impact of any share buybacks. Let's now move to Slide 7, please. The trends for 2025 and beyond allow us to maintain a differentiating positive EPS growth trajectory in the medium term. This differentiation should now be apparent vis-a-vis our domestic and European peers. EPS is expected to grow by 10% per annum over the planning period, above consensus estimate even before accounting for the effect of any buybacks. And then on Slide 8, please. We have been diligent and clear on how we intend to allocate capital and our priority remains unchanged. Our first and foremost priority is to fund profitable loan growth and invest in bolstering our capabilities. Our capital generation capacity suggests that we ought to be increasing payout. Lastly, our excess capital provides us with significant firepower to do more. Allow me to provide you with an update on these priorities, starting with loan growth on Slide 9. Loan growth in Greece continued to show resilience with corporate lending continuing to lead the way. We are seeing sustained momentum driven by a combination of strong economic fundamentals, a robust investment cycle and the structural support mechanism in place. Businesses are actively engaging with the banking sector to finance expansion, transformation and innovation, reflecting a deeper shift in the corporate landscape. We expect this dynamic to persist fueling high single-digit growth for corporates. The mortgage market presents a more complex picture. Demand is evident, but structural constraints around supply and legacy portfolio dynamics continue to weigh on growth. Government support measures offer some relief and growth is now turning positive. As a result, lending to individuals will be a growth area in the coming years. We're operating in an environment of hidden competition, particularly in the large corporate segment, which has led to gradual compression in spreads. We're actively defending profitability through prudent underwriting, optimizing risk-weighted assets and increasing fee and commission income. The commercial book remains resilient, and we are confident in our ability to navigate these dynamics effectively. Overall, the outlook remains constructive. Corporate lending will continue to be the engine of growth, supported by a recovering economy and targeted investment flows. Whilst mortgage activity may be -- may be slow in picking up, the broader loan book is well positioned to deliver in our expectations. We remain confident in our guidance and continue to expect mid- to high single-digit growth over the medium term. On Slide 10, you can see the revenue benefits from the investments we have made in growing parts of our core business. Beyond balance sheet growth, we have made important strides in diversifying our revenue streams and enhancing our cross-selling capabilities, which is a key pillar of our medium-term growth strategy. Trade finance and overall transaction banking fees have seen strong growth, achieving an 8% CAGR, boosted by our internal efforts to deepen our share of wallet with clients and also thanks to our partnership with UniCredit and the larger product pallet that they are now able to offer us to our corporate customers. In Asset Management, fees and assets under management have both doubled since December 2022, with over 60% of this growth coming from net new money, complemented by positive market effects. The former highlights our growing distribution capabilities, capitalizing on our affluent and wealthy clientele whilst the latter demonstrates the outperformance of our products. Mutual funds have taken the lion's share of this growth with net sales accounting for 75% of the total growth and a continuing bias towards balanced and equity funds. These are products that carry higher management fee margins, helping our fee CAGR in asset management reach an impressive 32% since the first quarter of '23. The outlook for these 2 areas remains very constructive. Our corporate customers, they are increasingly more sophisticated and their needs are expanding beyond vanilla lending. As such, we aim to support them in their growth journey through an expanded pallet of transaction banking, trade finance, treasury and advisory product, the latter with our new larger business following the acquisition of AXIA Ventures. In Asset Management, Greece is at early stages of a new secular trend with rising disposable incomes and improving financial literacy among affluent customers, creating long-term tailwinds for AUM growth. Moving on to Slide 11. Shareholder remuneration has been on a consistent upward trajectory, reflecting both our strong capital generation capacity and our commitment to sustainable value creation. We reiterated dividends with -- we started again paying dividends with a 20% payout ratio, increased this to 43% of reported profits last year, and we are currently accruing at 50% for 2025. This progression underscores our confidence in the robustness of our capital position and our ability to support higher distributions going forward. Indeed, our capital generation capacity suggested the payout north of 50% is sustainable, aligning with our strategic objective to deliver predictable and growing returns to our shareholders. Cash dividends have followed a similar upward path, starting with EUR 61 million out of 2023 profits and rising to EUR 70 million for 2024. For the current year, the introduction of an interim dividend of EUR 111 million to be paid in the fourth quarter confirms the positive momentum and our disciplined approach to capital deployment. Now when it comes to the split between cash dividends and share buybacks, our approach remains balanced and responsive to market conditions. While cash dividends provide immediate and tangible returns, buybacks offer flexibility and accretive value, particularly in periods of market dislocation. We continue to assess the optimal mix guided by our capital planning framework and our overarching goal of enhancing total shareholder return, cognizant of the change in the return of investment for future buybacks. Let's now move to M&A and start with Slide 12, please. We view M&A as a powerful tool that can accelerate the delivery of our strategy. The 3 transactions we announced earlier this year, FlexFin, AstroBank and AXIA Ventures, they are fully aligned with our framework. FlexFin enhances our factoring capabilities and opens access to underserved SME segments. AstroBank consolidates our systemic presence in Cyprus, doubling its profitability. AXIA Ventures strengthens our advisory offering, elevating our dialogue with corporate clients with additional focus on cross-border capabilities in conjunction with our UniCredit partnership. Moving on to Slide 13. As we have stated clearly, the financial impact of these transactions with a total 6% accretion to EPS and 60 basis points benefit to profitability in terms of return on tangible equity at the cost of circa 60 basis points of capital. Integration efforts are already underway, and we're working toward full rollout in line with our strategic road map. To ensure seamless execution, we have appointed a dedicated Chief of Integration and Group Initiatives Officer, who oversees all aspects of delivery and sits on the Executive Committee. This governance structure ensures strategic alignment, operational discipline and timely execution. We will continue to pursue opportunities that fit our framework and deliver long-term value to our clients and shareholders. And then finally, from my side, I'm pleased to announce that we are planning to host an Investor Day in the second quarter of 2026. We're close to the end of the period covered by our last event held in June 2023. So we believe it is time to update the market on the progress we have made across the group and explain our strategic priorities going forward. Planning is already underway, and we will be sharing more details in the coming months. At the full year results stage, you should expect to receive guidance for 2026, but with a 3-year business plan subsequently unveiled during the Investor Day. And with that, Vassili, the floor is yours. Vassilios Kosmas: Thank you, Vassili. Hello to everyone from my side as well. Let's start with the P&L on Slide 16, please. Quiet quarter in terms of one-off items this time. We've had EUR 25 million well-publicized donation to the Marietta Giannakou program for the reconstruction of schools as well as a few transformation and NP transaction-related costs. As you can see, trading and other income was also particularly low this quarter, mainly stemming from the liability management exercise we did on our Tier 2 note back in July. That had a EUR 12 million impact. As a result, our reported profit is a bit lower this quarter, while on a normalized basis, we're still cruising comfortably above the EUR 200 million line. Obviously, these 2 have implications for the full year guidance. Overall, we still expect to beat our original guidance of EUR 850 million in reported profits by a bit over 5%. We're still looking at EUR 2.2 billion of revenues, north of EUR 1.6 billion in NII and north of EUR 460 million in fees. Costs are still expected to be contained at EUR 870 million. We're tracking very well against the improved cost of risk guidance of 45 basis points. Associate income would likely come in at EUR 30 million. Tax, excluding the one-off PTA recognition should around about 26%. And finally, in terms of one-offs, we're likely going to have a couple of negatives in Q4, bringing the total for the year to positive EUR 30 million. All in, that should give a normalized EPS of EUR 0.35, in line with the consensus. With that, let's move to the next slide and talk about the underlying results and the main P&L items. Both net interest income and fees are growing sequentially. So the underlying core revenue picture remains solid. Operating income was down 5% Q-on-Q, solely attributable to trading, where, as mentioned, this quarter, we had a loss on the LME. Costs at EUR 214 million were flat versus previous quarter, and we're still trading better than expected. We expect a significant uptick in the fourth quarter on account of some seasonality typical towards year-end and thus retaining the full year guidance of circa EUR 870 million. Impairments came in at EUR 45 million for the quarter, bringing cost of risk at 45 basis points, in line with guidance and reflecting a benign credit environment. Finally, on the bottom line, reported profit after tax was down 36% as we had a large positive one-off in the previous quarter and a small negative this time. Normalized stood at EUR 217 million, almost flat Q-on-Q. So I still feel very comfortable with the full year guidance. Next slide on the main balance sheet items. Performing loans are up 2% in the quarter and a 13% jump from last year. Customer funds are also up 4% in the quarter with a year-on-year increase of 9%. Tangible book value, up 1.3% in the quarter on goodwill recognition with the annual growth rate of 13% after adjusting for dividends. And then on capital, which stands at 15.7% in terms of fully loaded CET1. But as you might remember, we will have a 60 basis point headwind in Q4 upon completion of AstroBank, already completed and AXIA. Let's move to Slide 19, where we discuss the 2 main components of revenue. NII was up for one more quarter, continuing the upward trajectory. At EUR 42 million, we're still seeing the impact of rate declines and to a lesser extent, the dollar depreciation. On the commercial side, with average rates still down in the quarter, we're seeing a lower contribution from loans. Even though rates appear to have stabilized, the lag effect of repricing means that we'll still have a headwind going into Q4. Deposits and funding costs continue to improve, although the pace of rates decline means that time deposit pass-through are more elevated than expected. With rates now hopefully at the trough, we should see some improvement in time deposit spreads. On the noncommercial side, securities book hasn't grown, so there's no material improvement this quarter. On the fee and commission side, we saw a small decline in the quarter. If we exclude the gain from the one scheme partnership with Visa in the previous quarter, third quarter was actually up 7% on a comparative basis. For yet another quarter, the star performance was asset management at EUR 32 million, being already currently running double the run rate of the 2022-'24 3-year average. Business credit fees came at EUR 33 million, up 2.3% versus the second quarter. Fees from cards and payments are seasonally strong in the third quarter. Overall, fees are up 10% versus the same quarter last year and even more if we adjust for the government initiatives, reinforcing the guidance we have given you for the year. Now let's move to Slide 20 to look at loans and customer funds. Performing loan balances reached EUR 35.7 billion with some EUR 700 million of net credit expansion in the quarter. Another strong quarter with EUR 3 billion of disbursements and a similar pattern in the board, corporates, including SMEs, driving growth evenly spread across sectors. Some small contribution from retail at around about EUR 50 million. Year-to-date, net credit expansion has now reached EUR 2.2 billion, while once we account for the negative FX headwind from the weaker dollar and the asset quality flows, performing balances are up EUR 1.6 billion. Net credit expansion is slightly better than expected and the repayment of a large circa EUR 300 million corporate exposure we were expecting in Q3 has yet to occur. This repayment has now been rolled into Q4, so do take that into account when forming your estimates. Spreads continue to be under pressure, but we remain disciplined in our underwriting criteria. As such, we will avoid deals or refinancings that do not meet our own credit criteria and are not accretive to our shareholders. Turning to customer funds, another quarter of solid growth with circa EUR 1.6 billion of growth in deposits, almost entirely coming from domestic corporates. Please note that about EUR 0.5 billion relates to bond placement that we led at the end of the quarter, which has quickly reversed in Q4. On AUMs, we continue to see good underlying net sales, EUR 400 million this quarter with circa 3/4 driven by OneMarket funds this time. Year-to-date, we have had EUR 1 billion net sales, reaching the year-end target a quarter earlier. AUMs have grown 17% versus last year, 1/3, as you can see, attributable to net sales and 2/3 coming from valuation effects, predominantly in equities. Contrary to the local industry, the dominant products we sell are equity and balance funds with good management transaction fees under the typical target maturity products that replicate time deposits. The above reflect the strength of the bank franchise. Turning to Slide 21 on asset quality. NPE ratio was at 3.6%, mainly on account of circa EUR 70 million of retail net flows. Coverage ratio has thus edged to 55%. The underlying picture remains solid. We're not particularly concerned with any flows as should be evident by the underlying cost of risk that stood at 26 basis points for the quarter. We don't expect any meaningful surprises in the coming quarters and remain on track to deliver the full year guidance of 45 basis points. To wrap it up, let's turn to Slide 22 on the capital. This quarter, we had 38 basis points of capital generation organically, and this includes everything that is business as usual. So P&L, DTAs, the usual DTC amortization, the semiannual AT1 coupon and RWA growth. Overall, we're still very much on plan for organic capital generation. As mentioned, we have accrued a further EUR 93 million towards dividend, bringing the total year-to-date to EUR 352 million, whilst 37 basis points of capital you see here includes DTC acceleration. All in, CET ratio stands at 15.7% on a fully loaded basis or 10 basis points higher if you take into account pending transactions. Note that the transitional CET1 ratio stands at some 36 basis points higher at 16.1%. With now, let's open the floor for questions. Operator: [Operator Instructions] The first question comes from the line of Demetriou, Alex with Jefferies. Alexander Demetriou: Just 2 questions from me. So next quarter, we see the AXIA and AstroBank deals close. So if you were to look across your current product offering and income lines, are there any other areas where you see gaps, you'd like to strengthen that could be supported by the bolt-on acquisitions or potentially supported through the partnership with UniCredit? And just secondly, so on loan yields, when should we expect the yields to stabilize if rates were to remain flat from here and we start to see the end of the repricing lag that we are likely to see continue into Q4? Vasilis Psaltis: Well, Alex, it's Vassilios. I'll take the first one. On the area of bolt-on, as we have said in the past, bolt-on has been quite an efficient and effective way of doing 2 things. Number one is to quickly go to narrower areas where we spotted gaps or where we want to accelerate further our product offering and/or geographies. And the second element that we have been fortunate to tie it so far is that we acquired with it excellent human capital, which is, as you well know, currently one of the biggest constraints that we have across the industry or across the industries, I should rather say, for growing further. So this, to us, being a proven strategy, which we do continue to scan the universe for areas like that. As I said, it's not just about gaps. It is also about progressing faster. There are such, and we're actively looking into that. Unknown Executive: If I may add regarding your question for the closing of the announced transactions, Astro has closed. So in the fourth quarter, you will see its numbers in the group numbers. As far as AXIA is concerned, we expect closing in the fourth quarter of 2025. Vassilios Kosmas: If I can pick up on the second part of your question, if I understand correctly, you tried to assess what's the outlook for the NII. I mean the first thing to note here that we are still very confident on our total revenue projections for 2026. Now as regards to the dynamics, you're right to say that some of the pressure that we had on the rates in Q3 versus Q2 will be abated. So you should expect a slightly better picture in Q4 versus Q3. So we continue this trend. But most of the growth in NII, we're going to be looking at it in the 2026 numbers, where effectively, we expect flat rates and the impact of volume growth on loans to come into play. Alexander Demetriou: If I could just follow up. So if we think about the loan yields in a stable environment, when do you expect them to be flat and we no longer see that repricing lag come through and so kind of lower interest income, excluding like the volume effect? Iason Kepaptsoglou: No. I think we need to leave that for the full year state where we're going to provide guidance for 2026. I don't think we ought to be commenting on that at this point. Alexander Demetriou: No, no, that's very clear. No worries. Vasilis Psaltis: I think given Alex's question, just hold on this point, I think it is useful perhaps to give a bit -- so sketching a bit on what may come our way for 2026 because I think the important thing for the market to understand is that for 2026, what we're going to be looking for is to capitalize on the strategic approach that we have taken so far. And as such, I think we're comfortable with market expectation vis-a-vis our total revenues. That is the point I would like to stress that Vassili has also mentioned before. And so far, we have been building on holistic relationship, which are now proven to be the core advantage of our bank, and that allows us to be more adaptable as the demand for nonlending services, including asset and wealth management, et cetera, is picking up. So that -- I think that is a key takeaway, and that is what you should expect to hear more from us when we have our full year results looking into 2026. Operator: The next question comes from the line of Kemeny, Gabor with Autonomous Research. Gabor Kemeny: Can I please follow up on NII and specifically on corporate loan spreads, which I believe have been trending down. You show that on Page 29 of the presentation. Is this a trend you would expect to continue? I mean 2.4% corporate loan spread is still very solid. That's the first one. Second one, you mentioned that the deposit pass-through has perhaps been higher than you expected. Indeed, you show a 55% deposit pass-through. Can you elaborate on the dynamics here and how the front book, back book of the pricing of the deposit portfolio looks like? And just lastly, a very comfortable capital position, even if we take into account the upcoming transaction closings. How do you think about raising your distribution above 50% from '25 results? Vassilios Kosmas: Let me try to pick on this, Gabor. Thank you for the questions. So starting with the corporate loan spreads, you're right to note that there's a bit of a linear 7 or 8 basis points tightening on a quarter-to-quarter basis. As we see the market, we're sort of leading the absolute level compared to our peers. So we're very happy with the mix that we have, that we keep some distance from the tightest situations. And as mentioned several times, we are walking away from situations that don't fit our return on investment criteria. I think it's useful also to keep in mind that the strategy here when we're looking at the corporate relationship is not all around spread, but around the overall relationship. That's why you see much of what we see lower in NII from spreads to be recouped from trade finance. Trade finance for reference is around about a bit more than 30% corporate. Transaction banking fees from corporate is around about 30% higher this year than the previous year. Now on the time deposit pass-through, I think you're right to note that pass-through is pretty much stable at around about 65%. We're sort of tracking the market on that one, to be frank with you. And what we see happening in the market is that as rates stabilize and mind you that rates practically have stabilized in Q3, the time deposit book takes around about 6 to 7 months in our case to converge. So you should expect in the next couple of quarters, time deposit pass-throughs to go, maybe collectively 4, 5 points for the whole market, including us. I wouldn't give you that for the next couple of months. But as I said, it should take couple of quarters for this to materialize, assuming, obviously, that base rates are going to be at the same rate that they currently are at around about 2%. Vasilis Psaltis: Now on the point of -- if I may take it, Vassili, on the point of distribution, I think for 2025, it is clear that we expect to pay 50% of the reported profit. So that's close to EUR 450 million, EUR 111 million of which will soon be distributed as an interim dividend. And from where we see it, we clearly have the capacity to grow higher than that, and it's something we intend to do from '26 onwards, both in terms of absolute amount on account of earnings growth and obviously subject to regulatory approval on the back of a higher payout. Gabor Kemeny: That's very helpful. Just a small follow-up on the 4, 5 points you mentioned, I'm not sure I got that. What did that refer to, please? Vassilios Kosmas: Time deposit pass-through, Gabor. Operator: The next question comes from the line of Munari, Filippo with JPMorgan. Filippo Munari: So I have 2 questions. The first one, I saw that you raised the normalized EPS target, excluding the buybacks to EUR 0.47 in 2027 from EUR 0.46, I think. So what's driving that? Is it better fees, better OpEx or a combination of things? If you can please give some color on that would be super useful. And then second thing on the trading and other income side. I understand there is EUR 12 million of negative impact from the Tier 2 refinancing in the quarter, but that should explain only part of the weakness because the run rate would be still quite higher than that. So can you please comment if there were other negative factors affecting the trading line in the quarter? Iason Kepaptsoglou: If I quickly take the guidance, the EUR 0.47 is something that we have disclosed back in August with the second quarter results, and it's mainly on account of a lower cost of risk. Hopefully, you remember the discussion we had back then about the improvement we've been able to produce on the guidance with cost of risk sustainably. So that's the only reason behind the EUR 0.47 in 2027. And then on the other question, Vassili. Vassilios Kosmas: Sure. I mean, if you turn to Page 16, if I understand correct your question, you're asking us around the Q2, EUR 30 million of trading and other income versus the Q3, EUR 1 million. You're right to point out that around about EUR 12 million is the LME. The other element, which is noteworthy here is rental income, to be frank with you, which is classified as other income. This is the dividend from our 10% shareholding in Prodea. This was a EUR 12 million dividend, which was paid out in June. And obviously, they don't pay such a dividend every quarter. I think more importantly, it's important for people to consider, and I think some of that is due on us, too, that when the bank is reporting around about EUR 460 million plus net fee and commission income, we're missing around about another 25-ish currently on an annualized base rental income, which other people used to report in this line. So I think in the coming quarters, we should make this more clear because this is a recurring line coming in. On top of this, our risk appetite for real estate is growing. This is an investment that we are continuously stepping our feet. So we expect more to come in Q4 in terms of investment and more recurring income to come out of these investments in 2026. But obviously, hopefully, you have made some patience to give you a bit of a full picture around that in February. Operator: The next question comes from the line of Kantarovich, Alexander with Roemer Capital. Alexander Kantarovich: My question would be on UniCredit participation, clearly a major factor affecting your valuations. And now that they have reached 29% and possibly going higher, surely, this would have -- this partnership is having a big strategic implications for Alpha. So my question is, how do you see this participation progressing in the near future in 2026, if possible? Vasilis Psaltis: Well, I think for something that you implied about the evolution of the stake since we are not the owners of the stake, I think I'm simply going to echo what Andrea Orcel has said on that. Now the way he and we view it is that we have an outstanding relationship at all levels with UniCredit. And this is not just a top management team, but a wide array of people at UniCredit that are regularly involved with people on our sites as we are going -- as we're doing so many things together. We and they were all excited to do it because it is truly a mutually beneficial relationship, both in terms of commercial activity as well as exchange of know-how. And the partnership is outstanding, and this is progressing well on all fronts. And thus as a result of that, both as Alpha Bank, but I think also as a country, we have welcomed UniCredit to Greece. And as the saying goes, if it works, I mean, don't fix it. There is nothing more at the moment beyond the current state. All I can reaffirm is that we are deepening and broadening the things that we are doing together. And there's going to be more on that, that we will be able to report quarter-by-quarter. Alexander Kantarovich: Okay. Okay. Let's call it deepening, yes. My second question is on the effect of FX on loans. I think you used the phrase FX headwind in one of your slides. Can you elaborate? Vassilios Kosmas: Sure. Yes, I'm happy to take that one. Effectively, what we're saying is that the bank, I mean, rough numbers has EUR 36 billion loan book in terms of euro. On that, you should include something in the tune of EUR 3.2 billion, EUR 3.3 billion of USD-denominated shipping loans. And obviously, interest is charged in USD. So these 2 metrics stemming from the balances, right, and the NII do have an impact when the dollar has weakened some 15%, 16%, if I remember the numbers correctly from the beginning of the year. So that is the impact that we're discussing here. Does that make sense? Operator: [Operator Instructions] Ladies and gentlemen, we have another question from the line of Novosselsky, Ilija with Bank of America. Ilija Novosselsky: I have 2, please. So first, on your Investor Day that should come in Q2. If you can just give us maybe a sneak peek of what would be the main topics that would be subject to discussion. And I also wanted to ask the reasoning behind the timing of the Investor Day because your previous one, which was in 2023, was at the time when there was a lot of change in rates, macro and so on. Well, now we are entering arguably a place of stability, and you also tend to give 3-year targets on your Q4 results. So I just wanted to ask about the reasoning for the Investor Day. And second, maybe if you can comment a bit of your loan pipeline for Q4, if you can say whether it should be stronger, weaker compared to this quarter and whether it should be large corporates or there's some movements more into SMEs. And also, I'm seeing on Slide 40, which is showing your disbursements versus repayments. So this quarter, you had rather solid disbursements, but you had an increase of repayments and if there's a reason for that. Iason Kepaptsoglou: I'm going to take the first one. Ilija, I'm sorry, I'm going to -- afraid I'm going to have to disappoint you. Unlike movies, we're not going to be producing trailers for the Investor Day. You need to hold your breath until then. And hopefully, it's going to be nice. So no color whatsoever on what we're actually going to be publishing with the Investor Day. In terms of timing, this has to do with Investor Relations planning and how we work internally. There's a specific cadence of events that's leading us towards the second quarter of next year, also taking into account the busy schedules that investors and analysts like yourself have. On the second question, Vassili? Vassilios Kosmas: Thank you, Iason. I mean, on the loan growth, if we start with Q3, as you rightly say, it was another strong quarter. Seasonally, Q3 is a good quarter because of the footprint on the bank. It's the bank typically has a much larger footprint in tourism and accommodation and both hospitality projects and trade around these areas is picking up in the summer. Hence, we had another good quarter. To a lesser extent, just I'm talking for the quarterly numbers, it was construction and energy, very typical drivers of our Q3 of our quarterly evolution. Now when it comes to Q4, first of all, important to note that we have guided the market on around about EUR 2.2 billion net credit expansion for the year. We're already there in the first 3 quarters. Now when it comes to Q4, it's fair to say that we're going to be crossing our annual number, but I would be hesitant if I were you to put another EUR 600 million, EUR 700 million into this. The reason has to do with what we mentioned during the presentation that there is a couple of large refinancings coming in Q4. This is a couple of transactions linked to M&A, where some of our competitors opted to go a bit more aggressively in credit terms. We didn't want to go there. So I would say you wouldn't expect -- you shouldn't be expecting any fireworks in Q4, still some positive mild positive growth. Then on retail, what we have seen, which is pretty much in line with the market is that from quarter after quarter that we had negative inflows, Q3 was the first -- not the first, but one of the quarters that we had positive inflows in all segments, both [ SBs, ] which is typically our stronger product line, but also mortgages and consumer loans. We expect this to continue as retail is turning corner. I mean, hard to imagine EUR 0.5 billion out of retail in the coming quarters, but still having like 50s or 60s rather negatives is a good number for us. I'll have to disappoint you on why the repayments in Q3 are in the tune of EUR 2.1 billion. Let's take it offline because honestly, I don't have it on top of my head. Operator: We have another question from the line of Nigro, Alberto with Mediobanca. Alberto Nigro: Very 2 quick questions. One is on the bond portfolio. This quarter it seems that the repricing of the bond portfolio has been very minimal. Can you help us to understand when we should see the better yields coming through the NII? And the second one, if you can help us to understand the impact of AstroBank in Q4 for the P&L lines and if this is included in the full year guidance? Iason Kepaptsoglou: I'll take the second one. On AstroBank, we're only talking about a bit under 2 months. So there's not a very big impact, and it's already included in the guidance that we have provided to the market for this year. So minor impact from AstroBank. Obviously, we're going to be extracting some synergies next year, and you will see a more material impact thereafter, in line with the guidance that we have provided for a 5% uplift to EPS. On the first question you had on the repricing of the bond portfolio and when we expect yields to improve there, we have yet again with us our CIO, Konstantinos, here to answer. Konstantinos Sarafopoulos: You've already seen the impact from Q4 and Q1 on the repricing of our bond portfolio, and you should continue to see that all the way into 2026, not only from the investments happened this year, but the upcoming maturities, which again are going to be reinvested that 1% or higher than the current back book yields. Obviously, on the last quarter, we didn't make any significant investments on all our maturities, and that's why we haven't seen any significant impact on quarter-on-quarter on that book. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Vasilis Psaltis: Well, thank you very much for your participation. We're looking forward to welcoming you again at the very last week of February where we're going to be releasing our full year results. Thank you very much. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.
Operator: Good day, ladies and gentlemen, and welcome to the Miller Industries Third Quarter 2025 Results Conference Call. Please note, this event is being recorded. And now at this time, I would like to turn the call over to Mike Gaudreau at FTI Consulting. Please go ahead, sir. Michael Gaudreau: Thank you, and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2025 third quarter results, which were released after close of the market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; Will Miller, President and CEO; Debbie Whitmire, Executive Vice President and CFO; and Frank Madonia, Executive Vice President, Secretary and General Counsel. Today's call will begin with formal remarks from management, followed by a question-and-answer session. Please note in this morning's conference call, management may make forward-looking statements in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention to the risks related to these statements, which are more fully described in the company's annual report filed on Form 10-K and other filings with the Securities and Exchange Commission. At this time, I'd like to turn the call over to Will. Please go ahead, Will. William Miller: Thank you, Mike. Good morning, everyone, and thank you for joining us today. I would like to start with a brief statement before I hand the call over to Debbie to discuss our results in more detail. Third quarter results were in line with our expectations as we continue to navigate industry-wide demand headwinds. The retail channel continues to delay purchases of new equipment due to macroeconomic uncertainty, which has left field inventory in our distribution channel elevated. Despite this, we continue to focus on the aspects of our business that we can control. In the third quarter, we took proactive steps to support our bottom line, including prudently decreasing production to reduce field inventory, rightsizing our cost for the current environment and securing our supply chain to mitigate the effects of tariffs. We are confident that we will enter into 2026 from a position of strength, and we are excited about the opportunities ahead of us, particularly the strong interest we are seeing for our global military business. Now I'll turn the call over to Debbie to review the quarter in more detail, and I'll return later to provide some comments on the current market environment and our outlook. Deborah Whitmire: Thanks, Will, and good morning, everyone. Net sales for the third quarter of 2025 were $178.7 million, representing a 43.1% year-over-year decrease, driven primarily by a drop in chassis shipments after volumes were significantly elevated in the prior year period. Gross profit was $25.3 million or 14.2% of net sales for the third quarter of 2025 compared to $42 million or 13.4% of net sales for the prior year period. The margin improvement was driven mainly by product mix with a higher percentage of unit deliveries compared to chassis shipments. SG&A expenses were $21.2 million in the third quarter of 2025 compared to $22.3 million in the third quarter of 2024. As a percentage of net sales, SG&A was 11.9%, 480 basis points higher than the prior year period. The year-over-year decrease in overall SG&A expenses was driven primarily by our cost savings efforts and lower executive compensation expenses. This was partially offset by a $900,000 onetime cost for retirement packages offered to all U.S. employees aged 65 and above. The total cost of the program was $2.7 million, and we expect to recognize the remainder of this onetime expense in the fourth quarter. Interest expense for the quarter was $93,000 compared to $251,000 in the prior year period, a decline of around 63%, driven primarily by a reduction in debt levels and to a lesser extent, a reduction in customer floor plan financing costs. Other income for the third quarter was $312,000 compared to other income of $321,000 for the third quarter of 2024, attributable to the gain on the sale of assets and currency exchange rate fluctuations. As a result of all the factors above, net income for the third quarter of 2025 was $3.1 million or $0.27 per diluted share compared to net income of $15.4 million or $1.33 per diluted share in the prior year period. Now I'd like to shift to a discussion on our balance sheet. At the end of the third quarter, we had a cash balance of $38.4 million, up $6.6 million sequentially and up $14.1 million as of the end of last year. In addition to growing our cash balance in the quarter, we also reduced our debt balance by $10 million down to $45 million during the third quarter. We have since paid down another $10 million, bringing the current debt balance down to $35 million. We continue to see our receivables convert into cash at a faster rate as inventory at our distributors returns to more normalized levels. As a result, accounts receivable as of September 30, 2025, was $232.6 million compared to $270.4 million as of the end of last quarter and $313.4 million as of the end of last year. Inventories as of the end of Q3 were $180.7 million compared to $165.5 million in Q2 and $186.2 million as of December 31, 2024. The sequential increase in inventories is due to our decision to prepurchase some materials to mitigate the effects of tariffs and slower chassis demand. Lastly, accounts payable as of September 30, 2025, was $82.2 million compared to $98 million as of June 30, 2025, and $145.9 million as of December 31, 2024. Now I'll turn the call back to Will to discuss our markets and our outlook for the remainder of 2025 and early 2026. William Miller: Thank you, Debbie. I'd like to provide some insight into how the steps we've taken will impact our fourth quarter. First, as part of our comprehensive cost reduction, in August, we made the decision to reduce headcount by approximately 150 positions across 3 of our U.S. manufacturing facilities. While this was an extremely difficult decision to make, we made it with long-term health of the business in mind, and we thank all of those employees for their valued contributions. Next, while the tariff landscape continues to evolve, we continue to take proactive measures to mitigate potential impacts. Earlier this year, we implemented tariff surcharge on all new orders of manufactured product, along with additional price increases on accessories and parts. We are also strategically accumulating some key materials from low tariff geographies to maintain our margins and keep our cost for raw materials as low as possible. Lastly, we are encouraged that inventory in our distribution channel continues to decrease. Despite the macroeconomic environment, we have preemptively adjusted production levels during the year to accelerate the reduction of field inventory. As we said in the second quarter, we expect to see a more normalized level of field inventory in 2026, which should position us well for when the demand environment improves. Next, I'd like to provide a bit more color on the body and chassis inventory dynamic. As you can see on Slide 7 of our presentation, chassis inventory has now crossed below body inventory, which is ideal as historically, this has allowed -- has led to the best dynamic for maximum flexibility at the distribution level. Additionally, we believe that inventory is beginning to reach more optimal levels, which position us well for the year ahead. Turning to 2026. We remain incredibly confident in our outlook for a strong year. We are entering the year with a strong balance sheet and the inventory dynamic I just spoke about give us confidence that the commercial market will begin to recover. Further, we're seeing greater demand in Europe as well as notable increase in Request For Quote or RFQ activity for our military vehicles. We expect that interest will continue into 2026 as we begin to prepare for production of military orders in 2027. We believe military recovery vehicles could be a substantial tailwind for us in future years, and we are taking the steps needed to position the company to capitalize on the rising demand. In the midst of all of the proactive steps we have taken to position the business for a strong 2026, we have continued our long-standing commitment of returning capital to our shareholders. We're extremely proud that we've paid a dividend for 59 consecutive quarters, and our Board just approved a dividend payable on December 9, 2025. During the third quarter, we also repurchased approximately $1.2 million of stock, bringing our total quarterly returns to shareholders to $3.5 million. We believe that repurchasing our shares represents one of the most attractive investments we can make with our capital, which demonstrates our confidence in the company's long-term prospects. At the same time, we continue to invest in our business, prioritizing innovation, automation and human capital. We are closely monitoring our capacity of heavy-duty recovery vehicles to ensure we are prepared to capitalize on exciting future growth opportunities. Despite current demand headwinds, we remain confident in our business and our outlook, reaffirming our previously issued 2025 fiscal year guidance for revenue in the range of $750 million to $800 million. As always, we expect the fourth quarter will be impacted by the holidays and planned maintenance and downtime at our facilities, which we have factored into our guidance. Our revenue guidance also anticipates no change in the current regulations or unknown effects of the evolving tariff situation. While there continues to be uncertainty in the market, we are confident that our proactive steps we are taking position us well for a strong 2026. We are encouraged that field inventory continues to trend in the right direction. And as we look to next year, we're very excited about the opportunities ahead of us. In closing, the entire management team and I would like to thank all of our employees, suppliers, customers and shareholders for their continued support. We will be on the road later this month at the Southwest IDEAS Conference and look forward to seeing some of you in person. At this time, we'd like to open the line for any questions. Operator: It is now time for Q&A. Our first question comes from Mike Shlisky with D.A. Davidson. Michael Shlisky: Your inventory chart you just referred to, Will, it looks like things are actually below a normalized level or very, very close to normalized level at this point. I'm not sure, can you just explain to us what that means? I'm trying to figure out if 2025 has been dominated by most of your sales being without the chassis attached to them on the invoice, whether at least at 2026, there will be just a much different mix at the very least if you sell no more tow trucks in general, there will still be a higher number of attached chassis with the higher invoice. Just a sense as to if there's a mix issue -- there's a mix benefit in '26 just from that alone? William Miller: Yes. I think what you're seeing is a little bit of a mix benefit from a margin perspective in 2026 with the lower chassis revenue. I think -- or sorry, in 2025. Moving into 2026, I think you're going to see that stabilize back to more historic levels with the chassis and body mix returning to normal. The inventory, yes, the projected line that we put out there earlier this year, we're slightly below that. We are closely monitoring field inventory as well as retail -- weekly retail activity and order entry. At this time, order entry is still slightly below the weekly average of retail activity. So we're waiting to see those get a little bit more in sync before we start planning to increase production. to meet current demand. But we believe we're close probably sometime late this quarter or early in Q1. We believe that all those factors will come together. Michael Shlisky: Great. And just to clarify again, if you sell the same number of tow trucks in 2026, you would expect to see higher top line just on... William Miller: Yes. That is correct. You'll see a higher top line with the chassis revenue being a part of that, and you'll see margins go back more to historical levels with the mix. Michael Shlisky: Okay. Great. Great. And to follow up on that comment there, Will. In the fourth quarter, it sounds like it'll still be with the older mix -- with the current mix you're at or roughly the same. But is that 14% range the right space to look at for 4Q and then again, back to the 13% for 2026? William Miller: Yes. I mean I think the mix will remain the same. Don't forget that Q4 is always our shortest quarter with the holidays as well as plant shutdowns in every facility for inventory as well as maintenance. So it could have a little bit of slightly downward pressure on those margins, although the mix probably stays similar. Michael Shlisky: Okay. Great. And then maybe lastly, I wasn't sure you can go into exactly the folks that were -- took a retirement during the quarter. I wasn't sure if those were very senior folks or if they were production or they were SG&A. But just a sense of the SG&A run rate going forward. Will the fourth quarter be a clean SG&A? It sounds like there's still some severance here, but what is the clean SG&A kind of quarterly run rate here? William Miller: That will -- you'll start to see clean SG&A probably in Q1 as the retirements are taking -- they're staggered throughout the remainder of this year. It was about a 50-50 split on salaried and hourly employees. So it was offered to all employees over the age 65. It was a split between the two. So there were some senior individuals in the sales offices that took part in it as well as some senior people in our manufacturing facilities as well. Michael Shlisky: Okay. Great. If I could just also maybe ask one last one to kind of sum it up because I think I mentioned in your comments as well, but all the factors that have driven increased record demand over the last bunch of years, older vehicles, more time on the road, more cell phone use behind the wheel, unfortunately, et cetera. Are all those factors still intact at this time and into 2026? Has anything changed as to the reason to buy a tow truck 12 months ago versus today? William Miller: No, I don't believe so. I think all of those factors that drive the demand at the retail level for the use of the equipment are all still intact. Operator: That appears to be our last question. I will now turn the conference back to William Miller for any additional remarks. William Miller: Thank you. I'd like to thank you all again for joining us on the call today, and we look forward to speaking with you on the fourth quarter conference call. If you would like information on how to participate and ask questions on the call, please visit our Investor Relations website, millerind.com/investors or e-mail investor.relations@millerind.com. Thank you, and may God bless you all. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning and welcome to the GeoPark Limited conference call following the results announcement for the third quarter ended September 30, 2025. [Operator Instructions] If you do not have a copy of the press release, it is available at the Investors section on the company's corporate website at www.geo-park.com. A replay of today's call may be accessed through this webcast in the Investors section of the GeoPark corporate website. Before we continue, please note that certain statements contained in the results press release and on this conference call are forward-looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in forward-looking statements, but are not intended to represent a complete list of the company's business. All financial figures included here were prepared in accordance with the IFRS and are stated in the U.S. dollar unless otherwise noted. Reserve figures correspond to PRMS standards. On the call today from GeoPark is Felipe Bayon, Chief Executive Officer; Jaime Caballero, Chief Financial Officer; Martin Terrado, Chief Operating Officer; Rodrigo Dalle Fiore, Chief Exploration and Development Officer; and Maria Catalina Escobar, Shareholder Value and Capital Markets Director. And now I'll turn the call over to Mr. Felipe Bayon. Mr. Bayon, you may begin. Felipe Bayon Pardo: Good morning, everyone, and thank you for joining GeoPark's Third Quarter 2025 Results Call. We are at a pivotal moment in GeoPark's journey towards strengthening our foundation and advancing our long-term growth strategy. On October 16, we successfully closed the acquisition of 2 high quality blocks in Vaca Muerta Neuquen securing full operational control of Loma Jarillosa Este and Puesto Silva Oeste. With this move, we have entered one of the world's most promising unconventional basins and opened a new chapter of long-term growth and diversification. In parallel, we launched our new strategic plan and capital allocation framework during our Investor Day on October 21. The plan is built around 2 clear priorities. First, sustaining a resilient and high margin base in Colombia; and second, rapidly scaling a transformational platform in Argentina. In our base case 2030, we are targeting consolidated production of 42,000 to 46,000 barrels of oil equivalent per day, an adjusted EBITDA of USD 520 million to USD 550 million and a net leverage ratio of 0.8 to 1.0; all while maintaining capital discipline, financial strength and our commitment to ESG. Beyond this firm plan, our vision for the business entails materializing further significant upsides in our existing high quality asset base along with accretive inorganic growth. To support this strategy, the Board of Directors approved a revised dividend program totaling approximately USD 6 million over the next 4 quarters or the equivalent of $0.03 per share per quarter starting with the third quarter of 2025 payout. As of the third quarter 2026, dividends will be suspended as investments in Argentina peak. Dividend levels will be reviewed as we progress through the investment cycle and return to positive free cash flow. This reflects our ongoing commitment to strong shareholder returns, investment in growth and financial flexibility. Turning now to our 3Q 2025 results. On the operational front, we had a solid third quarter. We delivered average consolidated production of 28,136 barrels of oil equivalent per day, which is exceeding 2025 guidance and up nearly 3% quarter-over-quarter, and this is driven by strong performance in our core operated and nonoperated assets in Colombia. Llanos 34, which we operate, remained a key engine with continued efficiency gains across drilling and workover operations and stable base management. In Llanos 123, we advanced drilling operations at Toritos Norte 3 and we made progress on infrastructure in Puerto Gaitan preparing for the next campaign in Llanos 104. Our team continued to improve efficiency and cost management across the board. Operating costs averaged $12.5 per barrel, fully in line with our 2025 guidance. By the end of the third quarter, we had captured more than USD 15 million in efficiencies, equivalent to about $19.5 million in annual structured savings, a clear sign of a leaner and more agile operating model underway. On the financial front, adjusted EBITDA reached USD 71.4 million with a 57% margin, broadly stable versus the second quarter supported by high volumes and steady realized prices. Net income was USD 15.9 million compared to the net loss in the previous quarter. Excluding a nonrecurrent exploration write-off in the Putumayo Basin, net profit would have been USD 23.4 million, consistent with our strong EBITDA performance. We invested USD 17.5 million during the quarter mainly to sustain and enhance production in Llanos 34 and progress exploration across Colombia. We ended the quarter with USD 197 million in cash. From June to October, we repurchased USD 108 million of our 2030 notes below par generating USD 9.5 million in annual cash savings and further optimizing our capital structure. With no principal maturities until 2027 and a net leverage ratio of 1.2x, we remain in a strong balance sheet position to manage our liabilities proactively. Our hedging program remains a key element of our financial resilience. As of early November, approximately 62% of the expected 2026 production is already protected through 3-way collars with a first floor at $65 per barrel, a second floor at $50 per barrel and an average ceiling at $73 per barrel. In summary, this was a quarter of disciplined execution and strategic performance. Looking ahead, we are on track to release our 2026 work program and investment guidance before year end. This plan will provide further granularity on our renewed strategic direction, again focused on building and maximizing value delivery from a high margin base in Colombia and our new operated assets in Vaca Muerta, Argentina. In particular, we are preparing to scale up operations in Loma Jarillosa Este and Puesto Silva Oeste blocks where we've already begun implementing productivity enhancements. Our priorities remain clear: operate safely and efficiently, maintain financial discipline and maximize shareholder value. Before we take your questions, we also wanted to briefly discuss the proposal we received from Parex Resources. As we said in our press release on October 29, our Board is always open to opportunities that fairly reflect the company's value, strategy and long-term potential. Following a robust process, our Board unanimously determined that the unsolicited nonbinding proposal of $9 per share that was submitted by Parex on September 4, 2025 prior to our announcement of GeoPark's transformative Vaca Muerta acquisition undervalues GeoPark, fails to reflect our growth prospects and our diversified portfolio and is not in the best interest of our shareholders. Following Parex's public reiteration of its $9 per share offer, the Board unanimously authorized me to further engage with Parex and provide additional information to help Parex improve its offer. In addition, GeoPark's Board of Directors has formed a special committee of independent directors, including Sylvia Escovar, Constantin Papadimitriou, Somit Varma and Brian Maxted to evaluate any potential revised offer from Parex and other value-maximizing alternatives for the company. We are not going to make any further comments regarding Parex or the process unless and until we determine that further disclosure is appropriate. We would appreciate if you keep your questions focused on the quarter. With that, let's open the floor to your questions. Operator: [Operator Instructions] Our first question comes from Joaquin Robet from Balanz Capital. Joaquin Robet: My question is regarding the 2026 Vaca Muerta work program. Could you provide more color on the upcoming studies and permits, their timing and whether the associated CapEx and commitments are fully funded? Felipe Bayon Pardo: Absolutely, Joaquin, and I'll give you a bit of context and then I'll ask Martin to take it into more detail. But one thing I'd say is that having started as operator in Vaca Muerta 21 days ago to be exact, we've already started conducting interventions on the wells and we're fully engaged with the operations and the program going forward. So Martin, if you can give us a bit more color, that would be great. Rodolfo Terrado: Absolutely, Felipe. Joaquin, thanks for your question. So I'll start by saying that our first priority on October 16 was to safely and seamlessly receive the operations, including 11 Pluspetrol employees that are now GeoPark employees. The production right now in both blocks is around 1,100 barrels of oil equivalent per day. And what we've done the day that we basically took over the operations was immediately, we started shutting in 3 wells from 1 pad. This operation has a total of 6 wells on production in Loma Jarillosa Este. So we shut in 3 wells from 1 pad so that we could go and install artificial lift. And just to share with everybody how we operate and how quick we are learning. We've done all 3 of the operations already and the first of the activities was done in 7.8 days. The last one we did it in less than 3 days. So actually when you add up all the days that we had in the program, we've done it in around 10% less than that was planned. In addition to that, as we go from the approximately 1,500 barrels of oil per day to 2,000 barrels of oil per day that those 6 wells can be delivering and we go to the 20,000 barrels, we know that the OpEx is key and we look at what are the things that we could do. So we already reduced around $200,000 per month for trucking. So that's where we are. Within the next 10 days, we will be putting on production those 3 wells. So that will put us on a total production for Vaca Muerta in the order of 1,600 barrels of oil per day to 1,700 barrels of oil per day. Now as we commented in our Investor Day, we're going to a 20,000 barrel oil per day on both blocks with 1 rig that will be starting operations by the end of next year and with an original plan to have a central processing facility for 20,000 barrels of oil per day also that will be ready by early 2027. So what are we doing in the meantime? And the #1 thing is we're talking with the neighboring operators and there's very open collaboration in a sense that many of them have spare capacity already installed. So we're looking at options so that between now and whether or not we decide to go with a central processing facility, we can optimize and maximize our margins in a sense of basically connecting to those operating neighbors and sending the production to them. We're also looking at opportunities that we have upgrading Loma Jarillosa. And like you were asking, Joaquin, on starting and permits, we already started those and our plan is to submit them by the first quarter of 2026. And I think the other question you had was around commitments. I'll say that on commitments, drilling commitments is only 1 for Puesto Silva Oeste and it's due by 2028. 1 well order of magnitude, you can think about $15 million. And then within Loma Jarillosa, there was a commitment to do the workovers in the block and we've already done them. So from a perspective of commitments, you can see that they're very low. Felipe Bayon Pardo: And I think on the funding side, Jaime, if you can give us a bit more color? Jaime Caballero Uribe: Yes, of course, Felipe. On funding, the program that Martin has described when you bring it down to numbers, we're talking about a CapEx range that is somewhere between $50 million to $70 million next year on the base case. Of course if these options that Martin referred to associated to using third-party capacity go through, we will be looking at a lower number most likely. So there are opportunities to optimize that. But in our base case, that $50 million to $70 million is fully funded. We already have existing credit lines in Argentina with local banks in Argentina that go up to $100 million. So there's no stretch in this. Furthermore, we are also looking and this more in the long term beyond 2026, our financing is characterized by a broad toolbox that you've heard me talk about this before. We are in discussions with other parties around the possibility of oil prepayments. There's a lot of interest in the market associated to that. We're also, in our base case, contemplating the possibility of debt issuance in Argentina. There is also a lot of appetite for that. So all this to say that we don't have any concerns around the funding of this program. Operator: Our next question comes from Eduardo Muniz from Santander. His question is in Colombia, could you comment on the lower CapEx for this quarter and give us an update regarding production and the stage of exploratory campaigning in Llanos Basin? Also, can you update on how the infill campaign is progressing relative to cost/performance targets and timeline? In CPO-5, could you provide more detail to us about the commercial agreement with BP that started in August? How did this impact oil discounts and transportation cost? Regarding reserves, we will see major changes given divestments, VM acquisition and positive results from exploratory wells. So how do you view your reserves and reserve life? What increment should we see in reserves? In Argentina, could you comment on the current phase you're at in terms of operations? How complex and the timing for getting regulatory permits to start building your own infrastructure? You closed the transaction in VM, has the cash disbursement been done? What was the final? Felipe Bayon Pardo: Eduardo, thanks for submitting your questions through the website and thanks for your interest in the company. Obviously there's quite a few questions here, we'll try to address them through some of us that are here in the room today. And I'll start with the first one and then hand it over to Martin and Rodrigo. But I would say that the CapEx that you've seen and the CapEx deployment over the year reflects the plan that we had for the year. So it's in line with the plan that we had and reflects the level of activity. But I'll ask Martin to go into some more detail. And then Rodrigo, if you can talk about some of the exploratory campaign in Llanos and you guys can talk about the infill campaign as well. And then we'll take the other questions. Rodolfo Terrado: Absolutely. So again thank you, Eduardo, for your questions. I'll cover the more operational ones and then will continue with Rodrigo. So if we talk about CapEx, you're absolutely right. Our third quarter CapEx was around $17.5 million and that reflects the execution of our planned and agreed drilling program. Most of our capital is drilling and if you look at the previous 2 quarters, we were spending around $25 million to $27 million and that was with 2 rigs. In the third quarter, we had 1 rig. So that's the main reason. Now looking forward into the fourth quarter, we're going to be ramping up and we already have 2 rigs already operating in Llanos 123 and a third rig coming for the exploration that Felipe mentioned in Block 104. So with that, you're going to see that the fourth quarter would be an increase from the third quarter. And another point mentioning there is that ramp-up, it's also an agreed decision with our partners based on the first half of the year results. We had very good results in Llanos 123 and very successful infill drilling program in Llanos 34. So let me go to that one to how we did in the infill drilling program in Llanos 34. That was a program that we planned for the first half of the year, 6 wells. Infill means that they are within the pads that are already drilled and we're exceeding plan on production delivering 2,600 barrels of oil per day, which is above what we had on the plan for those 6 wells and the cost of the wells have been exceptional. We are drilling the wells and we drilled those wells at $2.9 million each one. And as a comparison, those same wells last year, they were costing us 30% more. So it's a 30% reduction. And that's going back to what I mentioned before. By doing this, having good results, is that we are confident to bring back the rig and start drilling again infill wells in Llanos 34, which we're doing by the last part of December and into 2026. So this is a clear example of how we're maximizing value through CapEx and in our core assets. I think the next question you had was more around production. I'm probably going to reiterate most of the things that Felipe mentioned. But third quarter production was 28,136 barrels of oil equivalent per day. That's around 3% increase. We had strong performance across all assets and we also had Manati coming in. But if we look at the core assets that we have: CPO-5, no blockages so delivering above plan. Llanos 34 on plan even though we did have some upsets on electrical reliability that are already fixed. And Llanos 123, which is our block that has been growing continuously, we started the year at 3,700 barrels of oil per day and right now we're above 5,000 barrels of oil per day. So we feel that strong around delivering within our range of production guidance, which is 26,000 barrels of oil per day to 28,000 barrels of oil per day. We expect to be on the high range of that as we finish the year. I think with that, I'll turn it over to you, Rodrigo. Rodrigo Fiore: Eduardo, this is Rodrigo. I'm going to share where we are in terms of exploration in Llanos. The activity was concentrated in 2 assets or 2 blocks. The first one is Llanos 123 and the other one is Llanos 104. Let's talk about the Llanos 123 where we concentrate most of the activity. It's good to remember that we started the discoveries here a couple of years ago with Toritos. So what we are doing is near-field exploration. Actually we are testing the north part of the block, the north part of Toritos extension in a different structure. The name of the well was Currucutu. So we drilled that in the second quarter of this year and we are producing 400 barrels per day in a very stable way from that well. So that's allowed us to drill a new well to try to understand the detail there, how big is the structure there with the new well? So we are drilling that well actually right now so we expect some results by the end of this year for the northern part of Toritos area. After that, what we did is try to derisk the eastern part. We went with a new well to the right side of the main that we see there, Toritos Este 1 is the name of the well. We are starting the testing today so we are going to have some results maybe in a couple of weeks. So we are very anxious. The lot looks pretty promising. And the last activity that we have for this year is Visvita south, what we are trying to do there. Actually, we are drilling this well in this moment is try to prove the extension of the Visvita area to the south. So that is the main activity that we have in terms of exploration in 123. All of them has very interesting results. At the end of the day, it is the base for the growth of this field and the development plan that we have for the near future. In the Llanos 104, what we have done is Matraquero. We have just finished that well. It's under evaluation right now. We are discussing with our partner what is next for this prospect. But we are planning to drill the second well in the block by the end of this year. Vencejo is the name of that prospect and we are going to have some results late this year or maybe early next year. So that's the news that we have related with exploration coming from [ Los Llanos ]. It s a very interesting play for us. It's a growth driver. So that's why we are continue doing that in the next years and coming years. Felipe Bayon Pardo: And if I may, Jaime, can you tell us a bit about the commercial agreements with BP, the CPO-5? Jaime Caballero Uribe: Sure. Thanks, Eduardo, for the question. So CPO-5 commercial agreement, it's been quite a landmark for us because I'm going to talk a little bit about the optionality that it creates, right? So let's put some facts on the table first. The scope of the deal with BP covers about 6,500 barrels a day of our production. It's mainly CPO-5, but there's also Danos exploration crude involved in that deal that can fall within the scope. The duration of the deal that we signed with BP is 12 months starting back in August. And let me take you a bit through the intent. What we really want to do is we want to maximize the value of CPO-5 crude in the context of changing domestic demand, right? CPO-5 crude, the bulk of it is actually quite special crude because it's light oil and there's an opportunity there to capture maximum value relative to other crudes in the Colombian marketplace and blends in the international marketplace. And that was the problem that we wanted to solve. So we engaged in this conversation with a number of players around how could we create export optionality through Covenas. This is something that we hadn't done before at GeoPark and we open up that door. Basically the deal allows us this avenue to export directly at Covenas, right, FOB and in doing so, it allows us to capture the best possible terms that you can get and basically create arbitrage between the domestic prices that you can get which are a portrayal, if you will, of the reduced domestic marketplace that we have versus the broader international market. It also gives us blending optionality. So in the contract with BP, we can also blend these crudes with other crudes and therefore, improve the overall differentials that we get. Furthermore, the other characteristic of this contract is that it came in with financing optionality. So we actually got a credit line associated to oil prepayments of $50 million. It's an option. We haven't pulled it, but it's something that we can use at any given time and at very competitive terms. If you think about the commitment fees and if you think about the interest associated to these lines, it's probably 200 basis points below marketplace. So we're all very happy with this. When you do the numbers, 2 characteristics what I would say is the commercial discount in aggregate of these crudes is in the $4 to $5 versus Brent range. It's a very competitive discount relative to our other crudes and it's well on the plan that we've had for this year. From an accounting standpoint, if you look at our balance sheet, you will see that the selling expenses have come up, because now in the past, we had an offtake agreement where we didn't incur on the selling expenses, but we were getting a lower price. Now we incur on the selling expense associated to the transport to Covenas when we do exports, but that's offset by a better price capture. So that's the movement that you're seeing there. I hope this helps. Felipe Bayon Pardo: And I'll take the reserves one, which was your third question, Eduardo. And it's around, do we see major changes from divestments? The answer is no. It's on the margins. Vaca Muerta, definitely very, very positive in terms of the acquisition. As you recall, we've said that our 1P numbers would go from 5 to 7 years, 2P to 10 years. And what I'd say is that we're going through the certification process right now as we speak. So that's part of ongoing work that the team is going with the certifiers. But directionally, I say we aim to be over 100% of reserves replacement for the year, which is very good news. It's very good news. And I think it builds on what Martin was talking about in terms of operational excellence and conducting things like drilling and workovers and water shut-offs with sort of lower cost and less time that we used to. So a lot of efficiency going into the program. And what Rodrigo was talking about some of the -- not only exploration but appraisal opportunities that we have. So all of that will be brought into the conversation around reserves. But as you can probably imagine, we can't talk any more without -- or with more detail around an ongoing process. But again, we aim to be over 100% organically in terms of replacing our reserves. And your third question was around Argentina. And I think Martin has already talked on where we are in terms of operations with a lot of detail. I'll ask him to talk about some of the regulatory permits and infrastructure and optionality that we have around that. And on the last part of your question, which is the transaction. Yes, the transaction has been closed. Cash has been disbursed. We've paid $115 million, and that's the number that was announced to the market, and that's the final number for the deal. So Martin, if you want to talk about some of the permits and infrastructure? Rodolfo Terrado: Yes, absolutely. So the permits are basically around roads and the permits for the new pads, and finally, for the location of the CPF. As I mentioned before, we will be submitting those by the first quarter of 2026. And we are looking at opportunities, again, on whether or not we will fully use those permits. There is an option and chances that we could leverage from collaborative infrastructure from neighbors, and that would help us, again, create value in a sense of not having to fully use those permits. But our plan is to submit them. Usually, in Oakland, it takes between 3 to 6 months for approval once they are submitted due to the public consultations and all the requirements. But high level, that's where we are on permitting. Felipe Bayon Pardo: And can we have the next question? Operator: Our next question comes from Stephane Foucaud from Auctus Advisors. Stephane Guy Foucaud: I had a question around regulation. I know you can't talk about Parex, so it's more general than that. So in Colombia, I was wondering whether there will be any anti-competition restriction from the regulator, the government, with regards to when a player becomes too large or perhaps too much in a certain region? Felipe Bayon Pardo: Thanks, Stephane, and great question. And thanks for respecting and acknowledging the fact that we won't talk in detail around our engagement with Parex. And I won't speculate, obviously, around a potential deal. But I can tell you that in Colombia, there are obviously competition rulings that need to be taken into account for any deal, not necessarily this one. As I said, we're not speculating. But I'd say, Stephane, that there's additional things in terms of local requirements that need to be or would need to be considered in a deal that entails something like this or would entail something like this. And again, Stephane, thanks for respecting the fact that we won't talk in detail around our engagement with Parex. Thanks a lot. Can we have the next question, please? Operator: Our next question comes from Daniel Guardiola from BTG. Daniel Guardiola: I have a couple of questions. I'm going to keep it brief, so all my colleagues can actually ask questions. Considering that you guys talked about opportunities in Argentina, in Colombia, I wanted to ask you, Felipe, how would you rank on a risk-adjusted basis your value-accretive growth opportunities between both countries? So that would be my first question. And my second question, very briefly, I'm just curious, considering that the current environment with the proposal from Parex, et cetera. And I know you're not going to comment on that, and I don't want to push to comment on that. But I was just wondering if you can provide any sort of indication of what is the expected NPV of the recently acquired assets of Argentina, assuming, of course, that everything goes in line with the plan? So that will be my 2 questions. Felipe Bayon Pardo: Thanks, Daniel, and thanks for being in the call this morning. It's always good to hear from you. So I'll start with the second question and then I'll build on the first question, and I know Jaime can provide a bit more color. But the first thing I'd say is that there's already -- I mean, when we did the deal in Vaca Muerta, which is transformative and it's strategic for us. And if you remember from the Investor Day and the Investor Week, we said this is an opportunity, these 2 concessions that we have, that can bring some $300 million to $350 million of additional EBITDA in the next 3 to 4 years and 20,000 barrels, as Martin was explaining earlier in the call. So in that sense, it's clearly accretive. And I would also highlight something that Martin was saying. We're conducting all the required activities to ensure that we have designs and permits in place. But in addition, we've talked to the operators in the region to look at spare and haulage capacity in pipelines, in processing facilities, always with the mindset of maximizing value for shareholders. And this is very important. So we have a plan. We have a plan for Vaca Muerta, but we're looking at ways of optimizing and looking at optionality, if you will. So I think that's point number one. The other thing is that we've disclosed some numbers around Vaca Muerta and especially around the volumes. And we said that the 1P for the company, it would go from 5 to 7 years, 2P all the way to 10 years. And I'll share with you, Daniel, and everybody in the call, we're undergoing the review of reserves in Vaca Muerta. Remember that there's some information that's public that was the reserve certification at the end of last year that we won't disclose, we can't disclose. But where we are with the existing data, some of that is public data. We have the luxury of having the Province of Neuquen as our partner in this deal. All of that, we expect to have positive numbers in terms of reserves going forward for Vaca Muerta. So that would be accretive in terms of where we initially saw we were on the deal. So I think that's very relevant. We've obviously gathered a lot more data. We're on the ground right now, and that's great. And in terms of risk-adjusted basis for both countries, Colombia and Argentina, I talked about Argentina. And in addition to what we have in Vaca Muerta already in the 2 concessions, I mentioned we're talking to operators in the region constantly, Martin and Tommy on the ground, [ Ignacio ] and myself, we hold frequent conversations with operators to optimize. But we also hold conversations on potential opportunities going forward, and we mentioned this at the Investor Day. We're focused on what we have right now. We will remain very, very disciplined in terms of allocating capital and ensuring that everything that we bring into the portfolio has value with it. But there's a lot of opportunity. When you think that only 10% of the basin in Vaca Muerta has been developed. It's, I think, clearly a world-class basin for unconventionals. So that's that. And in terms of Colombia, I'd say, and I highlight a few things, and Martin and Rodrigo gave us some of the good news around performance today, which is great. As operator of Llanos 34, we're performing very well. But again, for example, Daniel, only 30% of Llanos 34 is covered with waterflooding. We've increased the level of water floods. We've been very successful with shut-offs and redirecting the water. And even with a newly updated model of the field, we have a lot more data in terms of where to put the water and what are the expected results. So Llanos 34, I think, provides a lot of additional optionality and upside in that sense. And I'll just say, it's -- that's why, Daniel, and I know you were very respectful of not talking about Parex. But I think that's why unanimously the Board rejected the offer of $9 per share because it failed to reflect growth prospects, our portfolio that's diverse and it's not in the best interest of shareholders. But clearly, Llanos 34 has a lot of legs still in it. That's the point I'm making. And then if you look at 123, and I mean, great news. A field that's producing 5,000 barrels in just 24 months, it's great. It's a great story. And guess what, there's a lot of optionality. And we're doing exploration and appraisal activity and there's full alignment with our partner, which is great from a technical point of view, from the intent to conduct more activities in that sense. CPO-5 is doing very well, very, very well. We have a great relationship with ONGC. They're doing -- they're conducting their operations very, very well and it's actually performing above plan. So I'd say, Daniel, that in that sense, having a portfolio that is in the 2 countries, Colombia and Argentina, and it's diversified in terms of conventionals and unconventionals is great. And again, we see that in the upcoming year or so with some potential changes in government as well, a government that's more prone to activity, that can only help our long-term plan be more robust or even more robust than it is today. I don't know, Jaime, if you want to add something. Jaime Caballero Uribe: Well, perhaps I'll just delve a little bit deeper on the technical aspects of how we go about capital allocation. Those of you that have been following us and saw our presentation at the Investor Day probably will recall our capital allocation matrix, right? And if you remember, that capital allocation process basically is all geared towards driving value maximization, right? We consider aspects such as NPV, breakevens, capital efficiency. But to your question, Daniel, we of course, consider risk and time to market. And we do it in a very intentional way, right, to make sure that things compete. This is probably not the right time to give you a specific indication of the expected NPV of Vaca Muerta and of our other assets. But what I would say is that our portfolio allocation process is designed to deliver competitive returns, double-digit returns at a 15% discount rate, okay, and at a $60 Brent price. So if you use those parameters of a 15% discount rate, $60 Brent price, delivering double-digit returns that kind of gives you an indication of the sort of strength of the portfolio that we have at GeoPark and that we are building in Argentina. I think the other important point of note to mention is, of course, that given the recent elections in Argentina and the outcome of the recent elections in Argentina, clearly, the 15% discount rate seems quite stringent given how the risk in Argentina is evolving. So we are very comfortable around the value accretion of the assets given the rigor that we've had in the capital allocation and in the recent developments that we've had there. Felipe Bayon Pardo: And Daniel, before I turn it over to the next question, I just want to highlight, and first, thanks for the question. As we've mentioned in the recent Investor Day and everything else, we have a plan that's robust. We have a strategy that's robust in terms of building in Colombia, and I've mentioned a few of the additional things that we're looking at. And I'd just like to go back to being very efficient and very focused in terms of how we conduct our operations. And the fact that, that long-term plan includes Vaca Muerta, the concessions, and that's accretive as well, and it builds on what Jaime was talking about. And Daniel, in the next few weeks, we'll be presenting the work program and budget for next year that will reflect this view on our strategy and how we deploy capital to ensure that we continued to bring accretive opportunities and we continue to provide value to shareholders. Operator: Our next question comes from Vicente Falanga from Bradesco. What are the risks related to your polymer injection project in Llanos 34? What could go wrong? What are the key operational milestones in terms of well results for the GeoPark to derisk its Argentina operations? Felipe Bayon Pardo: Thanks, Vicente. And I'll ask Rodrigo to talk about some of the aspects around the polymer injection. Rodrigo Dalle Fiore: Vicente, thank you for the question. As you know, polymer fluorine is a proven EUR technology with a solid track record not only here in Colombia, but also globally. So particularly in Los Llanos. So in the neighborhood, we have some good examples. So it's a proven technology is the firm message I want to deliver here. But obviously, there are certain risks that we have to manage during the implementation of this technology. The risks are related with subsurface uncertainties, operational execution, economic sensitivities, but all of them are considering in the plan that we have. So that's why there are, I think, 2 key elements in order to face those risks. The first one is related to how are you going to implement the project? What we think for the near future -- actually for the present because we are working on it, is phase the implementation in different kind of phases. So we are going to start this year, at the end of this year with 2 wells. We expect finish next year with 9 wells in terms of polymer injection in Tigana field. And we see about 30 patterns for the full development for Tigana -- for Jacana, sorry. Actually, we are working in something that is new for the development plan. It is in Tigana, because at the moment, we have no injection -- polymer injection in the north as well, and we are designing that project to include in the development plan as soon as possible. The other thing that I consider as critical is the talent and the people. So we hire experienced -- we hired -- last year, we hired experienced people coming from other parts of Colombia. They have been injecting water in the Llanos Basin for the last 10 years, the same with polymer. So we consider we have the expertise in place. We're working very seriously because polymer fraud is one of the key elements in the development plan for the field. It's not the only one, it's one of those elements that we have in terms of maintaining the production of this big field. So that's why we are very excited about the project. We believe that we have the capabilities to implement in the right and success way. And that's what we are doing right now because we expect in a couple of months to have the first well injecting polymers in the area. Felipe Bayon Pardo: And in terms of operational milestones of results for derisking operations in Argentina, Martin? Rodolfo Terrado: Yes. So Vicente, thanks for your question. And let me start by saying that in terms of the milestones on well results, if we look at the 2 blocks that we acquired in Loma Jarillosa and in Puesto Silva Oeste. We're surrounded by active Vaca Muerta development. And within the blocks, as I mentioned before, Loma Jarillosa Este has 6 wells that are already drilled and on production. And so from a subsurface, the risk that we see low. When we look at the activity that is coming and the drilling risk and operational risk, let me mention these 2 things. First one is when we start drilling, we have the advantage that we will start with a pad that has been partially drilled. The pad #1030 has 5 wells that have been drilled, out of which 2 wells are fully drilled. They're just waiting on the completion. And the remaining 3 only need the last section, which is the horizontal, which would be around 2,500 meters of the horizontal drilling. So we will start with the drilling operations that are now going full on one pad from 0. And then the second comment is one way to make sure that we're derisking is our team. And we have a very solid team that we had in place and we have completed. And let me give you a little more flavor of what I mean. We have some of the folks that are now in Argentina operating these blocks were already being part of the previous deal that we had as secondees. And so 1 year, fully engaged as secondees in different roles. And prior to that, some of these guys and these men and women were working in companies like Chevron, like YPF, like Pan American Energy. So our leaders in the ground in Argentina, they have each of them in the order of 10 years of unconventional experience, both in Argentina and in the U.S. So with that team, we feel that we can go about derisking the operations properly. Rodrigo Dalle Fiore: Yes, I would add something related with the subsurface perspective. The blocks are geologically proven. So the reservoir and the oil is down there. So there are a couple of elements that support our confidence there. First of all, the previous operator in Loma Jarillosa drilled 6 wells. So we have a lot of information coming from that subsurface database. Then we have -- we built a technical understanding and we consider with all this information, at least for the North block, we have a very robust development plan with that information. At the same time, in Argentina, the production per well is public. So we can analyze all the neighborhoods. Actually, we did that. And the expectation that we have in terms of well type is 1.1 million and 1.3 million barrels per well for the full life of the well. So that's plenty in line with the neighborhood. So that's another topic or at least point that adds confidence to our analysis. The third point is we have been for a year working with Phoenix in the south of this area, and we have the experience in Confluencia Norte. So Confluencia Norte supports our understanding of Puesto Silva Oeste, sorry. And that's why we believe that in terms of risk and manage the milestone for coming, we are very solid with the development plan. So that's my contribution related with the subsurface. Felipe Bayon Pardo: Do we have any more questions on the line? Operator: Our next question is from Isabella Pacheco from Bank of America. Isabella Pacheco: Just a quick one. How much do you expect the Vaca Muerta acquisition will add to your 4Q '25 production? Felipe Bayon Pardo: Martin? Rodolfo Terrado: Yes. So Isabella, quick answer. For the 75 days that we will have Vaca Muerta on production, it's going to be in the order of 1,400 to 1,600 barrels of oil per day for the quarter. Felipe Bayon Pardo: Do we have anymore Operator: Our next question is from Alejandro Demichelis from Jefferies. Alejandro Anibal Demichelis: Just I know you're not going to be talking about Parex and so on, but maybe you can give us some indication of the rationale for keeping the poison pill still in place at this moment. Felipe Bayon Pardo: Thanks, Alejandro, and good to have you on the call today. And yes, I'll give you my view on the poison pill, and this is something that we discussed at the Board very early on. Remember, I joined earlier in the year, June 1. And if you look at this from a shareholders' perspective, and this is part of the conversations we had at the Board, we want to ensure that anybody who wants to acquire equities of the company or shares of the company and wants to build a position, it fully reflects a premium in terms of the purchase of those shares when the acquisition. And at the end of the day, Alejandro, what we're looking for is for the right value, the right premium to be acknowledged. And at the end of the day, it's something that would benefit all of the shareholders across the board. Jaime Caballero Uribe: Yes. I guess what I would add, Felipe, to this is if we look at the recent events, we've had a shareholder accumulating a position that has been basically capped in the market conditions, right? And I would argue that it's actually enabling the conversation that we're having now, which is in the benefit of all shareholders, which is what is the premium over market price that's going to be recognized. So now more than ever, the poison pill makes sense, and that's why we are supportive of keeping it. Operator: We currently have no further questions. So I'll hand back to Felipe Bayon for closing remarks. Felipe Bayon Pardo: Thank you so much. And again, thanks, everybody, for being here in the call today and for your interest in the company. Very thrilled with the performance we've had in 3Q. It's a very, very solid set of results that we've presented to the market in terms of our operations, our cost efficiencies, dealing with the reservoirs and ensuring that we maximize value. So I'd like to acknowledge the teams that day in and day out are actually supporting these results. So very, very thrilled with that. Very, very happy with how the results are coming out and that we've presented to the market. And the last thing is we had the roadshow and the Investor Day a couple of weeks back, where we looked at our strategy going forward and then maximizing value in Colombia through a very robust plan that's in place with incorporating all of those efficiencies and technology and innovation. And also, the work that Rodrigo was mentioning around exploration and appraisal and looking not only around new technologies and enhancing operations, but also around new opportunities in country. And on top of that, a value-accretive transformational strategic acquisition in Vaca Muerta. And those 2 in conjunction provide a very, very solid outlook in terms of value creation and maximizing value for shareholders. So thanks again, everyone, for being here on the call today. And again, I'd like just to thank the team, the GeoPark team for everything that they do. Have a good day. Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Synaptics First Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Head of Investor Relations. Please go ahead. Munjal Shah: Good afternoon, and thank you for joining us today on Synaptics' first quarter fiscal 2026 conference call. My name is Munjal Shah, and I'm the Head of Investor Relations. With me on today's call are Rahul Patel, our President and CEO; and Ken Rizvi, our CFO. This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at synaptics.com. In addition to a copy of our earnings press release detailing our quarterly results, a supplemental slide presentation and a copy of these prepared remarks have been posted on our Investor Relations website. Today's discussion of financial results is presented on a GAAP financial basis, along with supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs, and certain other noncash or recurring or nonrecurring items. All non-GAAP financial metrics discussed are reconciled to the most directly comparable GAAP financial measures in our press release and supplemental materials available on our Investor Relations website. As a reminder, the matters we are discussing today in our prepared remarks, in our supplemental materials, and in response to your questions may contain forward-looking statements. These forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. Although Synaptics believes that estimates and assumptions underlying these forward-looking statements to be reasonable, they are subject to a number of risks and uncertainties beyond our control. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements. Therefore, we refer you to the company's earnings release issued today and our current periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements speak only as of the date hereof. Except as required by law, Synaptics expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Rahul. Rahul Patel: Thank you, Munjal. Good afternoon, everyone, and thank you for joining our fiscal Q1 2026 earnings call. We had an outstanding start to our fiscal year, delivering strong results that reflect the continued momentum in our business. Revenue in our Core IoT portfolio grew by 74% year-over-year, driving 14% revenue growth for the company. Our strength was broad-based across both processors and wireless connectivity. We delivered strong earnings growth, with non-GAAP earnings per share up 35% year-over-year to $1.09. As a company, we are sharpening our focus and aligning our resources to capture the growing opportunity in Edge AI. In the last quarter, we met with customers across the globe and at our Tech Day here in San Jose. Those discussions have affirmed my confidence in our ability to strengthen our leadership in this market. By bringing together our unique capabilities in analog mixed-signal, multi-core processing, and advanced wireless connectivity, we are enabling customers to bring intelligence to the Edge. This quarter, we reached a major milestone in our Edge AI roadmap with the successful launch of our next-generation Synaptics Astra Edge AI processors. Astra introduces a new class of AI-native silicon, built from the ground up to power the next wave of intelligent devices at the Edge. These products represent a decisive leap forward in our Edge AI strategy and reflect our strong execution and firm commitment to leadership in this market. Importantly, Astra is not just a standalone product, it brings together Synaptics' integrated approach to high-performance solutions by incorporating our processing, wireless connectivity, and mixed-signal capabilities. The response from customers, ecosystem partners, and the media has been very positive for the following reasons: First, we developed the new generation of Astra SL2600 series to enable billions of AI devices at the Edge, from battery-powered devices to high-performance industrial systems. It delivers industry-leading price performance to enable intelligence at the far Edge. Its scalable architecture allows our customers to address a wide range of applications, including those that require multimodal human-machine interface, vision, and voice capabilities across consumer, enterprise and industrial end markets. Customers can future-proof their designs as requirements for multimodal compute, power efficiency, application features, and AI models continue to evolve. Second, we introduced Synaptics Torq AI in the new generation of Astra processors. Torq combines a future ready neural processor architecture with open-source compilers, setting a new standard for IoT AI application development. Further, as part of our close collaboration with Google Research, we have integrated their open-source Coral NPU, a machine learning accelerator optimized for energy-efficient AI at the Edge. This silicon-level collaboration enables customers to develop innovative Edge products with AI inference across a broad range of applications. Third, the Synaptics and Google partnership is fundamentally about creating a robust and open software development environment that elevates AI-native Edge IoT product development from a highly fragmented, proprietary ecosystem into a unified, open-source approach. Developers now have access to multiple flexible and scalable programming frameworks, comprehensive software development kits and tools, and a rich repository of resources that include pre-optimized models, multimodal AI applications, and a curated developer experience supporting a wide range of use cases. Our lead customers have begun sampling the new Astra SL2600 devices, and we are already securing design wins. We expect initial revenue contributions to start in the second half of the calendar year 2026. This marks a significant execution milestone for our engineering and product teams, reflecting their outstanding commitment to innovation. Looking ahead, the AI inference compute opportunity is significant as hybrid compute across the data center and the Edge is taking shape. We are already seeing strong early traction and a healthy pipeline of customer engagements. We had hundreds of customers and partners join us at our Tech Day, where we showcased Edge AI use cases such as industrial vision, fleet management, home automation, smart appliances, IoT hubs, and robotics. Moving to our wireless connectivity portfolio, we had a solid quarter with strong execution across our strategic priorities. Our Wi-Fi 7 and broad-market solutions are starting to gain traction, and our roadmap remains firmly on schedule. Development of our wirelessly connected microcontroller with AI, all in a monolithic silicon, is advancing as planned, and we look forward to sharing more in the quarters ahead. Across our Core IoT portfolio, we achieved multiple wireless connectivity and processor design wins spanning a diverse range of end markets, including action and sports cameras, educational and commercial tablets, point-of-sale systems, unified communication platforms, operator solutions, and wearables. We're also seeing increasing customer commitments in home security systems, Matter-enabled IoT hubs, trackers, AI-enabled wearables, and body cameras. As we continue to invest in our roadmap, execute on our engineering goals, and deepen partnerships with our leading customers, we feel confident in our ability to deliver long-term growth across our processor and wireless connectivity portfolio centered on enabling AI at the Edge. Let me now turn to our mixed-signal technology products. In Enterprise & Automotive, our PC products continue to show steady improvement, and our broader enterprise portfolio continues to recover. We have gained market share over the last year, and we expect the momentum to continue into the current quarter. While we continue to see softness in automotive due to subdued market demand, we are benefiting from the continuation of our existing designs and are actively investing in new innovative automotive solutions that will help increase our silicon content. In Mobile Touch, we are seeing strong customer traction with our next-generation touch controller, which features a differentiated multi-frequency architecture designed for foldable OLED phones and other large-screen applications. This new design enables thinner and larger panels and integrates advanced sensing and filtering capabilities to effectively manage display noise. It also supports continuous time sensing, offering customers greater design flexibility and more cost-effective integration. We have secured marquee design wins with a top Android phone OEM and we are also seeing strong interest from OEMs in China for smartphones and tablets. We expect these wins to start contributing to revenue in the next fiscal year. Notably, our content in foldable phones will be more than twice that of our current smartphone designs. As the adoption of foldable phones increases, we are optimistic about the opportunity it creates for Synaptics. Overall, we are seeing steady improvement in our financial performance, with both revenue and EPS increasing sequentially and year-over-year. This progress reflects the strong execution across our organization, particularly from our engineering teams, who continue to deliver on our product roadmap. Our pipeline of opportunities is expanding, and we believe we are well-positioned to build on this momentum. I am confident that our focus, innovation, and disciplined execution can drive long-term growth for Synaptics. I will now turn the call over to Ken to review our first quarter financial results and outlook for our fiscal 2026 second quarter. Ken Rizvi: Thank you, Rahul, and good afternoon, everyone. I will focus my remarks on our non-GAAP results which are reconciled to GAAP financial measures in the earnings release tables found in the investor relations section of our website. Now let me turn to our financial results for the first quarter of fiscal 2026. Revenue for fiscal Q1 was $292.5 million, above the midpoint of our guidance and up 14% on a year-over-year basis driven by strength from our Core IoT products. The revenue mix in the first quarter was as follows: 35% Core IoT, 51% Enterprise and Automotive, and 14% Mobile Touch products. Core IoT product revenues increased 74% year-over-year, driven primarily by increased demand for our processor and wireless connectivity products. Enterprise & Automotive product revenues were flat year-over-year with strength in our enterprise portfolio offset by softness in Automotive. Mobile Touch product revenues were lower than expected, in part, due to supply chain constraints during the quarter. First quarter non-GAAP gross margin was 53.2%, in line with our guidance range. And first quarter non-GAAP operating expense was $104 million, slightly better than the midpoint of our guidance range. Our non-GAAP operating margin was 17.6%, up approximately 110 basis points sequentially and 90 basis points year-over-year. Non-GAAP net income in Q1 was $43.3 million. And non-GAAP EPS per diluted share came in above the midpoint of our guidance at $1.09 per share, an increase of 35% on a year-over-year basis. Now, let me turn to the balance sheet. We ended the fiscal first quarter with approximately $459.9 million in cash, cash equivalents, and short-term investments, up approximately $7.4 million from the prior quarter. Cash flow from operations was $30.2 million in the first fiscal quarter. We repurchased $7.2 million of our shares during Q1 and a total of $15 million of our shares through today. Capital expenditures for the first quarter were $12.2 million, in part driven by lab build-outs to support our R&D efforts. Depreciation for the quarter was $7.5 million. Receivables at the end of September were $119.5 million and the days of sales outstanding were 37 days, down from 41 days last quarter. Our ending inventory balance was $143.1 million, which increased by $3.6 million from the previous quarter. The calculated days of inventory on our balance sheet were 94 days, essentially flat with the last quarter. Now, turning to our second quarter of 2026 guidance. Our guidance is subject to the fluid macroeconomic global trade and tariff environment which continues to remain uncertain at this time. Please refer to our Safe Harbor Statement in the earnings release and in our supplemental materials. For Q2, we expect revenues to be approximately $300 million at the mid-point, plus or minus $10 million. And our guidance for the second quarter reflects an expected mix from Core IoT, Enterprise & Automotive, and Mobile Touch products of approximately 31%, 53%, and 16%, respectively. We expect non-GAAP gross margin to be 53.5% at the mid-point, plus or minus 1%. And non-GAAP operating expenses in the December quarter are expected to be $106 million at the midpoint of our guidance, plus or minus $2 million. We expect non-GAAP net interest and other expenses to be approximately $1 million and our non-GAAP tax rate to be in the range of 13-15% for the second quarter. Non-GAAP net income per diluted share is anticipated to be $1.15 per share at the mid-point plus or minus $0.15, on an estimated 40.4 million fully diluted shares. This wraps up our prepared remarks. I would like to turn the call over to the operator to start the Q&A session. Operator: [Operator Instructions] Our first question comes from the line of Ross Seymore of Deutsche Bank. Ross Seymore: I guess my first one for Rahul is a little bit of a longer-term one. Congrats on launching the Astra platform. I know you talked about significant interest and that the revenue contribution would start kind of in the second half of next year. Could you give us any idea on the metrics that we could maybe track externally as to the success of that product, whether it be the TAM opportunity down the road or the number of design wins? Any sort of color that we could monitor as to the slope of the growth that you see coming forward with that product? Rahul Patel: Thank you, Ross, for the question. I think we are really excited about the 2600 series that we launched. As you can tell, from the opening remarks, we have now secured design wins way ahead of when we thought we would be getting award letters, right? Clearly, there's a very wide range of designs coming into the pipeline as a result of what we are bringing in 2600 series products. And at this point, I'll share with you that the product is designed in such a way, it future-proofs IoT systems for multiple years, not only from having the ability to run a lot more capability because of the CPU complex as well as the multi-core processing capability, but also from an AI point of view. And we have a SKU map of pin compatible devices that on the same PCB can be swapped for newer capable devices. And so that scale of technology that's been deployed here in this family of products is very compelling to a wide range of applications. We are seeing from home applications to industrial applications, from things like fleet management applications to robotics, lots of interest. And we have secured designs. And so when I say secured design, we've got a board letters already as we sample the part. I would not be surprised if we go to production sooner than what we had planned for, given the success that we are experiencing in the bring up with the product. And given that, I would anticipate our pipeline would develop very nicely over time over the next few months. Having said that, specifically to respond to your question, at some point, we will give you an update on the pipeline in the form of the size of the funnel. And when I say size of the funnel, I would be specifically talking about design that have been awarded to Synaptics and not the broader marketplace where people talk about the opportunity. We'll be very specific about the designs that have been awarded to Synaptics and the designs that are going into production with Synaptics through that award process. And so that is where we are going to go in terms of giving the ability to track our success with our processor line of products. I believe we are maybe a couple of quarters away from where we can start opening up and giving you that update. The intent also is to give you this update periodically, right? And so I'll keep you apprised of our progress on a going-forward basis. And so give us a couple of quarters or maybe a little bit less than that, and we'll get back to you with how we're going to track the method and the periodicity with which we'll be providing an update. Ross Seymore: And I guess as my follow-up, a little bit of a nearer-term question, perhaps for Ken or Rahul for you, if you wanted to answer. But lots of intersegment volatility versus your original expectations. The Core IoT up-sided significantly, the Mobile Touch down-sided a bit. Can you just talk about what drove those and perhaps how that applies to the guidance that you're implying for the fiscal second quarter as well? Ken Rizvi: Sure, Ross. I mean it's a good question. So in the prepared remarks, we did see -- I'll touch base on the Mobile Touch products. There were some supply constraints there. So that's why you're seeing some increase here as we move from the September quarter actuals to the December quarter guide. And then when we look at the Core IoT business, if we just step back and look over the last 7 quarters or so, I think we've been averaging something like 50% plus year-over-year growth on a quarterly basis. So we've seen very strong growth in that Core IoT segment, driven by what Rahul commented earlier, both processors and the connectivity business. And so there's always some movement from a customer dynamic standpoint that can move quarter-to-quarter. But if you look holistically, we've done very well in terms of the growth rates on a year-over-year basis and very happy not only with the September results overall, but how we've guided in December. Rahul Patel: Yes. Just to add to what I think, Ross, I think even in the near term, if you look at the September quarter and you extrapolate from the guide, you combine the 2 quarters and you look at the half, first half of the year versus the first half of the year -- fiscal year '25. We are north of 60% growth year-over-year. And so a little variation here or there, but the growth remains consistent. And I would add that we feel very comfortable with our guide of 25% to 30% growth for the fiscal year '26. And so looking at all parameters and the fact that if you look at the actual dollars, we are now at a run rate of $400 million in IoT revenues on an annual basis. It's a substantial amount of business. It is growing at a very good clip rate, and we are further excited about the opportunity that our newer products are going to bring to the table. I would also add that the road map is very solidly building out. I did talk in my prepared remarks that we are building a product that is going to be wireless connectivity processor and AI integrated in a single die. And so this thing is going to go into multiple applications. It's going to broaden the coverage of end markets for us as a result between what we have launched in silicon as of now and what is coming in our pipeline in the next couple of quarters. Operator: Our next question comes from the line of Neil Young of Needham & Company. Neil Young: So I just wanted to follow-up. You talked about some of those end markets that you're achieving design wins in. Specifically, are you seeing any outsized strength in any of those markets that you listed? If so, what do you think is driving that? And then on the longer term, which end markets do you see becoming the largest? And then I have a follow-up. Rahul Patel: Yes. I think our big area of focus right now is to tap into the existing markets. However, on a going-forward basis, as AI and the need for AI comes to the far end of the Edge, which we believe is "in design phases in many places," as you can tell from the AR glasses to many wearable devices to many things that you would have from home automation point of view, we see our marketplace expanding dramatically and in a place where we'll be highly differentiated. And so I'm very excited about markets where at the far end of the Edge, where AI plays a huge role for human machine interface and multimodal processing with voice, vision, and other computes for AI inference, along with industrial applications, such as robotics, humanoids. So the gamut is fairly wide open in terms of applications as we have designed our product and software platform. Neil Young: And then looking into the second quarter, if you were to force rank the sequential growth across the enterprise, PC and Auto, how do you see each of those markets shaking out? And then if you could maybe talk about what's driving the strength or weakness in each of those markets. Rahul Patel: Yes. So I would say, as we look at -- you mentioned Enterprise, PC, Auto. So we don't break out the details in those categories. But if you look at the Enterprise and Auto market, as we highlighted on the prepared remarks, we're seeing strength in the enterprise space overall. There's been a nice recovery as we think about on a year-over-year basis, how that's trended. And as we head into the December quarter, you can look at our guide that we're expecting that enterprise and auto space to be up sequentially September through December, which shows some nice sequential growth and growth overall. So that specific area, I would say, as we look into September, more driven by the Enterprise segment, and we would expect some continued strength as we move into December. Operator: And our next question comes from the line of Christopher Rolland of Susquehanna. Christopher Rolland: Congrats on the results. I guess probably, Rahul, for you, as it comes to mobile, you guys have, I think, one major mobile player using your combo chips. But can you talk about possibilities for more, particularly handset OEMs potentially doing their own APs or elsewhere? And how possible are these opportunities for you guys? Rahul Patel: Yes, Chris, excellent question. And you're absolutely right on the money in terms of the opportunity ahead for us in mobile. Clearly, there are many mobile phone OEMs that are going down the path of building their own apps processor, and that effectively presents an opportunity for players like ourselves who have clearly very solid wireless connectivity product to offer; however, don't have the ability to play in a "bundle" with apps processor offering, becomes an opportunity for us with a provisioning of very differentiated market-leading wireless connectivity for phone OEMs who want to build phones and tablets and use wireless connectivity from Synaptics basically. And so we are very excited about that opportunity. We are also engaging with many OEMs in this area. I would also add, you did not ask, but very similar connectivity product can be extended to multiple other marketplaces because of the high-performance connectivity capability it brings to the table. And so there is also leverage going into high-performance set-top boxes, automotive, and other marketplaces with that level of wireless connectivity. And so there's clearly opportunity for us to leverage our strength in wireless connectivity beyond IoT marketplace with mobile and other places basically for wireless connectivity that's going to be high performance. Christopher Rolland: And you were speaking about your road map for new products in the prior question. You also mentioned Astra that you could potentially pull that in. I think it was a 2027 high-volume timetable for shipments. But I was wondering if you could update us in terms of the status on high-volume shipments for the MCU plus combo chip product you are talking about. And perhaps I think you have a broad markets MCU on your road map as well. Rahul Patel: Yes. I think, Chris, again, an excellent question, and thanks for asking this. The product that -- first and foremost, let me -- I think you asked about 2 products. We have what I call is a microprocessor class product, which is the product that we just launched, and it's in the hands of multiple customers in sample stages, and we are getting design awards for. That is the SL2600 series of products or family of products. Those go into production in second half calendar 2026. That's when we start seeing the first revenue realization basically from those products. We would be seeing clearly a lot more momentum and revenue growth as we go from end of '26 -- calendar '26 into '27 and beyond. The highly integrated MCU class processor plus Wi-Fi 7 and Bluetooth integrated monolithic die implementation will sample in the second half of '26. And more likely, you will see at the earliest revenues in the second half of calendar '27 and, obviously, it will ramp from there. And that's what I had discussed in my prepared remarks. Having said that, the teams are building the next generation of products. We also have a semi-custom solution that is targeted for a major customer in the works, and it is expected to sample in the fall time period to that major customer. And so those are the big products that are in flight, and there are a couple of others that are in early stages of design. So the road map is building out very nicely from where we are with Astra line of products and the MCU class of products. Christopher Rolland: That semi-custom sounds interesting. You're going to have to tell us more next time. Operator: Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Kevin Cassidy: Congratulations on the great results. Just to dig in a little more on the Core IoT and that strong growth you're seeing. On the wireless side, are you seeing -- is the growth being driven by more units? Or is it -- is there a strong upgrade cycle giving you a higher ASP? Rahul Patel: So Kevin, excellent question. On the wireless side, we are in a ramp-up phase basically. And so the contribution to the revenue is broad-based. And so it's a lot of new designs that are going into production that are contributing. So I can't tell you exactly today there is one particular market segment that's pushing the envelope more than the other. However, I do believe in 2 or 3 quarters from now, things would get to a steady place in terms of one marketplace emerging as a faster-growing segment than the other. And at that point, we'll be able to highlight where the growth is primarily coming from. But at this point, broad-based ramp-up stage, both in wireless as well as connectivity. Kevin Cassidy: Yes, on the enterprise side, are you seeing any potential for a refresh cycle in docking stations? Or is the growth going to come just from PC components? Rahul Patel: I think, Kevin, as we look at that overall enterprise space, I would expect actually both areas as we think about calendar year 2026. I think what we've talked about on previous calls, we haven't seen this year any step function in terms of PC and enterprise upgrades. It's been more steady in terms of the growth. It's been positive, but more steady. And I think that's the opportunity as we look into calendar year '26 if we see a significant upgrade cycle as a result of either Windows 10 or just the longevity of the PCs, which the last time we've had a significant upgrade was back in that '21, '22 period. So that's an opportunity for us as we think about calendar year '26. Operator: Our next question comes from the line of Peter Peng of JPMorgan. Peter Peng: Congratulations on the results. The first question I have is just on expanding into outside your core consumer markets now into industrials, especially with the SL2600 launch and then also the broad markets. Maybe if you can just an update on the initiative there as you kind of build out that channel on that long tail of customers. Rahul Patel: Yes. I think, Peter, first of all, thank you. And then a great question. And so one thing I would share with you is we just put up some of the demonstrations that we had on our Tech Day on our YouTube channel. And so it just probably went live yesterday. It will be great if you guys can check it out. I think you will see some of the industrial applications with our processors being demoed over there from a robotic arm that effectively is developed by a partner that has our touch controller in the palm and multiple instances of touch co1ntroller. It's got our processor, Astra processor in there and it's got our wireless connectivity as well. And so you can see, as a result, the potential of our products. I have said this in my last quarterly call that the combination of our analog mixed signal capabilities in the company and our connectivity along with the processor presents a total solution capability that goes from human machine interface to processing with AI inference capability, and it was -- it is on display in that demo that we have at our Tech Day. And it's a video of that demo as well on YouTube channel, along with multiple demos. We also have a demo of fleet management with our Astra processors on our YouTube channel. And so the other nature of these markets is such that consumer ramps much faster than industrial. And so we expect industrial to be lagging consumer in our ramp in the IoT business versus consumer ramps up faster and refresh cycles, refresh cycles happen much faster as well versus industrial. And so the capability in our product line, the engagement in building out solutions to support industrial applications is absolutely underway. And engagement with our customers is also underway. It's just that the designs for industrials will come a little later in a sizable manner versus consumer. Peter Peng: And then maybe if you can -- I think there's a lot of optimism about smart glasses and so forth. Maybe you can just talk about your engagement and what kind of content opportunities do you think you can have in this opportunity? Rahul Patel: Yes. I think I really don't want to kind of tip a whole lot on this topic, but you are touching a sweet spot for Synaptics' Astra line of products on a going-forward basis. With the product capabilities that I described earlier in the earlier question, clearly, the scale at which the volume needs to experience economic value is out there to be delivered by a solution supplier like Synaptics. And that in itself is a huge opportunity for us that we have our eyes set on in not just AR glasses, but also many variable opportunities on a going-forward basis. The combination of general purpose CPU with the optimal GPU, with the optimal audio processor, with the optimal vision processor and all working with a newer processor embedded. And also, like I said in my prepared remarks, taking the Coral NPU, open-source Coral NPU made available by Google, collaborating with Google to build out that system in the Astra 2600 series is an indication of exactly where we could be going for the variable sets of applications, AR glasses being one of them. And we are really excited about that opportunity, largely because the economic value equations that get addressed through Astra line of products is today up for grabs basically in the marketplace. Operator: Our next question comes from the line of Robert Mertens of TD Cowen. Robert Mertens: This is Robert Mertens on the line for Krish Sankar. I guess, just the first one, I know we talked a lot about your strategy going into Edge AI applications. But are there any core technologies that you think you need to develop either in-house or small tuck-in acquisitions or working with partners to bring into your Edge AI portfolio to be more attractive to the broader customer base, whether it's ultra-low power processing side or integration of your connectivity suite. Just anything there would be really helpful. Rahul Patel: Yes, Robert, excellent question. I think our strategy has been largely to enable best-in-class solution for our customers. And in many situations, it would mean that we would provide a total solution. In some situations, it would mean that we may provide a processor, and the customer may choose some other components to build out the solution. And so we are fairly open in our engagement with our customers. Having said that, the biggest differentiation in our processor strategy is to not go down this path of building out walled gardens. We are a firm believer in open-source. Our software development platforms support multiple open-source communities. Our ability to enable our customers to work with the vast ecosystem of models that are being developed for various applications in form of AI inference capabilities is to enable them to bring those to our platforms much more easily and with very little effort from Synaptics' team. And so, this is our strategy to operate at scale. And this strategy is developed in combination with Google Research. And so here, you have a company that also believes in open-source and enabling the software ecosystem, supporting the Synaptics approach in the bigger picture. And so that is how we are differentiating ourselves versus some of the peer set in the marketplace that have gone down this path of owning software development platforms. And effectively, in our opinion, it holds us back from scaling faster and enabling our customer base and the developer community as a result. And so that is our largest strategy. Having said that, we are always going to be on the lookout for opportunities to inorganically fuel our growth in IoT. And that option is definitely on the table. Robert Mertens: If I could just have one final question. Sorry about that. Just real quick, looking into your Enterprise and Automotive business, I know you've mentioned that the channel inventories have been improving over the last couple of quarters. Backlog levels seem to be normalizing. So just in that framework, what sort of other signs of improvement on a quarterly basis do you see there? I know you expected to rebound a bit into the December quarter. Is that something you expect to continue through the beginning of next year? Or is that more just pull-ins from various projects? Ken Rizvi: So I would say, overall, if you looked at the Enterprise and Automotive segment, within that, the Enterprise segment has done better over the last years, it has continued to improve. I think automotive has been more sluggish, but the enterprise piece has really performed nicely over the last 12 months or so. And I think as we think about and look forward into calendar year '26, which is not too far away, the one other opportunity that's out there is around some of the upgrade cycles and not only for the PCs, but as you think about RTO activities and the like and as people refresh the workstations, those are great opportunities for Synaptics as well. So we're excited about that business in terms of the share that we have and the franchise positions we have, and there's some great opportunities ahead of us as we think about 2026. Rahul Patel: Just to add to what Ken indicated, I think a couple of other things. In the Enterprise segment, we are gaining market share in the PC business, right? And that, despite the market being largely flat to GDP-like growth, we are seeing strength in our business and largely driven by the share gains. And it is something that goes back to our analog mixed signal capabilities in the company. And we continue to do well in that regard versus our peer set in the marketplace. And it's also showcased extremely well in Mobile Touch as well. As in my prepared remarks, I indicated, right, clearly, our product -- our newer generation product that is targeted for the next generation of phones that would launch in the second half calendar 2026 time period showcases how different and differentiating is our analog mixed signal capability in our products and especially in touch area. And I think we continue to do well. We continue to invest very judiciously and bring out really good products that are effectively helping us increase total silicon content in the phone as well. And so really excited about what that business is capable of bringing to the table in the second half of calendar 2026 and beyond. Operator: I'm showing no further questions at this time. I'll now turn it back to President and CEO, Rahul Patel, for closing remarks. Rahul Patel: Before we conclude, I would like to reiterate that the Synaptics team executed very well this quarter. We strengthened our leadership position in Edge AI with the launch of our new generation of AI-native Astra processors, and we continue to innovate on the next-generation of processors, wireless connectivity and mixed-signal products and solutions planned for delivery in calendar 2026 and beyond. Our financial results reflect our ongoing commitment to disciplined execution. I want to thank all my teammates in engineering and across Synaptics for their dedication and hard work in delivering on our commitments. Equally importantly, I would like to thank all our shareholders for their continued support of Synaptics. I look forward to connecting with many of you at upcoming industry events and conferences. Have a great rest of the day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Vermilion Energy Q3 2025 Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference call over to Mr. Dion Hatcher, President and CEO. Please go ahead. Anthony Hatcher: Good morning, ladies and gentlemen. I'm Dion Hatcher, President and CEO of Vermilion Energy. With me today are Lars Glemser, Vice President and CFO; Darcy Kerwin, Vice President, International and HSE; Randy McQuaig, Vice President, North America; Lara Conrad, Vice President, Business Development and Travis Thorgeirson, Director of Investor Relations and Corporate Planning. Please refer to the advisory on forward-looking statements in our Q3 release. It describes the forward-looking information, non-GAAP measures and oil and gas terms used today and outlines the risk factors and assumptions relevant to this discussion. Vermilion delivered another strong quarter in Q3, demonstrating both operational excellence and financial discipline. Our production came in at the upper end of our guidance range, and we're able to generate robust fund flows from operations in a challenging commodity price environment. Our performance this quarter reflects improvements in both capital and operating efficiencies, driven by the strategic repositioning of our asset base. These structural improvements enabled us to lower the top end of our 2025 capital guidance by $20 million without impacting our production. This speaks to the growing efficiency of our capital deployment. In addition, we lowered our full year operating cost guidance by more than $10 million due to the improvements we are realizing in the second half of 2025. This momentum will carry into the 2026 budget guidance, which includes even lower capital and unit operating costs, reflective of our larger, more cored up portfolio. When compared to 2024, the last full year before we launched our asset high-grading initiative, our production per share has increased by over 40%, where our unit cost structure is down by 30%. This reflects the strength of our repositioned portfolio where 85% of both production and capital is now concentrated in our global gas business. By focusing on these more efficient, longer duration assets, we have better positioned Vermilion for sustainable long-term success. Our Q3 results underscore the resilience and the competitive strength of our differentiated asset base. Notably, our realized gas price in the quarter, excluding hedging gains, was $4.36 per Mcf, significantly outperforming the AECO 5A pricing. In Canada, we realized a gas price that was more than double the AECO benchmark. And when combined with our direct exposure to premium priced European gas, our realized pricing is 7x the AECO benchmark. When you include hedging gains, the realized price increased to $5.62 per Mcf, 9x the AECO benchmark, highlighting the strategic advantage of being a global gas producer. During the quarter, we made a deliberate and strategic choice to temporarily shut in a portion of our Deep Basin gas production and defer the start-up of several wells, resulting in approximately 3,000 BOEs per day of production impact in the quarter. We expect to bring these volumes online in Q4, where pricing is more favorable. During the quarter, we met a portion of our volume commitments by purchasing rather than producing our own gas, demonstrating our commitment to profitable development. We continue to make progress towards key milestones with the development of our global gas assets in Germany, the Montney and the Deep Basin. In Germany, in 2026, we will bring our discovery well at Wisselshorst online and look to expand takeaway capacity over the next 2 years to maximize the economics of this prolific well. We will also advance our plans to spud the follow-up Wisselshorst structure in early 2027 and with a shorter cycle time than our initial exploration well, plan to bring these wells on production in the second half of 2028. In Canada, we will continue to invest in the Montney asset, as we progress towards a significant inflection in free cash flow in 2028. In the Deep Basin, we will run an efficient, consistent 3-rig program and generate strong free cash flow by producing volumes into our existing infrastructure. As we look out over the next 3 years, these projects will significantly improve our free cash flow outlook. I will now pass it over to Lars to discuss the Q3 results as well as our 2026 budget guidance. Lars Glemser: Thank you, Dion. Vermilion generated $254 million in fund flows from operations in Q3 with free cash flow of $108 million after E&D capital expenditures of $146 million. We continue to reduce debt during the quarter and have now reduced our net debt by over $650 million since Q1 2025, bringing net debt to under $1.4 billion as of September 30. This resulted in a net debt to 4-quarter trailing FFO ratio of 1.4x, reflecting continued progress towards strengthening Vermilion's balance sheet. In addition, Vermilion returned $26 million to shareholders through dividends and share buybacks. comprising $20 million in dividends and $6 million of share buybacks during the quarter. This resulted in the company repurchasing 600,000 shares for a total of 2.5 million shares repurchased year-to-date. In total, we have repurchased approximately 20 million shares since mid-2022. Q3 production averaged 119,062 BOE per day with a 67% gas weighting, which was at the upper end of our guidance range. In North America, production averaged 88,763 BOE per day, inclusive of the July divestments of our Saskatchewan and U.S. assets. as well as shut-in gas production and deferral of new well start-ups in Q3 in response to pricing. International operations averaged 30,299 BOE per day, up 2% from the previous quarter due to strong performance across our business units. In the Deep Basin, we ramped up to a 3-rig drilling program in Q3, targeting multiple stack zones across our 1.1 million net acre land base. We drilled 13, completed 12 and brought on production 3 gross liquids-rich gas wells in the Deep Basin. The drill program results to date are exceeding our expectations with test rates indicating deliverability well in excess of our type curves. Internationally, we executed a successful 2 gross or 1.2 net well drilling program in the Netherlands, discovering commercial gas across 2 zones, the Rotliegend and Zechstein. Both wells are expected to be completed, tied in and brought on production in Q4 of 2025. These 2 wells are the latest successes in our 2-plus decades of exploration and development in the Netherlands and combined with recent discoveries in Germany, demonstrate Vermilion's broader European gas exploration capabilities to repeatedly add European gas reserves at a cost of $1.50 per Mcf into a gas market currently in excess of $15 per Mcf. Meanwhile, Osterheide, our first German exploration well continues to produce at a restricted rate of 1,100 BOE per day, generating nearly $2 million per month of excess free cash flow. And our second well, Wisselshorst, is on track for start-up by mid-2026, with preparations underway for follow-up drilling of 2 gross or 1.3 net wells in the Wisselshorst structure. As a reminder, the first well is expected to recover 68 Bcf of gas and our P50 estimate of gross gas in place for the structure is 380 Bcf. We also released our 2026 budget yesterday, featuring an exploration and development capital budget of $600 million to $630 million with approximately 85% allocated to our global gas portfolio. Key investments include drilling and strategic infrastructure in the Montney, a continuous drilling program targeting high-return liquids-rich gas wells in the Deep Basin and drilling and infrastructure capital in Germany and the Netherlands. We expect modest production growth from second half 2025 levels on our continuing operations with annual average production between 118,000 and 122,000 BOE per day, maintaining our commitment to financial discipline and free cash flow generation. Our 2026 budget includes a significant reduction in our overall cost structure with a 30% improvement in capital and operating efficiencies, reflecting the benefits of our repositioned global gas portfolio and our focus on operational excellence. For 2026, we plan to invest approximately $415 million into liquids-rich gas assets in the Montney and Deep Basin, drilling 49 gross wells, which translates to approximately 45 net wells, reflecting our high working interest in Canada. In the Deep Basin, we plan to run a 3-rig program to drill 43 gross wells. Notably, minimal new infrastructure spending is required to support this development, which is a key advantage of our Deep Basin asset. In the Montney, we plan to drill 6 and complete and bring on production 10 wells. In addition, we will continue to expand our infrastructure in advance of total Montney throughput growing to 28,000 BOE per day by 2028, which aligns with the build-out of third-party gas infrastructure. Once we achieve target production, infrastructure and drilling capital requirements will decrease, as we expect to drill about 8 wells per year to sustain production. The combination of higher production and lower capital will pivot the Montney asset to significant excess free cash flow of approximately $125 million per year for 15-plus years, assuming commodity prices of $3 AECO and $70 WTI. Internationally, we plan to invest around $200 million in 2026, focusing on European gas exploration and development and optimizing base production. This includes drilling 1 well at a 50% working interest in the Netherlands and preparing for 2 additional follow-up wells at 64% working interest at the Wisselshorst discovery in Germany in early Q1 2027. We will bring the initial Wisselshorst well online mid-2026 and expand the supporting infrastructure to enable significantly higher production over the next 2 years. We will also invest in economic workovers and optimization projects across our international assets. Higher maintenance spending in 2026 compared to prior years is due to nonrecurring turnarounds, including a planned 32-day turnaround in Ireland, the scope of which is scheduled to occur every 5 years. Our priorities on shareholder returns remain unchanged. We will use excess free cash flow to maintain a strong balance sheet, fund a sustainable base dividend and be opportunistic with share buybacks. I'm pleased to announce our intention to increase the quarterly cash dividend by 4% to CAD 0.135 per share, effective with the Q1 2026 dividend. The dividend payout remains at a modest level even during this commodity price period, and we see the potential for higher return of capital, as free cash flow increases in the Montney, Germany and Deep Basin. I will now pass it back to Dion. Anthony Hatcher: Thank you, Lars. Looking ahead, Q4 will mark the first full quarter of our repositioned global gas portfolio, following an active year of acquisition and disposition activity. We expect fourth quarter production to average between 119,000 and 121,000 BOEs per day, inclusive of the decision to defer the start-up of multiple wells. Based on this performance, our 2025 full year production guidance is expected to be 119,500 BOEs per day. Importantly, we're able to maintain this production outlook, while reducing our E&D capital guidance to between $630 million and $640 million. The $20 million reduction at the top end of our guidance reflects continued improvement in capital efficiency. The capital reduction aligns with the improvement in operating costs, enabling a $10 million reduction in operating cost guidance. We're now entering the next phase of our strategy with a larger, more focused asset base, one that's characterized by longer duration assets, high-return drilling inventory, a more efficient cost structure and a top decile realized gas price. With proven success in exploration and development across our portfolio, the plan to increase free cash flow in our key development assets and an improving outlook for natural gas pricing, Vermilion is very well positioned for the future. In closing, I want to thank the entire Vermilion team for your efforts over the past year in creating our high-grade portfolio and realizing strong efficiencies throughout the business. It's truly been a heavy lift by all, and I'm extremely proud of your work of our team. With that, thank you. We'll now open the line for questions. Operator: [Operator Instructions] And your first question comes from Travis Wood from National Bank Capital Markets. Travis Wood: Could you provide some additional color or further color around Australia in terms of kind of where current volumes would be sitting at and how you're setting that asset up through 2026 and potentially into 2027 with incremental drills and what that capital would look like? Anthony Hatcher: Thanks, Travis. It's Dion. I'll take the call. Yes, Australia, as you know, is a premium pricing there. We get USD 10 to USD 15 premium to Brent pricing, which helps our netbacks. The last year here, we've been focused on optimizing the platform and frankly, getting ahead on some of our maintenance. We're well advanced on that. With respect to the next drilling program, we drill every 2 to 4 years. Tentatively, we planned the next drill for 2027. But frankly, we have flexibility on that depending on rig rates as well as commodity price environment. So we'll be at around 4,000 barrels per day currently, probably drift a little lower next year and then set up for that drilling program likely in kind of mid-2027. Travis Wood: Okay. Perfect. And then probably for Lars, you gave a modest dividend bump on the back of the quarter. How -- and I think you've walked through this before, but just to remind us, what -- or rather, how are you finding that balance of buying back more stock at this valuation versus kind of the base dividend growth, as you look out on the 2026 budget and flexing some optionality around commodity prices, too, I guess. Lars Glemser: Yes. For sure, Travis. Thanks for the question. I think at the end of the day, what we're really focused on is things that we can control and driving per share value. We've got a number of ways to drive per share value. I would say that share buybacks is one of those ways to do it. There are other options as well. And if you kind of look at the portfolio now, we're getting a lot of this infrastructure spend in the Montney behind us. We've got a lot of infrastructure to fill up in the Deep Basin. We've been able to derisk some of these exploration projects in Germany as well. And we want to balance that operational momentum with return of capital as well in delivering per share value over the longer term. Part of that is to continue strengthening the balance sheet as well and so we will have a chunk of our excess free cash flow reserve for debt reduction in 2026 as well. I think the dividend increase that should be viewed as confidence in a lot of these operational activities that we're executing on as well. And in addition to that, we will continue to buy back shares and be opportunistic on that front. Operator: There are no further questions at this time. I'd like to turn the conference call back over to Dion Hatcher for further questions. Anthony Hatcher: Great. I'm going to pass it back to Travis here. I know we had some questions on the Inbox from IR. So maybe we can work through a couple of those. Travis Thorgeirson: Yes, for sure. Thanks, Dion. First one, just for Lars here. So you mentioned in the release a realized gas price of about 7x the AECO price in the quarter. Can you please help me understand the drivers behind this? Lars Glemser: Yes, for sure. Thanks, Travis, for the question. Zooming out here, a lot has changed with the portfolio in terms of the repositioning that we have done. Something that has not changed is we continue to have a very diverse portfolio. And so if you start with that AECO benchmark price, which is the price a lot of our peers use as well in terms of how do we do relative to that. It's not just the European assets that are contributing to a strong corporate realized price. So here in Canada, we actually realized the price in the third quarter of $1.37 per Mcf, which was more than double the AECO benchmark. We've got an active program in terms of selling into the daily and the monthly price index as well. We also have over 26 million Mcf a day exposed to the Chicago market as well. So we're well diversified within our Canadian portfolio. We were also able to strategically shut in and defer wells without meaningfully impacting the liquids production in our Canadian business as well. So a combination of all these led to that outperformance. When you combine the strong Canadian business with our European gas business, that's where you really start to see the impact and benefits of a diversified portfolio. And so the impact of that is we end up with a realized price of $4.36 per Mcf before hedges. Say before hedges, we do have an active hedging program, both here in Canada as well as European gas. The majority of our hedge gain in the third quarter was driven by our gas hedges. When you combine that with the realized price, we get up to $5.62 per Mcf. So a really strong quarter, really shows the benefits of that diversified portfolio, and we are organically investing in both the Canadian assets as well as the European assets. Just a reminder as well, Travis, as we move into 2026 here, I think it's worth noting that a $1 increase in that AECO price, it would effectively add $100 million of excess free cash flow. So lots of exposure to that AECO price and still lots of exposure to the TTF price as well. A $1 improvement in that TTF marker would add about $24 million of excess free cash flow. So we feel that Vermilion is very well positioned to benefit from improving gas prices here to 2026. Anthony Hatcher: Yes. The only thing I can add to that, I think it's worth walking through the details because, again, it was 9x the AECO benchmark. So it's worth thinking through how we're able to deliver that with our differentiated portfolio, but back to you, Travis. Travis Thorgeirson: Thanks, Dion, Lars. Next couple here for Darcy. Could you provide more background on the next steps of the Wisselshorst prospect in Germany? What are the debottlenecking plans? And how are you thinking about drilling follow-up locations there? Darcy Kerwin: Yes. Thanks, Travis. So in Germany at Wisselshorst, as you know, we have the one discovery well, we call, Wisselshorst Z1a that tested at pretty prolific rates, so a combined test rate of slightly over 40 million cubic feet a day. Our intention is to have that well tied in and producing by Q2 of next year, so Q2 of 2026. I think we've talked before that, that initial rate kind of ties into a more local gathering system that will be restricted for some time, but we expect that those restrictions start to go away in 2027, allowing us to bring production kind of up into that 17.5 million cubic feet a day. And then there's some additional debottlenecking options that we expect to have online in 2028 that doubles that to 35 million a day. So that kind of talks about that first discovery well. So on the back of that successful discovery well, we see a number of follow-up locations. We intend to spud 2 of those, so the second and third well into the Wisselshorst structure in January 2027. Timing is partially driven by our ability to secure the rig that we want to use to drill those wells and really doesn't impact our expectation around online time. We expect to get those wells drilled kind of through the first half of 2027 and expect them tied in and producing by second half of 2028. Anthony Hatcher: So maybe I can summarize that. Like I think the takeaway, it's quite interesting. We're excited about Germany, but the simple math is the 1.6 net wells that we drilled with Osterheide and the Wisselshorst well that will come on mid next year, that's going to add about 25 million a day of gas, which is, again, about 25% of our production. The 2 wells that Darcy just walked us through, the 2 Wisselshorst follow-up wells, that will be 1.3 net wells. So once those are on in the second half of '28, that will be another 20-plus million a day of gas. So if you zoom out 3 net wells, it's going to add about 45 million a day of gas, which is almost half of all our European gas production. So again, that's why we're excited about Germany, just materiality of these wells and kudos to the team to be able to get the rig we wanted and do all the preplanning to really reduce that cycle time. So thanks for that, Darcy. Travis Thorgeirson: And then the next one here for Darcy, jumping to the Netherlands. A couple of discoveries in the quarter. Could you give a bit more background on what we're seeing there? Darcy Kerwin: Yes. So in the Netherlands, we drilled 2 successful wells in a field called Oppenhuizen. We discovered gas in 2 zones in each of those wells. We discovered gas in the Rotliegend and Zechstein formations, 2 of the primary formations that we do chase in the Netherlands. We've discovered about 16 Bcf gross of recoverable gas and the F&D costs for those wells are less than $1.50 per Mcf. We talked about tying those wells in Q4 of this year. So both wells are tied into existing facilities now. We're currently producing the first of those 2 wells at a rate of about 15 million cubic feet per day, limited by surface constraints at that location. And we intend to kind of bring the second well on as capacity opens up there. Travis Thorgeirson: Okay. And then the last one here over to Randy. You noted the Q3 drilling program in the Deep Basin has exceeded expectations so far. Can you provide a bit more color on what we're seeing to date in the results? Lee Ernest McQuaig: Sure. Yes. So yes, as Lars had mentioned, we completed 12 wells in Q3. Of these 12 wells, 6 of them tested at over 10 million a day of gas production. And then we also had some strong liquid rates from the other wells in the program. With our focus on profitability, most of these wells were deferred and will be coming on production over the next month. So we'll have a better sense of performance, but those initial test results definitely exceeded our expectations. And then when we think about it on the capital front, the program also did come in under budget, and that's really what we're starting to see is the cost benefits of running a consistent 3-rig drilling program, which we plan to, as we noted in the call, through '26 and into '27. So overall, very pleased with the results of this program. Travis Thorgeirson: Thanks, Randy. Dion, back to you. That's all we have for additional questions. Anthony Hatcher: Thanks, Travis. So with that, I'd like to thank everyone again for participating in our Q3 results conference call. Enjoy the rest of your day. Operator: Thank you. Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation, and you may now disconnect. Have a great day.
Operator: Good morning, and welcome to the Hyatt Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and Global FP&A. Thank you. Please go ahead. Adam Rohman: Thank you, and welcome to Hyatt's Third Quarter 2025 Earnings Conference Call. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Joan Bottarini, Hyatt's Chief Financial Officer. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, quarterly reports on Form 10-Q and other SEC filings. These risks could cause our actual results to be materially different from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. In addition, you can find a reconciliation of non-GAAP financial measures referred to in today's remarks under the Financials section of our Investor Relations website and in this morning's earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation containing supplemental information on our Investor Relations website this morning. Please note that unless otherwise stated, references to occupancy, average daily rate and RevPAR reflects comparable system-wide hotels on a constant currency basis. Percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. With that, I will turn the call over to Mark. Mark Hoplamazian: Thank you, Adam. Good morning, everyone, and thank you for joining us today. I'd like to begin today's call by expressing my deep appreciation for our Hyatt colleagues around the world, especially those recently impacted by Hurricane Melissa. Our thoughts are with them and their families and we're hopeful for their continued safety and well-being. I want to thank the many colleagues who have stepped in to provide care and support, including financial assistance through the Hyatt Care Fund. This care and compassion from the members of the Hyatt family reflects the very best of who we are. Over the past couple of months, I've had the opportunity to visit teams across both Europe and Asia Pacific. I came away deeply inspired by how our colleagues around the world embrace our evolution to a more inside-led and brand-focused organization and continue to bring Hyatt's purpose to care for people so they can be their best to life. Turning to the quarter, I'd like to provide an update on our transactions activity, starting with the sale of the hotels acquired as a part of our acquisition of Playa Hotels & Resorts. On September 18, we sold a property in Playa del Carmen to a third-party buyer for approximately $22 million and net proceeds were used to repay a portion of the delayed draw term loan. This was 1 of 2 properties that were not subject to long-term management agreements with Tortuga Resorts. We remain on track to close the real estate transaction with Tortuga for the remaining 14 hotels by the end of the year. We also continue to make progress to sell several of our owned properties. We have 3 hotels under contract with signed purchase and sale agreements and 3 more hotels with a signed letter of intent. We expect all 6 hotels to close in the early part of 2026. We will share additional updates as these transactions progress. And we remain on track to exceed 90% asset-light earnings mix in the near term. Now turning to operating results. This morning, we reported system-wide RevPAR growth of 0.3% for the quarter, which was impacted by a holiday shift and lapping with onetime events last year. Our luxury brands continue to generate the highest RevPAR growth consistent with trends that we've seen since the beginning of the year. Leisure transient RevPAR increased 1.6% to last year and was up approximately 6% across our luxury brands. Our all-inclusive portfolio continued to deliver strong results, with net package RevPAR up 7.6% compared to the third quarter of 2024, demonstrating the strength of luxury all-inclusive travel. Business transient RevPAR was flat in the quarter, but we saw improved performance in the United States, which grew by 3% compared to last year, with select service delivering positive quarterly growth for the first time in 2025. Group RevPAR declined 4.9%, in line with our expectations, which assumed difficult year-over-year comparisons, including the Olympics in Paris and the Democratic National Convention in Chicago, and the shift of Rosh Hashanah into the third quarter of 2025 compared to the fourth quarter of 2024. Group pace for the fourth quarter is up approximately 3% as we lap easier comparisons due to the holiday timing and last year's elections in the United States. While we are still in the planning stages for 2026, we are encouraged by the forward-looking booking trends. Group pace for full-service U.S. hotels remains up in the high single digits and is expected to benefit from special events like the World Cup and America 250 celebrations. Corporate negotiated rate discussions are ongoing, and we expect average rates to increase in the low to mid-single-digit range in 2026 compared to 2025. Pace for our all-inclusive resorts in the Americas, excluding Jamaica, is up over 10% in the first quarter, reflecting the continued prioritization of leisure travel. We look forward to providing more details on our 2026 expectations during our fourth quarter earnings call. Turning to growth. We achieved net rooms growth of over 12% during the quarter or 7% when excluding acquisitions. Notable openings included the stunning Park Hyatt Kuala Lumpur located in the tallest skyscraper in Asia Pacific, along with the Park Hyatt Johannesburg. In the United States, we welcomed Hyatt Regency Times Square to our system, following an expansive multimillion dollar transformation, marking the first Hyatt Regency property in Manhattan and our 30th property in New York City. We ended the quarter with a strong development pipeline of approximately 141,000 rooms an increase of more than 4% to last year. Momentum across our Essentials Portfolio continues to build following the introduction of the Hyatt Select and Unscripted by Hyatt brands earlier this year. We signed a number of new deals for each brand during the quarter and have many more in discussions. In addition, we signed a master franchise agreement with HomeInns Hotel Group to develop Hyatt Studios across China. Further expanding our upper mid-scale brand presence in China. Under this agreement, HomeInns plans to open 50 new Hyatt Studios hotels over the coming years while building a robust pipeline to fuel future growth across China. At the end of the third quarter, upper mid-scale brands now represent 13% of our pipeline, up from 10% at the end of 2024 and more than half of Hyatt Select, Hyatt Studios and Unscripted by Hyatt opportunities are in markets where we currently have no brand representation, helping to drive organic capital-light growth and increased network effect across our global portfolio. Our strong pipeline and the momentum we are seeing in our upscale and upper mid-scale brands underscore the significant white space that we believe will support strong growth for years to come. Before I close, I want to spend a few minutes highlighting one of the most powerful strategic assets of our business, our loyalty program, World of Hyatt. During the quarter, World of Hyatt surpassed 61 million members, an increase of 20% year-over-year. World of Hyatt continues to be the fastest-growing major global hospitality loyalty program with membership having increased nearly 30% annually since 2017. Today, we have more than 40% more members per hotel compared to our closest competitor, clear proof of the deep engagement and strong preference we've earned from high-end travelers. While growth and scale matters, what truly sets World of Hyatt apart is our purpose. Our program goes beyond transactional awards to create an experience platform that delivers meaningful personal connections, whether it's through our Guest of Honor program, which allows members to gift their top-tier status to others, or the introduction of award gifting, we've redefined what loyalty looks like by making it personal. Being personal also means that our members receive the most consistent and guaranteed benefits in the industry. In addition, we reward deep engagement through our Milestone Rewards program, which delivers differentiated value even after a member achieves the highest elite status. The expanded agreement with Chase, which we announced yesterday, is a compelling proof point of how our differentiated loyalty program can deliver value to shareholders while providing rewarding experiences for members across all stay occasions. The significant increase in economics will be driven by the expanded collaboration with Chase, the continued growth of World of Hyatt membership, the strength of Hyatt's global portfolio of premium brands and Hyatt's robust pipeline. Adjusted EBITDA recognized by Hyatt related to these economics is expected to be approximately $50 million in 2025. We expect this to grow to approximately $90 million in 2026 and more than double to approximately $105 million in 2027, and we anticipate continued growth in future years. We also expect to deepen engagement with our members and continue to evaluate additional card products in the future, building on the success of our current co-branded cards. When a loyalty program is designed with care at its core, it leads to greater guest preference and helps support a powerful commercial platform that delivers more direct bookings and makes Hyatt more attractive to owners. And as we continue to grow our portfolio and expand into new segments and markets, we believe the power of World of Hyatt will continue to fuel preference and long-term value creation well into the future. As I look ahead, I'm encouraged by the momentum in our business and the performance of our brands. Our evolution to a brand-focused organization is designed to position Hyatt to be the most responsive, innovative and highest performing hotel company. and I'm incredibly excited for our future. I will close by expressing my gratitude to all Hyatt colleagues who care for each of our stakeholders every day. Joan will now provide more details on our operating results. Joan, over to you. Joan Bottarini: Thank you, Mark, and good morning, everyone. Over the past year, we've taken steps to align our above property and corporate teams in support of our brand-focused evolution, and we are confident these changes will deliver long-term benefits from multiple stakeholders. Our commercial teams have identified greater capacity to invest in initiatives that are expected to benefit our owners, including technology innovations and marketing efforts to further improve the performance of our brands. We also expect to realize lower run rate adjusted G&A costs over time. We expect adjusted G&A in 2026 will be moderately below full year 2024, despite 2 years of inflation and the addition of incremental payroll and other costs from acquisitions over the last year. As a result of these initiatives, we expect to incur approximately $50 million of restructuring charges this year the majority of which were recorded in the third quarter. Now turning to third quarter results. RevPAR grew 0.3% compared to last year, in line with our expectations shared during our second quarter earnings call. In the United States, RevPAR declined 1.6% to last year, in line with our expectations, driven by select service hotels and the timing of Rosh Hashanah. Business transient RevPAR grew low single digits in the quarter, an improvement over the decline we saw during the second quarter. Full-service hotels were negatively impacted by the holiday timing, which led to lower group contribution in the quarter, while select service hotels were below last year due to softer leisure transient demand. RevPAR outside of the United States performed well, and we saw continued strength in international markets. Europe saw positive RevPAR growth driven by strong international inbound travel despite lapping a tough comparison from onetime events last year. Greater China grew RevPAR to last year due to increases in leisure transient demand. Net package RevPAR growth at our all-inclusive properties grew 7.6% in the quarter, highlighting the continued strong demand for leisure travel. Pace for our all-inclusive hotels in the Americas excluding Jamaica, is up over 8% in the fourth quarter and for the holiday festive period is up over 11%. As Mark mentioned, the sustained demand for luxury all-inclusive travel gives us confidence as we look ahead to 2026. We reported gross fees in the quarter of $283 million, up 6.3%, excluding the impact of the Playa Hotel acquisition. Gross fee growth was driven by international RevPAR performance, new hotel openings and non-RevPAR fees. Owned and leased segment adjusted EBITDA increased by 7%, when adjusted for the net impact of asset sales and the Playa Hotel acquisition. Distribution segment adjusted EBITDA was down to last year from lower booking volumes and lapping a onetime benefit related to ALG Vacation credits from last year. The decline in travel from 4-star and below hotels led to lower booking volumes and earnings flow-through despite higher pricing and cost mitigation initiatives. In total, adjusted EBITDA was $291 million in the third quarter, in line with our expectations. During the quarter, we repurchased approximately $30 million of Class A common stock and have approximately $792 million remaining under our share repurchase authorization. During the quarter, Net proceeds from the sale of a hotel in Playa Del Carmen were used to repay a portion of the delayed draw term loan, and we expect to close the Playa Real Estate Transaction by the end of the year and we'll use the net proceeds to repay the outstanding balance on the delayed draw term loan. As of September 30, 2025, we had total liquidity of approximately $2.2 billion including $1.5 billion in capacity on our revolving credit facility. On October 30, we executed a new credit agreement that replaces the prior facility and provides for a $1.5 billion senior unsecured revolving credit facility, which will expire in 2030. We remain committed to our investment-grade profile and our balance sheet is strong. Before I cover our full year outlook for 2025, please note that we continue to include additional schedules within the earnings release related to our expectations for Playa in the fourth quarter of this year. We've lowered our fourth quarter outlook for Playa by $7 million at the midpoint of our range as a result of Hurricane Melissa, while the full year outlook remains unchanged after a strong third quarter. For modeling purposes, our outlook assumes that we will own Playa's real estate for the entirety of the fourth quarter. I'll now cover our full year outlook for 2025, which does not include the impact of the Playa acquisition or planned real estate sales transaction. The full details of our outlook can be found on Page 3 of our earnings release. We were encouraged by the performance of our hotels over the course of the third quarter. We expect full-service hotels in the United States to deliver higher growth in the fourth quarter compared to select service hotels due to easier group comparisons. We also anticipate our luxury portfolio and international markets to perform well in the fourth quarter, supported by strong demand trends and high-end consumer resilience. We've tightened our RevPAR range and expect full year 2025 RevPAR between 2% to 2.5%, which implies RevPAR growth in the fourth quarter between 0.5% and 2.5%. The quarter is off to a good start with October RevPAR increasing in the United States by approximately 1% and globally by approximately 5%. For the United States, we expect RevPAR growth for both the fourth quarter and full year 2025 of approximately 1%. We expect fourth quarter RevPAR growth outside of the United States to remain an area of strength, especially in Europe and Asia Pacific, excluding Greater China. We're increasing our net rooms growth outlook range to 6.3% to 7%, which does not include rooms added from the Playa acquisition. Gross fees are expected to be in the range of $1.195 billion to $1.205 billion, a 9% increase at the midpoint of our range compared to last year. We've lowered our adjusted G&A range to $440 million to $445 million reflecting the run rate cost efficiencies that we've been able to achieve throughout the year. Adjusted EBITDA for the full year is expected to be in the range of $1.09 billion to $1.11 billion, an 8% increase at the midpoint of our range compared to last year when adjusting for the impact of asset sales. As a reminder, owned assets sold in 2024 accounted for $80 million worth of owned and leased segment adjusted EBITDA last year. Our full year adjusted EBITDA outlook implies growth in the fourth quarter of 9% at the midpoint of our range. Adjusted free cash flow is expected to be in the range of $475 million to $525 million, which excludes $117 million of deferred cash taxes paid in 2025 relating to asset sales that took place in 2024. In the fourth quarter, we'll receive upfront cash of $47 million as part of the amended agreement with Chase. And we are increasing our full year outlook for capital returns to shareholders and expect to return approximately $350 million in 2025, inclusive of share repurchases and dividends. Our capital allocation priorities remain unchanged. We are committed to our investment-grade profile, identifying opportunities to invest in growth that creates shareholder value and returning excess cash to shareholders in the form of dividends and share repurchases. In closing, our third quarter results reflect the strength of our business model and the effectiveness of our long-term strategy. Looking ahead, we believe our talented brand-led organization, strong development pipeline and differentiated loyalty program provide meaningful advantages in today's dynamic environment. As we continue to expand into new markets and segments, we're confident in our ability to drive sustained growth, enhance profitability and deliver attractive returns to shareholders. This concludes our prepared remarks, and we're now happy to answer your questions. Operator: [Operator Instructions] Our first question comes from Steve Pizzella from Deutsche Bank. Steven Pizzella: Just wanted to start on net rooms growth, if we could. Good to see you raise the core NUG guidance for the full year and the pipeline increased. As we start to think about next year, realizing it is still early, but with the trends you are seeing in your pipeline and the positive commentary, how are you thinking about net rooms growth going into 2026 and beyond? Mark Hoplamazian: Thanks, Steve. I appreciate the question. The headline here is organic growth is extremely strong. We are on track to more than double our core organic growth rate from last year to this year. Last year, we had a number of inorganic adds to our portfolio. This year, we are seeing tremendous strength in organic growth, and that's thrilling. We have real momentum in signings as we head into the fourth quarter. That's really the new brands that we launched this year, Hyatt Select and Unscripted are based on the momentum that we're seeing right now, we are expecting continued acceleration of signings through the fourth quarter. In terms of net rooms growth, we have about 38 hotels that we have planned to open in the fourth quarter, 7 of those were opened in October. Just for reference, we actually opened 34 hotels in the fourth quarter of last year, and we feel really good about completing those openings. Now I'll say what I say on this call every year, which is if some hotels end up opening in early January versus December, the growth story and the momentum is not impacted whatsoever. Even if it may impact the actual calculation at December 31. And as you all know, opening a hotel is a complex thing and an educated guess until the first guest actually spends a night. But having said all that, it really looks good at this point based on what we're seeing across the globe. The pipeline additions are also coming about 35% in Asia Pacific and 35% in the U.S. So we're seeing good strength across the board. And very, very confident about 6% to 7% growth again next year. And if I had to take up that, I would say there is more glass half full than glass half empty in that number. Operator: Our next question comes from Smedes Rose from Citi. Bennett Rose: I guess I just wanted to ask you a little bit about kind of what you're seeing so far in terms of group pace in the U.S. and kind of internationally for 2026, anything you can share on that. Mark Hoplamazian: You're going to start? I'll start and Joan can provide additional commentary. So we ended the year -- sorry, end of the quarter, third quarter with pace into '26 up in the high single digits. October was a stunning month in terms of total bookings. Full cycle bookings were up 15% in October, which is quite significant. Having said that, the bookings for 2026 specifically, were actually weaker than we expected them to be. But we have over 60% of the business on the books. In fact, it's probably closer to 65% now. And we have really, really attractive date patterns remaining in 2026 to book. So our confidence about group business coming through really strong into 2026 is very high even in spite of the fact that October itself was somewhat weaker in terms of '26 bookings. But again, full cycle across '27 -- '26, '27 and '28, very strong in general. So really seeing great progression there. And then with respect to Global Group, we've had, I think, pretty consistently strong group ex some difficult comparisons like the Olympics last year, lapping that is impossible to -- it's impossible to lap that positively. And -- so we're seeing group actually alive and well across the board. And Joan, did you have anything that you wanted to add? Joan Bottarini: The only thing I would add is you didn't mention this, Smedes, but we've obviously are encouraged by what we're seeing in Q4, which is what we had expected all year round because of the holiday shift. So we're up 3% in the production that we saw in October is strong for really short-term, high-quality corporate bookings. So we feel really confident about Q3 -- excuse me, Q4. And Mark had mentioned several years out, we're seeing increased levels of booking activity, really, really strong booking activities out, which is positive because that means associations are booking and confident in their future outlook into future years. Mark Hoplamazian: Yes. I mean I think in terms of the actualized business in October, group was up almost 4%. So we're seeing very, very strong group actualized business. Operator: Our next question comes from Ben Chaiken from Mizuho. Benjamin Chaiken: I want to clarify the G&A comment earlier. I think you said 26%, if I heard you correctly, I believe you said 26% down moderately versus 24%, is that versus the $445 million of adjusted G&A, just so we're on the same page. And then can we touch on maybe what's driving that lower? Joan Bottarini: Sure. So Ben, we talked about some organizational changes that we made this year and also some other efficiencies that we realized along the way throughout the year. So that's why we took down our numbers, our expectations for 2025. And the reference below 2024 was for 2026. And so yes, we expect to be slightly down in 2026. We're still in the planning processes for 2026, and we'll give you the full guidance range in our Q4 earnings call. But -- what is really notable is the M&A activity and some incremental resources that we've added, we've been able to look at a 2-year period and expect to be down in 2026. So -- good results coming out of our organizational changes and outcomes for us. Operator: Our next question comes from Richard Clarke from Bernstein. Richard Clarke: Just a question on the $50 million uptick in capital returns. I guess you've got the -- is that coming from the extra $47 million you're getting from Chase and how you're factoring in the $50 million restructuring charge. Just how -- where is that extra $50 million come from? And I guess that's going to mean you're going to return somewhere around sort of 70% of free cash flow back to shareholders this year or adjusted free cash flow. Any reason why that percentage can't edge up next year to maybe closer to 100% of free cash flow going back to shareholders in '26? Joan Bottarini: So Richard, you have the offsets exactly, right. We factored in that bonus that we realized in the negotiation of the new card agreement. And also the offset for this year is for those restructuring charges, which is all incorporated into free cash flow. As we look ahead into next year, we are on track to move much closer to our goal of 50% conversion on free cash flow to EBITDA. So we feel really good about that. We had some onetime items impacting us in 2025, but we're on path for 2026. Operator: Our next question comes from Stephen Grambling from Morgan Stanley. Stephen Grambling: I was hoping you could maybe outline a little bit more on the assumptions that underpin the EBITDA step-up from the co-brand credit card in '26 and '27. As we think about changes in the terms of deal versus future sign-ups of new cardholders or even increased spend in cardholders? And do you include the fees that you'll recognize from the upfront payment? Joan Bottarini: So okay, a couple of things to unpack there, Stephen. I'll start with your last question that the accounting for the upfront payment will be amortized over the life of the agreement. So that's just the accounting recognition. So just a point on that. And then yes, we are really, really pleased with the outcome of the new agreement. And the benefit is clear, as we've outlined -- actually, Mark outlined that doubling our earnings by 2027 is really strong result. And also, it is a benefit to not only HHC but also to the World of Hyatt program, which, as Mark outlined, all of the benefits that, that program provides to our members, but also to our owners. It's a win-win actually across the board with respect to all of our stakeholders. What we would say about the estimates that we put out while they're very strong, we've seen really, really incredible growth in the World of Hyatt program and also in our rooms growth. So as both of those factors increase over the coming years. We think there's upside to these numbers in the credit card fees that we will earn over time. But we've taken a very reasonable assumption related to 2026 and 2027. And we'll continue to update you as those results come in. Operator: Our next question comes from David Katz from Jefferies. David Katz: I wanted to ask about the master agreement with Home Inns. Number one, a little more color on the economic intensity of those, presumably, it's lower because of how those structures usually are. And then secondarily, how are we thinking about it in terms of net unit growth today and what that could provide over time? Mark Hoplamazian: Great. Thanks, David. You know that we've been in business in a partnership with a JV with Home Inns for 5 years now. We launched UrCove by Hyatt in 2020, I believe. And the brand has been remarkably successful. It took a while to really start to gain momentum for obvious reasons given the launch timing. But the brand itself is resonating with Chinese travelers the attractiveness of the brand within the Home Inns portfolio and for Home Inns as a company is very high because it is the highest quality, highest end brand that they have in their entire portfolio. And we are also concurrently growing our World of Hyatt base, which was exactly the intention of being able to serve that next tier down, essentially an upper mid-scale brand in U.S. parlance. The locations of UrCove by Hyatt are extraordinarily attractive. They are adaptive reuse office spaces almost without exception. There are a few new builds, but many, many of them are adaptive reuse offices. In very key locations in primary cities. So the kind of customers that we're going after and being able to attract the World of Hyatt is very, very strong. Now at Hyatt Studios, the program there will be new build and primarily. We have the ability to do adaptive reuse as well, but a lot of them will be new build. And the ability to gain as much momentum for Hyatt Studios in China would not really be available to us without a partner who has basically a development and construction machine, a significant organization that is excellent at what they do. And we've seen the quality of what they've actually produced with UrCove, which gives us tremendous confidence in where we see this going. In both cases, we -- well, there are different economic structures because in one case, it's a joint venture, we earn fees directly. And on top of that, we own half of the venture. In the other case, it's fees. So we will be earning fees on the Hyatt Studios that open. They will benefit from the development of those properties and really being able to utilize an existing resource that they've got. And it helps their network as well because it gives their own over 100 million members of their loyalty program, brands to trade up into. And frankly, over time, we expect those same clientele to trade up further up into our full-service hotels. So as a network effect matter, it's very significant. We will be fee positive for Hyatt Studios and we earn fees directly and have a JV -- 50% JV interest in UrCove. So I think it's been a great partnership. It's expanding, and it's not a situation in which we're basically making $3.50 a year on something that is just for the sake of having a bunch of rooms. In terms of total impact, we're talking about 50 hotels of about 100 rooms a piece, maybe 125. So it's not going to actually have a massive impact on our net rooms growth. So we're not doing this because we can -- with smoke and mirrors, add to our net rooms growth figures. This has got real commercial impact. Operator: Our next question comes from Shaun Kelley from Bank of America. Shaun Kelley: Mark or Joan whoever wants to take it, would love just a little bit more insight on the cost program that your initiatives there, I know. I think we talked about strategically a little bit what you're doing, but just kind of what catalyzed the decision sort of the why now question, it's obviously encouraging, but it takes a lot to move a big organization. And what are some of the key building blocks or things that this can allow you to do a little bit more efficiently, maybe specifically on behalf of the owners, we sometimes hear feedback that these things can have an impact and help streamline some communication there. Mark Hoplamazian: Thanks, Shaun. The ultimate goal here is to move towards an insight-led and brand-focused organization. That sounds like corporate speak, but it's real in the sense that we are going deep on being able to understand the different customer groups that we serve across our portfolio, and they are different. How we get to them? That is distribution channels and marketing are different as well. So we broke our business down into 5 brand groups. And those 5 brand groups will be the way in which we actually operate the business going forward. It happens concurrently with a significant elevation of our practice of agile ways of working, which we have been working on for 4 straight years, which is designed to move more quickly, test and learn and experiment and innovate more quickly. And then the third element is artificial intelligence, expanded use of machine learning and models. We've built several agentic platforms already internally. Some have been solely focused on driving top line. Some have been really focused on cost efficiency and many -- they're all focused on driving performance, including providing a platform that our hotel teams can use to help optimize or improve, I would say, maximize performance of their hotels, which is a direct impact on owners. I just got back from Europe, during which we had an Owners Advisory Council meeting, and I went into some detail about the work that we've done on that last platform that I just mentioned. And there are direct measurable impacts that we can point to actually across all the things that we've done so far. So we have positive results. We're leaning into doing those. When we put these things together, that is the practice of agile, which is inherently cross-functional, we append all the work that we're doing with all-inclusive, and we then look at how we are in service of our brands in a different way than we were before, how we organize the company had to change. And in the course of reorganizing the company, we found tremendous levels of efficiency in how we're staffed. So a lot of that cost gain was in staffing. Some will be also in third-party costs because we are automating a significant number of functions and processes that really are able to be automated at a fraction of the cost of paying third parties to do it for you. And we've just scratched the surface. We are leaning into this very heavily, and you will see this as a tailwind for us for the years to come. Operator: Our next question comes from Duane Pfennigwerth from Evercore ISI. Duane Pfennigwerth: Joan, I appreciate your comments on capital allocation. Maybe you could speak to priorities in the intermediate term. Does the order maybe change? Is deleveraging more of a focus, capital return, maybe less emphasis on finding opportunities that will accelerate your growth further? Joan Bottarini: Sure, Duane. I think with respect to the leverage comment, we've have a commitment in the near term to delever, we are required with the asset sale proceeds from the Playa sale to actually pay down that delayed draw term loan, which I noted in my prepared remarks. So that is on the horizon. And we've also made a commitment to reach investment-grade leverage by the end of 2027. And we've got some asset sales that we're working on right now and some that we expect to also complete by the end of 2027. So that will improve our leverage with those asset sale proceeds. Now I'll let Mark comment on the M&A front and opportunities that we see. But with respect to returns to shareholders, we have been consistent in delivering those returns when we've had excess cash. And that will be the approach that we continue to follow going in. We'll obviously give you some insight into 2026 on our fourth quarter earnings call. But we've realized some incremental free cash flow through this -- through the credit card agreement, and that's the driver of what improved our capital returns guidance for this year for 2025. So we are taking those excess cash and doing exactly what we've committed to. Mark Hoplamazian: Yes. I would just point out that I think it's very important to look at history and our behaviors. You can, I think, have a higher level of confidence that we say what we do and we do what we say. Since 2013, we have consistently continued to prioritize investing -- reinvesting in our own business and returning capital to shareholders initially strictly through share repurchases and then more recently, through both dividends and share repurchases. We repurchased stock every year for the last 12 years in a row despite the fact that we've executed over $5 billion worth of acquisitions. In fact, it's probably close to $6 billion and have transformed the balance sheet in the process. So we believe that return of capital to shareholders is a key priority. We also believe that we can maintain that even as we find strategic opportunities to grow our business, in businesses in segments that are very, very profitable in which we can have a differentiated competitive position. So you can expect us to continue to do that in that way. And with the elevation of the conversion to free cash flow that, Joan talked about earlier, you can also expect that we will find more opportunities to return more capital to shareholders over time. Operator: Our next question comes from Michael Bellisario from Baird. Michael Bellisario: Just on loyalty, can you remind us just how the room night contribution from World of Hyatt has tracked year-to-date, I think it was at 45% last year. And then just looking at how do you keep narrowing the gap to peers? And kind of what does that do for the value prop for owners and developers? Mark Hoplamazian: Yes. Thank you. First of all, penetration has continued to increase. We're still in the mid-40s, but there's incremental progress year-over-year. And the membership growth has continued to be extremely strong. We're compounding currently at over 20% per annum pretty much every quarter that goes by. I think the relative importance continues to grow, because the engagement level of our members, especially our lead members, is very, very high. They stay longer, spend more and are more frequent guests. So the value of our elite membership base is extremely high. And the value of the overall membership base is very high, as demonstrated by the card arrangements that we just renegotiated because we have a higher end customer base. And they are -- have higher household incomes and investment portfolios. I think in terms of the evolution, we believe that we are going to continue on an upward trajectory in terms of penetration. That's important in many dimensions. I just want to remind you that we have maybe the highest group composition in the United States, let's say, about 40% of our business is group, and group customers are not eligible for World of Hyatt point earning and therefore, they don't really count in the context of penetration. And I would say that the -- I would say that even despite that, our total direct channel delivery is in line with our peers. This is an interesting dynamic because when you look at our total delivery through group channels, which is direct, World of Hyatt, hyatt.com and Hotel Direct we are in line with our peers at a fraction of their size. So this is one area everyone talks about size and scale being the magic. Well, this is one area in which apparently being 10x our size doesn't matter. And I think part of that has to do with the compelling platform that we've created and the fact that World of Hyatt creates -- delivers on great experiences, but also great value. The final thing I will say is that we are -- we manage a bigger proportion of our total network than any of our major larger competitors. And that matters because we have very consistent delivery, very, very consistent delivery of benefits. Our elite members do not find wide variability across our hotels. Why? Because we directly control it. We're not influencing, we are actually directly controlling the delivery of benefits at the hotel level, and that matters. Operator: Our next question comes from Brandt Montour from Barclays. Brandt Montour: So a couple of your peers were willing to sort of give some insights or sort of early thoughts on how next year's RevPAR could shape up in the U.S. or globally. And just curious, Mark, from what you're seeing in business transient, what you're seeing in group, what you're seeing in leisure and of course, we have the World Cup. Sort of how do you -- what kind of confidence you guys have going into next year in terms of the RevPAR environment reaccelerating? Mark Hoplamazian: Yes. I mean, I think Joan and I will tag team this. So look, there are a number of tailwinds heading into next year between World Cup and America 250 celebrations. The infrastructure build, it continues at pace. Hyperscalers are moving from planning stage to construction phase in their data center construction. And the minimum size of investment in those projects is $5 billion. Some of them are much, much bigger than that. So there's a tremendous level of activity in terms of mobilization of resources to lean into the data requirements of AI of the future. So I think there's a lot of tailwind into economic activity in the United States, as we look forward. Part of that, I think, is anticipated and maybe driving some of the group pace that we see into next year. Joan? Joan Bottarini: I would just add on -- we are still early in the planning cycle, but the backdrop that Mark just described in the U.S. has given us confidence that we will be at or incrementally positive in the U.S. going into next year. Group is a significant factor to that because you layer in on top of those strong pace numbers and it helps improve with rate. And the demand that, as you look at this year, where we had some of maybe easier comps in the second quarter and the third quarter going into next year for the U.S. is what we would expect. Outside the U.S., we've posted very strong results this year. And what we're hearing from our teams is that we expect those results to be good, continue the momentum that we're seeing demand in international markets continues to be very strong. So while we may be lapping a little bit of tougher comps on that side, we still expect overall globally that we'll be incrementally positive in 2026. Mark Hoplamazian: Yes. Just one final comment, Leisure demand continues to be very strong. We've mentioned all of the various data points that in our script. But leisure just taking a real-time gauge of this. Leisure demand in the U.S. was up 3% globally up 7% in October. So this is not abating. I think there's been incessant questions about can leisure really hold up? Can you really maintain pricing levels, et cetera, et cetera. And the answer is the data continues to prove it. So I'm not sure what else -- what other proof is required we're seeing it in all of our numbers. And yes, we do serve a different customer base. So I'm not making any comments about mid-scale and below. I am making a comment about us. Operator: Our next question comes from Patrick Scholes from Truist Securities. Charles Scholes: Mark, 3 months ago, you had noted you were feeling cautious and conservative about China. How are you feeling today about that market? Mark Hoplamazian: I feel incrementally better. Part of it is, I just got back from China a couple of weeks ago. So every time I'm there, and I'm talking to my teams about what's happening and what they're seeing in the marketplace. It does give me a lot of energy, but even adjusting for that sort of near-term boost of positive 5. What I would say is a couple of things. One, some of the things that we have been known for in China continue to shine in ways that I think are notable. We just opened the first urban Alila hotel in Shanghai, and it is absolutely world-class and stunning in every dimension, not just the physical product, which is amazing, but also the guest experience. We're running materially more than 20% ahead of the brand that used to occupy that hotel, which is a super luxury brand, mono-brand. And that's in a relatively weaker market. And so I think our performance has continued to be exceptional, and I think that is driving continued openings that really are meaningful. So I toured a brand-new Andaz in Macau, over 700 rooms, more hotels going into Macau in the future. I toured the Thompson, which just opened, so it was preopening and Unbound Collection hotel adjacent to the Thompson and this is at a location adjacent to a mini central business district, which is right next to the convention center. So you might think that there's a lot of hand-waving about driving net rooms growth through lower chain scales. But for us, we're seeing strength actually in our core strength, our core strength there, which is the upper upscale and luxury brands. Our food and beverage revenues have been hit hard, I think, based on what's going on in the marketplace. The general pressure from the government remains persistent and that is causing people to be very cautious about, I would say, conspicuous consumption is the way to put it. And therefore, we have adjusted like our whole philosophy is to be agile and pivot and adapt, and we are. So banqueting is weaker, food and beverage is weaker, but rooms business is very strong for our brands in the upper upscale and luxury. And of course, we're not ignoring the upscale and upper mid-scale through the comments that I made earlier on Hyatt Studio. So I would say, in terms of operating dynamics, I think it's positive, the government has shown signs starting to pivot from a policy perspective to be more constructive to support consumer things that drive consumer purchases because it's -- consumer has grown as a proportion of their total economy. They are hyper aware of that. And finally, they are another year into the relatively slow path of resolution of the Evergrande debt overhang. And so capital markets are still not restored to pre-Evergrande levels. But a lot of the properties that I mentioned, not Alila Shanghai, which is a private developer, but many of the others are state-owned enterprises. And so a lot of our inventory is growing there. So our opening schedule, and now I'm talking more broadly about Asia Pacific is very strong, but a lot of it is Greater China. So I feel actually incrementally better. I do. Operator: Our next question comes from Conor Cunningham from Melius Research. Conor Cunningham: If we could just talk a little bit about free cash flow conversion. I think you're targeting about 40% this year, and then you're saying that -- you reiterated the plus 50% next year. It seems like you've had a lot of incremental positives from the credit card deal. You've talked about G&A today. RevPAR reaccelerating into next year. It just seems like the plus 50% feels like a pretty easy threshold for you to get to. So if you could just talk a little bit about the free cash flow conversion, if there's anything on the working capital side of the -- or the hotel sales are limiting that a little bit. Just anything there would be helpful. Joan Bottarini: Yes, Conor, you picked up -- obviously, the credit card deal is going to be helpful into next year. And we had the onetime items impacting us this year. So we're getting back to a normalized rate in 2025, excuse me, 2026. And remember, we will also have incremental fees from Playa going into next year post the asset sale transaction. So that will be helpful and be a meaningful addition to our free cash flow conversion. Operator: Our next question comes from Chad Beynon from Macquarie. Chad Beynon: Mark, I wanted to ask about the impact of the government shutdown so far in the fourth quarter and then on the back of, I guess, it's fairly real time on the back of the FAA's announcement to further cut some airline traffic starting this week, how that could affect travel in the fourth quarter? Mark Hoplamazian: Sure. Thanks for the question. A couple of things. One, government -- direct government business in the Hyatt system is relatively small. So it's not having a material impact on our results and wouldn't. Government-related is actually positive because a lot of defense contractors and other service companies that are serving key elements of the government, I wouldn't say it's uniform, but it's -- in general, it's been positive because there is government activity that continues despite the fact of a broader shutdown. . So I think that the key at this point, it has to do with agility and hotel teams being prepared to pivot. Our hotel teams are relied upon in our world to track their revenue base, their sources of revenue looking forward and to basically insulate themselves as much as possible from things that could be potential risks and rebalance through revenue management and through tapping different distribution channels. We're making that easier for them using some AI tools that are an overlay to our revenue management system. So I have every expectation that whatever impact there actually would have been would be mitigated because they'll pivot on a continuous basis. Looking forward, I think it's naive to think that reduction in air travel won't have an impact on travel. By definition, it does. There are less people flying. And at the same time, I think what I said just a minute ago about agility and being able to pivot is really, really important. There are drive to resources that we often tap. We learned this muscle and strengthened it tremendously during the early stages of COVID. So there will be -- I'm talking specifically about leisure travel now. And so therefore, I think there will be some mitigating factors. I also would just point out that my recollection is when we had a long government shutdown some years ago, the air traffic control dynamics is actually what led to finally getting back to a reopening of the government. And so I think with reduced mobility, there might be more back pressure on lawmakers to come to the table. That's speculative, of course, but just a reference to what happened last time around when there was an extended shutdown. So yes, I think there's a potential risk here because, again, it would be naive to say no, there won't be any risk whatsoever when something like 10% of the capacity is coming out of the system. So right now, lift into some of our key markets is not based on what we can tell from our engagement with our key carriers talking specifically about Cancun, Punta Cana on the all-inclusive side. Really remain encouraged by what we're seeing, and we always have options with respect to charter, if we need extra air capacity. Operator: Our last question comes from Meredith Jensen from HSBC. Meredith Prichard Jensen: Just circling back to what you just mentioned about the ALG business and all-inclusive. I was hoping knowing the importance of optimizing that distribution strategy from ALG. If you could speak a little bit more about this channel and what you're seeing in terms of broad B2B consumer and potentially how broadening the offering to ALG through Playa programs. I know they introduced like ALG Luxe, can continue to increase the mix of client within the ALG. Mark Hoplamazian: Yes, I think I might have lost you at the very end there. But generally speaking, ALGV is a critical distribution channel. I think the visibility it provides to us in terms of what the dynamics are in leisure travel are tremendous. Over 2.5 million individual customers are booking through that platform, hundreds of thousands of travel agents and advisers are linked directly into our systems. And so it is the biggest packaging platform in North America. So it really is a strategic asset in every way. I think we've -- the team has done a superb job of really maximizing the potential of that business through really being disciplined about which markets they serve and getting out of unprofitable markets, but also the pathway that I described earlier with respect to automation and the utilization of AI has also just begun there, too. So what we expect is to be able to render that business into a more and more efficient platform with much better predictive analytics embedded in it and much more higher signal-to-noise ratio and actionable insights from AI that we can actually utilize to make the booking path for travel agents and advisers that much more compelling. So what we are seeing in general is what we have said in the past, which is 4-star and below has been weaker. That's really been the key message our direct production into our own resorts is up year-over-year, has continued to rise every year since we've owned the company. And that is telling because it's both primarily 5-star, which is our portfolio. And secondly, it is an offering. Now you're right, expanded by the Playa Hotels, which is super attractive to the customer base that is booking through ALGV. And with that, I just want to thank you all for taking the time this morning to be with us. We, of course, appreciate your interest at Hyatt and really look forward to hoping -- and hoping that you will visit our hotels and resorts, and you can experience the power of Hyatt Care firsthand. So have a good rest of the day and good rest of the week. Thank you. Operator: This concludes today's conference call. Thank you for participating, and have a wonderful day. You may all disconnect.
Operator: Good day, everyone, and welcome to Saga Communications Third Quarter 2025 Earnings Release and Conference Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Chris Forgy. Sir, the floor is yours. Christopher Forgy: Thank you, Matt, and thank you to your dulcet tones. And thank you to everyone who has taken the time to join Saga's 2025 Q3 Earnings Call. We appreciate your continued interest and support and your participation in Saga Communications, what we believe is the best media company on the planet. I'm here with Sam Bush, and today represents 28 years of Sam doing Saga earnings call. So Sam, congratulations. And with that, I'm going to relinquish the floor to you for now, and I'll save my remarks for later in the call. Samuel D. Bush: Thank you, Chris. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial measures. Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data tables. For the quarter ended September 30, 2025, net revenue decreased $528,000 or 1.8% to $28.2 million compared to $28.7 million last year. Station operating expense increased $2 million to $24.7 million for the 3-month period. As reported in the press release, this increase was primarily the result of an industry-wide settlement with 2 of the music licensing organizations we are licensed by. In mid-August, the Radio Music License Committee, which Saga is a member of, announced separate rate-setting settlements with ASCAP and BMI. The settlements established license fees, which applied retroactively for the periods from January 1, 2022, through September 30, 2025, and on a go-forward basis through December 31, 2029. In September, we booked $1.7 million for the periods from January 1, 2022, to December 31, 2024, and another $407,000 for the 9-month period ending September 30, 2025. The fourth quarter impact of the increased rates will be approximately $135,000 over our previously projected music licensing fees. We reported an operating loss of $626,000 for the quarter, which without the settlement would have been an operating income of $1.5 million compared to $1.6 million for the same period last year. We also reported station operating income, which is a non-GAAP financial measure, of $3.5 million for the quarter. Without the settlement, station operating income would have been $5.6 million for the quarter compared to $6 million for the same period last year. It is important to note that the company would have reported net income for the quarter without the music licensing settlement. For the quarter, gross broadcast revenue included NTR, nontraditional revenue, which is mostly events we are involved in, decreased $1.8 million or 6.8%, while our gross interactive revenue increased $1.1 million or 32.6%. Gross political revenue was $73,000 for the quarter this year compared to $677,000 last year. For the third quarter this year, the increase in our interactive revenue made up almost the entire decrease in our broadcast revenue when adjusted for political. I think Chris is going to emphasize this again but we're in radio, so repetition is always a good thing. And I just want to say again, for the third quarter this year, the increase in our interactive revenue made up almost the entire decrease in our broadcast revenue when adjusted for political. For the 9-month period ended September 30, 2025, net revenue decreased $3.1 million or 3.7% to $80.6 million compared to $83.7 million last year. I won't go through the 9-month numbers that were reported in the press release other than to indicate that without the music licensing settlements, station operating expense would have decreased $1.7 million instead of the reported increase of $390,000. Without the settlement, operating income would have been $574,000 instead of an operating loss of $1.5 million and station operating income, again, a non-GAAP measure, would have been $13.8 million instead of $11.7 million. Also without the settlement on a same-station basis for the 9 months ended September 30, 2025, station operating expense would have decreased 3.9% or $2.6 million. Corporate expenses decreased $80,000 for the quarter and increased $74,000 for the 9 months ended September 30, 2025. Corporate expenses included $226,000 for the 9-month period relating to a potential proxy contest initiated earlier this year by one Saga shareholder. This has been disclosed in our previous public filings. The decrease in other operating expense for the 9 months ended September 30, 2025, compared to the same period in 2024 is primarily due to the sale of a nonproductive AM station along with 2 translators in Asheville, North Carolina, the sale of WNDN, FM in Chiefland, Florida and the shutting down of a nonproductive AM station in Bellingham, Washington in 2024. The decrease in other income is due to a onetime gain in 2024 related to the sale of Saga's equity investment in BMI when the organization was sold. In addition to what Saga and I have already said -- in addition to what I've already said, I want to emphasize that for the quarter, total interactive revenue was up 32.6% and for the 9-month period, up 17.1% with a 54% profit margin for both the quarter and the 9-month period, excluding sales commissions for the quarter and for the year. Pacing for the fourth quarter is currently tough as we are up against $2 million in political we booked in the fourth quarter of last year. This was $1.6 million in October, $389,000 in November and $10,000 in December. For the fourth quarter, we are currently pacing down approximately 11%, including political and 4.7% when political is excluded. On a positive note, our interactive pacing is strong for the fourth quarter being up 32% as of now. The company paid a quarterly dividend of $0.25 per share on September 19, 2025. The total dividend paid was approximately $1.6 million. To date, Saga has paid over $140 million in dividends to shareholders since the first special dividend was paid in 2012 as well as has bought back over $58 million in Saga stock. The company intends to pay regular quarterly cash dividends in the future. Further, as part of our overall capital allocation plan for 2025 and beyond and as stated in the press release on October 17, 2025, the company entered into an agreement to sell telecommunications towers and related property and other assets located at 22 sites for a total cash purchase price of approximately $10.7 million. Sales proceeds net of brokerage commissions and certain adjustments in the amount of approximately $8.7 million were paid to the company, with the remaining cash proceeds of $1.8 million, representing 4 sites being deposited into an escrow account pending final landlord consents to assign the ground leases where the towers are located. We also entered into long-term leases at each of the sites to allow us continued use of the towers at a nominal cost. We are continuing to work through the tax and accounting implications of this transaction, which will be disclosed in our future filings. As we have previously stated, we intend to use a portion of the proceeds from the sale to fund stock buybacks, which may include open market purchases, block trades or other forms of buybacks. All said, we believe Saga is in a strong financial position to improve profitability as our digital initiative improves both local radio and interactive revenue. The company's balance sheet reflects $26.3 million in cash and short-term investments as of September 30, 2025, and $34.2 million as of November 3, 2025. We currently expect to spend between $3.25 million to $3.75 million for capital expenditures in 2025. We currently expect that our station operating expense will be flat for the year as compared to 2024. This takes into consideration the expense reductions we have made, offset by the music license fee settlement with ASCAP and BMI as well as for our continued investment in our ongoing revenue initiatives. Without the music licensing settlement expense, we would expect station operating expense to decrease by 2% to 3%. We anticipate that the annual corporate general and administrative expense will be approximately $12 million for 2025 compared to $12.4 million in 2024. And with that, Chris, I'll turn it back over to you. Christopher Forgy: Did you say crass? That's kind of crass, Sam. Congratulations anyway on your 28 years of earnings calls. Over the past several years and we have -- past several months, I'm sorry, Saga's elite group of leaders and employees, Saga's corporate team and Saga's Board of Directors have been extremely busy in the Saga verse. Since early this year, we have been diligently installing Saga's blended digital strategy, including the comprehensive training and development of Saga's market leaders, sales managers, media advisers, on-air content creators and our directors of content creation. We've made additional strategic investments in R&D and resources to assist our team members to run faster in the Saga's blended strategy. This in order to achieve our objective of 2x gross revenue, most of it digital, in 18 to 24 months by capturing just 5% of the available search and display dollars available in our 27 Saga markets. We've added acumen and expertise to our Saga Board of Directors with expertise in digital, M&A and the financial audit and consulting space. We are committed to sell one tower and the land the tower is on to a local developer as well as some excess land we own. And we are also in the process of listing and selling the company-owned home in Sarasota, Florida following multiple hurricanes that pounded Florida's West Coast. And we have completed, as Sam said, the sale of several Saga towers, not because we needed the money but because of a larger strategic plan to return value to shareholders through stock buybacks and other capital allocation. This while continuing Saga's robust quarterly dividend strategy. As a part of the tower sale, I would like to personally thank and show our appreciation to Executive Vice President and CFO, Sam Bush; Senior Vice President and Controller, Cathy Bobinski; Vice President of Engineering, Tom Atkins; Vice President of Finance and Board Secretary, Katie Semivan; and Financial analysts, Cynthia Loerlein and [indiscernible], for their efforts to help us complete the sale of these towers. This was a Herculean effort and it's much appreciated and it's still continuing. We're not quite done yet. Finally, we have -- we finally have and continue to make strategic expense reductions at the market and the corporate levels to allow us to reinvest in our transformational digital strategy to enable us to be more nimble. We're also selectively utilizing, as we've stated earlier, in AI to help improve efficiency and performance and to cut costs and to increase margins. And over the next few months, we will continue to bring much of our digital deliverables into the house to allow us to better serve our team members and ultimately, our customers, again, to provide efficiencies, increase scalability and increase margins, all of which will require the acquisition of people to accomplish this feat. Saga has come a long way in a very short period of time, yet we are far from finished. To fully understand how far we've come and why we believe Saga's blended strategy will work, we really need to go back to the beginning to the principles of what Saga was built on in the first place when Ed Christian founded the company. Internally, we refer to this with an old Latin phrase, Finis Ab Origine Pendet, which means the end hangs on the beginning. Saga focuses on small and medium markets. Case in point, 21 of our 27 markets are smaller than Market 100. Our acquisition strategy focused on markets with state capitals, state universities, nonclosable military bases, strong ag business, large retirement communities with high net worth like we have in the villages in Ocala, Florida. And on the ground, Saga's market employees are known, liked and trusted in the local communities in which they serve. We pour ourselves into the local marketplace. Our leaders get involved in city government, raise money for important causes where money raised stays in the local community. We get belly to belly with influencers and decision-makers to move local business forward. Saga is really woven into the fabric of the communities in which we serve. But the name Saga has never mentioned. It's all about our local media groups and the name like the Columbus Media Group, for example. Finally, Saga does on average $1 million to $1.5 million more a month in local direct revenue than we do in local agency revenue. And as we stated, local direct revenue is the primary driver to Saga's blended strategy. I hope this is starting to make sense to you now. Saga was 10 years late to the digital party. We started this digital transformation way behind the curve, and we have the luxury of observing and learning from iterations and reiterations of our broadcast brethren. From a digital advertising perspective, Saga is really a cash flush start-up. And what we know is this, the local advertising market is overdue for disruption. And it just so happens that Saga Communications operates in the size markets where we can have strong impact and influence on the local communities in which we operate, and that includes the advertising community. These local advertising markets are ripe for disruption. Why? Because businesses are pouring more and more money into digital advertising every year but the rapid growth of digital budgets has outpaced the ability of advertisers to completely understand them and to use them effectively. There are too many digital providers and too many conflicting solutions. Businesses don't know who to trust. In this case, trust, simplicity, clarity with a click visit call and search approach, focused on the consumer journey, not the product-based selling that usually takes place wins. And advertisers are fed up with ineffective campaigns and empty promises. They don't really like what they are buying, know what they're buying, and they don't really like who they're buying it from. And there's a shift in consumer behavior. Advertising strategies haven't caught up with the journey people take when they buy. In other words, search and display is broken and there is a gap where tech meets human behavior. So focusing on the influence of the ads on the real consumer journey when a consumer interacts with a product or service will allow us, we believe, to not only win the market but also redefine it. And internally, we have begun seeing measurable returns on the yeoman's efforts that our team members have put into this transformation, and I want to underscore yeoman's efforts. We have found that local direct advertisers who were not pitched to blend, we lose 29% of our existing radio business that we had. And with local direct advertisers that bought a blended product, their radio spend increased by 9% and their overall radio and blended spend increased by 27%. Now we just simply need to scale it. And finally, this biggest and most encouraging news comes from Sam's report that he mentioned not once but twice, and I'm going to mention it a third time because frequency sales. And again, the biggest and most encouraging news comes from Sam's report. During today's earnings call, and to make sure you didn't miss it, I'm going to make sure you didn't miss it. This above all else, proves that there are green shoots popping up as it relates to our digital transformation. The blend is gaining momentum. Again, for the third quarter 2025, the increase in Saga's interactive revenue made up almost completely the decrease in our broadcast revenue when you adjust for political. The question has always been, can we run fast enough in the blend to outrun the downdraft in the sector? Well, hope is not a strategy, and this may be an indication that perhaps we can. But make no mistake, although we are still in the infant stages of our digital transformation, this transformation is hard, really hard. It's taxing and it's working. We have the very best, most committed and passionate team of broadcasters I have ever had the pleasure of working with and serving, and they are the engine that make the blended transformation a reality. Thank you to all of you again for your time and your interest and your support and involvement in Saga Communications what we believe to be the best media company on the planet. Sam, do we have any questions? Samuel D. Bush: We did. We got questions from 3 different shareholders and an analyst. And I'll start with Michael Kupinski's question from NOBLE Capital. The first 2, he had 3 questions but the first 2 are interrelated, so I'm going to read both of them and let you address them jointly. Can you give us some color on the tone of the market, pacings into the upcoming quarter, local spot versus digital versus national? And then the second part of that is, while Saga does not get a lot of national advertising, it had been a key revenue growth driver for the company. How is this category performing going forward? Christopher Forgy: So I'll address the last vertical first. National is weak in the fourth quarter. And it has had a little bit of a tradition in coming in later and later, which impacts our forward pacing. And Saga has 2 outstanding national sales managers and Tom Howe and Bruce Werner and a really proactive partner in Katz Radio. Unfortunately, we don't really control a lot of what happens in that vertical. As Sam mentioned, overall, total revenue pacing, excluding political, is down 4.7% for the quarter. Local pacing is consistent across the quarter, and digital pacing is still pacing plus 32% for the quarter, which is why we are running to the Saga's digital transformation in the first place. I hope that answered the question. Samuel D. Bush: I think it made a great start towards it. Historically, advertisers reacted favorably in anticipation of Fed rate cuts given the favorable influence they had on the economy. As we have seen in many radio company results, the Fed rate action has had no impact and the radio spot advertising remains weak. Any thoughts on why there is this anomaly? Christopher Forgy: Well, first of all, Sam, I don't believe it's an anomaly. And by no means, what I'm about to say is directed at the person who asked this question, and it's the economy, stupid. On Main Street, there's a delayed reaction, in my opinion, to rate cuts by the Fed. In our world, rate cuts impact our 2 largest economic indicators as to how radio will perform going forward, and they are housing starts and auto purchases. The 50 basis points reduction the Fed has dribbled out, kicking and screaming, simply has not gotten to Main Street just yet. We believe spot radio's downdraft is more a function of the macro decline in the sector and not the rate cuts or lack thereof. And as I said, not really based on the interest rate reduction. Samuel D. Bush: Very good. Thank you, Chris. We did have 2 additional questions from 2 shareholders, and I'm going to combine them because they were similar in nature or augmented each other. There was a question as to why there wasn't a concrete plan for a buyback, including timing and amounts once the tower sale closed. And I would say there was a number of complexities to the tower sale. And we, Saga had very specific expectations for the final terms and conditions as well as there were certain real estate transfer issues that had to be dealt with and are still being dealt with, shown by the fact that 4 of our towers, the sites are still in escrow, and we're working through, which we will work through but we're working through the timing and the complexities of getting the real estate aspects of those transactions, those pieces of the transactions closed. It wasn't until days before the closing that we actually felt comfortable with the final sale proceeds. As Chris stated, we didn't sell the towers because we needed the money. We sold them because it was the right thing to do from a capital allocation standpoint. So again, we didn't feel comfortable with the amount until a couple of days before the closing and as to what the final sales proceeds would be and when the closing would take place. And that's information that was necessary -- is necessary for the Board to know when considering final buyback plans. Buybacks are still a priority for a portion of these proceeds as we have previously stated. There will be more clarity to this in the near future as the Board continues to look at the amount and timing and make some final decisions. And I think that's it. We appreciate all of you joining, and I think we can turn it back over to Matt to wrap up the call. Christopher Forgy: Thank you, Matt. Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Greetings, and welcome to the Park-Ohio Holdings Group Corp. Third Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Chairman and CEO, Matt Crawford. Please go ahead, sir. Matthew V. Crawford: Thank you, Kevin, and welcome to our third quarter call. Our third quarter was highlighted by our continued transformation into a leaner, more predictable business through the business cycle. While many end markets, particularly here in the U.S., where we derive a majority of our sales, showed mixed demand, we were able to demonstrate consistent operating profit and margin performance. While we did not -- while we do not anticipate a meaningful rebound in demand during the fourth quarter, we do expect to build on these initiatives as we move into 2026 and will also benefit from new business and strong backlogs. We use the word transformation here quite a bit, and I want to be more precise regarding what that means as we move towards 2026. Our transformation began several years ago as we challenged our capital allocation model and shed assets that were either underperforming or we felt were ill-suited for a higher growth, higher margin and less capital-intense business. We then began to invest more urgently in those businesses, which we have great opportunities for significant operating leverage and include clear competitive moats. While this model continued to support some level of acquisition, we were and are more focused on long-term competitive advantage, the right kind of products and services and customer partnerships. During 2025, we have seen this transition take hold. While mixed demand signals from our diverse customer base have muted the improvements in our operating execution and quality of earnings, we see the improvements and also have seen a more consistent stream of earnings results despite the underlying volatility. We firmly believe that in 2026, will be another important step forward as we combine these productivity improvements with new business and strong backlogs. Equally important is that we expect to do these things while reducing debt meaningfully during the fourth quarter and we will continue that trend into 2026. I want to thank and applaud the effort of our entire Park-Ohio team as we manage the challenges of today with an eye toward the exciting times ahead. Pat, can you cover the third quarter, please? Patrick Fogarty: Thank you, Matt. Our third quarter results were generally in line with our expectations for the quarter given the mixed industrial environment, and we continue to see positive trends in each of our business segments. Before I get into the details of our third quarter results, I want to provide a few highlights achieved during the quarter. First, as we previously announced, we refinanced both our senior notes and our revolving credit facility, extending maturity dates by 5 years and strengthening our balance sheet and liquidity. We incurred bond-related expenses of $2 million related to the redemption of our previous bonds, including a noncash write-off of unamortized costs. These expenses reduced our GAAP earnings during the quarter by $0.11 per share. In connection with the refinancing of our bonds, we received upgraded ratings on the new senior secured notes from Moody's, S&P Global and Fitch Ratings. Second, we continue to make strategic capital investments in new technology and information systems, capacity expansion and margin improvement initiatives. These investments will enable sales growth and higher profitability in the future. And finally, new equipment orders in our industrial equipment business continue to be very strong with new bookings and backlogs at record high levels at most locations. Our business strategy focuses on end market and application diversification beyond traditional end markets. Most notably, we continue to see strong order activity in the electrical steel processing to support both expanded application usages and electrical grid infrastructure and in the defense markets for munitions and shell production and armored vehicle protection plating. Bookings year-to-date are highlighted by an order from a major steel producer totaling $47 million for induction slab heating equipment for high silicon steel production. Further enhancing the strong demand for our induction products is our global operational footprint, enabling our customers to diversify their supply chains with local content to help minimize their risk and reduce their overall costs. Backlogs as of September 30 were up 28% since year-end and are expected to remain strong heading into 2026. Turning now to our third quarter results. Third quarter revenue totaled $399 million and was stable in each business segment sequentially. The year-over-year sales decline was a result of lower end market demand, most notably in certain North American industrial end markets, which more than offset growth in Europe, where demand from electrical end markets continues to be strong. Third quarter gross margins of 16.7% were slightly below prior year's gross margins, demonstrating our pricing discipline and operational consistency despite modest volume pressure in certain end markets. Adjusted EPS was $0.65 per diluted share in the quarter compared to $0.66 in the first quarter and $0.75 in the second quarter of this year. Results in the third quarter underscored cost control and productivity gains, offsetting higher interest expense of $1.1 million from our new senior secured notes, which reduced adjusted EPS by $0.07 per diluted share. We generated EBITDA of $34.2 million in the quarter. As a percentage of net sales, our EBITDA margin was 8.6% in the quarter. On a trailing 12-month basis, our EBITDA as defined totaled $140 million. In the quarter, we recorded an income tax benefit on pretax income of $4.5 million, driven by ongoing federal research and development credits and other discrete tax items. We expect our full year effective tax rate to range between 13% and 16%, reflecting the positive impact of ongoing tax initiatives. During the quarter, our working capital initiatives drove positive operating cash flow of $17 million compared to $9 million last year. We are currently estimating fourth quarter free cash flow to be strong and range between $45 million to $55 million. Full year free cash flow is estimated to range between $10 million to $20 million, driven by reduced working capital levels in each business. Our liquidity continues to be strong and totaled $187 million as of September 30, which consisted of approximately $51 million of cash on hand and $136 million of unused borrowing capacity under our various banking arrangements. Turning now to our segment results. Supply Technologies net sales of $186 million in the quarter were in line with sales in both the first and second quarters of this year. Sales were down compared to a year ago as lower customer demand in certain key end markets, including industrial equipment, bus and coach and consumer electronics, partially offset increases in electrical, heavy-duty truck, semiconductor and agricultural end markets. Geographically, total sales in Europe were stronger year-over-year, but were offset by lower sales in North America and Asia on a year-over-year basis. Our proprietary fastener manufacturing business performed well in the quarter despite a slight decline in demand for its proprietary products, primarily in North America. Adjusted operating income in this segment totaled $18 million, an increase sequentially compared to last quarter and a decrease from $21 million in the prior year due to lower year-over-year sales. Adjusted operating margins increased 100 basis points to 9.9% in the current quarter compared to 8.9% last quarter and down from 10.5% a year ago. The overall operating margins in this segment continue to exceed historic levels due to efforts to improve operating efficiencies in our warehouses and manufacturing plants around the world. During the quarter, we completed the consolidation and expansion of certain facilities in the U.K. and Ireland in support of expected growth in the electrical distribution market, supporting the data center build-out. We recorded $1 million in expenses related to these activities and have added back these onetime nonrecurring costs to arrive at adjusted earnings per share. We expect further expansion resulting from investments to optimize warehouse operations and manufacturing capacity around the world. Although current demand in several end markets has remained stable to slightly down year-over-year, we expect improved demand trends and average daily sales levels in 2026 in certain end markets, including power sports, agriculture, semiconductor, consumer electronics and aerospace and defense. In our Assembly Components segment, sales improved sequentially to $97 million in the quarter. The sequential improvement compared to last quarter reflects increased production and new program launches beginning to ramp up. Segment adjusted operating income was $6 million compared to $6.1 million last quarter and $6.6 million a year ago. In this segment, we continue to win new business in each of our product lines, which includes fuel filler and fuel rail products and molded and extruded rubber and plastic products. We are currently launching over $50 million of incremental business across all product lines throughout 2026. During the quarter, we incurred costs to expand our production capacity, improve asset utilizations and expand our rubber mixing capacity to accommodate the sales growth in each of our product lines. These nonrecurring costs are added back to arrive at our adjusted earnings in the quarter. In our Engineered Products segment, sales were $116 million compared to $124 million a year ago, with the decrease driven by lower demand in our forged and machined products business and lower levels of production in our industrial equipment facilities in North America and Asia. Aftermarket sales remained strong during the quarter throughout most of our global service centers. In our Forged and Machined Products Group, the lower sales were driven by lower railcar demand and the closure of a small manufacturing operation last year. New equipment bookings were $174 million in the first 9 months of the year. And as I mentioned, we expect to achieve record annual bookings exceeding $200 million this year. Our capital equipment backlog continues to be strong, totaling $185 million, an increase of 28% compared to backlogs at the end of last year. In addition, order intake from aerospace and defense and power generation customers continues to be strong in our forging plant in Ohio. During the quarter, adjusted operating income in this segment was $3.7 million compared to $5.2 million a year ago. The decrease in profitability in the quarter was a result of the lower sales levels in our forged and machined products business. We continue to implement plant floor improvements in this part of our business and our 2 forging plants, which will drive higher margins as sales volumes improve. I'll conclude my comments with an update on our current expectations for the full year. We expect full year 2025 net sales to be in the range of $1.600 billion to $1.620 billion and adjusted earnings per share to be in the range of $2.70 to $2.90 per diluted share. We also expect full year free cash flow to be in the range of $10 million to $20 million and fourth quarter free cash flow between $45 million to $55 million. Now I'll turn the call back over to Matt. Matthew V. Crawford: Thanks, Pat. We'll now open the floor for questions. Operator: [Operator Instructions] Our first question is coming from Steve Barger from KeyBanc Capital Markets. Christian Zyla: This is actually Christian Zyla on for Steve Barger. First question, kind of a 2-part question. First, how are you accounting for the recent large orders in your EP backlog? Is that percentage of completion or completed contract? And then maybe just broader, do you expect that large order from last quarter to be largely delivered in '26? I guess that would imply double-digit growth rate in EP, assuming a steady business otherwise. So can you just help us square that circle and how you're thinking about EP? Patrick Fogarty: Absolutely, Christian. This is Pat. Our contracts in that part of our business are accounted for using the percentage of completion method. So as it relates to the large order of $47 million, it represents 5 pieces of equipment. We expect 3 of the 5 to be recognized during the course of 2026, with the latter 2 in the following year in 2027. Matthew V. Crawford: Christian, I would just add that I think we said it a lot, but I want to be crystal clear. We are seeing electrical infrastructure, industrial electrification, whether it be the single order we talked about or a myriad of orders related to graphite and other things that are important to, again, the grid and battery technology are underpinning significant growth in this business, not just around that one order, around a myriad of orders globally. So this is a very, very exciting part of our business, and we will see it begin to impact maybe a little bit at the end of the year, but really into 2026 and beyond. This is not something that is stopping. This is something that is beginning. So we feel that, that big order is really important, but also symbolic for what is happening in industrial electrification where we are extremely well positioned, both from an OE perspective and an aftermarket perspective. So this is one of the most exciting. And I think, as you know, why we have focused in our transformation a fair amount of energy around our business that focuses on this. But as Pat points out, these things are not built overnight. Even if you take percentage of completion, it will be a little bit choppy, but we'll begin to see the benefit of it clearly going into 2026. Christian Zyla: Completely understood. And I guess with those comments, just doing the math, I think $50 million of orders this quarter for EP solid momentum. The backlog is at, I think, record highs from what we can see. So I guess a question on that is with the orders that are coming in the new business and part of EP's margin performance in this quarter, are you having margin pressure from some of those front-end investments of your projects? Does that abate as we go into '26 and '27 as you see that business ramp? Or just how should we think about the ramp of those contracts in that business related to the margin cadence? Matthew V. Crawford: No, that's a great question. Really good question. So you're going to -- I'm going to have to harp on transformation again. Let me start by saying, again, I didn't misspeak, but I want you to understand the value stream we're talking about here. This is not just graphite and steelmaking. This is also mining. rare earth mineral mining, the Caterpillars of the world, all the people that make mining equipment. I mean the distribution of the value stream and where we're seeing the benefit is remarkable. Again, we haven't seen much in the way of mining in a long time, and we are. So I think there is some transition going on in the order book. I would also highlight defense. I know it's not related to this, but highlight defense as well. There is a transition going on vis-a-vis our order book. And I think that we have seen this year sort of a period of time in the third and fourth quarter where we were filling the order book and preparing to respond to this. We were onboarding people and preparing our facilities for what we think is a pretty long run. And to some extent, clearing out some old jobs that we've mentioned in the past that had some challenges. So I do feel as though there has been margin pressure, not from the customer standpoint, not from the market standpoint, but really around preparing this business for what we anticipate is going to be a heck of a run here on this backlog. So -- and I would also highlight that to say where we are seeing very strong performance is in the aftermarket. So we continue, I think that's, as we've discussed, a razor-razor blade model. And our expectation is that continues to underpin and pay for this transition as we modernize our key facilities, both here in Europe. So we're making some investments here around long-term competitiveness. So you're right, we are seeing some cost pressure as we as we bring people on board to prepare for these orders, we are seeing some investment around modernizing these facilities, preparing for these large orders. But this pipeline is a lot bigger than just that one order, I can tell you that. And you're seeing it in the order book. And it's not just steel. It's all aspects of that value stream as well as defense and others. Christian Zyla: Got it. And then if I could just follow up on that. Do you expect that margin pressure to then flip into a benefit in parts of '26? Or is that a '27 event? Just how should we think about it in terms of the ramp versus the execution of the contract and when that business starts kind of flipping and performing as you expect? Patrick Fogarty: Yes, Christian, I would -- this is Pat again. Clearly, margins will begin to improve as each individual contract is priced uniquely. So -- but clearly, there -- under the percentage of completion method, we're estimating our end margin on each of the jobs and recognizing that as we complete the job during the course. So coupled with aftermarket strong margins, we would expect margins in the industrial equipment side of our business to continue to improve. And keep in mind, this part of our business historically was our highest margin business. And so between the repricing of the new jobs and various value drivers that we're implementing in each of the manufacturing facilities around the world will clearly have a benefit on future margins. Matthew V. Crawford: Christian, I don't want to overstate. I hate to not be positive, but there are -- and again, we're just finishing, I think, in closing out. As Pat mentioned, some of these jobs take 18 months to complete. So a few of the jobs that have impaired profitability in 2025 have been related to orders that were placed a year or 2 ago, where there are some challenges around inflation, around execution, around labor. Those are the kinds of risks that we're just not seeing in the marketplace now. And you might or might not ask about tariffs. That's a positive for us here, not only in terms of our customers' health, but also in terms of our global footprint allows us to be exceedingly nimble versus our competition on where and how we make this product. So all of the above, every one of those things I just talked about is a positive for margin accretion. I don't -- to Pat's point, I don't really know another way to talk about it other than to say, for years, this business operated at 10%, and there's nothing about it that's worse today than it was then. The aftermarket mix is better. The margins are strong. The customer relationships are strong. Our locations and where we operate are appropriate and cost effective. Like I said, we're spending some money to modernize some of the locations, which I think is great. This is an exciting time. So yes, I would expect to see meaningful progress in 2026 and not the end of 2026. Christian Zyla: Great. I appreciate that answer. If I could sneak in one more, and we appreciate you letting us take the time for the questions. But just last question on free cash flow, Pat. Your guide of $45 million to $55 million would be a record free cash flow quarter. Can you just talk about what's embedded in that expectation? I mean, is that largely working capital benefits, less CapEx that quarter? And then just what drove the overall difference or reduction from last quarter? Patrick Fogarty: No problem. Let's talk about the reduction from the guidance. The previous guidance was $65 million for the second half of the year. Our guidance for the quarter takes down the results of the third quarter, which was $7 million of free cash flow. What we're seeing throughout every one of our businesses is the growth in working capital that we've seen year-over-year has primarily been in receivables and a little bit in inventory. We're seeing the harvesting of many accounts and various working capital items in the fourth quarter, primarily receivables. In inventory, there -- the management of Supply Technologies is reducing receipt activity, which will help lower inventory based on the revenues they're seeing in the fourth quarter and the first quarter. But more importantly, is the reduction of days on hand and the ability to manage lead times better. As we ended last year with the threat of tariffs, there was a lot of prebuy activity, a lot of excessive order taking by our supply base and delivering into our facilities in the first half of the year. We now see lead times reducing dramatically. So that helps days on hand. That helps our inventory levels, and we're seeing that happen. It began to happen in the third quarter, but significantly reducing levels in the fourth quarter. Matthew V. Crawford: Christian, I might say it a different way, too. I might just say that by historical standards, we are still not where we need to be in terms of our working capital efficiency. So this -- the fourth quarter begins to bring that back into line. It doesn't get us where we need to be. There's nothing underlying -- no fundamental issue on that. It's as Pat described, our customers push-pull in terms of tariffs, push-pull in terms of demand planning as well as new product launches that, in some cases, have been delayed, but we will see come to fruition as we get into 2026. So all those things have made us less efficient managing working capital than we have been in the past, and we see a significant move stride forward, some of which because new products will launch, some of which there's a little more clarity, if possible, on tariffs or at least supply chains and some of which I think is because we're not necessarily expecting a big uptick in the economy, but at least people are getting accustomed to how to manage their supply chains. Operator: Next question is coming from Dave Storms from Stonegate. David Storms: I want to start at a high level here. The latest macro headwind -- potential macro headwind is this government shutdown domestically. Are you seeing any impacts of that ripple through to your business lines? Matthew V. Crawford: I don't have any explicit examples of that. I mean we know it can't be good, right? We have not -- we -- as you know, Dave, we've seen a lot of strength across the business from defense. I am sure it has slowed down the internal workings of some of the major orders or some of the updates or scope changes, the kinds of things that happen under the hood every day. So I don't want to suggest that we're not probably seeing a little bit of adverse effect, but not in a way that would be important to explicitly discuss. David Storms: That's perfect. I just wanted to check to see if... Matthew V. Crawford: No, it's a great question. David Storms: Moving on, I did want to touch on Supply Tech, too. It sounds like you're seeing some volume pressure in a couple of end markets and a couple of different geographies. But it seems like pricing is still holding up. How sustainable do you think this is? Do you feel like we're maybe reaching an inflection point where margin can maybe get back to growing further in Supply Tech? Matthew V. Crawford: Well, I think that we did an incredible job last year, I think, in managing price. I think we've done a good job today with some of the tariff exposure -- or this year with some of the tariff exposure we had. I think where we are today is more focused on strategic initiatives around growth, a return to growth to provide the operating leverage that we know exists in that business, which should take us to higher levels. And equally, some of the investments that we've talked about that will be transformative in terms of our costs and how we go to market. And I talk a lot about competitive long-term advantages. Some of the infrastructure investments we're making around how we distribute products and how we manage data are going to be meaningful over years to come. So I do think there's opportunity on the margin side. But to be clear, I think it's less today about pricing than it is about competitive -- improving our competitiveness as well as getting operating leverage that comes with some incremental volume. What's tough to manage in any business is volatility, right? It's not as simple as significant changes. It's the month-to-month variability. So when you see across Industrial America, a gross number of being things being -- build rates adjusted for inflation being down a little bit, that's one thing. The volatility is what's particularly hard to manage. And we've seen a lot of that this year. So I compliment the Supply Tech team and their service model being able to respond and react to somebody going from flat to down 10% one month to up 10% the next month. It's not as simple as everything just being down a couple of percent. So it's been difficult to manage this year. And again, against the backdrop of what we expect to be a strong 2026. So you got to manage that as well. David Storms: Understood. That's great commentary there. And just kind of sticking with that, as you're adding improvements of macro theme for the last year or so has been the implementation of AI. Are you seeing any areas to strategically implement AI to further enhance your operations? Matthew V. Crawford: Well, we can spend a long time trying to define AI. But I'm going to answer emphatically yes, in one particular way and then a good conversation going forward. But I'm going to answer emphatically that our investments in information technology over the last couple of years, which now include harnessing AI around cleaning data, around managing data, around investing in data management tools. These, I think, have been the building blocks to position ourselves for some of the use cases we're seeing on AI. So when I think about business improvements that we'll see in 2026 and efficiencies we'll garner from the business, a lot of that, I think, is just from how we manage data differently and the quality of data we have today in our business. So -- particularly in supply technology, which is really a data business in many ways. So that is where I think we're beginning to see the benefit and where we're beginning to see the building blocks of some of the use cases that are going to actually drive efficiencies in the business. So we do see incremental improvement in the context I discussed. And I think that as we build better and broader use cases across the business, that's going to be a bigger opportunity for us. But the benefits today are more just on the data management side, AI or not. David Storms: Understood. And then one more for me, if I could sneak it in here. you pretty explicitly mentioned that your outlook for 2025 is meaningful cash generation with the goal of debt reduction. Are there any metrics that you could put around that debt reduction maybe in terms of market debt levels or time lines? Patrick Fogarty: Yes. Well, the debt reduction as a result of the strong free cash flow in the quarter, clearly will happen. When you look at the amount of the free cash flow for the full year, $10 million to $20 million after the payment of our quarterly dividends, you can extract the debt reduction from that. So it's roughly $5 million to $10 million year-over-year. And as we step into next year and expect an improvement in free cash flow, that debt reduction will increase. David Storms: But explicitly in the fourth quarter, the end of this quarter, the end of the fourth quarter, what do we expect to reduce debt? Patrick Fogarty: Of the $45 million to $55 million, we would expect $35 million to $45 million of debt reduction. Matthew V. Crawford: Yes, that's, I think, the answer to your question. David Storms: Quarter-over-quarter. Matthew V. Crawford: Quarter-over-quarter, we're expecting $35 million to $40 million of debt reduction from free cash flow. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Matthew V. Crawford: Great. Thank you all, and thank you for your very important questions. It allowed us, I think, to highlight some of the positive changes happening in the business. We look to not only close out the year strong, but also to begin to set the table as we are for a really successful 2026. Thank you for your time today. Bye-bye. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good day, and welcome to QuinStreet's Fiscal First Quarter 2026 Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference call over to Vice President of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin. Robert Amparo: Thank you, operator, and thank you, everyone, for joining us as we report QuinStreet's Fiscal First Quarter 2026 Financial Results. Joining me on the call today are Chief Executive Officer, Doug Valenti; and Chief Financial Officer, Greg Wong. Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-K filing. Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements. Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com. With that, I will turn the call over to Doug Valenti. Please go ahead, sir. Douglas Valenti: Thank you, Rob. Welcome, everyone. Fiscal Q1 was another good quarter of performance and progress for the company. We delivered record revenue and exceeded our outlook for both revenue and adjusted EBITDA. Auto insurance demand remained strong. Home services continued to grow at double-digit rates, and adjusted EBITDA remained strong, inclusive of heavy investments in new media and product [Technical Issue]. We expect further significant growth in auto insurance revenue and margin in coming quarters and years due to strong product and market fundamentals and to our rapidly expanding product, market and media footprint. Auto insurance carrier results are good. Consumers are shopping and marketing budgets continue their relentless [Technical Issue] but still early shift to digital and performance marketing. While carrier spending is expected to remain strong, uncertainty about tariffs and their eventual impact on claims costs appears to be delaying what we expect to be another significant inflection up from here in carrier marketing spend. In the meantime, we are preparing for the next leg up in auto insurance by investing in new media capacity and in dramatically expanding our product and market footprint to drive growth and expand margins now and into the future. We also expect continued strong growth in our noninsurance non-auto insurance verticals, and we are investing aggressively there as well. Overall, our total addressable market opportunity is already enormous and growing, and we continue to deliberately, contiguously and successfully expand our footprint. We estimate that we are less than 10% penetrated in our current footprint of addressable market. We expect to grow total company revenue at double-digit rates on average for many years to come. We also continue to focus on margin expansion with a near-term next milestone goal of reaching 10% quarterly adjusted EBITDA margin in this fiscal year, which, as you know, ends in June. Our levers to grow EBITDA margin are threefold: one, growing and optimizing media to catch up to auto insurance demand; two, growing higher-margin products and businesses; and three, capturing operating leverage from top line growth and from efficiency and productivity initiatives. Some examples. Auto insurance margins are expected to expand 5 points this fiscal year and are already up over 2 points just since July, with margins in new faster-growing product market areas of auto insurance running at more than twice those of our core click marketplace. Also, margins in big new media areas in auto insurance and across the company are now past breakeven and expanding further as they scale. And our exciting QRP and 360 finance products are expected to grow well over 100% this fiscal year and to nicely contribute to expanded profitability. Another area of current and future investment and excitement is artificial intelligence or AI. We are confident that we are going to be an AI winner. We expect AI to accelerate our already fast-growing markets by improving consumer access, interface and engagement in digital media. We also believe that we will disproportionately benefit from AI due to our structured proprietary data and our over 17-year history of successfully applying AI as a competitive advantage. We have dozens of new AI projects underway across the company and business, and they are already improving consumer satisfaction, client results, media efficiency and productivity. And they are already adding revenue and expanding margins. Finally, before I share our outlook for fiscal Q2 and the full fiscal year, I am pleased to announce that the Board of Directors has authorized a new $40 million share repurchase program. The authorization reflects the strength of our underlying business model and financial position and confidence in our long-term outlook for the business. Turning to our outlook. We expect revenue in fiscal Q2 to be between $270 million and $280 million and adjusted EBITDA to be between $19 million and $20 million. We expect full fiscal year 2026 revenue to grow at least 10% year-over-year and full fiscal year adjusted EBITDA to grow at least 20% year-over-year. With that, I'll turn the call over to Greg. Gregory Wong: Thank you, Doug. Hello, and thanks to everyone for joining us today. Fiscal Q1 was another record revenue quarter for QuinStreet. For the September quarter, total revenue was $285.9 million. Adjusted net income was $13.1 million or $0.22 per share, and adjusted EBITDA was $20.5 million. Looking at revenue by client vertical. Our financial services client vertical represented 73% of Q1 revenue and declined 2% year-over-year to $207.5 million. Auto insurance momentum accelerated in the quarter, growing 16% sequentially versus the June quarter and 4% year-over-year against a very tough comparison. Noninsurance financial services, which included personal loans, credit cards and banking, declined 10% year-over-year as the year ago period included a very large limited time promotional offer that benefited our credit cards vertical. Our home services client vertical represented 27% of Q1 revenue and grew 15% year-over-year to a record $78.4 million. Other revenue has been consolidated into our home services client vertical to more accurately depict the operational structure of that business. Turning to the balance sheet. We closed the quarter with $101 million in cash and equivalents and no bank debt, and we remain in a strong financial position. In the September quarter, we repurchased $7 million worth of company shares and subsequent to quarter end, another $10 million worth of company shares, exhausting our previously authorized share repurchase program. In our October 30 Board meeting, our Board of Directors authorized a new share repurchase program of up to another $40 million. We continue to have a rigorously disciplined approach to capital allocation and continue to prioritize: one, investing in new products and initiatives for future growth and margin expansion; two, accretive acquisitions; and three, share repurchases at attractive levels. We will continue to be measured in our approach and remain focused on maximizing shareholder value. As we look ahead into Q2, I'd like to remind everyone of the seasonality characteristics of our business as I do every year at this time. The December quarter, our fiscal second quarter, typically declined sequentially. This is due to reduced client staffing and budgets during the holidays and end of year period, a tighter media market and changes in consumer shopping behavior. This trend generally reverses in January. Moving to our outlook. For fiscal Q2, our December quarter, we expect revenue to be between $270 million and $280 million and adjusted EBITDA to be between $19 million and $20 million. We expect full fiscal year 2026 revenue to grow at least 10% year-over-year and full fiscal year adjusted EBITDA to grow at least 20% year-over-year. With that, I'll turn it over to the operator for Q&A. Operator: [Operator Instructions] Your first question is from Jason Kreyer from Craig-Hallum. Jason Kreyer: Wonderful. Doug, just wondering if you can give some more details on the media investments that you made in the quarter, how those are performing. Specifically, you kind of teased out some of the faster growth areas where you're seeing better margin performance. Just curious more details on that. Douglas Valenti: Sure, Jason. We have been focused on growing our proprietary media campaigns and scaling those pretty dramatically in response to the market demand in auto insurance and in response to the competitive pressures we've seen against scarce media and auto insurance because of the spike in auto insurance demand. And those campaigns have done -- have both scaled nicely over the past few months and have now gotten beyond -- well beyond breakeven and our margins there are expanding and are expanding nicely, but we expect there's a lot more to come. And as I indicated, we've already seen about a 2-point improvement in our auto insurance margins overall since July and expect at least 5 points by the end of the fiscal year. And those campaigns are -- will be a big contributor to that. Other contributors include new products and services in auto insurance beyond our historic click marketplace that are also getting to good scale and also have significantly better margins. I don't want to talk a lot about the details of those, so I don't want to give our competitors a road map to everything we're doing. But suffice to say, they're very contiguous. They're good scale. They're highly effective and proprietary as well, and we expect those to continue to scale and to again, continue to contribute. By the way, those numbers for auto insurance do not include QRP. QRP margins are treated separately from auto insurance. And QRP, as I indicated, also continues to scale very nicely, and we expect to be quite profitable this year to reach profitability and be nicely profitable this fiscal year as well as it gets to quite good scale. It grew last year. Last year, it grew by 294%. This year, we expect to grow at least 70% plus in QRP, while the 360 product on the home services side is going to grow at even faster rates. So -- we're seeing a lot of good scale and expansion from us in new media, incremental products and services in auto insurance, our new breakthrough products, the QRP and 360 and other businesses across the company, including home services that have better and higher margins in auto insurance. So a lot of good things going on, on the margin expansion front. Jason Kreyer: Yes. Certainly seems promising. I wanted to follow up on your tariff comments. It seemed like last quarter that a lot of the tariff concerns had pretty well abated. Now it sounds like maybe those are back on. I'm curious if there's a new round of tariffs causing concern or if the carriers are kind of reacting more to tariffs in recent months more than they were this summer. Douglas Valenti: No new tariffs, but no resolution of -- not much by way of resolution of existing tariffs. In fact, some of them went up for some countries affected. We can only go by spending behavior of our clients and by public -- any public statements or public information. Spending behavior-wise, the clients are spending strongly, and we expect them to continue to do so, but they're not yet spending at the rate that we would expect given their very strong financial performance. One of the things that we note is mentioned in the public filings is the risk and difficulty in quantifying the exact impact of tariffs. And so it -- we would say that -- and that's one of the few things that's mentioned when it comes to why they might not be spending more than they are relative to their performance. So we would just point out that, that remains a risk factor that they identify and one that they identify as one that's difficult to quantify the exact impact of, which probably implies that they're being a little bit more conservative than they would be otherwise. And I think as things get more clarified, there'll be -- we would expect, given, again, the engagement we have with them, the performance that they are reporting and the performance that we know that they have with our products, we expect a lot of room for another big leg up from here. And I think those of you that follow anybody else in our space has heard the same thing, I think, from all the others in our space as well. We're getting kind of very similar reads on the market. Operator: Your next question is from Zach Cummins from B. Riley Securities. Zach Cummins: Doug, I was curious if you could just talk a little bit more about the spending trends you're seeing broadly among your auto insurance carriers. I know for a good part of the past 12 to 18 months, a lot of the recovery has really been driven by just a couple of major carriers. But just curious if you've seen any sort of evolution in spending trends here in recent months among your carrier partners? Douglas Valenti: We've seen a broadening of spending, Zach. I mean I'd say that some of the non-biggest players have grown their spend at a significantly higher rate this -- over the past year or so then have the larger players -- larger players are still spending strongly and plan -- as they've indicated to us, plan to continue to do so. So I didn't mean to imply for a minute that the tariffs were a risk factor to current spending levels. I think they're just a factor in how fast we get to what we believe is going to be a pretty significant next leg up in spending for carriers. But we're seeing a broadening trend, a lot of very healthy spending from a lot of different clients. And I think record numbers of clients spending -- if you want to pick a metric of $1 million a month, yes, we've got a record number of clients doing that now. And so that would be a data point for the broadening trend. But deepening, broadening of spend, a lot of deep engagement of clients with the various products and very, very healthy activity. Zach Cummins: Understood. And a follow-up question, Greg, I really appreciate the additional segment detail regarding Q1. Just as we look at the full year guidance and the implied ramp in the second half of the year, anything we should keep in mind in terms of like credit card offers or anything to that extent in the credit-driven verticals that we should be building into our model? Gregory Wong: No. I think about the guidance overall, Zach, is what we expect to see is continued strong spend within auto insurance, although we expect a leg up once we -- you get more clarity around tariffs, et cetera, that Doug was talking about, we do expect to see a leg up. That is not baked into our outlook because we just don't know the timing of that. So I'd tell you, continued strong spend of the carriers and then what you would typically see is typical seasonality in the back half and then continued progress against our other initiatives as well as the noninsurance business is how I'd characterize the outlook for the year. Operator: Your next question is from Patrick Sholl from Barrington Research. Patrick Sholl: I was just on the -- following up on the credit-driven verticals, have there been any indications in like the current macro environment of any changes in like the monetization of that -- of those categories in terms of like the customer profile that's coming through those media channels? Douglas Valenti: I would say not -- they are not significant changes, but the trends. And the trends are that the lower-end consumer is under more and more pressure. And so we're seeing very healthy demand for credit and debt-related relief products and also in some cases, personal loan products, which are -- which serve more of that demographic than the upper end of the income spectrum. The middle and upper end of the income spectrum continue to be very healthy. The banks reported it yet again. We're seeing it yet again. The demand for credit cards, credit card debt is at record levels, but delinquencies are not. They're at quite low levels. And so there continues to be trend-wise a bifurcation. Our credit card business is primarily aimed at upper income consumers. So that works for us. And our [ M1 ] financial products business tends to be aimed at helping lower-end consumers. So that works for us there. The only other business that we have in that area is the banking business, which is a source of funds business. And that market is still growing very rapidly. It was kind of dormant during the 0 interest period. And once interest rates came back up, that market really has taken off, and we have very, very strong demand from a very broad range of clients, and we continue to do very well there. And again, the only trend there is that interest rates are more normalized now. Even if they come down a little bit, they're still -- the source of funds accounts are open again. And so -- and banks are utilizing that to raise capital. So those would be the general trends, but nothing significant, no significant changes or inflections that we've seen. Patrick Sholl: Okay. And then within the Home Services segment, I guess, have you seen any sort of like change in like activity there driven by lowering interest rates? Or is that more going to flow through the financial services sector? Douglas Valenti: We have not. We see -- we continue to see robust demand for home services. And we have all the business opportunity and market opportunity we can stand and we will have, I think, for decades to come there. It's a massive market. It's healthy. Performance marketing works very well. They're done well, and we do it better than anybody. And our clients tell us that, by the way. And there -- it's a matter of continuing to execute and implement and execute and implement. We're doing that every day. And as you've seen, we're growing at very consistent, very good rates and probably limited only by our capacity to execute, not by market demand. So we're very early in our penetration there. The market is quite healthy. Consumers have a lot of equity. They have a lot of capacity to fund products or projects. And they haven't been relocating as much, which means that there aren't as many new projects associated with moving in, but there are a lot of new projects associated with nesting and fixing up where they are. So on balance, just a super healthy market. Homeowners are in very good financial shape in general, and we're very early in our penetration of that very large market. Operator: [Operator Instructions] And your next question is from Elle Niebuhr from Lake Street Capital Markets. Unknown Analyst: So first, wondering how we should think about mix shift impacts on gross margin into 2026, especially as the carrier budgets remain healthy. Douglas Valenti: That's a great question. The carrier budgets are healthy, but we haven't really modeled the next leg up in growth for this fiscal year. So if, in fact, we stay at steady state and then just grow with seasonality as we enter this insurance shopping season in the March quarter, we're likely to see that mix -- where the mix has shifted pretty dramatically to auto insurance over the past 1.5 years or so. They're starting normalizing more and that mix shift trend will soften. And in fact, we may actually see growth of other products and services and businesses faster, [ grow ] faster than auto insurance. If that's the case, that's generally speaking, until and as we get these new media campaigns both for auto insurance, generally speaking, that will expand gross margin. And we indicated, as I indicated in my prepared remarks, we are targeting getting to a 10% adjusted EBITDA in the back half of the fiscal year, which would be, of course, the March or June quarters and that would be a component of that -- a factor in that. Unknown Analyst: Got you. And then with that margin expansion, do you see that coming from auto mix or operating efficiency? Or where do you see that expansion coming from? Douglas Valenti: Yes, 3 main areas. One is the mix and initiatives, particularly the new media initiatives in auto insurance continuing to scale and continuing to expand and continuing to help grow our margins there. The growth of our higher-margin businesses, as I indicated just now when we talked about that, either the new products for 360 and QRP or home services, some of our other businesses that are structurally higher margin, growing faster or at least not falling back in the mix. And then certainly efficiency and productivity initiatives, which we have a ton of going on. And just to give you a data point on that, just to make sure that's real, it's real to you. In the past 2 years, we've gone from like $600 million a year in revenue to $1.2 billion a year in revenue. In that period, we have gone from 902 employees to 928 employees. So we've doubled revenue by adding 26 employees. So when I talk about efficiency and productivity initiatives, we really have efficiency and product initiatives and they're working very well. Operator: Thank you. There are no further questions at this time. And that concludes our question-and-answer session for today. Thank you, everyone, for taking the time to join QuinStreet's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you for joining. You may all disconnect your lines.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Marex Q3 earnings call. [Operator Instructions] I will now hand the conference over to Adam Strachan, Head of Investor Relations at Marex. Please go ahead. Adam Strachan: Good morning, everyone, and thanks for joining us today for Marex's Third Quarter 2025 Earnings Conference Call. Speaking today are Ian Lowitt, Group CEO; and Rob Irvin, Group CFO. After Ian and Rob have made their formal remarks, we will open the call for questions. Paolo Tonucci, Chief Strategist and CEO of Capital Markets, will join us as usual for Q&A. Before we begin, I would like to remind everyone that certain matters discussed in today's conference call are forward-looking statements relating to future events, management's plans and objectives for the business and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to Marex's press release issued today. The forward-looking statements made today are as of the date of this call, and Marex does not undertake any obligation to update their forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS financial measures on this call. A reconciliation schedule of the non-IFRS financial measures to the most directly comparable IFRS measures is also available in Marex's earnings release issued today. A copy of today's release and investor presentation may be obtained by visiting the Investor Relations page of the website at marex.com. I will now turn the call over to Ian. Ian Lowitt: Good morning, and welcome to our third quarter 2025 earnings call. I am pleased to announce another very strong quarter with our performance at the top end of the preliminary range we published on October 8. As you will see, we have continued to outperform. And in today's remarks, I will look to explain how we have evolved the firm to generate this growth and how we've increased our earnings resilience. In the first 9 months of the year, we generated an adjusted profit before tax of $303 million, up 26% compared to the same period last year. This included $101 million in the third quarter, up 25% year-on-year. We have maintained our momentum from the first half of the year despite the more challenging operating environment for some of our businesses. Given the slowdown in exchange volumes since April, some typical summer seasonality as well as the distraction and disruption caused by the short report, we are extremely pleased to have delivered such a strong quarter, our second highest on record. We are grateful for the engagement we've had with our clients and investors and for their support during what has been a challenging period, one we are pleased to have put behind us as reflected in our performance. Our Clearing segment continued to perform very strongly. Average clearing client balances have increased every quarter since Q1 2024 and grew again this quarter, up 4% from Q2, notwithstanding some modest impact from the short report, which has since normalized. We experienced one of our highest ever client onboarding quarters, converting several new large clients during the summer from the strong pipeline we previously highlighted. This reflected in increased commissions and higher clearing net interest income as growth in client balances offset the impact of lower rates. Our balances will, of course, fluctuate to some extent with asset prices and exchange margin rates, but we aim to deliver continued growth in balances to offset further anticipated rate cuts. Our Prime Services business continued to be a standout success and a driver of growth and margin improvement for our Agency and Execution segment. As a reminder, this is a business that had $85 million of revenue when we bought it from TD Cowen in December 2023. On the Marex platform, it has generated $171 million of revenue in the first 9 months of the year. As the Prime business grows across each of its 3 components: Outsourced trading, prime of prime and on-balance sheet prime, we remain attentive to the associated risks. The primary risk is client leverage, which we manage carefully and keep at a relatively low level. The on-balance sheet business is very diverse, both by client and the portfolio of positions. Our Hedging and Investment Solutions business delivered a strong performance as market conditions became more supportive after a challenging Q2. We also continue to expand our product capabilities and geographic reach to access more clients. All of this more than offset a weaker quarter for Market Making in what was a challenging market environment. We continue to see opportunities for growth through disciplined M&A and have an attractive M&A pipeline for the remainder of the year and into 2026. We recently announced the acquisition of Winterflood, which we expect will provide us with an opportunity to transform our existing U.K. equity Market Making business. The Aarna and Hamilton Court acquisitions are performing well, while Agrinvest is providing opportunities to expand our business more broadly in Brazil. These M&A opportunities, along with our organic initiatives are contributing to our geographic diversification as our international investments are starting to bear fruit, particularly in the Middle East, APAC and Brazil. Rob will provide more details on our segmental numbers shortly. We believe this quarter's strong results validate our strategy. On Slide 5, we have laid out some of the key metrics that we use to assess our performance. Third quarter revenues grew 24% to $485 million, delivering an adjusted PBT of $101 million, up 25% year-on-year. Revenues in the first 9 months of the year grew by 23% to $1.45 billion, while margins expanded to 20.9%. Revenue per front office FTE increased to $1.31 million on an annualized basis. Our growth is driven by the addition of new producers as well as our improvements in producer productivity. For the first 9 months of 2025, productivity improvements accounted for around half of our growth. Looking now at the operating environment in more detail on Slide 6. As I mentioned earlier, we are pleased that we've been able to maintain our momentum from the first half of the year even in a more challenging market environment in Q3. In Q3, exchange volumes were down 8% year-on-year and 14% lower than in the second quarter, while volatility also declined to its lowest level in the past year. On the positive side, equity valuations were buoyant with markets at all-time highs, which is supportive of our Prime business and to a lesser extent, our Solutions business. With this backdrop, our third quarter profits were up 25% year-on-year and down just 5% compared to our record second quarter, which included record volumes in April. We aim to set up the firm to deliver growth through a variety of market environments, and our third quarter performance is evidence of our success. This is partly due to the evolution of our business mix, as I'll describe on the next slide. Over the past 2 years, we have looked to strengthen our earnings resilience through product and geographic expansion. Our evolving business mix is now more diverse than it was at the time of our IPO. In 2023, around 70% of our profitability came from Clearing and Agency and Execution in energy, both of which are strongly correlated with exchange volumes. An additional 10% came from Agency and Execution in securities, which was also somewhat correlated with exchange volumes. While every area of the firm has grown since then, the share of profit that is strongly linked to exchange volumes is now around 54% today. As we've described in previous quarters, the most significant incremental contribution has come from Prime Services, which now accounts for nearly 1/4 of our total profits. Prime profits are like Clearing, recurring and dependable and based on client balances. They are high-quality, durable earnings that generate high returns. Within Agency and Execution in Securities, we have grown businesses such as FX, which provide trading revenues that are not captured in exchange volume metrics. These efforts to diversify our firm are not accidental, but rather a deliberate strategy to grow in a way that enhances our earnings resilience. It's also worth noting, as Rob will discuss in more detail, that within Clearing, NII has remained essentially flat in the $50 million to $60 million range despite rates being down 100 basis points from the peak in Q3 2024. Our ability to grow balances has offset those rate reductions and commissions have increased with client balances. This helps explain our strong performance in Q3 and how we've been able to outperform during a period of somewhat lower exchange volumes. With that, I'll hand it over to Rob, who will take you through the financials in more detail. Crispin Robert Irvin: Thanks, Ian, and good morning, everyone. We are very pleased with the strength of our performance this year. We generated $1.45 billion of revenue and $303 million of adjusted profit before tax in the first 9 months of the year. As Ian mentioned, we achieved this performance despite operating in a less supportive environment for some parts of our business. In Q3, we delivered both revenue and adjusted PBT at the top end of our previously announced preliminary range. Q3 revenue of $485 million was up 24% versus last year. We saw continued strong growth in Clearing and Agency and Execution as well as a strong performance in Hedging and Investment Solutions. Together, these more than offset a softer performance in Market Making, demonstrating the value of our diversified model. Total reported costs grew 24%, in line with revenues. Front office costs were up 23%, reflecting strong revenue performance and continued investments in future growth. Control and support costs were up 26%, primarily driven by higher compensation costs tied to strong performance and investments in our support functions, which include investments relating to recent acquisitions and our compliance with Sarbanes-Oxley. Margins were broadly stable versus the third quarter of last year at 20.7%, delivering adjusted PBT of $101 million, up 25% year-on-year. Our adjusted return on equity remained very strong at 27.6%, all of which meant we delivered an adjusted basic EPS of $1.01 per share, up 23% year-on-year. Focusing now on our segmental performance. We're showing performance over the last 5 quarters to give you a clearer sense of the trends within each business. Starting with Clearing, which grew 14% versus the prior year, driven by growth across all revenue lines, record client balances and higher volumes. I'd highlight the stability in Clearing net interest income despite the continued downward trajectory in interest rates as we have grown client balances to more than offset this. And our new client pipeline for the remainder of the year remains strong. Adjusted profit before tax margins declined slightly to 50% due to continued investments in regional expansion, including APAC, South America and Continental Europe. Agency and Execution continued to deliver strong growth with revenue up 52%, reflecting the breadth of our client franchise and strong client engagement. Securities was the largest overall driver of growth in this segment with revenue up 82%, driven primarily by Prime Services. As Prime has become a more meaningful contributor, we've provided a quarterly revenue breakout. In the third quarter, Prime revenues rose to $57 million, reflecting continued client growth and momentum. Securities ex Prime also delivered strong growth, notably in equities, rates, credit and FX. The acquisition of Hamilton Court, which completed on the 1st of July, contributed $20 million in revenue this quarter, in line with our expectations. Energy grew 7%, driven by continued growth across our large oil, energy and environmental desks. Versus the prior quarter, Energy declined as activity in the third quarter moderated following record volumes in the first and second quarter. Adjusted profit before tax margins improved from 15% to 26%, driven by growth in higher-margin activities, particularly Prime Services and productivity gains from restructuring. Turning to Market Making, where revenue declined by 16%, reflecting challenging market conditions across different asset classes. Robust performances in Securities and Energy were offset by weaker results in Metals and Agriculture. Securities saw growth from equities, credit and FX. This is also where you'll begin to see contributions from Winterflood once the transaction closes. Energy performed strongly, benefiting from higher client hedging activity versus the prior year. Metals declined in the third quarter amid ongoing uncertainty surrounding global tariffs as well as a tough comparison. Base metals, where we have significant footprint, was soft due to reduced client activity and lower volatility of precious metals, where we currently have lower exposure, performed well, supported by price strength in silver and gold. Agriculture remained under pressure as ongoing tariff-related uncertainty and elevated commodity prices, particularly in cocoa and coffee, which reduced liquidity and open interest. Our performance was broadly in line with the second quarter. Adjusted profit before tax margins reduced to 16% reflecting lower revenues. Solutions revenues grew 36%, delivering its strongest quarter on record with growth across Financial Products and Hedging Solutions. Hedging Solutions grew 20%, driven by robust client demand and continued momentum in FX. Financial Products grew 54%, reflecting strong performance in equity-linked structured notes. Margin rose to 25%, reflecting the strong revenue growth. Despite this margin improvement, we continue to incur elevated costs associated with platform investment and new hires to support future growth. Now looking at the first 9 months of the year. Clearing grew 15% on last year with growth across all revenue lines. The addition of new clients has led to higher volumes and client balances. Margins remained strong at 50%. Agency and Execution was the strongest performer with a 51% increase in revenues and strong profit growth as margins expanded to 25%. This was driven by growth in both Securities and Energy. We saw strong performance in all asset classes within Securities and strong demand in Energy, reflecting record volumes in the first half of the year. Market Making revenues decreased by 6% as lower revenue in Metals and Agriculture were partly offset by growth in Energy and Securities. Finally, Solutions revenue increased 10%, mainly due to growth in Financial Products, where margins were lower from the ongoing investment in our new technology platform. Previously, I presented our volume data at this point. However, given the evolution in the mix of our business that Ian spoke about, we plan to update this as part of our year-end process. You will still find the exchange volume data slide in the appendix for consistency. Turning now to net interest income. NII for Q3 was $38.6 million, down $25 million compared to Q3 2024. Interest income was up modestly at $194 million, driven by total average balances growth of $4.8 billion, which broadly offset a 100 basis point decline in the average Fed fund rate. Interest expense increased to $155 million as we had an additional $1.7 billion of average structured note balances and 2 senior debt issuance. We continue to hold significant levels of liquidity as we went through the third quarter, allowing us to position the firm strongly to support our clients and grow organically, which creates a headwind to NII. Compared to the second quarter, NII was up $4 million, driven by growth in average Clearing client balances. Clearing balances increased to $13.3 billion as we continue to add new clients, resulting in stable Clearing NII as this growth has more than offset the reduction in average Fed fund rates. Looking now at our balance sheet. As a reminder, on this slide, you can see that 80% of our balance sheet supports client activity. These are high-quality liquid assets. Once we net off assets and liabilities by client activity, we are left with a corporate balance sheet that carries corporate cash and other assets against group liabilities, including our structured notes portfolio and senior note issuance. Total assets increased to $33 billion at the end of September, driven by growth in client balances and Clearing and growth in Securities, which includes Prime. We continue to manage our capital and liquidity risk prudently, maintaining significant headroom above minimum requirements to ensure we are well positioned in periods of market stress. At the end of the third quarter, total corporate funding was $5.8 billion, up from $3.8 billion at year-end, with $1.5 billion of surplus liquidity above our regulatory requirements. This also supports our investment-grade credit ratings from both S&P and Fitch. In September, S&P reaffirmed our rating, reflecting our robust performance and strong balance sheet. Finally, we announced again a quarterly dividend of $0.15 per share for the third quarter of 2025 to be paid to shareholders on December 3. We are a proactive and involved risk management approach at Marex. In Market Making, we are a client flow-driven business and do not take a directional view on prices. However, we do carry a small level of inventory to source client demand and capture the trading spreads. Average daily VAR was $3.9 million in the first 9 months of 2025 and remains at a very low level relative to the growth in the overall business. In terms of credit risk, we had a realized credit loss of $800,000, representing just 0.1% of revenues and reflecting our proactive and disciplined approach to credit risk management. Now I'll hand back to Ian for concluding remarks. Ian Lowitt: Thanks, Rob. So in conclusion, at our Investor Day in April, we outlined our expectation of delivering sustainable profit growth in the 10% to 20% range. Around 10% of this is expected to be organic, with the remainder, which we estimated to be around 40% of our total growth coming from inorganic opportunities. We have a strong track record on that front and remain confident that we can continue delivering given the pipeline of opportunities ahead. Since going public, we have consistently outperformed market expectations, and we're particularly pleased to have maintained this outperformance during the current quarter despite a less supportive market environment. This success is due to the diversification of our franchise. Of course, we remain mindful of headwinds, including rate reductions and lower exchange volumes as we have seen this quarter. As you've heard on this call, we're delivering consistent Clearing NII despite rate cuts as our growth in client balances has absorbed this. And our diversified business has continued to perform strongly despite weaker exchange volumes as we have continued to add new clients and capabilities. Together, this demonstrates how we position Marex to outperform this quarter and how we have set up the firm to continue to grow through a range of market environments. I'm pleased to report that the fourth quarter has started very strongly, and we remain optimistic about the remainder of 2025 and the year ahead. We're in the middle of our 2026 budget process, and it's exciting to see all the opportunities before us as our markets develop. Settlements in stablecoins, event contracts, crypto prime brokerage, there are just so many opportunities for us in addition to all the other organic opportunities we've discussed with you before. With that, I'll hand it back to the operator to open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Chris Allen with Citi. Christopher Allen: I guess I just wanted to start off on the fourth quarter commentary, noted off to a strong start. Maybe just if you could provide some color just in terms of where you're seeing improvement? Is it from an environmental perspective, client additions or just some of the new acquisitions coming up to speed? Ian Lowitt: Chris, yes, look, I think we're seeing sort of strength across interestingly, all of our businesses. So we're actually seeing strength in Clearing. We're seeing strength in Prime. We're seeing strength in our Agency and Execution. We're seeing strength in elements of our Market Making, and we're seeing actually record levels in our Solutions franchise. So it really does have the feel of all of the parts of the firm are sort of performing well. I mean, I think when you look at exchange volumes, they're up marginally on sort of the prior month. So really, it just feels like the momentum that we had as we came out of sort of Q3 has continued into Q4. October was a record month for us. And I think on the basis of what we saw in October and what's continued, albeit it's only 2 days into November, I think we would be certainly expecting -- notwithstanding the fact that we don't know what will happen in the last 2 months, we would certainly expect on the basis of October to have a record quarter in the fourth quarter. Christopher Allen: And then just for a follow-up question. Obviously, you're seeing good client additions in a couple of different businesses. Maybe you could talk to the pipeline for clients, specifically in Clearing and Prime in the months ahead. Ian Lowitt: Let me take the question on Clearing and then Paolo is here, and he can sort of talk to the opportunities in Prime on the client side. I mean, what we're seeing is really just a continuation of what we've been describing to you for quite an extended period. So what we're seeing is a combination of the normal addition of small and medium-sized clients that are looking for essentially single clearance. And then we're seeing our ability to bring on board some of the sort of largest, most sophisticated sort of players. And those have very long sort of lead times to them. So just in the last couple of weeks, we've brought on board one client that I think we've probably been talking to for almost a year, very large client, and they're just coming on now. So the good side of this is you have a very accurate sense of the pipeline. And it just feels like the same things that we've been seeing before are playing out, which is there are a bunch of large players that are looking to diversify their clearing. They're looking for a firm with the skill set that Marex has, its orientation around client service. And they find our offering sort of intriguing. And we're just having more and more great conversations with clients. And as we grow out globally and as we add more products, we can solve more of their problems and we're winning more mandates. What would you add to that? Paolo Tonucci: And just in terms of the Prime business, similar to Clearing, very strong pipeline, probably as strong as we've ever seen. And the mix of those clients is also, I would say, sort of improved. So more interest from the sort of larger and more active participants in the market. I mean, certainly, going back to your earlier point about what's driven performance, what's likely to drive performance. Certainly, the fact that equity markets have been so buoyant has helped. But I suspect that actually most of -- the vast majority of our improvement has been driven by the incremental clients that we brought on. Operator: Your next question comes from the line of Ben Budish with Barclays. Benjamin Budish: Can you guys hear me okay? Ian Lowitt: We can, Ben. Benjamin Budish: Maybe my first question, it sounded like at the end of your prepared remarks, you mentioned crypto as an emerging opportunity in addition to Prime and other sources of organic growth. Just curious, I think you do a small bit of that currently. Could you maybe just give us a little color on what your exposure is today and how you think about that opportunity set maybe over the next few years as the regulatory environment is clearly changing in a more constructive way? Ian Lowitt: Yes. I mean, look, I think we actually have built a lot of the building blocks that we need to be able to offer clients a pretty comprehensive set of services in the space. So the focus of our efforts to date has been around sort of clearing crypto futures on exchange and supporting our clients with regard to that. And we've also provided our clients with a series of services around certain sort of settlement capabilities they've been looking for with regard to ETFs that they have launched, and that's been sort of another area where we've participated. We're in a position where we can sort of cross-margin clients with sort of their crypto margin posting together with sort of other products. And then within our Solutions business, although it's not sort of a big part of what we do, we've needed to build out capabilities so as to sort of custody assets in part because while it's not a big part of what we do in structured notes, some of the structured notes issuance that we do has returns that are linked to crypto. So the opportunity that we really see for ourselves is essentially fleshing out the range of services that might loosely be termed sort of prime brokerage for crypto, which are probably not very different to the set of services that clients look for when they look for sort of FX prime brokerage. So they're looking for you to be able to buy or sell sort of crypto. They're looking for you to be able to take on stablecoins. They're looking for you to be able to take stablecoins or crypto as collateral. They're looking for you to be able to settle across multiple exchanges on their behalf, just as you would as a prime broker. They're looking for you to potentially be able to provide them with limited amounts of leverage. And I think that we're in the process of sort of building all of that out. And it's a very exciting opportunity. The market is changing. The world feels like it's moving to 24/7 trading, including sort of tokenized versions of treasury or equities. And it feels like a set of opportunities that on the back of our client relationships and the capabilities we have and our sort of scale as an organization that we'll be able to take advantage of. Benjamin Budish: All right. Very helpful. Maybe just one follow-up. Just coming back to the Prime side, and all the extra disclosures and commentary quite helpful. Can you just maybe talk a little bit about where the customers have been coming from? I think it's a lot of U.S. business, but have they been sort of cross-sells against the existing customer base? Has this been the result of maybe a business that needed some investment, which you've then done since you acquired that business a few years ago? And then going forward, similarly, do you see this as a cross-sell opportunity? Is it organic, net new? How do you think about those bits and pieces in terms of go-to-market? Ian Lowitt: Yes. Thanks, Ben. I mean, in terms of the geographic split, the majority of the growth has been in the U.S. I mean, it's where we have a more mature offering and where we probably have the majority of our sales teams. It's not to say that there's no growth in other areas, but I mean, the proportionate growth has been in the U.S. In terms of the mix of sort of new clients versus existing clients that are being offered this service, that's actually been a pretty even split. A lot of our clearing -- a lot of the relationships have been introduced by Clearing. They're clearing relationships that have been servicing businesses that have needs for a broader sort of prime offering. So I would think half of our new clients have come from that source. The other half are sort of a mix of opportunities and relationships that have sort of been worked on for some time. And for a variety of reasons, we weren't able to offer the full set of services. Some of those are ETF managers. ETF managers have become a sort of an interesting sort of subsector, but the sort of traditional prime clients still represent the majority of assets under management. And that's just the sort of typical range of hedge funds and family offices, some trading groups that we can now offer them a much more comprehensive set of products, I think, is the sort of main driver. And then the stability of our offering versus what they've sort of experienced in the last couple of years, I think, has been very helpful. Operator: Your next question comes from the line of Alex Blostein with Goldman Sachs. Alexander Blostein: I was hoping to expand a little bit on the earlier discussion around crypto coins, prediction contracts, but maybe as it relates to retail investors, in particular, I guess, what role do you guys see Marex playing in that ecosystem? How are you thinking about connecting to some of the retail brokerage platforms where a lot of their activity obviously originates. So maybe help us kind of think about what you see the addressable market really here for your business and which part you're looking to participate in? Ian Lowitt: Yes. I mean, I suspect that the opportunities are a little different in the different parts of that ecosystem. So if you're just talking about, for example, event contracts, I think that this is -- it's an area that is generating quite a lot of interest and excitement. There's a lot of work that's going on with regard to potentially having some of those contracts listed on the actual exchanges, in which case, there's sort of a requirement for an exchange clearer. So we are in discussions with some of our clients who are aggregators of retail flow, particularly the ones outside the U.S. who are interested in being able to offer those types of products to their clients. So [indiscernible] contracts, either for financial instruments or if it evolves into a series of contracts that are broader than just financial instruments. They would want to be able to offer those to their clients. And that's the way in which we've chosen to participate with retail flow. So we are the clearer for a lot of the retail flow aggregators outside the U.S., and that's a way for us to participate in that. I mean, in terms of, for example, stablecoins as payment, I mean, there may be a retail angle to that. It's not one that we're exploring at all. But we engage with many of our clients who have shared with us what appear to be some genuinely interesting use cases with regard to payment and stablecoins and are engaging with us in helping them to provide those services. So I believe quite strongly that, that will sort of take off over the near term and that will represent an opportunity for us. I mean, obviously, coming off stablecoin as a method of payment will be a view that people want to have stablecoins available as a source of collateral. That creates sort of a set of opportunities, which is how do you convert a stablecoin into something that generates interest, if it's going to be utilized for the purpose of collateral. Then if you're dealing with that, there are a whole slew of additional prime opportunities that I think sort of arise with that. But that is -- that at least for us at the moment is much more of a sort of sophisticated financial player opportunity. So the retail stuff feels like it's around event contracts, and we will be working with people who clear through Marex to get access to exchange. And these other opportunities, we're likely to pursue with some of our more sophisticated sort of financial counterparts. Did that answer your question, Alex? Alexander Blostein: Yes. No, that makes a lot of sense. Second question, I wanted to just follow up on the point made earlier around liquidity buildup, and you guys obviously issued a little bit of debt early in the year. You continue to utilize the structured notes as part of the funding as well. Where are you sort of in building some of the maybe excess capacity? I don't know if that's a good way to frame it. But as you think about sort of excess capital that maybe exists within the ecosystem today, that's kind of truly deployable, what's that amount today? What is the ROE you're targeting for that? And is that sort of enough to support the business over the next, call it, 6 to 12 months? Or do you see yourself sort of coming back to market seeking incremental liquidity? I don't know if that makes sense, but that's the nature of the question. Ian Lowitt: Yes. I mean, I'm very sensitive to the differentiation between sort of liquidity and capital. I think of capital as equity. So there's sort of a question about equity, and then I think there's a question about liquidity. So I think that -- where I think we are with regard to liquidity is the following. We want to establish ourselves as a regular issuer in sort of the U.S. so that there's just sort of a broad sort of understanding of our credit and broad acceptance of our name so that we are able to tap into that market if we ever want to. So if there was a big acquisition or whatever, that sort of tapping into a large investment-grade pool is available to us. And that's a strategic objective that we have. And so this year, we sort of issued into the U.S. even though we didn't have a specific need for the cash, we felt that, that was something that we want to do. And I'm almost certain that we would look to sort of continue that into next year. So establishing a debt program in the U.S. is very important to us. And if you're not issuing sort of $500 million slugs, you really don't have the kind of size that's interesting to investors. And so that's what I think you should anticipate, not for any reason other than you need to be a frequent issuer in order to establish yourself. I mean, you've got a sense of how fast the firm is growing. So even in a year like this, it looks like we've been growing near the sort of 25%. And hopefully, you have a sense from sort of the commentary that we're pretty excited about sort of the prospects we have next year. And we recognize that as we grow, we want to maintain the firm as sort of super safe from a liquidity perspective. So I think you should expect that we will come to market for debt, notwithstanding the fact that we already have sizable surpluses, mostly because we're comfortable carrying those surpluses and we want to sort of be in the market and a frequent issuer. With regard to equity, we do recognize that as sort of the constraint. There has to be one on the firm, and it's equity. So we have to be very mindful of how we deploy it. We're running quite a bit above sort of the 10% strongly capitalized level on the RAC ratio, and that represents sort of excess that we are carrying, but we're still generating 27% ROE on average. And as we look to deploy our equity, we really don't want to be dilutive. So we're looking for plus 20% returns when we're talking about acquisitions or internal deployment of that capital. And as we look in our budget process and we look at our opportunities next year, then certainly over sort of 6 months or longer, we are confident that we can continue to support that growth with the internal capital generation that comes with the level of earnings that we're also delivering. Operator: Your next question comes from the line of Dan Fannon with Jefferies. Daniel Fannon: I wanted to follow up just on the competitive environment. You guys have obviously been having success in adding clients and clearing balances. Just curious if you've seen any change in dealer behavior given the regulatory changes that are softening up for them? Or any shift in the competitive backdrop as you think about the prospects of additional market share gains going forward? Ian Lowitt: I mean, it's sort of interesting. I mean, this is sort of my perspective on it and then interested in Paolo's perspective as well. I mean what we see from the banks is much more active involvement in trading and looking for us to help them access market liquidity, which is completely noncompetitive activity and actually help support our business. What we are not seeing is a sort of different level of competition for sort of clearing, which, again, as we've shared on some of these calls, is not a surprise to us because of sort of the very long lead time associated with clearing mandates as well as the fact that you need to make a lot of investments as well as the fact that you need to invest in organization and sort of capabilities. So we're not seeing a change with regard to that. And we're not really seeing a change with regard to sort of pricing on structured notes or any of these other products. So at the moment, it does not feel as though the lower sort of capital requirements that are sort of being imposed on banks by this current administration's regulators is affecting our prospects. I don't know what you would... Paolo Tonucci: Yes, no, I'd agree with that. I think we've seen 1 or 2 spots where there's been a little bit of incremental competition. On the stock lending side, we've seen a couple of new entrants somewhat aggressive with pricing. But that doesn't really -- it's not really disrupted our progress with acquiring prime clients. I mean, it has a sort of very marginal effect. You can see a little bit of that in the third quarter versus the second quarter where there was a bit of sort of rate compression, but very much at the margin. Beyond that, I think the sort of the combination of sort of expertise and the sort of quality of the offering sort of remains a really important differentiator. And we typically are seeing, whether it's sort of clearing or prime, pretty consistent competition. It is competitive. It's not that we have a completely free field, but no one sort of competing really on pricing other than, as I said, a little bit of sort of compression on some of the stock lending. Daniel Fannon: Great. That's helpful. And then just as a follow-up, you talked about an active potential M&A pipeline. I just would like to get a little more context around that versus prior periods. And as you think to 2026, do you anticipate that being a more active year than what you guys have done so far or will do in 2025? Paolo Tonucci: Yes. I think it's all lining up to be a very active '26. I think there's still a couple of months left in '25. So we're still hoping to sign at least a couple of sort of agreements, but '26 really is sort of lining up very well. I think the continued sort of interest from companies in joining the sort of Marex organization and being sort of part of our platform really has driven a lot of that sort of reverse inquiry. So we're benefiting now from many companies wanting to be part of Marex and sort of coming to us. And even in the competitive processes, and you will be aware of some of those, even the competitive processes, we often start in a very good position because of the sort of track record of successful M&A. So I think '26 will be a strong year. Operator: Your next question comes from the line of Bill Katz with TD Cowen. William Katz: Ian, just maybe a qualifying question first. You mentioned that, obviously, we still have another 2 months to go, but it could be a record quarter. Is that revenue, volume, earnings, all of the above? I'm just sort of curious of where you -- I just want to make sure I understand where the deeper momentum might sit. And then I have a bunch of follow-ups. Ian Lowitt: Yes. I mean, just when I say records, I actually just care about profit. So I think it's -- when I say a record quarter, it's a record profit quarter. That said, I mean, I think we'll be on track for a record revenue quarter as well. So it will be a combination. But really, when I say record, my focus is on profit. William Katz: Okay. Maybe a broader question for you. A lot of my other questions were asked already. Just as we think through tokenization and blockchain technology, could you talk a little bit about maybe the pros that you could see for the business? Does it unlock any efficiencies for you that could also potentially accelerate the M&A pipeline for you? And then conversely, is there any risk to any of the businesses as things move from sort of the TradFi into the DeFi platform? Ian Lowitt: Yes. I mean, here's sort of what we see at the moment. So I mean, around tokenization, the big benefit is that these markets can sort of operate 24/7. And so in one form or another, we think that the way that is likely to play out is that people will be able to transact not just sort of crypto 24/7, but there will be tokenized versions of treasuries and equities and a range of other assets. And it's sort of hard for me to see how you do that away from sort of tokenization. So I think that, that's clearly going to be an opportunity. And to the extent that there's sort of more activity in the world because people are trading more days and more hours, I think that's good for our business. I think that there's also sort of a tokenization opportunity around sort of stablecoins and again, the fact that it's sort of 24/7, and it means that people can make payments weekends, they can make payments at night. All of those kinds of things, I think, will also add to the activity and out of payments in stablecoin will come a whole sort of slew of other services that people will look for with regard to sort of stablecoin. And again, I think that, that's additive to our business. In terms of the concern that somehow we move to tokenization for everything and that, that potentially disrupts sort of clearing and the clearing ecosystem, I must express some level of sort of skepticism around that. I do think that the activity is going to sort of continue -- or a lot of that is going to continue to be cleared on exchange. If we get sort of our cash sooner rather than later, that's a good thing rather than a bad thing. And I've never understood how for very, very large sets of data like a clearing house, you sort of have benefit of being tokenized where what you've got to do, you've got to sort of keep track of more and more nodes and at some level, that feels like that should not give you economies of scale, but at some level, this economies of scale. So it's conceivable that there are changes to the exchanges and the exchange ecosystem, but we can't anticipate what those are. We don't see those as sort of being real. What we do see, though, is a series of opportunities. And we believe that we're setting ourselves up to capture those, and we think we have sort of the organizational nimbleness to position ourselves well. And critically important, we have relationships with a series of the most sophisticated players in the space, and we're working together with them. And that's an absolutely massive competitive advantage for us as we determine how these things are likely to play out because you're not sort of building things with a view that at some point in the future, somebody might find it useful or interesting. You're engaging in things that sophisticated clients are talking to about today that would be very helpful and that they're willing to engage in, in size. William Katz: Okay. If I could maybe squeeze a third one in, I apologize for maybe overstaying my welcome. But just another big picture question for you as you sort of think through 2026 and very encouraged by the momentum of the business and the pipeline. So maybe a two-parter. Can you give us an update on just how things are progressing with Winterflood, Valcourt, just in terms of initial expectation that you've had a little bit more time to work with those platforms a little bit? And then the broader question is, as you look to next year, how do you sort of see the interplay between revenue growth and margin opportunity? I appreciate that some of these deals come on at suboptimal margins, take some time to get you there. But how do you sort of see the interplay driving profit before tax growth year-on-year? Paolo Tonucci: Yes. Thanks, Bill. I mean, in terms of the progress that we have made with all of the acquisitions, I mean, including those that are closed, Aarna, which was the Abu Dhabi acquisitions, now Marex Abu Dhabi, that's sort of -- it's on track. It's in line with our expectations. I think the Hamilton Court acquisition has outperformed expectations, and they've had also a record month in October. And I think we're starting to see some of the benefits of linking that into our wider client base. And the margins there, you can see that will improve. Margins are somewhere in the sort of high 20s, low 30s. I think that, that will sort of improve with revenue growth as they settle into being part of the bigger platform, Winterfloods, I expect will show a similar pattern. From what we can see, although we don't have all of the details, it looks like they've had a very strong last quarter. Certainly, it looks like it's, from a revenue perspective, one of the best quarters they've had in the last 3 years. So we're quite optimistic that, that business is actually building up some momentum and we'll accelerate that. But it will start a relatively low margin. It's not going to -- we're not going to be getting a 30% -- or a high 20% PBT margin. I think from an ROE perspective, it will probably be quite accretive, though. So I'm optimistic about that. Valcourt is a small business, but where there's more value in the accounts that are opened up, and we're seeing that coming through, but that won't move the needle. That won't move the needle in terms of profit or margin. And generally, I think the trend that we're seeing has been an improvement in margins. The improvement in margins has been sort of very broad-based. But obviously, the area where we still have the lowest margins are the Agency and Execution ex Prime. And that, I think, benefits from some of the new desks settling in and maturing. And we have had a large number of new desks. And we've -- as you've seen, we've become much more active in credit, much more active in FX. So I think you can expect some margin improvement, I think, from the sort of low to mid-teens up into the sort of higher teens. And that will drive the overall group's margin improvement because they're quite large revenue streams. Ian Lowitt: I mean, just sort of for clarity, we haven't closed Winterfloods yet. So we're waiting on approval from the regulators. But obviously, to the point of your question, we are engaged with some of the folks there. And so we are learning more about their business. But obviously, that hasn't closed yet. We hope to close this year, but if that doesn't happen, we would expect it to close early next year. I think with a sort of general point with regard to 2026, I think that as we've indicated, we expect that -- we're hoping that margins will improve, but we really are not looking to improve margins dramatically because we continue to invest. And we think that that's the right decision to make to position the firm for long-term success. And so while we hope that margins improve and they should, as a result of some of the things that Paolo was describing and other things that we have going on inside the firm, we don't see ourselves dramatically changing margin in part because the business mix doesn't change that quickly. And also we want to continue to invest in support and control. We want to continue to invest in opportunities that are likely to generate returns for us in the future. And we're confident that, that's the right way to sort of operate. So '26, we'd expect margins to get better, but not dramatically better. Operator: Your next question comes from the line of Ben Budish with Barclays. Ian Lowitt: Ben? Operator: Please, Ben, go ahead. It seems like Ben Budish has disconnected. We'll go to the next question coming from the line of Carlos Gomez-Lopez with HSBC. Carlos Gomez-Lopez: The first question is about the fact that you are a frequent issuer in the debt market. Have you considered to retap the AT1 market as well? And what do you think of pricing in that space? Second, in terms of the long-term ROE of the business, when you went public, I think you were comfortably at something like 20%. You are now comfortably around the 27%. I know that you are more focused on margin than ROE, but where do you think you will stabilize in the long run? Ian Lowitt: So with regard to AT1, I mean, I think we remain sort of interested in AT1. And at some point, it will sort of come back on to the menu of things that we might do. I don't have a sort of current price of where we think we'll be able to bring AT1. I don't know, Paolo, if you have... Paolo Tonucci: Well, yes, but we sort of -- we stay close to all of these issuances and prices are interesting, but we don't need to issue at the moment. And we have a maturity in 2027. So we have a little bit of time before we have to make that decision. But we're certainly close to that market. Ian Lowitt: Yes. And then with regard to ROE, I believe that we can continue to operate in and around sort of the current levels of ROE, so somewhere between 25% and 30%. I mean, as you say, we don't manage to it. So I'm comfortable, for example, that we're carrying some amount of excess equity, which is, I think, desirable and creates optionality for us. I mean, we could be driving up our ROE if we reduce the level of equity. But I think that equity represents -- it's sort of critical to sort of support the growth of the firm. And so I think we're sort of happy to do that. But given the mix of what we do, which is essentially supporting flow rather than holding any positions, that's an inherently high ROE activity. And my hope and expectation is that we'll continue to operate in that 25% to 30% range. Carlos Gomez-Lopez: That's very clear. And if I can follow up, and I'm sorry to ask this, but can you give us an update on all the litigation that you as a public company now you have to face and how much that is costing all of you, the management team, in terms of time and effort. And again, sort of I guess that's something we need to be updated on. Ian Lowitt: Yes. I mean, look, I think that -- I mean, one of the things that sort of happens with a short seller report is there are -- these class action lawsuits that sort of follow inevitably with those. Our lawyers in New York are extremely confident that they will be able to get that dismissed because it's sort of groundless. The costs associated with it are not significant. And so it feels, at least at this point, more of a sort of distraction and sort of a nuisance more than anything else. And so I wouldn't draw much from it. It's just a natural consequence, the same law firm sort of follows all of these sort of short reports and sort of files these class action lawsuits. Obviously, we don't know exactly how that plays out. But at least based on the advice that we have received so far, it doesn't feel like it's sort of consequential. Carlos Gomez-Lopez: Very clear. Ian Lowitt: All right. Well, thanks, everybody. Thanks for joining us. Thanks for all the questions. We look forward to continuing the conversation with the analysts and with investors over the next period. We're really, as you've hopefully got a sense of from the answers to the questions, sort of excited about our prospects, both in terms of sort of newer opportunities as our markets evolve as well as the sort of standard opportunities that come from sort of share gains in our products. And so we're excited about and enthusiastic about where we think we'll end the year and then our opportunity set in '26. So thanks for joining us, and we look forward to continuing the conversation with you all. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning, and welcome to the Assured Guaranty Limited Third Quarter 2025 Earnings Conference Call. My name is Becky, and I'll be your operator for today's call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to our host, Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead. Robert Tucker: Thank you, operator, and thank you all for joining Assured Guaranty for our third quarter 2025 financial results conference call. Today's presentation is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The presentation may contain forward-looking statements about our new business and credit outlook, market conditions, credit spreads, financial ratings, loss reserves, financial results or other items that may affect our future results. These statements are subject to change due to new information or future events, therefore, you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them, except as required by law. If you're listening to a replay of this call or if you're reading the transcript of the call, please note that our statements made today may have been updated since this call. Please refer to the Investor Information section of our website for our most recent presentations and SEC filings, most current financial filings and for the risk factors. This presentation also includes references to non-GAAP financial measures. We present the GAAP financial measures most directly comparable to the non-GAAP financial measures referenced in this presentation, along with a reconciliation between such GAAP and non-GAAP financial measures in our current financial supplement and equity investor presentation, which are on our website at assuredguaranty.com. Turning to the presentation. Our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Limited; Rob Bailenson, our Chief Operating Officer; and Ben Rosenblum, our Chief Financial Officer. After their remarks, we will open the call to your questions. As the webcast is not enabled for Q&A, please dial into the call if you'd like to ask a question. I will now turn the call over to Dominic. Dominic Frederico: Thank you, Robert, and welcome to everyone joining today's call. We continue to build value for Assured Guaranty shareholders and policyholders during the third quarter and first 9 months of 2025. Adjusted book value per share of $181.37 and adjusted operating shareholders' equity per share of $123.10, both reached record highs at the end of the third quarter. Year-to-date, Assured Guaranty earned adjusted operating income of $6.77 per share. This is an increase of approximately 17% compared with the same period last year. Third quarter financial guarantee production was strong. We produced $91 million of PVP in the quarter, 44% more than in the third quarter of last year and 42% more than in the second quarter of 2025, as transactions coming to market return to a more typical business mix for Assured Guaranty. Rob will provide more details on this later in the call. For the first 9 months, we generated a total of $194 million of which U.S. public finance business produced $152 million. We benefited from record U.S. municipal bond issuance and strong investor demand for our municipal bond insurance including both from institutional investors on some very large infrastructure transactions. Additionally, our U.S. public finance secondary market business flourished with $1.5 billion of insured par, representing 2.5x the amount of secondary business we insured in all of 2024. Non-U.S. public finance and global structured finance contributed $42 million of PVP collectively during the first 9 months. Production in these business lines tend to be more episodic than in U.S. public finance because their transactions are fewer, generally larger and typically have longer lead times. In structured finance, we've been building our subscription finance business which is characterized by many smaller, shorter duration and renewable transactions. Rob will provide more details on this. Our investment portfolio performance has been enhanced by the greater use of alternative investments in recent years. We continue to see excellent performance from our alternative investments, whose inception to date annualized internal rate of return, including from funds managed by Sound Point and Assured Healthcare Partners was approximately 13% through September. In terms of our share repurchase program on November 5, the Board of Directors authorized the repurchase of an additional $100 million of our common shares, bringing our current authorization to just over $330 million. I'm looking forward to a successful fourth quarter in which we have already booked some sizable transactions. We continue to look for strategic opportunities to expand our current insurance businesses into new sectors and new markets and to diversify our revenue sources further to support prudent sustainable growth. I will now turn the call over to Rob. Robert Bailenson: Thank you, Dominic. In the third quarter, the PVP across our 3 insurance business lines was $91 million. This result was led by our core business, U.S. public finance. We closed U.S. public finance transactions totaling $7.9 billion of par in the third quarter compared with $5.4 billion in the third quarter of 2024. The third quarter of this year saw a marked change from the previous 2 quarters in the business mix of U.S. municipal bonds that came to market. Many BBB issuers held back from coming to market during the first 6 months of the year. This resulted in a skew toward higher rated transactions in the available market for our insurance during the first half of the year. However, in the third quarter, issuance by BBB credits came back from its temporarily lower levels and the mix of sectors and of underlying credit ratings in the municipal bonds we insured came more in line with our typical production mix, which contributed to strong third quarter results. For the first 3 quarters of the year, U.S. municipal bond issuance increased by more than $50 billion over what was already a record issuance during the first 9 months of 2024. And total primary market insured par volume rose 18%. We continue to lead the industry, ensuring 63% of the total insured U.S. municipal market par sold in 9 months 2025, compared with 57% in 9 months 2024, ensuring approximately $21 billion of primary market par through September 30. Also year-to-date Assured Guaranty ensured some of the largest transactions that came to the municipal market, reflecting the continued institutional demand for our guarantee and the increased price stability and market liquidity our insurance can provide. For example, on a sold basis, we insured 14 transactions of $100 million or more in the third quarter. Year-to-date, we insured over 40 transactions of $100 million or more. For the third quarter, this included approximately $650 million for the Massachusetts Development Finance Agency, $600 million for the New York Transportation Development Corp., New Terminal 1 at JFK Airport. $422 million for the city of Orlando and $372 million for the Illinois Municipal Electric Agency. Additionally, AA issuers and investors have continued to derive value from our guarantee. In aggregate, during the first 9 months of 2025 we issued 132 policies on bonds with AA underlying ratings across the primary and secondary municipal markets, totaling $5.8 billion of par. Further, our secondary market U.S. public finance strategy continued to produce strong results. We generated $32 million of PVP in the first 9 months of 2025, compared with $5 million in the first 9 months of 2024. The company's $1.5 billion of par written in the secondary market represented 7% of our U.S. public finance par written in the first 9 months of 2025 compared with 2.4% in the first 9 months of 2024. With $4 trillion of municipal bonds outstanding, this business has plenty of room to grow. Non-U.S. public finance added $5 million in PVP for the quarter and has contributed $19 million in PVP year-to-date. Year-to-date contributions or from several primary infrastructure finance and regulated utility transactions throughout the U.K. and the European Union as well as secondary market transactions for U.K. subsovereign credits. Global structured finance contributed $8 million in PVP for the quarter and $23 million in PVP year-to-date. Global structured finance's year-to-date PVP contribution came primarily from subscription finance and the upside of a transaction in Australia that provided protection on a core lending portfolio for an Australian bank. As Dominic mentioned, our global structured finance business has increasingly moved towards repeatable business. which generates future premiums as we see with subscription finance. And since these are shorter duration transactions, we also benefit because we earn the premiums more rapidly and can recycle that capital. For example, the new business we insured in the first 9 months of this year will mature within 5 years, and we will earn all the premiums during that period. This time frame is 2 to 3x faster than the structured finance business we were insuring just 5 years ago. We are looking forward to a solid finish for the year. I'll now turn the call over to Ben for more details on our financial results. Benjamin Rosenblum: Thank you, Dominic and Rob, and good morning. Adjusted operating income in the third quarter of 2025 was $124 million or $2.57 per share which compares with adjusted operating income in the third quarter of last year of $130 million or $2.42 per share. In comparing third quarter 2025 to third quarter 2024, it's important to note that investment income portfolio and the scheduled premiums from the financial guaranty insured portfolio, both contributed more to adjusted operating income in the third quarter of this year than the comparable period of last year. . As of September 30, 2025, our deferred premium revenue was $3.9 billion, consistent with last quarter. Large premium transactions as well as supplemental premiums on certain existing transactions contributed to the stable warehouse of earnings that offset amortization on the existing insured portfolio and demonstrate the strength of our underwriting and new business development efforts. Earnings from the investment portfolio come in several forms with different earnings recognition methods. The majority of our investments are available for sale, fixed maturity and short-term securities that are in net investment income. This portfolio earned $11 million more in the third quarter of 2025 than it earned in the third quarter of 2024 due to several factors. First, certain CLO equity tranche investments that were previously in a CLO fund reclassified to the available-for-sale fixed maturity portfolio. Net investment income in the third quarter 2025 included $9 million related to the CLO equity tranches, whereas in the prior year, the change in the NAV of the CLO fund was $8 million and was reported in equity and earnings of investees. And second, net investment income on the externally managed fixed maturity portfolio increased by $4 million as our managers reinvested into some corporate securities that were higher yielding. Offsetting these increases was a reduction in earnings of $7 million from the short-term investment portfolio as interest rates and our average balances declined. In addition to the CLO equity tranches, we have other alternative investments whose changes in NAV are reported in adjusted operating income. Earnings from this portfolio tend to be more volatile than earnings from the fixed maturity portfolio. In the third quarter of 2025, the change in NAV from these alternative investments was a $25 million gain compared with a $28 million gain in the third quarter of 2024. On an inception-to-date basis, as of September 30, 2025, our aggregate alternative investments have generated an annualized internal rate of return of 13%, substantially greater than the returns on the fixed maturity portfolio. While adjusted operating income in the third quarter of 2025 reflects a modest decline compared with the third quarter of 2024, this was primarily attributable to the amount of benefit related to improvements in U.S. RMBS recoveries. In both periods, we increased our recovery assumptions on second lien charged-off balances, which resulted in a $26 million benefit in the third quarter of this year and a $29 million benefit in the third quarter of last year. These assumption updates are based on observed trends over the past several years. Last year, we also updated recovery assumptions on first lien transactions. However, these assumptions remain static this year. Overall, we saw positive results in our third quarter loss development with a total net economic benefit of $38 million, primarily related to legacy RMBS exposures and a non-U.S. public finance exposure. As I mentioned last quarter, the largest below investment-grade exposure in the investment portfolio, which was obtained as part of a loss mitigation strategy was paid down in the third quarter. While there was no significant impact on income associated with this final resolution on an inception-to-date basis, we received over $100 million more than we paid out. In October, a commercially leased building that was part of a loss mitigation strategy for a troubled insured exposure was sold. We expect to realize an after-tax gain associated with the sale and final resolution of this exposure in the fourth quarter of approximately $10 million to $15 million more than we paid out. These outcomes showcase our multifaceted approach to loss mitigation, combining vigorous legal defenses, enforcement of our rights under financial guarantee insurance contracts and financial flexibility as well as our ability to extract value from the underlying collateral of our workout credits. Turning to capital management. In the third quarter of 2025, we repurchased 1.4 million shares for $118 million at an average price of $83.06 per share and also returned $16 million in dividends to our shareholders. Including our Board's approval earlier this week of an additional $100 million in share repurchases, our remaining authorization is $332 million. In terms of our current holding company liquidity position, we have cash and investments of $272 million, of which $35 million resides in AGL. These liquidity balances reflect the $213 million cash component of the $250 million stock redemption approved by the Maryland Insurance Administration that was implemented in August. Share repurchases, along with adjusted operating income and new business production collectively contributed to new records for adjusted operating shareholders' equity per share of over $123 and adjusted book value per share of over $181. While adjusted operating income varies from period to period, the consistent quarterly increases in these book value metrics reflect the value of our key strategic initiatives, which build shareholder value over the long term. I'll now turn the call over to our operator to give you the instructions for the Q&A period. Operator: [Operator Instructions] Our first question comes from Marissa Lobo from UBS Group. Ameeta Lobo Nelson: So first, on the changes to the investment portfolio you outlined, including higher-yielding corporates and CLO equity. How are you thinking about the ongoing allocation to these higher-yielding sectors in light of current macro trends? Benjamin Rosenblum: Were always work with our outside investment managers, and we have an internal group that looks at our investments as well, both our treasury and functional alternative investments. And our idea is to obviously both optimize the yield on our investment as well as maintain a safe portfolio with adequate liquidity in the event we have a loss. Ameeta Lobo Nelson: Okay. And just looking at the listing of the low investment grade, could you talk a little bit about the issues with the Brightline transportation exposure and what's causing some of the pressure on those deals? Dominic Frederico: Well, Brightline, as you know, is a new operation. They're having the total growing pains of a startup. They had a problem with both the choice of the lines and the number of the cars you're able to put on the availability for service. We're very comfortable with the structure, with our exposure. You remember we're in the senior most section of the capital stack, significant equity and subordinated debt is beneath us. So in terms of our view of it, they're having the typical growing pains as they get better at their management of both availability and route structure, it will basically work itself out. Ameeta Lobo Nelson: And finally, just looking at the opportunity set. I was curious if there's a place for AGO to get involved in the current data center CapEx cycle? Dominic Frederico: I'll let Rob -- but yes, absolutely. Robert Bailenson: Yes, we are actually evaluating the data center, and we are -- we look at that opportunity every quarter as well as other opportunities we have executed in new areas like liquid natural gas, and we are actively looking at data centers as well. Dominic Frederico: It's an asset that led to [ self structure ]. Operator: [Operator Instructions] our next question comes from Tommy McJoynt from KBW. Thomas Mcjoynt-Griffith: Along the same line of that previous question. But more broadly speaking, I guess, what do you guys view as the pipeline to grow written premium into 2026. So as you guys look about the various opportunities for increased infrastructure spending, any other structured credit pieces. If you could just talk about the pipeline into 2026? Robert Bailenson: Well, we see great opportunities with all 3 of our financial guaranty lines of business. In U.S. public finance, as you've seen, we've made a big investment in secondary market both internal resources as well as modernizing our systems where we can interact much more quickly with our asset managers and investors that are looking for secondary market opportunities. As you can see, we've had great success this year, and we continue to see that as an opportunity going forward and a growth opportunity given that the market is 90% uninsured, there are a lot of credits that we can actually provide value on. It also demonstrates the trading benefit and trading value that we see in the market, and it helps us on the primary execution and also those primary executions help us in the secondary market as well. In global structured finance, we're looking at core lending portfolios of banks and also regulatory capital that's needed in -- for these Europe -- most of the European and Australian banks. And as you can see, we've executed significantly in the fund finance sector, and we see continued growth opportunities there. And in Australia, we're looking at infrastructure as well, like airports and other utilities. So we're very -- we feel very strongly going forward in the sector. Dominic Frederico: Yes, I think we're very bullish on the ability of the company to produce and what production is going to look like going forward. As you look in the current quarter, it kind of reinforces our view of the domestic public finance market that we were getting hurt by a mix of business for the early quarters and this quarter kind of returned to normal and so the activity that we're able to book through that cadence. If you look internationally, as Rob says, we've got tremendous opportunities kind of across the globe where we have the law in our favor or rule of law, and those markets are expanding in terms of both asset classes, as you somebody mentioned, in terms of data centers, it's an opportunity that we've seen coming strongly. Obviously, we're concerned about the power sources for some of those things, but that's part of the underwriting equation. As Rob said, we shifted to a different type of structured finance. It's shorter term, earnings quickly, releases capital for recycling, will provide a better ROE to the bottom line of the company. Those opportunities, as more counterparties we identify and able to get an agreement with, we'll continue to expand that market and become a significant part of a repeatable business. So we look for good revenue sources to meet our underwriting criteria, and we think that there's a great opportunity globally to the type of businesses that we write and the success we've had as I said, the quarter, I think kind of verifies that or give some validation to that premise. Robert Bailenson: I also want to just reiterate, we've been actively opening up new counterparties in both Europe and Australia, that want to trade with us for their core lending portfolios and risk-weighted assets. And as we open up these lines to these banks and trading with these banks, we help them in many areas, not just in fund finance, but other parts of the balance sheet that they need risk-weighted asset protection. Thomas Mcjoynt-Griffith: Got it. And switching over to the Puerto Rico side, there were some positive developments during the quarter with the Oversight Board and some consolidation in the creditor groups. What's the onus for you guys to get more positive on -- where you'd have to book a favorable reserve development particularly around that PREPA exposure? Like what type of events would you need to see? Dominic Frederico: Well, Tommy, 2 things. One, you just cost me money because I bet the room we would not get a PREPA question. So now I'm down some bucks, thank you very much for that. What's going to really get a recognition of the value that we placed on the reserve and the claim is a deal. And obviously, we've had 3 deals that have been rescinded on us by the government. And we think we're in a very preferred position relative to being a creditor based on the appellate decision recently in terms of the perfected of our lean and the size of the claim. Now this administrative expense for the might has been disappearing. We've been steadfast in our direction in our view that we're going to defend our legal rights. And a great example is if you look at the current year, there are 3 transactions that reflect the full recovery of any paid losses or paid losses, if any, as well as an additional return on the fact that we held to our legal rights and litigated or negotiated ultimate settlements in our favor. And if you go back to RMBS, I look at it, we're 4 for 4. I don't expect to go 4 for 5. Operator: This concludes the question-and-answer session. I would now like to turn the conference back over to our host, Robert Tucker for closing remarks. Robert Tucker: Thank you, operator. I'd like to thank everyone for joining us on today's call. If you have additional questions, please feel free to give us a call. Thank you very much. Operator: This concludes today's conference call. Thank you all for attending. You may now disconnect your lines. Have a great day.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the 1stDibs Q3 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Kevin LaBuz, Head of Investor Relations and Corporate Development. Kevin, please go ahead. Kevin LaBuz: Good morning, and welcome to 1stDibs earnings call for the quarter ended September 30, 2025. I'm Kevin LaBuz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer, David Rosenblatt; and Chief Financial Officer, Tom Etergino. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our third quarter financial results and fourth quarter outlook. This call will be available via webcast on our Investor Relations website at investors.1stdibs.com. Before we begin, please keep in mind that our remarks include forward-looking statements, including, but not limited to, statements regarding guidance and future financial performance, market demand growth prospects, business plans, strategic initiatives, business and economic trends and competitive position. Our actual results may differ materially from those expressed or implied in these forward-looking statements as a result of risks and uncertainties, including those described in our SEC filings. Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today, and we disclaim any obligation to update them, except to the extent required by law. Additionally, during the call, we will present GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find on our Investor Relations website, along with the replay of this call. Lastly, please note that all growth comparisons are on a year-over-year basis, unless otherwise noted. I will now turn the call over to our CEO, David Rosenblatt. David? David Rosenblatt: Thanks, Kevin, and good morning, everyone. The third quarter was a breakthrough period for efficiency and execution, demonstrating our commitment to financial discipline. We delivered revenue and GMV at the high end of guidance and critically, disciplined expense management drove adjusted EBITDA margins to negative 1%, a 13 percentage point improvement year-over-year, well above the high end of guidance and our best as a public company. We now expect to generate positive adjusted EBITDA in the fourth quarter and for the full year 2026. Reflecting this strong financial performance and our clear line of sight to free cash flow generation, our Board has authorized a new $12 million share repurchase program. Generating free cash flow creates an opportunity to return capital, particularly if we continue to trade at a discount to our assessment of intrinsic value. We are also proving that this efficiency doesn't come at the expense of market leadership. We continue to grow and gain market share even in a tough environment. This combination of operational execution and financial rigor is the story of the quarter. The core of our third quarter effort was to build a more efficient growth engine. We achieved this by realizing a net head count reduction, new performance marketing efficiencies and other cost savings totaling $7 million annually, while growing our product development capacity. We believe that our growth potential is unlocked by investing in product and engineering. Historically, we disrupted this market via technology, and we are committed to maintaining that principle. In September, we executed a targeted reduction in overall headcount, not only to save cost, but to reallocate capital, shifting head count away from sales and marketing roles and into technology development. The net effect is a strategic shift in our workforce composition. While overall head count is lower, we are actively increasing our product and engineering team. Our conviction is simple. The most scalable and highest ROI way to meet the core needs of our buyers and sellers is through technology. This strategic realignment was anchored by the arrival of Bradford Shellhammer in August as our new Chief Product Officer and Chief Marketing Officer. This isn't just an efficiency play. It's a growth strategy. We are now primed to modernize our marketing channels, shifting investment towards high engagement formats like social video and personalized communications. Driving growth via content and community. This marketing reorganization in combination with increasing our product development capacity significantly enhances our operational agility and allows us to deliver richer, more consistent value at every customer interaction. The focus in the third quarter was on architecture and foundation. We began a deep review of our highest leverage opportunities in 4 core business drivers: fueling new buyer growth retaining and engaging existing buyers, improving monetization and ensuring seller success. We are currently developing our 2026 product road map and are excited to share more details during our fourth quarter earnings call. Turning to the third quarter. funnel performance demonstrated clear evidence that our product-led strategy continues to produce results. Our ongoing optimization efforts drove our eighth consecutive quarter of conversion growth, proving the compounding impact of our continuous product iteration. We also saw AOV strength during the quarter. While we observed a slowdown in traffic, the combination of conversion growth and rising average order value drove GMV acceleration. That success in conversion was driven by specific product initiatives designed to increase buyer trust. Our most significant launch in the third quarter directly targeted a major point of buyer friction pricing. Competitive pricing is a key pillar of our product strategy. The objective here is to ensure that the marketplace offers fair and transparent item prices and shipping costs. Over the past year, we have built the foundation for this through the full rollout of our machine learning-based pricing models across all verticals, which bring transparency to a historically opaque market and reinforce buyer trust. In the third quarter, we introduced the technology to enforce another component of the strategy, price parity. With tools like Google Lens and browser extensions, making it easier than ever for buyers to comparison shop, price inconsistencies between platforms can undermine buyer trust and damage our brand reputation. Potentially creating an incentive for buyers to circumvent our platform. To combat this, we launched the first phase of an automated enforcement mechanism that ensures that items listed in our marketplace are priced at or below their price on competing sites in accordance with our terms of service. So far, nearly 90% of identified violation have been remedied by sellers. This is a critical step in reinforcing trust as pilot data showed that items updated at parity saw conversion increases. This initiative moves our policy from soft guidance to consistent automated enforcement, ensuring a more confident and frictionless experience for buyers and driving higher GMV for compliant sellers. Price parity proves that our team can solve complex problems to make sure that we can tackle even more ambitious initiatives faster, we are making significant advancements in integrating AI into our product development process. We view AI as a powerful tool to drive both internal efficiency and customer value. This quarter, our focus was on maximizing employee productivity. Within engineering, we estimate that over 25% of all new code is being written by AI, accelerating our development process. By building AI into our workflows, we are ensuring that our new leaner cost structure maximizes output and product velocity. Beyond engineering efficiency, we are actively incorporating an AI component into every major initiative in our road map. We also continue to make progress in our advertising program by leveraging our high-quality, high-intent audience. For our core sponsored listings, the third quarter focused on efficiency, expanding inventory and optimizing the ad load for better seller visibility. More strategically, we successfully launched our first non-endemic advertiser in late-September. This validates the value of our audience, but the revenue opportunity is still nascent and will develop over time. Moving to the health of our supply. The third quarter underscored our commitment to high-quality, high-performing inventory. We ended the period with nearly 1.9 million total listings, marking continued growth, up 1%. As anticipated, the number of unique sellers continues to stabilize following our 2024 pricing actions. We ended the quarter with approximately 5,800 unique sellers indicating that the major headwind from the essential seller program is now largely behind us. This disciplined strategic focus resulted in a healthier, more valuable marketplace with the churned cohort having a minimal impact on GMV and listings. This strategic pruning allows us to reinforce our core value proposition. Our 2025 seller sentiment survey confirmed that 1stDibs is now the primary sales channel for our sellers, surpassing their own showrooms for the first time. This finding underscores the platform's growing relevance and reinforces our unique position as the premier essential destination for luxury design. Because we've successfully aggregated supply around the highest quality dealers, we expect to be in a strong competitive position, when the luxury market rebounds. Given the significant product enhancements we have delivered to our dealers, we believe the platform now offers a dramatically higher ROI for our sellers. Our ability to deliver this high ROI is a direct result of sustained investments in marketplace technology. To ensure that we can continue to invest in the technology that powers their success, we executed a subscription pricing action on certain seller cohorts on October 1. This marks our first broad-based increase for this segment, since 2019. This decision reinforces the status of the platform as an essential sales channel, underpins the platform's long-term sustainability and provides a tangible tailwind to our recurring revenue. In closing, the third quarter was defined by focus and execution. We successfully executed a major strategic realignment, fundamentally redesigning our organization to prioritize high ROI technology investments and further reduce our cost structure. The results, we delivered our best adjusted EBITDA margin as a public company, confirming that this realignment represents a major step forward on our path to profitability. Our commitment to reaching adjusted EBITDA positive is absolute and we have maintained this rigor, while successfully reallocating capital to technology that will serve as the engine for our future expansion. We continue to gain market share and we now have the durable financial model needed to capitalize on the next phase of e-commerce growth. We've built the foundation. Now we're ready to accelerate. Thank you for your continued support. I will now turn it over to Tom to review our third quarter financial results and fourth quarter outlook. Thomas Etergino: Thanks, David. Good morning, everyone. Our record third quarter margin performance validates the comprehensive effort to improve efficiency that we began in 2022 by protecting and growing our technology investments, we have structurally lowered our operating expenses, while enhancing our long-term growth trajectory, setting the stage for sustainable margin expansion in the years ahead. Our commitment to efficiency is clear. Operating expenses were down 6% year-over-year and down 10% when excluding severance costs. This reduction is fundamentally changing the profitability curve of this business. Third quarter performance confirms we are making good progress on our path to profitability by structurally lowering our breakeven point. I will now walk you through the details that support these outcomes. From a funnel perspective, third quarter results validate the effectiveness of our product road map. Our ongoing optimization efforts drove our eighth consecutive quarter of conversion growth, which accelerated during the period. AOV also rebounded. While we observed a partial offset due to softening traffic growth, driven in part by a reduction in performance marketing spending, the combination of conversion growth and AOV rebound drove the GMV acceleration. GMV was up 5% in the third quarter versus down 2% in the second quarter. On-platform average order value of nearly $2,700 and median order value of approximately $1,300 were both up 10%. This dynamic was driven by a slight mix shift towards higher-value orders. In addition, the year-ago period also included auction orders, which have below-average AOVs, creating an easier comparable base. Returning to funnel trends. Traffic softened driven by lower paid traffic, where we tightened efficiency thresholds and reduce performance marketing spending. We ended the quarter with over 75% of traffic from organic sources, up 3 percentage points year-over-year. This organic strength is a key financial advantage, reflecting the power of our brand and a low dependence on performance marketing to drive traffic. Both our core buyer segments, trade and consumer grew GMV. This broad-based growth confirms the platform's value proposition with the Trade segment driving slightly stronger growth year-over-year. Vertical performance highlights the diversification of our marketplace. Art, which accounts for a low teens percentage of total GMV was the fastest-growing vertical, up double digits. We also saw strong GMV growth in jewelry and vintage and antique heat furniture. Active buyers totaled approximately 63,200 at quarter end, up 1%. Turning to supply. We ended the quarter with approximately 5,800 unique sellers, down 17%. As seller count continue to normalize following our 2024 pricing actions. We closed the quarter with nearly 1.9 million listings, up 1%. This outcome shows that the elevated churn from our pricing optimizations were successfully isolated to low-impact sellers, resulting in de minimis financial impact in both GMV and listings. Our focus remains on the quality of our supply base. Moving on to the income statement. Net revenue was $22 million, up 4%. Transaction revenue, which is tied directly to GMV was approximately 75% of total revenue with subscriptions making up most of the remainder. Take rates declined approximately 40 basis points year-over-year due primarily to a mix shift in order value. Gross profit was $16.3 million, up 9%. Gross profit margins were 74%, up 3 percentage points year-over-year. Gross profit margins included a nonrecurring insurance recovery related to a prior shipping matter, which contributed approximately 1 percentage point to our reported margins. On an adjusted basis, gross profit margins were at the high end of our 71% to 73% guidance range. Sales and marketing expenses were $8 million, down 13%. Excluding severance charges of approximately $800,000, sales and marketing expenses were down 22%. This outcome is a direct reflection of our continued expense discipline and the strategic realignment we executed in September. We realized savings from lower personnel costs and simultaneously tightened our performance marketing efficiency thresholds. Sales and marketing as a percentage of revenue was 36%, down from 44% a year ago. Technology development expenses were $5.9 million, up 8%, driven by higher headcount-related costs due to our annual merit increases awarded in March and additional bonus awards in the quarter. As a percentage of revenue, technology development was 27%, up from 26% a year ago. General and administrative expenses were $6.4 million, down to 7% due primarily to lower headcount-related costs. As a percentage of revenue, general administrative expenses were 29%, down from 32% a year ago. Lastly, provision for transaction losses were approximately $790,000, 4% of revenue, flat year-over-year. Total operating expenses were $21 million, a 6% decrease, excluding severance cost of roughly $800,000, operating expenses were down 10%. The strategic realignment executed in September fundamentally changes our profitability equation. The estimated $7 million in annual savings structurally lowers the revenue level required for us to break even. A reduction in performance marketing spend is the largest component of these savings achieved by raising our efficiency thresholds for new consumer acquisition. While this deliberate decision will reduce our paid traffic volume, it confirms our commitment to self-sufficiency. We are leveraging this reduction to create a more efficient cost structure that can achieve profitability with minimal reliance on top-line growth. Adjusted EBITDA loss was approximately $240,000 compared to a loss of $3 million last year. Adjusted EBITDA margin was a loss of 1% compared to a loss of 14% a year ago. Moving on to the balance sheet. We ended the quarter with a strong cash, cash equivalents and short-term investments position of $93 million. We maintain a robust cash position, but our future focus is on free cash flow generation. Following this quarter's success in cost reduction, we now have a clear line of sight to generating positive adjusted EBITDA and free cash flow. This confidence is why our Board has authorized a new $12 million share repurchase program. As we ramp free cash flow generation over time, our financial flexibility increases, allowing us to be opportunistic with capital deployment. Given our belief that our shares are currently trading at a discount to their intrinsic value, this represents an excellent opportunity for shareholder value creation. Turning to the outlook. Our guidance reflects quarter-to-date results and our forecast for the remainder of the period. We forecast fourth quarter GMV of $90 million to $96 million, down 5% to up 2%. Net revenue of $22.3 million to $23.5 million, down 2% to up 3%, and adjusted EBITDA margin of positive 2% to positive 5%. Our GMV guidance reflects continued conversion and AOV growth, a slowdown in traffic due in part to our higher efficiency thresholds in performance marketing. This trade-off is strategic we are accepting lower traffic and lower near-term order volume in exchange for significantly higher margins and better unit economics. Our revenue guidance reflects the full quarter benefit of the seller subscription price increase, which took effect on October 1. Our adjusted EBITDA margin guidance reflects structural efficiency gains from the lower performance marketing and personnel costs following the September strategic realignment. Seasonally higher revenue and gross profit margins at the high end of our 71% to 73% range. In addition, our fourth quarter expense base reflects a temporary tailwind of approximately $300,000 from the strategic realignment. The immediate savings from the reduction of sales and marketing roles creates a short-term benefit to margins that will moderate as we onboard the product and engineering roles over the next few quarters. In summary, the third quarter was a pivotal period. We continue gaining market share, while structurally reducing the revenue needed to breakeven. The cost reductions we implemented led directly to our best adjusted EBITDA margins as a public company. This gives us high confidence in our outlook. We are tracking to achieve positive adjusted EBITDA and free cash flow in the fourth quarter and for the full year of 2026, assuming low single-digit revenue growth. A major financial milestone that proves we are successfully building a capital efficient and resilient business model. We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you. I will now turn the call over to the operator to take your questions. Operator: [Operator Instructions] Your first question comes from the line of Ralph Schackart with William Blair. Ralph Schackart: Maybe just kind of kick things off. Can you provide a bit more color on the rationale and the benefits you expect from your September strategic realignment. It sounds like you've made some fairly significant changes here, particularly in performance marketing, strategy. But if you sort of outlined the major benefits you expect beyond just the important sort of movement to positive EBITDA? And then I have a follow-up. David Rosenblatt: Ralph, sure. So this September realignment was really the most recent stage of a process that began 3 years ago in order for us to get to breakeven. And I think it's worth noting that in total, this process has reduced our GMV breakeven by almost $250 million. Throughout the process, we've really been focused on all parts of our cost structure. Headcount, performance marketing, which you mentioned, as well as external vendor relationships. The goal for this 1 was really twofold. First, to achieve adjusted EBITDA profitability in the fourth quarter of this year and then also to maintain that profitability and also reach positive free cash flow for the full year '26. And then second, importantly, to reallocate head count and non-headcount investment from sales and marketing to higher ROI engineering and product development. And so we're now at a point, where roughly 50% of our head count is in product engineering, which I think is a good place to be. Ralph Schackart: Great. And it sounds like you had a pricing increase, I think you said on October 1. Can you give us a sense of the order of magnitude there and how the platform has performed, since you push through the price increase? David Rosenblatt: What was the second part of the question? Ralph Schackart: Just on the price increase, what the reaction has been from -- as a result of pushing that through? David Rosenblatt: Yes. So I mean, in general, we try to make sure that our prices to sellers align with the value that we create. We've obviously made a lot of improvements and investments into the platform. Since 2019, yes, we really haven't meaningfully changed rates over that time. And so this was a very targeted combined subscription increase and also in -- at certain price points, commission increase. The subscription part of it only impacted about 20% of our sellers and amounted to roughly a 10% increase on those 20%, and we saw no meaningful increase in churn. As a result, I think because of the sort of proportionality between value creation and the costs that we charge our sellers. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending, and you may now disconnect.
Operator: Good morning, and thank you for standing by. Welcome to the Flowers Foods Third Quarter 2025 Results Conference Call. Please be advised that today's event is being recorded. I would now like to hand the conference over to your opening speaker today, J.T. Rieck, Executive Vice President of Finance and Investor Relations. Please go ahead. J. Rieck: Hello, and good morning. I hope everyone had the opportunity to review our earnings release, listen to our prepared remarks and view the slide presentation that were all posted earlier on our Investor Relations website. After today's Q&A session, we will also post an audio replay of this call. Please note that in this Q&A session, we may make forward-looking statements about the company's performance. Although we believe these statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially. In addition to what you hear in these remarks, important factors relating to Flowers Foods business are fully detailed in our SEC filings. We also provide non-GAAP financial measures for which disclosure and reconciliations are provided in the earnings release and at the end of the slide presentation on our website. Joining me today are Ryals McMullian, Chairman and CEO; and Steve Kinsey, our CFO. Ryals, I'll turn it over to you. A. McMullian: Okay. Thanks, J.T. Good morning, everybody. Welcome to our third quarter call. Our proactive efforts to strategically align our portfolio with consumer demand are yielding positive results. By effectively targeting areas of opportunity with differentiated offerings, we're finding pockets of growth amid ongoing pressures in the bread category. To address these challenges, we're redefining traditional loaf, incorporating value and better-for-you attributes that align with evolving consumer preferences. While it will take time, we're confident our strong portfolio of brands will successfully enable this transformation. I'd like to take this opportunity to thank our dedicated Flowers team for their hard work and resilience during this period of change. We are also grateful for the ongoing support of our shareholders as we strive to enhance long-term performance. And finally, I'd like to acknowledge that this will be Steve Kinsey's final earnings call after 18 years as our CFO. His contributions to Flowers have been invaluable, and we're deeply appreciative of his leadership throughout the years. We wish him all the best in his future endeavors. And with that, Daniel, we're ready for questions. Operator: [Operator Instructions] Our first question comes from Scott Marks with Jefferies. Scott Marks: First thing I wanted to ask about, you made some comments in the prepared remarks about consumer sentiment reaching a low point for the year in Q3, but you also made comments about expecting category demand to normalize as the economy strengthens. So maybe if you can just help us understand how you're thinking about that and maybe what gives you confidence in the recovery of the category and the normalization of demand? A. McMullian: Sure. Thanks, Scott. Of course, it's tough to pinpoint the exact time line, right? But we do think over time, the category will stabilize. This is a very large category. It's a staple in many households in the United States. I think we've just got to get some of this noise out of the way. People are still very concerned about tariff situation. The job market now with the government shutdown and the disruption that, that has brought, I think it's going to take a little bit of time to work our way through that. So we do see the weakness continuing at least partway into '26 from where we stand right now, but we do think over time, it will stabilize. I think in the meantime, it's important for us to continue focusing on the consumer, continuing to invest in the consumer, bringing those both value and better-for-you offerings to the consumer, which is clearly where they're going, and that's what we intend to do. Scott Marks: Appreciate that and then the second question for me would be, you talked about some of your newer investments pressuring margins a little bit, just investing to kind of generate consumer trial and ramp volumes. Maybe how should we be thinking about offsets to that within whether it's the supply chain efficiencies or any other offsets that you can call out for us? A. McMullian: Yes. You're spot on there, Scott. I mean we're focused on the long term. And so that means continuing to invest in the consumer. And we will continue to do that. I think you've seen us do that with all the innovation that we brought to market over the last several years. But the truth of the matter is, I mean, all innovation tends to pressure margins in the short term. They're newer items. But as we build scale and as we make targeted CapEx investments to increase our throughput and efficiency, we expect those margins to improve. Operator: Our next question comes from Steve Powers with Deutsche Bank. Stephen Robert Powers: Okay. Congrats again to you, Steve, and thanks for your help over the years. So first question, just maybe to follow up on Scott's initial question, just around the consumer and I guess, your sort of your planning stance into '26. You talked about some signs of stabilization in the category over the course of 3Q, but then some weakening as the quarter came to an end. So just -- I guess, just thinking about fourth quarter and sizing up '26 scenarios, are you expecting more or less the status quo to prevail? Or are you building in allowances for things to maybe get a little bit worse before they get better? A. McMullian: More towards the status quo with some opportunity for improvement. I mean you're spot on that in Q3, periods 8 and 9, we saw the category begin to stabilize. But comping what, 5 named storms last year and 0 this year was a pretty tough comp in period 10. So you could see the category did fall off in period 10. But since then, it started to migrate back to where it was trending in periods 8 and 9. Stephen Robert Powers: Yes. Okay. Perfect. Yes. So more just the comparisons versus the storms of last year. Makes sense. A. McMullian: Yes, that's right. Stephen Robert Powers: Okay. And then the other question I wanted to ask is it was just around Simple Mills. It was a point of upside, at least versus our estimates in the quarter. And in the prepared remarks, talked about general strength and performance in line with your own expectations. Maybe just go a little bit deeper and highlight some of the areas where you've seen the most progress since acquisition and where as you integrate and build further, you see the most opportunity? A. McMullian: Yes. The first thing I would call out is just the collaboration effort between our teams. The integration is going exceedingly well. We're finding areas of opportunity in customer engagement, in procurement, among other areas, and across their categories, they still continue to perform very well, and as we noted in the prepared remarks, in line with our expectations. We're very excited about next year for Simple Mills. Of course, we're not giving guidance today, but they do have quite a bit of new innovation coming for next year that we're all pretty fired up about, and so we're -- overall, Steve, we couldn't be more pleased. Operator: Our next question comes from Jim Salera with Stephens. James Salera: Steve, it's been a pleasure working with you. Hopefully, you have a long vacation planned as we get into the beginning of next year, taking advantage of some time off. Ryals, I wanted to maybe ask a little bit more detail around the other segment because branded retail actually came in ahead of what we were modeling and the other piece came a little bit behind. I would assume that's foodservice, just given some of the headwinds that QSR and the industry has been facing. But can you offer any color there, maybe kind of foodservice and your private label business performance? A. McMullian: Yes. Jim, the foodservice business has been under pressure, not surprisingly, given the economic environment and consumer sentiment. So that's really all that is. I would continue to note, though, that despite that weakness, the work that we've done over the last 2 to 3 years to improve the profitability of that business is still delivering very nicely on the bottom line. So that's good to see. But we -- look, we would expect that to recover as the economy recovers. It tends to ebb and flow with that. So nothing terribly unusual there. Volumes were a little bit better in that other category, primarily due to vending. So you may note that as well. Private label is interesting because it has been weak. You can see that in the syndicated data, which may seem kind of strange given where we are economically. But the price gaps between private label and some of the lower-priced branded products have narrowed significantly. And so I would chalk it up to that. James Salera: Okay. Is it a fair way to think about just because we have a little bit less visibility on foodservice. Is that kind of run at the same pace of industry traffic? Or is there a way for us to think about kind of incorporating that into our model? A. McMullian: Yes. You can look at traffic, would be a good indicator. And remember, our foodservice business is really broad, right? So it's broad line through the big distributors, but it's also QSR, which has clearly been under pressure. We compete across all those channels. So it's just general weakness across foodservice given the economic environment. James Salera: Okay. And then if I could sneak in one more. You guys brought down your expectations for headwinds from tariff, but we've also recently seen some step-up in ag commodity prices. Can you just offer any thoughts around how we should kind of be putting together puts and takes as we think about modeling your '26 gross margins, if there's maybe opportunity for upside there or with kind of all the moving pieces, that should probably be a little bit more conservative from our view. R. Kinsey: I mean, Jim, Ryals has made a statement. Obviously, we're not prepared to give guidance for 2026 today. But what I would say, when you look kind of across the whole bucket, we are still expecting inflation. I mean wheat commodities are still very volatile. There are other things that are going to be up next year. Obviously, we only had tariffs for part of the year this year. So when we give guidance on 2026, my guess is you'll see some inflationary pressure with regard to input costs. Operator: Our next question comes from Max Gumport with BNP Paribas. Max Andrew Gumport: Congrats, Steve. First, on the dividend and on cash. So you noted you're reducing your expectations for CapEx this year as you focus on returning to a more normalized leverage ratio. I was hoping you can talk about the balance between pulling this lever, pulling down CapEx versus reconsidering whether the dividend is at an appropriate level. And I'm really asking because it feels like an acknowledgment or an early admission that this combination of your leverage and the dividend are restraining to some degree, your ability to invest in the business. R. Kinsey: Yes. I mean, obviously, every quarter or throughout the year, we consider capital allocation. It's very important to us. I mean we're very focused on delivering shareholder value. I would say from a CapEx perspective, the pullback, while we are focused on our deleveraging, and this is part of the -- would be part of the strategy, a lot of it has to do with project cadence. We shifted some of the projects into next year. And then we did a reassessment of projects to make sure we're only doing the projects that deliver the best return. So I'd say it's exclusive of any consideration around dividends necessarily. And then on a quarterly basis, our Board considers the dividend. I don't want to get ahead of anything or speculate. But the reality is the focus is always on delivering the shareholder value, and then based on the facts and circumstances at the time, the Board makes their decision from a dividend policy perspective. So I'd say really no difference in philosophically how we think about capital allocation. But obviously, we're aware of our leverage ratios, we're well aware of the payout ratio and all of that will go into consideration as we think about capital allocation going forward. Max Andrew Gumport: Okay. And then coming back to margins. So this quarter, your gross margin was down 190 basis points. EBITDA margin was down 160 basis points, and that looks to be despite the tailwind you've actually had some lower ingredient costs as a percent of sales. So it feels like negative price mix and lower volumes are really starting to pressure your margins, given the competitive environment and the consumer environment don't seem to be swinging to positive at least in the early part of '26. It's not clear that either of those pressures will be dissipating in the near term. So I'm just curious how you're thinking about the potential need to navigate through several more quarters of margin pressure. R. Kinsey: Yes. When you look at the gross margin, I mean, obviously, there is the top line pressure. I mean Ryals talked about the consumer, and you've seen that we've had more promotional activity. So that is causing some of the gross margin pressure. But the largest item on gross margin actually has to do with Simple Mills and the fact they're 100% co-maned. So obviously, that's a higher cost product. So that is the key -- one of the key items that impacted gross margin overall for the quarter. We'll lap that February of next year. So if the category were to stabilize or we would see some improvement in overall consumer sentiment, putting aside any inflationary environment, margins should benefit from that. And then on the SG&A side, if you recall, we converted a big part of our labor pool in California from independent distributors to company employees. So that's a big driver of that. We'll lap that next year as well, and then overall labor costs have been up. So again, from SG&A as a percent of revenue, it does go back to kind of the pressure on the top line, but I'd say there's really no one item that I'd call out as overly impacting the overall EBITDA margin from SD&A except for labor. Operator: [Operator Instructions] Our next question comes from Mitchell Pinheiro with Sturdivant & Co. Mitchell Pinheiro: Steve, yes, I wanted to just congratulate you on a heck of a run. And yes, it's certainly great working with you. And I guess you were the third CFO of Flowers I've known. So -- and I guess the longest of those runs. So again, congrats. So I have a question, Ryals. On one hand, we talked generational shift in your prepared remarks, and then we're also talking consumer weakness, especially at the low end, but they're still eating. They're still there, and bread has consistently evolved towards better for you. I mean it's just been a natural evolution. So nothing's really changed there. So I'm curious if you could try to tie sort of generational shift to the sort of economic weakness in your remarks. A. McMullian: Yes. I think it's more than just the economic weakness. Certainly, that plays a role, Mitch. I mean you've been around a long time, and you've seen when we enter periods of economic uncertainty, there's always trade down from traditional loaf to more value-oriented brands like private label or otherwise. So I do think that, that does play a role in this, but the shift that we're really talking about is centered around traditional loaf, meaning the traditional 20-ounce soft variety and white breads, and there has definitely been a shift, frankly, that's been underway for several years now, but it has just accelerated over the last 12 to 18 months, where the category is really bifurcated into premium, differentiated, or value, and traditional loaf has really taken it on the chin because of that. That's very impactful for us, obviously, because we're very concentrated in that category, particularly given we have the #1 brand and #1 SKU in that category, but we are intent on redefining traditional loaf. We think we've got a great opportunity with the strength of our Nature's Own brand to lead the category in the transformation of that particular segment. We clearly acknowledge the challenges that we're facing in the short term, given that consumer shift, but we have growing optimism in the longer term, and that's primarily due to two things: one, our team, which I think is the best in the industry; and two, our portfolio of #1 brands. So we will continue to invest in the consumer, continue to innovate. You've seen us do that over the last several years, we're making significant progress, and while at the same time, working to optimize our cost structure. I mean you look in the quarter, Mitch, and you see Canyon up 6% in units, Dave's Killer Bread, up 10% in units. You've seen us enter into the small loaf category that definitely addresses a consumer need. And in the quarter, we gained 15 points, 15 full points of unit share, and we're already #2 under that Nature's Own banner, and while that category is growing 85%, obviously, off of a small base, but significant growth. So I believe we're doing all the right things for the long pull while we try to mitigate the challenges in the short run. Mitchell Pinheiro: So listen, I mean, Nature's Own has obviously been a tremendous success story, and it is weighted towards traditional loaf, but you also have Merita and Sunbeam and I don't know, Captain John Derst's bread and all these other breads underneath, where do they stand? I mean, is it -- I know they're important for regional shelf space and things like that, but I'm just curious, they seem to be left in the dust a little bit, and I'm curious if they're -- how strategic they are. A. McMullian: Yes. That's been a change that's been underway for many years now, Mitch, and I would tell you that the regionals have been fairly deemphasized over the last 8 years or so, 8 to 10 years, and the primary reason for that is retailer consolidation. You can't run a national ad with Sunbeam, which you can with Wonder, and you can with Nature's Own. Now certainly, they do play important roles in particular markets like take Sunbeam in Atlanta or Bunny in Louisiana, they are still very important brands, but they're much smaller than they used to be. They've been supplanted by the likes of Nature's Own and Wonder over time. Mitchell Pinheiro: So okay. And then just last question on that is, I mean, it certainly would add complexity to -- not that you want to get rid of brands, but it certainly adds sort of unnecessary complexity to have these smaller brands, and so is that not a problem? Is that not an issue? Or do you have sort of a solution for that? A. McMullian: Not so much with the regional brands, but I do agree with you overall regarding complexity, and that's one of the reasons we talk about a little bit of near-term margin pressure from all the innovation we're bringing forth because that does -- the small loafs are growing very, very fast, but it's still relatively small, right? And you're introducing an additional complexity into a bakery that's accustomed to running really fast runs of Nature's Own Butter bread, for example. But it is what the consumer wants, and we're all about being there for today's and tomorrow's consumer, and over time, as I mentioned, as we make targeted investments in the bakeries to increase the efficiency and throughput of those products, those margins will begin to rise. So it to me, I'm not very concerned about it. It's a short-term issue that I'm willing to undertake because I know I'm delivering for the consumer. Mitchell Pinheiro: Okay. And just a couple of things. You're down to 44 bakeries. Is that going to be the right number for a while? Or are there opportunities for additional consolidation? A. McMullian: Mitch, we're always evaluating our cost structure, and we know that we have further supply chain optimization to take place, where and when that will occur is too speculative, but it is certainly top of mind that we need to -- particularly in this environment and going forward, we need to be as efficient as we can possibly be. So removing complexity, increasing focus and making sure that we're optimized from a cost structure standpoint is top of mind. Operator: I'm showing no further questions at this time. I would now like to turn it back to Ryals McMullian, Chairman and CEO, for closing remarks. A. McMullian: I want to thank everybody for taking time today and joining us for questions. We very much appreciate your interest in our company, and as always, we look forward to speaking with you again next year, actually. So take care. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning. My name is Olivia, and I'll be your conference operator today. At this time, I would like to welcome everyone to TransAlta Corporation Third Quarter 2025 Conference Call. [Operator Instructions] Thank you. Ms. Paris, you may begin your conference. Stephanie Paris: Thank you, Olivia. Good morning, everyone. My name is Stephanie Paris, and I am the Vice President of Investor Relations and Corporate Strategy of TransAlta. Welcome to TransAlta's Third Quarter 2025 Conference Call. With me today are John Kousinioris, President and Chief Executive Officer; Joel Hunter, EVP, Finance and Chief Financial Officer; Blain van Melle, EVP, Commercial and Customer Relations; and Nancy Brennan, EVP, Legal and External Affairs. Today's call is being webcast, and I invite those listening on the phone lines to view the supporting slides that are posted on our website. A replay of the call will be available later today, and the transcript will be posted to our website shortly thereafter. All the information provided during this conference call is subject to the forward-looking information statement qualification set out here on Slide 2, detailed further in our MD&A, and incorporated in full for the purposes of today's call. All amounts referenced are in Canadian dollars, unless otherwise noted. The non-IFRS terminology used, including adjusted EBITDA and free cash flow are reconciled in the MD&A for your reference. On today's call, John and Joel will provide an overview of TransAlta's quarterly results. After these remarks, we will open the call for questions. With that, I will turn the call over to John. John Kousinioris: Thank you, Stephanie. Good morning, everyone, and thank you for joining our third quarter conference call for 2025. As part of our commitment towards reconciliation, I want to begin by acknowledging that our company operates on the traditional territories of indigenous peoples across Canada, Australia, and the United States. We recognize the rich and diverse histories, cultures, and contributions of the First Nations, Inuit, Metis, Aboriginal and Native American communities. And it is with gratitude and respect that we thank the peoples who have lived on these lands, for reminding us of the ongoing histories that precede us. TransAlta delivered solid performance during the third quarter, demonstrating our fleet's resilience during challenging market conditions. Our Alberta portfolio hedging strategy and active asset optimization continued to generate realized prices well above spot prices, while availability remained high across the fleet. During the quarter, we delivered adjusted EBITDA of $238 million, free cash flow of $105 million or $0.35 per share and average fleet availability of 92.7%. Based on our results to date and expectations for the fourth quarter, we remain confident in achieving our 2025 guidance range. We're tracking to the lower end of the adjusted EBITDA range and the midpoint of free cash flow, which Joel will speak to later in the call. As you all know, a key priority for our company is to progress our legacy thermal opportunities, which we continue to do during the quarter. In Alberta, our data center project will contribute to powering a new industry in the province. And in Washington, our Centralia project will support reliability for decades to come. Commercial negotiations for both projects continue to progress during the quarter. And while we remain confident in our advancement of these key priorities, we've decided to shift the timing of our Investor Day to the first quarter of 2026, following data center and Centralia announcements. We will provide you with detailed updates on both projects and their impact on our company, as well as the opportunities we see across all of our core markets at that time. Returning to the quarter, we executed agreements to extend our committed credit facilities totaling $2.1 billion with our syndicate of lenders. Our syndicated facility of $1.9 billion now has a maturity of June 30, 2029, and our bilateral credit facilities of $240 million were extended by 1 year to June 30, 2027. During the quarter, we completed the sale of a 100% interest in the 48-megawatt Poplar Hill facility, as required under the terms of the Heartland Generation acquisition. And following the quarter, on October 2, we also closed the sale of a 50% interest in the 97-megawatt Rainbow Lake facility. The proceeds from the divestitures go to Energy Capital Partners, as agreed to under the terms of the transaction. This marks the successful conclusion of the remaining regulatory requirements for the Heartland acquisition. In August, the AESO announced its final design for the restructured energy market, or REM, which I will speak to momentarily. The government of Alberta also introduced proposed amendments to the TIER regulations. The proposed changes include recognition of on-site emissions reduction investments as a compliance pathway under the TIER system. This may impact the emission credit market. However, as most of our credits are deployed internally towards our gas fleet emissions obligations, we do not anticipate this change, if implemented, to be material to our business. And finally, we continue to engage directly and collaboratively with the Government of Alberta and the AESO, on the Alberta data center strategy and their approach to large load integration. Turning more specifically to the work that we're doing in realizing the value of our legacy generation sites. At our Centralia site, we're actively engaged in commercial negotiations with our customer and expect to be in a position to execute a definitive agreement before year-end. At that time, we will be able to share our detailed development plans for the site. We also continue to progress our Alberta data center strategy and the associated commercial negotiations. Recently, we entered into a demand transmission service contract with the AESO for 230 megawatts, representing the full allocation awarded to the company through Phase 1 of the AESOs data center Large Load Integration program. In September, Parkland County unanimously approved the rezoning of over 3,000 acres of TransAlta-owned land surrounding our Keephills and Sundance facilities to support future data center development. We're grateful for this community support, which represents an important milestone to advance the opportunity for new investment, job creation, and economic growth in the region. We continue to work closely with our counterparties on their data center project and are steadily progressing towards the finalization of a memorandum of understanding. We also continue to engage directly with the provincial government and the ISO on Phase 2 of the Large Load Integration program. We're excited about the data center opportunity in Alberta and the meaningful investment it can bring to the province. In August, the AESO announced its final design for the Alberta restructured energy market or REM. The structure is consistent with our expectations, adds greater certainty to the market, and supports system reliability, something our diverse and dispatchable generating fleet in Alberta is well suited to provide. Notably, the REM will help ensure appropriate price signals are received by generators to enable reliable generation investment and ensure Alberta is competitive with other jurisdictions. The REM contemplates an increase in the provincial price cap to $1,500 per megawatt hour and eventually to $2,000 per megawatt hour, with additional administrative scarcity pricing during periods of tight system conditions. The REM also creates a new ramping product to enhance system reliability, which our dispatchable fleet is well positioned to serve and mitigates against any adverse impact from the adoption of locational marginal pricing for incumbent generators through the allocation of financial transmission lines. The REM is expected to be implemented in 2027 or 2028, and we will continue our active engagement in the AESO consultation process, which is now focused on implementation. We believe that the changes to the market provided by the REM, coupled with the anticipated load growth from the fully allocated 1.2 gigawatts of data center system access granted by the ISO will see Alberta's power supply and demand imbalance improve, and lead to a recovery in the merchant power price in the province, benefiting our diversified legacy fleet. The forward price has begun to reflect the changing supply and demand dynamic in the province, driven by electrification, data center load, and population increases, along with the slowdown in incremental new supply coming online, which makes our existing generating fleet increasingly valuable. There appears to be a reaction today to a reference to Project Greenlight's data center in-service date being pushed out to 2030. Our understanding is that that is very much an outside date and that Kineticor and their customer are still driving to have the project in service in 2027 or 2028. It remains our view, based on the information that we have, that forward prices do not yet fully factor in the impact of the REM or 1.2 gigawatts of data center load that will be coming online. The gradual increase in load we now expect will rebalance the current oversupply of generation in the province and drive opportunities for growth in the long term. TransAlta's dispatchable thermal and hydro fleet have existing capacity to provide reliability and serve the expected load growth. Before I turn the call over to Joel, I'd like to offer a few words on my upcoming retirement. As we announced today, I will be retiring from TransAlta and its Board, effective April 30, 2026. It has been an honor to lead TransAlta, and to work with such a committed and talented team. Together with our Board, we have evolved our business and built a strong foundation for the future by increasing shareholder returns, delivering strong financial results, navigating regulatory change, diversifying our business, and positioning our fleet to meet the customer needs of the future. I fully support Joel, as the next President and CEO of TransAlta. He's a proven leader and the right person to advance TransAlta's strategy. I look forward to working with him, management, and the Board, over the coming months to ensure a successful transition. I'll now pass the call over to Joel. Joel Hunter: Thanks, John, and good morning, everyone. I'd like to start by offering my congratulations to John, on his upcoming retirement, and thank him for his leadership, guidance, and strategic vision for TransAlta, as well as his active support of my leadership. I look forward to working together to ensure a smooth transition and continued execution of our strategic priorities. We will announce the CFO successor in the coming months. Turning now to our third quarter results. I'll start with an overview of the period, where our fleet demonstrated resilience in softer market conditions. During the quarter, we generated $238 million of adjusted EBITDA, which was $77 million lower than the third quarter of 2024, due to lower Alberta and Mid-C power prices, subdued market volatility impacting energy marketing and trading results, and lower contract revenue from our Centralia facility. Turning to our segmented results relative to the same period of 2024. Hydro segment adjusted EBITDA decreased to $73 million compared to $89 million last year due to lower spot power prices in Alberta, as well as lower ancillary services revenue, which was impacted by lower availability from higher planned maintenance outages. Through optimization, we're able to reallocate these services to our gas fleet, maintaining our market share of the associated ancillary revenues. Environmental and tax attribute revenue to third parties was also lower than last year. The wind and solar segment produced adjusted EBITDA of $45 million, in line with the third quarter of 2024. In the gas segment, adjusted EBITDA decreased to $110 million from $141 million in 2024, mostly due to lower realized power prices in Alberta, along with higher carbon pricing, partially offset by the addition of the Heartland assets, which increased contracted production, along with incremental ancillary services revenue due to production optimization between the gas and hydro segments. The energy transition segment delivered adjusted EBITDA of $28 million, a $6 million decrease year-over-year due to lower market prices, partially offset by lower purchase power costs and a higher volume of favorable hedge positions settled. Energy marketing adjusted EBITDA decreased by $25 million to $17 million, primarily due to comparatively subdued market volatility across North American natural gas and power markets and lower realized settled trades in the quarter compared to last year. And corporate adjusted EBITDA was in line with last year at $35 million. As a reminder, our adjusted EBITDA excludes the impact of ERP costs as the integration is not reflective of ongoing operations or the performance of our operating assets. Overall, free cash flow was $105 million in the third quarter, which was $26 million lower than the same period last year. Lower adjusted EBITDA and higher net interest expense was partially offset by lower current income tax expense and lower distributions paid to noncontrolling interests. Turning to the Alberta portfolio. The third quarter spot price averaged $51 per megawatt hour, which was lower than the average price of $55 per megawatt hour in 2024. The decline year-over-year was primarily due to incremental generation from the addition of new gas and renewable supply in the province, as well as benign weather. Throughout the quarter, we deployed hedging strategies to enhance our portfolio margins and mitigate the impact of lower merchant power prices. We realized the benefit from approximately 2,500 gigawatt hours of hedges at an average price of $66 per megawatt hour, representing a 29% premium to the average spot price. In addition, our hydro fleet delivered an average realized merchant price of $76 per megawatt hour, a 49% premium to the average spot price, while the gas fleet realized an average merchant price of $79 per megawatt hour, a 55% premium to the average spot price. Our merchant wind fleet, which cannot be used as firm power for hedging activities, realized an average price of $28 per megawatt hour. We were also able to deliver additional ancillary volumes across the Alberta fleet. In the quarter, our average realized price for hydro ancillary service pricing settled at $47 per megawatt hour, an 8% discount to the average spot price. Due to the optimization of ancillary services to the gas segment from hydro during planned outages, the gas segment realized an average ancillary service price of $41 per megawatt hour. Despite relatively benign weather in the quarter, which resulted in lower spot power prices, we captured additional margins by fulfilling a portion of our higher priced hedges with purchased power when prices were below our variable cost of production, leading to an overall realized price per megawatt hour produced of $103 compared to $90 per megawatt hour in the same period last year. For the balance of the year, we have approximately 1,900 gigawatt hours of our Alberta generation hedged at an average price of $72 per megawatt hour, well above the current forward curve of $57 per megawatt hour. Going forward, we expect to continue to optimize our fleet and reduce production in low-priced, high-supply hours by fulfilling our financial hedges and customer requirements with open market purchases. Looking at next year, our team has increased our hedge position to approximately 7,800 gigawatt hours at an average price of $66 per megawatt hour, which remains well above current forward pricing levels. Based on our year-to-date results and balance of year expectations, we remain confident in our 2025 outlook. We are currently tracking towards the lower end of our adjusted EBITDA range, largely due to the Alberta spot power price tracking to the lower end of the outlook range of $40 to $60 per megawatt hour. Currently, we expect the full year spot price to average $46 per megawatt hour. In terms of sensitivity to the Alberta spot power price, $1 per megawatt hour is expected to have a $2 million impact to our adjusted EBITDA for the balance of the year. Other factors influencing adjusted EBITDA include lower wind resource and subdued market volatility. Free cash flow is tracking to the midpoint of the outlook range and the aforementioned adjusted EBITDA impacts are partially offset by lower expected current taxes and lower expected distributions to noncontrolling interests. Consistent with the past year, we'll provide a fulsome 2026 outlook update on our fourth quarter 2025 conference call in February. I will now turn the call back over to John. John Kousinioris: Thank you, Joel. We remain focused on the following priorities for 2025. First, delivering adjusted EBITDA and free cash flow within our 2025 guidance ranges; second, improving our leading and lagging safety performance indicators while achieving strong fleet availability; third, maximizing the value of our legacy thermal energy campuses by capturing the opportunity presented by securing a data center customer at Alberta thermal as well as advancing our coal-to-gas conversion at Centralia; fourth, successfully pursuing any strategic M&A opportunities that may arise; fifth, maintaining our financial strength and flexibility; and finally, successfully implementing the upgrade to our ERP system. I believe TransAlta offers a compelling investment opportunity. We're a safe and reliable operator with strong cash flows, underpinned by our diversified hydro, wind, solar, and gas portfolio located across 3 countries and complemented by our leading asset optimization and energy marketing capabilities. There is significant and growing value in our legacy thermal sites, which our team is actively working to repurpose to meet the growing need for reliable generation in the jurisdictions in which we operate. We also remain a clean electricity leader with a focus on tangible greenhouse gas emission reductions as we remain on track to achieve our ambitious 2026 CO2 emissions reduction target. We remain disciplined in our approach to growth, focused on delivering value to our shareholders as we work to diversify our portfolio within our core jurisdictions and increase the stability and contractiveness of our cash flows, and our company has a sound financial foundation. Our balance sheet is flexible, and we have ample liquidity to pursue and deliver multiple growth opportunities, along with the ability to also return capital to our shareholders. Finally, and most importantly, we have our people. Our people are our greatest asset, and I want to thank all our employees and contractors for their commitment in setting the company up for success in the remainder of 2025, and beyond. Thank you. I'll now turn the call over to Stephanie. Stephanie Paris: Thank you, John. Olivia, would you please open the call for questions from the analysts? Operator: [Operator Instructions] Our first question coming from the line of Robert Hope with Scotiabank. Robert Hope: Congrats to John and Joel, on the announcements. John Kousinioris: Thanks, Robert. Joel Hunter: Thanks, Robert. Robert Hope: Maybe on the data center front. So it appears that discussions are going slower than anticipated regarding customers for the data centers in Alberta. Can you maybe add a little bit of color of what is driving this, as well as has your confidence in securing a project increased or decreased since the Q2 call? John Kousinioris: Robert, we remain confident in our ability to progress the data center opportunity that we have here in the province. Look, it's a big initiative, both for our prospective customers and for our company. It takes time to make sure that all of the details that we need to work with. And frankly, there's multiple parties involved in bringing it forward. It just takes time to do all of that. Phase 2 of the ISO process and the Government of Alberta process in terms of large load integration is also critically important. That's taking a little bit of time to sort out because, at least from our own perspective, it isn't just about the initial 230 megawatts that we've got. It's about how we're thinking about phasing a real data center opportunity for the province and for our company. All of this takes time, but we're tracking, and we remain in the confidence that we had last quarter and in other earlier times of the year to move it forward. It is very much a key priority for our company. Robert Hope: Aare you in discussions to serve other data center customers in Alberta in -- on a shorter-term basis? You did mention Greenlight. You do have confidence that it could be in service in '27, '28. What gives you that confidence? And could you be supplying power to them in that timeframe as well? John Kousinioris: So all of the discussions that we're having, all of the work that we're doing are really around a single opportunity. And we've taken, at least from a TransAlta perspective, an exclusive approach with those prospective customers. So that's the way we're looking at it. It's also our expectation that once we're able to announce our MOU and begin moving forward that we'll be able to start seeing load come into our sites gradually and probably a bit more earlier than probably what Kineticor is currently anticipating that they would have coming in. So hopefully, that gives you a little bit of color. Operator: Our next question coming from the line of Mark Jarvi with CIBC. Mark Jarvi: Congrats, Joel and John. Not to get too far ahead of ourselves, but once you do have the MOU in place, then what would be the sort of time line when you think you can get to a binding agreement? And given the fact it's taking a bit longer to get to the MOU, does that shorten the window from MOU to final agreement? John Kousinioris: Mark, good morning. Look, we would want to go pretty quickly, I would think, and we've already begun kind of getting our team ready and getting internally ready to kind of get to definitive documentations pretty quickly to move that forward. I can't give you sort of a specific time line on that when that would occur. But certainly, I'd be pushing our team to try to get it done as soon as possible. I think one of the key elements of the MOU is to have enough sort of specificity in that and an understanding of the arrangements between ourselves and our customers in order to permit that to kind of make the definitive documentation of it easier to proceed. But I think it's going to happen in -- like, I think it will actually be quicker than certainly it's taken to get the MOU done is what I would say. Mark Jarvi: You used the word counterparties in the plural. Can you elaborate on what that means? Is that on the funding side for the customer? Is it a sort of joint venture in the data center? Anything you can shed on that. And the fact that it is multiple customers, how has that sort of affected the time line to reach MOU? John Kousinioris: Yes. We do -- we are working with more than one customer. We're working together to see the opportunity come through. And that's been the case throughout candidly, our engagement. And given where we are in the process and how we're working through it, there isn't a lot more that I can give you, Mark. I wish I could, but I can't. Mark Jarvi: On the last call, you indicated that -- you took the view that your underutilized coal-to-gas converting units sort of are akin to incremental generation when you think about Phase 2 and you're trying to have those conversations with the AESO and the government. How have those progressed? And are you getting traction with that concept? John Kousinioris: Yes. I'm glad you asked about that. So we have had discussions on Phase 2. Joel and I, and Nancy have spent a fair bit of time, and Blain has been involved in that as well as we move forward. I mean, I'll give you a bit of a sense on our company's position, which our sense is it is being well received by the government, would be that we don't -- just to give you a bit of a sense is, one, we don't think that colocation is necessary. We think that it would be better -- there isn't a need to co-locate the data center with the generation going forward. That would be number one. We absolutely believe that underutilized generation like our coal-to-gas units would be akin to incremental supply and be able to meet the need for data centers coming into the jurisdiction as a bridge to new generation that would be built into the 2030s to be able to meet that going forward because it isn't just about reliability, sustainability and cost; speed matters. And those units are the right units that we need. And it's particularly so given the challenges associated with the supply chain. I mean, I think the practical reality is that getting a turbine, for example, or transformers is many years out. So I think they have a pretty critical role to get us from kind of where we are today to where we envision the market going. And so, that's been what we've been advocating for. And I do think the government understands that position and candidly believes it has some merit. Mark Jarvi: Just to follow up on that, John. When you talk about potentially a bridge, are you saying some of the underutilized megawatts would be something that could be viewed as -- there for a couple of 3 to 5 years until new megawatts come in or potentially as "permanent supply" in the eyes of Phase 2 process? John Kousinioris: Yes. I'm not sure that -- at least we're not thinking of it necessarily as permanent supply. So for example, if we have a unit and it has a 20% capacity factor, there is a lot of horsepower left in that particular unit to run and be able to supply incremental data center needs over a period of time. And so when we look at Keephills 2, Keephills 3, the Sheerness facilities that we have, Sun 6, and our ability to potentially bring something new to the market in the fullness of time into the 2030s, we absolutely see a bridging role during Phase 2 to get that there. Operator: Our next question coming from the line of Benjamin Pham with BMO Capital Markets. Benjamin Pham: I wanted to touch just base on the delay of your Investor Day. I can understand the reasons for it. I'm wondering, when you did set the Investor Day, you go back, was your priorities to get the MOUs on both of these projects? I vaguely recall it was more related to updating your long-term strategic capital allocation process. Or has that changed as time has progressed? John Kousinioris: No. Ben, we set the date expecting that we would have had a bit more certainty or the ability to provide a little bit more clarity around both the data center strategy that we have going, some of the other initiatives that we're working on, plus Centralia. It's taken us a little bit more time to land those things. So we could have had the Investor Day, but the way we like to think of it, it wouldn't have been the Investor Day that we would have wanted to have to permit all of our investors and the investment community generally to understand the impact of these projects on the company and be able to have all of the building blocks that are necessary to be able to understand kind of fully the go-forward strategy of the company. So it's really as simple as that. So we had picked a date we thought that prospectively -- that, that would be something that we would be comfortable to be able to meet. We're still working through everything and retain our confidence level. We just want to make sure we have a good Investor Day and one that will be helpful to our investors. So that's what we've decided. Benjamin Pham: Your comments on the connection queue and updates, I mean, those in-service dates you mentioned are always –- tend to be conservative and that they move around. Does that warrant then perhaps for your projects to look at some outside dates just given that progress is a bit slower on some of your developments? John Kousinioris: Yes. No, I think we feel pretty comfortable about where we are because what we're looking -- remember, it's going to be a grid-connected opportunity, and then we will be effectively covering the generation needs that the entity has. So we feel very comfortable about our ability, from a power perspective, to meet the needs of the supply that we have for our customers, like I think we're in good shape there. I think from our perspective, the time line is going to be driven more by the time it takes to actually build out the data centers and get that infrastructure in place. I think there's a substation we need to put in place, but that's something that we're pretty comfortable from a supply chain and from a time line perspective to get it done. So we're not -- I can tell you that TransAlta today isn't concerned about the kind of timing perspective from our data center opportunity. Benjamin Pham: Just if I may, the 3,000 acres, I mean, I think that's a massive amount of megawatts you can theoretically add on to that acreage. John Kousinioris: It is -- so I agree. It's -- like we see it as a significant opportunity. And we're grateful for the engagement that we've received from Parkland County, who also see the opportunity for the county to have a real hub for data centers just West of the City of Edmonton there. So all the work that we're doing, as I mentioned earlier in the call, isn't just for the 230. It's as we envision kind of the broader campus that we hope to develop over time. Operator: Our next question coming from the line of Maurice Choy with RBC Capital Markets. Maurice Choy: You touched on planning with your customers for phases beyond 230 megawatts. And you also spoke about [ AESO's ] Phase 2 being critically important. If you think ahead between now and sometime in Q1 when you have your Investor Day, I guess, looking at the other way, what would be the top reason that could derail your time line to be even later? John Kousinioris: Yes. Look, it's difficult to be speculating. I mean, I think all I can say is -- and look, all we can tell our investors is we continue to work, I would say, doggedly to set up our facility and the permitting around the opportunity that we have. So we don't see, how can I put it, issues that could arise from a TransAlta perspective, from a timing perspective to get there. We're working with our customers because they, in turn, have knock-on effects that they need to deal with to be able to land all of that and to be able to understand better kind of what the future pathways are. So we have confidence in Phase 2. We believe the government and the ISO is committed to the development of a data center industry here in the province of Alberta. It is a priority. Our team is now with very senior people in the government, and we -- there's nothing I have heard that would suggest that that isn't the case. So there isn't particularly a derailer that I would see in us moving through, to be honest. Maurice Choy: Maybe just a quick follow-up to that. Is there any regulation or policy, federal or provincial, that you need -- you see as absolutely necessary for clarity for this MOU and definitive agreement to go forward? John Kousinioris: It would be helpful from our perspective to kind of have a bit of a sense on where Phase 2 is going to be landing so that we can plan around that because I think we will be able to meet within that. It's just it's important to be able to get that done. The other area -- and look, we've talked about this before, is the clean electricity regulations remain a bit of a challenge for us. We're working hard to ensure that we have maximum optionality to be able to fit within those regulations as they currently exist to ensure that we can meet the promise of the opportunity that we see through the data center work. When our team is thinking about things, it's more the CER, to be honest, that we think about long term as being something that we need to manage around. Phase 2 is more of a clarity point that we think will be constructive. Hopefully, that gives you a sense, Maurice. Maurice Choy: It does. And maybe that's exactly where I'm going to finish off with on the federal policy side. So obviously, the Canadian federal budget came out earlier this week. It doesn't feel like we got much clarity on both the CER and/or the industrial carbon tax heading into 2030 or post-2030. I know that the Alberta government has frozen the carbon tax at $95 per tonne. But what can you share in terms of your expectations of both how the CER and the industrial carbon tax will be through 2030 and beyond? John Kousinioris: Look, we -- I'd be speculating. I can tell you that like when we do our internal modeling, we have a number of scenarios that we run as we assess our fleet, and it's everything from the carbon price staying at $95 to the carbon price continuing on its anticipated trajectory towards 2030. What I can't tell you is our engagement on the CER with the federal government continues. Our team was in conversations relating to that. I think it was last week in Ottawa, and I'm actually in discussions on it again later today. So it's an ongoing process of discussion that we have. Maurice Choy: Quick follow-up then. Who underwrites that risk of federal policy changes? Is that your data center customer, or would that be you? Or is that still under negotiation? John Kousinioris: So that's something that we're working through with the customers. It's not something that I can give sort of specific details on that. I think that what we try to do in mapping out the opportunity that we have is to ensure that it's robust and candidly insulated from kind of regulatory uncertainty, to be honest, Maurice. Like, that's actually what we're trying to do. And in part, when you hear the company talking about being more contracted and how we're diversifying, in part, it is driven to sort of insulate the company from any kind of regulatory shifts or repercussions that take place. And that's actually the approach our team is taking with respect to the data center file. Candidly, it's a similar approach in Centralia, I would say. Blain and his team are working on that. It's the same thing there. It's a real focus for us. Maurice Choy: Perfect. My congrats to John, Joel, all of you, and hope to connect at the Investor Day. John Kousinioris: Great. Thanks a lot, Maurice. Operator: Our next question coming from the line of John Mould with TD Cowen. John Mould: Maybe at the risk of going too in the weeds here, just trying to read the tea leaves a little more on these AESO in-service dates. So the Keephills load [indiscernible] as reported by AESO are 100 megawatts by January of 2027 and then another 115 midyear. Like how should investors view the time lines for your projects as provided by AESOs data? Are those timelines by which the load could actually be online or more of a timeline for those to be ready to connect to the grid from an AESO perspective? Just help us understand that aspect. John Kousinioris: Yes. I mean, those dates are oriented to when we think that we would begin to be -- like it's tied to when the connection to the grid would occur and when the load would start ramping up. So they're not linked, John, if you see what I'm saying. They're tied. So we do see a gradual feathering in of load over time. And we would see -- the work that we're looking at doing, I mentioned the substation earlier, it would be a complete facility to be able to kind of accommodate the full ramping up of the generation over time. And remember, the ISO requires the load, I think, to be in place, I think it's the 1st of December of '28, right? So that's what our current expectations are. John Mould: I'd just like to clarify your comments on Phase 2. Do you or your customer need clarity on any aspects of Phase 2, even if it's just like early details on bring your own power or allocations in order to finalize an agreement, in order to be able to have line of sight on some of that aspirational -- maybe it's not aspirational, just the potential multistage development that you referenced in your news release? And what time line are you hoping for more clarity to the market on the key aspects of Phase 2? John Kousinioris: On the last point, it's pretty clear to us that the AESO and the government are aware of the fact that having certainty sooner rather than later would be positive. So -- I can't give you a specific date on when we would get that, but I know that they're trying to move at an appropriate pace to be able to give us that level of clarity. I'd say the #1 thing, at least from my own perspective, on Phase 2 is just getting a better understanding of what that bringing incremental power is all about and what role our legacy facilities where we do have capacity can bring in that context. That's probably the #1 thing just from a planning perspective for us going forward. And we're working to develop optionality so we can deal with that whichever way it goes. So that's something that we continue to work on. And certainly, we'd be able to provide more clarity on at our Investor Day. John Mould: Just one last one on just your hedging and midterm pricing. I'm wondering what kind of interest you're seeing from C&I customers around signing mid- to long-term deals, just given the potential for the power pricing environment to normalize considerably over the next few years? And then from your side, how you're balancing the potential for that increased appetite with your aspirations on supplying large loads? John Kousinioris: Yes. Look, I might start and then get Blain to kind of chime in because it's his team that kind of oversees all of that work. I'd say -- and Blain, you can correct me, but I'd say it's been pretty steady. Like, I'd say the C&I demand that we have -- and I think we're actually the largest C&I player now in the province of Alberta. The C&I book that we have from a renewal perspective, an incremental business, it kind of continues as business as usual. We continue to see our customers roll over. I think the average tenure, Blain, is roughly in that 3-year kind of range. We have seen some of the re-contracting prices come down a little bit, I would say, Blain, and Blain will be able to provide more color as they rolled off because some of them were done when we had higher power prices, and it kind of takes time for that to roll off, and so we're seeing that. But those prices are still constructive from our perspective. When you're looking at kind of 2028 -- late '27, '28, which is when we would expect to see kind of the forward curve in the merchant market to tighten up, we're not -- I don't think that's impacting a lot of the 1-year, 2-year, even 3-year renewals, Blain, right now, in terms of moving the needle. I mean, I don't know what your perspectives are. Blain Van Melle: John, that's exactly right. The C&I business hasn't really faltered even through the lower prices that we have right now. The re-contracting remains very robust. We continue to extract some good premiums over the financial market. And I would expect, as we move forward here and as some of this load does start to materialize already reflected in the forward price that that contracting levels will ramp up a little bit as the customers start to meet to plan for those power needs in later 2027, 2028, and 2029. John Kousinioris: Yes. John Mould: Congratulations to both Joel and John on the announcements. Operator: Our next question coming from the line of Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: John, it's been a real pleasure over the years. Joel, congrats. It's been a pleasure to get to know you more recently, and big and exciting shoes to fill here given the data center opportunity. But back to the opportunity in here, speaking of which, I just want to understand a little bit more about the Greenlight situation and what got posted by AESO here. In as much as you all articulate clear confidence that there's still an ability to have that project in service by '27 or '28, what was the purpose of this AESO update that was posted? I just want to understand what exactly transpired if there doesn't seem to be necessarily a push in time line from your perspective? Just to clarify that because clearly, the market is pretty [ perturbed ] out there about this time line issue. John Kousinioris: Yes. And look, we know that this came out, when was it, yesterday when the updated date was, I think, identified from people. I mean, I think that's a question fundamentally for Kineticor, I think, more than TransAlta. But I can tell you, look, we've been in discussions with Kineticor and certainly have a view on what's going on from a governmental perspective. Based on those discussions, they're still driving for '27, '28. Not just them, but actually their customer too, is what our understanding is. I know that they have a bit of -- in the area where -- and this is not a secret particularly. In the area where they're proposing to kind of set everything up, they're working to make sure that there are no restrictions from a transmission perspective. And I think one of the things that they're looking at from a worst-case scenario is, if they need to do a bit of debottlenecking, what does that look like. But I don't think that, that's what they're driving at and certainly not as the load would sort of be ramping in. So everything we have heard based on our engagements is we're still tracking and they're still tracking more importantly, forget about us, to that '27, '28. So hopefully, that gives you a little bit of color. Julien Dumoulin-Smith: So there is some focus on a potential for a bit of debottlenecking to use your terms, but that doesn't seem to be too substantive despite the statement technically on the website, from what you understand on the practicalities of transmission, seems like it's a fairly minor issue. John Kousinioris: Based on my understanding that, that 2030 date, and I don't know how to describe it, it was almost like a worst-case kind of scenario in terms of where they are. It's sort of an outside kind of date. And look, the idea through Phase 1 is that you would have had this thing done by the end of 2028. So like, it's pretty clear that they've had some discussions to make sure that they've had full optionality around their opportunity. And candidly, we would be doing exactly the same thing. So like, I think, I can tell you, for our company's perspective, we continue to operate and envision things being business as usual. Julien Dumoulin-Smith: Excellent. Just a quick follow-up there. Just on Centralia. I know that's been a bit of an ongoing question here, but you talked about end of the year here. What should we expect specifically by the end of the year in terms of the scope of that opportunity? And what are you tracking, as far as it stands here today, for what that should look like here, customer, scope of conversion, et cetera? John Kousinioris: We would expect, by the end of the year, based on the work that we've done and how things are progressing with our teams -- and I can tell you, our customer has been outstanding to work with. They've been a great partner to us in visioning the opportunity we have for us to provide the reliability services to them. So we would see a definitive agreement. That definitive agreement would be an omnibus agreement that would deal with the work that we would need to convert the facility from coal to natural gas. It would set out the revenue streams that we would -- revenue tenure. It doesn't contemplate that more agreements would be required. It would be the agreement. And we have done a reasonable amount of work, engineering, costing that I do expect we'd be able to share with the market on kind of what the scope of the work would be around Centralia in order to be able to get the work that we need done there, which is not just the coal-to-gas conversion, but also a little bit of life extension given that we've harvested the facility a little bit and even some controls work that we need to be able to do. So it would be -- I don't know -- I mean, Blain and his team are working on this one as well, a comprehensive arrangement, Blain, I would say. I don't know if you want to add anything. Blain Van Melle: No, I think that's right, John. You said -- in the next 6 week leading up to Christmas that we'll have something to announce -- John Kousinioris: Yes. Blain Van Melle: It would be like a true definitive agreement that spells out all the work that needs to happen over the next year as we approach bringing that facility back on line on natural gas. John Kousinioris: That's right. Operator: Our next question coming from the line of Patrick Kenny with National Bank Financial. Patrick Kenny: Congrats to John and Joel. Just maybe back on the rezoning at Sundance and Keephills just given the close proximity of the 2 sites. Wondering if you could just speak to how you might be thinking about integrating these 2 assets for a larger scale customer just in terms of sharing generation, transmission, even fiber and water licenses. And maybe how that might compare to your Sheerness site or perhaps give a competitive advantage over some other Phase 2 proponents. John Kousinioris: Yes. I would say -- thank you, Patrick, and good morning. What we did is -- so 3,000 acres is a significant amount of land, and you know this, our mine is quite comprehensive up there, and it actually ranges on both sides of the highway, and Keephills is on the south side of the highway, which goes east-west there. The Sundance facility is on the north side of the highway. And so what we did is we took kind of a comprehensive approach from a rezoning perspective to be able to flex up from a scale perspective. Our initial view is that the site from a locational perspective would be proximate to our Keephills facility. In fact, just going through my memory, located south of our -- immediately south of our Keephills facility, and that would be where we would be looking to build out the data center and the substation to deal with that. I think, over time, as we look to optionality and opportunity around Sundance, there is opportunity for us to do that as well. But right now, it's more around Keephills. We've got the water access that we need. We've got existing infrastructure that we need. The fiber is close at hand. So we're not really seeing any impediments, but getting the rezoning done was critically important. And as I mentioned earlier, it was a really great process, a lot of engagement from our side and great receptivity from the folks in Parkland County, which we're grateful to as they kind of see the vision of what this can provide. Patrick Kenny: I guess with all these irons in the fire, and Joel, I'm sure, at Investor Day, you'll be outlining a funding plan. But assuming the Centralia economics on the conversion come in as expected, perhaps you could talk to how the returns might rank here just in terms of Centralia versus supporting Phase 2 load growth in Alberta, or even compare it to M&A opportunities that you might be looking down in the U.S.? Joel Hunter: Yes. I would say, Pat, when we look at Centralia, again, typical with any kind of legacy asset that you can extend the life of with, I would say, capital spending that's a fraction of what it would cost for a new build that it would offer attractive risk-adjusted returns for us. But this is where we'll provide more detail to you and the investor community at our upcoming Investor Day once we have definitive agreements in place, so we can talk about what that would look like from, as John mentioned, the cost perspective, what kind of the build multiple would be for that. But again, consistent with our strategy, this would be really attractive risk-adjusted returns for us, underpinned by long-term contract. This is kind of how we want to position ourselves going forward to increase the contractiveness of our portfolio. And similarly, with any opportunities that we see in Phase 2, these would be underpinned, again, by long-term contracts with, hopefully, a very attractive risk-adjusted rates of return. John Kousinioris: Maybe on the M&A side, Joel, I think we've seen a bit of a -- not compression, I can't think of the right word, but kind of a realignment -- I mean, maybe talk a little bit about renewable and gas kind of opportunities we're looking at. Joel Hunter: Yes. John Kousinioris: -- because we haven't talked about it much on the call, but we are actively looking at a number of acquisition opportunities. Joel Hunter: Yes, there's -- yes, good point, John. There are a lot of opportunities out there, Pat, that we're looking at, both on the renewables side and on the thermal side. I would say that we're seeing really a convergence in multiples, if you will, where on thermal generation, depending on the location, depending on the contract profile, et cetera, that multiples are converging up toward probably the lower end of where we are seeing for renewables. So again, consistent with our strategy remain technology agnostic, remain focused on our 3 geographies for M&A opportunities, but it is very robust out there right now. For us, it's just remaining really disciplined in how we allocate our capital here going forward. John Kousinioris: Yes, very return focused, I would say. Joel Hunter: Yes. Operator: There are no further questions in the queue at this time. I would now like to turn the call back over to Stephanie for any closing remarks. Stephanie Paris: Thank you, everyone. That concludes our call for today. If you have any further questions, please contact the TransAlta Investor Relations team. Operator: This concludes today's conference call. Thank you for participating. And you may now disconnect.
Operator: Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the PublicSquare Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. William Kent, Head of Corporate Affairs. You may begin. William Kent: Thank you, Angela, and good morning, everyone, and welcome to PublicSquare's Third Quarter 2025 Earnings Conference Call. Joining me today are Michael Seifert, Chairman and Chief Executive Officer; and James Rinn, Chief Financial Officer. Before we get started, we want to emphasize that the information discussed on this call, including our outlook and guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our 2024 10-K for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. I'll now hand the call over to Michael. Michael, please go ahead. Michael Seifert: Thank you, Will, and welcome, everyone, to our third quarter 2025 earnings call. We appreciate you all joining us today. And to get us started, I would like to share some of our most notable highlights from the quarter. It was a big one for us. First, we beat our previously issued revenue guidance by 10%, and we are proud to reaffirm fourth quarter 2025 as well as full year 2026 revenue guidance. Secondly, our fintech revenue increased 28% quarter-over-quarter with our payments revenue increasing 50% quarter-over-quarter and our credit revenue increasing 22% quarter-over-quarter. Third, 1 year ago, we spoke about how the investments we made in 2024 paired with the restructuring of our business that took place in November of 2024 would lead to a drastic improvement in our ability to generate more revenue while reducing our spend. Today, I am proud and grateful to report that our efforts have paid off resoundingly. Our net loss has decreased by 33% compared to the prior year period, and our operating expenses decreased 13% compared to the prior year period. I'm incredibly proud of the way our team has executed. We're continuing to leverage strategies to increase our efficiency, and we are excited for this positive momentum to continue. Finally, our third quarter performance emphatically affirms our decision made earlier this year that we spoke about on the Q2 earnings call to streamline our focus and double down on fintech. We continue to see rapid growth in our payments business as we onboard new merchants who are passionate about our commitment to economic liberty and technological excellence. And we expect this momentum to carry into the fourth quarter with our robust onboarding pipeline and anticipated Christmas shopping activity. Additionally, our credit business remains healthy and is positioned to benefit from these same trends as we exercise the power of our bundled checkout offering that we speak about often. Looking to 2026, we plan to take advantage of significant opportunities to build upon our 2025 success. We're expanding our fintech platform with new services our merchants and customers have sought after, including private label credit cards, innovative fundraising tools, crypto payment capabilities and digital asset treasury management solutions. I will now pass the microphone to our wonderful CFO, James Rinn, to provide a deeper financial overview on our performance in the third quarter. James, please take us away. James Rinn: Thank you, Michael, and good morning, everyone. Let's walk through the key financial highlights from the third quarter and year-to-date 2025 results. As a result of our decision announced on August 12 to monetize our Brands segment through the sale of EveryLife and to monetize our Marketplace segment through a sale or strategic repurposing of the Marketplace IP to complement our fintech offering, we are accordingly showing the results of both those segments and discontinued ops throughout our financial statements. In regards to revenue growth and financial performance, we reported net revenue from continuing operations of $4.4 million for the quarter ended September 30, 2025. That's a 37% year-over-year increase compared to $3.2 million in Q3 of 2024. As Michael mentioned, Q3 revenue beat our most recent revenue guidance of September of 2025 by $0.4 million or 10%. The breakdown of revenue illustrates the strength of our current revenue streams. As stated, fintech financial technology, which includes payment processing via PSQ payments and credit offering via Credova earned $4.4 million in net revenue, which, as stated, was a 37% increase over the prior period. This includes $1.5 million from our recently launched PSQ payments, an increase of 50% from Q2 of 2025. Year-to-date fintech revenue was $10.9 million, which equates to an increase of $4.3 million or 66% from the prior year. As noted, our credit business revenue increased by $0.5 million or 22% quarter-over-quarter to $2.9 million in Q3. The company enhanced the quality of its credit portfolio performance through greater use of AI-driven underwriting and machine learning. Our portfolio has demonstrated consistent improvement in early payment performance with first payment default rates declining and doing so in a challenging market environment. Regarding operating expense controls for continuing operations, I'd like to highlight the following. The company maintained strong expense discipline in Q3 and continued to optimize capital allocation. For Q3, general and administrative expenses reduced by $2.3 million or 22.3% compared to the same period last year. And year-to-date, G&A expenses decreased by 33% or $10.1 million year-to-date 2025 compared to 2024. R&D expenses for the quarter increased by $0.8 million over the prior year and $2 million year-to-date compared to 2024. We continue to invest in internally developed software. These actions drove this increase in expense, and we allocated $2.3 million in capital for ongoing enhancements to our fintech platforms that are key to our future success. Ultimately, this resulted in a notable improvement in our operating loss of $8.1 million compared to the prior year and a $24.2 million operating loss year-to-date 2025. Transitioning to margin and profitability. Fintech non-GAAP gross margin for Q3 was 68% compared to 97% in Q3 of last year. The decline is primarily related to revenue mix and the growth in our lower-margin payment processing revenues. Our GAAP operating loss from continuing operations for the quarter was $9.7 million, a $0.6 million improvement from the $10.3 million in the same quarter of 2024. Moving on. Net loss for the quarter was $12 million compared to a loss of $13.1 million for the same quarter of 2024. The net loss on a per common share basis was $0.26 per share, a 37% per share improvement compared to a loss of $0.41 per share reported in Q3 of 2024. For continuing operations, the net loss improved from $0.27 per share to $0.22 per share in the current quarter. For discontinued operations, the net loss improved from $0.14 per share to $0.04 per share in the third quarter of 2025. Discussing cash flow and liquidity. As of December 30, 2025, PublicSquare had $12.3 million of cash and restricted cash, which included $1.3 million related to discontinued ops. Net cash used for operating activities decreased by $9.7 million during the first 3 quarters of 2025 as compared to the same period of the prior year. On our revolving line of credit that we utilized to finance our Credova credit products, we had $4.6 million outstanding on our $10 million line of credit. We made a strategic decision to retain consumer financing receivables on our balance sheet, representing approximately $3.4 million of cash flow year-to-date in 2025. We executed on this strategy to improve financial results and enhance yield of fund capital. This capital will be cycled back to cash based on the payment terms and with healthy returns. Discussing our ATM, at-the-market offering, which was established May 23, 2025, I will note that we did not utilize the ATM during Q3. Transitioning to discuss the monetization of our Brands and Marketplace segments, the company has engaged an investment bank to conduct a robust sales process of its Brands segment business. This process, I'm happy to report, is on target to reach a purchase agreement by the end of the fourth quarter of 2025. We are continuing to explore a sale or strategic repurposing of our Marketplace segment, and we will provide updated disclosures as appropriate. Coming back to expenses, we're happy to report that the company has experienced better-than-expected operating expense reductions results in its reorganization announced in the fourth quarter of 2024, realizing approximately $11 million of its expected $11 million in annualized savings. So we're well ahead of schedule in 2025. Moving on to discontinued ops. Brands driven primarily by EveryLife earned $3.7 million in revenue in Q3, which equates to 42.7% increase or $1.1 million increase compared to the prior period. Trailing 12-month revenue for EveryLife exceeded $13.4 million. Marketplace earned $0.2 million during the quarter, which was in line with management expectations. The business outlook and guidance is unchanged from our September 25, 2025, Analyst and Investor Day. Fourth quarter 2025 revenue is expected to be approximately $6 million, comprised of $2.4 million in payment processing revenue and $3.6 million in credit product-related revenue. Again, we affirm our full year 2026 revenue guidance of greater than or equal to $32 million in revenue. And so to summarize, we are growing revenue at a strong pace, maintaining healthy margins and significantly narrowing operating losses in part due to reducing operating costs year-over-year. We believe we are well positioned to deliver long-term shareholder value as we grow market share, maintain operational discipline and scale the business. Now let me hand it back to Michael for more about the exciting path forward for PublicSquare. Michael Seifert: Thank you, James. As we mentioned, Q3 was a monumental quarter for us as a company. We have focused our business and doubled down on our fintech charter with our mission-first model in order to build a parallel economic ecosystem that serves a vast network of merchants and customers who value economic liberty. With our bundled checkout offering, including payments, credit and digital asset treasury management, paired with our leveraging of AI, DeFi, and proprietary economic modeling, we are firmly positioned to lead the values-driven next gen of fintech that is growing rapidly amid systemic distrust of legacy finance. Today, roughly 5 weeks into Q4, we are positioned exactly where we want to be. The business is exceeding expectations, and we anticipate a significant Christmas shopping season for our merchant and customer community. We will have quite a lot of exciting developments to announce over the next 7 weeks, especially regarding our soon-to-launch fundraising platform, PSQ Impact, as well as our private label credit card program. We're packing a ton into Q4 as we seek to end the year on our highest note ever, so be sure to stay tuned. We are grateful you're on the journey with us. Onward and upward. Now let's move on to Q&A. Operator: [Operator Instructions] Your first question comes from the line of Darren Aftahi with ROTH Capital. Darren Aftahi: Congrats on the progress. Just two questions, if I may. Just in terms of the bundling, can you talk about both the attach rate of customers bundling and then how that's benefiting retention? And then second, on your '26 revenue guidance, can you speak to in a little bit more detail what's assumed as kind of existing products to drive that growth versus new products? I guess, said another way, how much kind of line of sight do you have in that 32% versus some of these call options on new products you're introducing? Michael Seifert: Great questions. Thanks for joining us today. To address your first question, I will say that the majority of our enterprise clients are utilizing our bundled services. So the majority of our payments revenue is actually coming from payments clients that are also leveraging our credit offerings at checkout to drive conversion as well as our marketing services. Because that's really the trifold beauty we bring to the transaction is that we're able to not only secure your transaction via our payment processing capabilities, provide conversion tools via our credit offerings that lend to the entire credit spectrum. But also, we -- as we mentioned on our Analyst and Investor Day back on September 25, we want to help you elevate your brand message, utilizing our brand, creative storytelling and marketing capabilities. So again, the majority of our revenue generated through payments is actually with merchants who are also using our credit offering and the suite of marketing services that we leverage. And to go a little bit further on that, you asked the question of kind of what that does to retention. This makes our product incredibly sticky because we are far deeper ingrained in your business and in the operations layer of your transaction than a typical payments company would be. We are meeting with your CFO. We're having conversations with your marketing department about how to drive conversion. And when you, as a consumer, go to checkout on these sites, these merchants that we work with, you actually see multiple payment options that are all housed underneath our umbrella. And it leads to a deepening of a relationship with our merchants and ultimately, a stickiness that is hard to replicate without that bundled service. So Darren, I just reaffirm that this is truly key to our success as we move forward. Regarding revenue for 2026, I would say that the guidance that we have issued is really focused on our business as it stands today. We don't want to factor in too much of new verticals that we've talked about over the last 2 months. We're conservatively projecting those into our revenue guidance for 2026 and really want to feel confident in issuing guidance that is based on the foundation of the business as it stands today. James, I don't know if there's anything else you'd add there, but... James Rinn: Yes. I would reiterate that our $32 million 2026 guidance is based on kind of the product set and revenue sources that we have today related to private label credit cards and some of the development in those areas. We'll update forecast accordingly in the quarters ahead as we have better visibility, but that's not really baked into the current forecast. Operator: Your next question comes from the line of Francesco Marmo with Maxim Group. Francesco Marmo: Congratulations on the quarter. Kind of like big picture, you already kind of touched on this, but I was curious if you could give us a bit more color around the momentum in top line. I was wondering whether it is primarily new customer addition, new customer being onboarded? Or is it more higher transaction volume from existing customers or greater adoption of your bundled offering? Michael Seifert: Great question. Thanks, Francesco. I would say that the majority of our top line growth, the strong majority is from new customer acquisition. We've really turned onboarding on in the second half of the year. We've gotten far more efficient in our ability to move folks through the pipeline in a much more expedited manner. So the growth in top line that we have seen over the last 2 quarters as well as the growth we anticipate seeing in 2026 that we've guided towards is largely an effect of our expedited onboarding capabilities. And we are grateful that we've barely scratched the surface on our pipeline. So being able to move through that pipeline more efficiently is going to be key to our success over the next 12 months. And thankfully, we've already started to see that prove itself out. The only other thing I'd add here is that obviously, in Q4, many of our merchants are in the retail sector. So it's exciting that we get to have these newly onboarded merchants as we head into Christmas shopping season, help them elevate their brand and some of the deals they're offering for events like Black Friday or Cyber Monday, Christmas shopping season. This is sort of their Super Bowl, and so we're honored that they would invite us into the transaction layer with our bundled offering to help them drive sales toward the end of the year here. Another reason why we anticipate a strong Q4. So that's how I'd answer that. Will? James? Great. Thank you, Francesco. Operator: At this time, I will be handing the call over to Mr. William Kent for submitted questions. William Kent: Thank you, Angela. As the quarters passed, we've taken questions through the Say Technologies platform before the call, and we'll answer a couple of questions that were submitted. The first question is, what is the utilization level of PSQ's payment processing service? Has there been growth? And is the client base mostly staying with niche, i.e., firearms dealers? Or are you seeing more diverse businesses that are making a switch over? Michael Seifert: Yes, I love this question. Thank you to whichever shareholder asked this. We're grateful you're on the journey with us. I would say resoundingly that our base of merchants that have joined us in our fintech offering is actually more industry diverse than I would have anticipated at this stage. We've had a wide-ranging network that has joined us in this mission, primarily focused on retail. So online retail e-commerce is our bread and butter certainly. But we've really expanded into more B2B SaaS services as well. We focused a lot on our ACH product, allowing for these business-to-business relationships to strengthen. We've really focused on the nonprofit space, and we've been able to provide a bunch of value there. We've had great opportunities in firearms adjacent verticals as well that have been referred to us by the firearm space. So our pipeline and existing merchant mix is more diverse than I would have anticipated at this stage. And I think that's a testament to the scalability of our payment stack and our multiple payment methods bundled into the checkout offering and the expansion of our TAM ultimately. We are really excited about the merchants that we get to serve. And we've built a strong foundation that we believe will catapult us to reaching that broader audience. So stay tuned on this, too. We'll continue to update The Street as we onboard new material merchants from these other verticals to kind of showcase what's possible in these spaces. And so far, we're really pleased with the progress. William Kent: Thank you. Next question. PublicSquare stock has been volatile, suggesting investor uncertainty around long-term strategy and profitability. How is management balancing new initiatives such as crypto Treasury as a Service with the goal of achieving steadier earnings and long-term growth? Michael Seifert: This is a great question. Thank you for asking it. So we certainly acknowledge that as we mentioned on the Analyst Day back on September 25, that from our perspective, our stock is undervalued. We really believe in the upside potential of our equity as our business continues to execute. And regarding new initiatives, our focus is to maintain the principles that guide Q3 to success. And ultimately, we believe will guide Q4, all of 2026 and our future to success, which is operating efficiency that is tied with an executional focus to drive this fintech business forward in such a way where we are able to substantially increase revenue while actually decreasing our losses and expenses. This is what we proved out in Q3, and it's what we anticipate proving out in the quarters to come. So our focus is anything that complements those principles, tight execution, lean efficiency of our operating business, constantly finding ways to improve our offering in order to drive an increase of revenue while reducing expenses, that is our focus. And to the extent that these new initiatives help to complement that and the investments we can make in these new initiatives drive value for our shareholders in alignment with those principles, those are the things that we prioritize. And so as I mentioned earlier on in this earnings call, in my comments, we are packing a ton into Q4. We've been strategically placing investments incrementally that will complete the full picture of our fintech offering, and we'll have quite a lot to announce over the next 7 weeks regarding those new initiatives but know that all of those initiatives are being deployed on the foundation of sound unit economics and a tight operational focus. William Kent: Thank you, Michael. And for our last submitted question, back on August 12, which was our second quarter earnings, you said that you were monetizing EveryLife via strategic sale and either selling or repurposing the marketplace IP. Later, you announced crypto Treasury as a Service and partnership with IDX and said you'd implement it for your own treasury. Do you have an update on those? Michael Seifert: Absolutely. So James touched on this a little bit in his comments, but everything we articulated on August 12 as well as September 25 is humming right along. We are indeed in the process of monetizing EveryLife via strategic sale, and we anticipate that we will be in the purchase agreement stage by the end of the year as previously affirmed. And we are pursuing the path of either selling or repurposing the marketplace IP. We are talking to multiple interested parties and also exploring the world in which we repurpose the marketplace IP and technology for the go-forward fintech business, and we'll provide announcements or updates on that process as relevant. And then regarding IDX and our overall positioning on crypto, absolutely, we are in the process of establishing our own treasury via our strategic partnership with IDX. And that ball is rolling right along anticipated time lines. So we're happy with the progress that we articulated 6 weeks ago. We've made leaps and bounds since then. And as I mentioned, Q4 is going to be big for us as we leverage these different strategies and updates to do two things: Number one, end 2025 on an incredibly high note, but also set up for a clean 2026, where our fintech focus is dialed in and that we have these monetization efforts significantly progressed upon so that we can focus on the go-forward business as we head into Q1 and Q2. James, anything you'd add? James Rinn: No. I think you covered it well. Michael Seifert: All right. Well, ladies and gentlemen, I believe that concludes our questions. So with that, we can't tell you how much we appreciate you joining us this morning. We are grateful that you're on the journey with us. We appreciate your interest in PublicSquare, and we hope you have a fantastic remainder of your Thursday. Thank you all. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Stevanato Group Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Lisa Miles, Chief Communication Officer. Please go ahead, madam. Lisa Miles: Good morning, and thank you for joining us. With me today, I have Franco Stevanato, Chief Executive Officer; and Marco Dal Lago, Chief Financial Officer. A presentation to accompany today's results is available on the Investor Relations page of our website under the Financial Results tab. As a reminder, some statements being made today are forward-looking and based on current expectations. Actual results may differ materially due to risks outlined in Item 3D, Risk Factors of our most recent annual report on Form 20-F filed with the SEC. Please review the safe harbor statement included at the beginning of today's presentation and in our press release. The company undertakes no obligation to revise or update these forward-looking statements, except as required by law. Today's presentation may include non-GAAP financial information. Management uses these measures internally to assess performance and believes they may be helpful for investors in evaluating the quality of our financial results, identifying trends in our performance, and providing meaningful period-to-period comparisons. For a reconciliation of these non-GAAP measures, please refer to the company's most recent earnings press release. And with that, I will hand the call over to Franco Stevanato. Franco Stevanato: Thank you, Lisa, and thanks for joining us. Today, we will review our third-quarter performance, share updates on our investment projects, and discuss the current market environment. We delivered another solid quarter of financial results, driven by revenue growth, a record mix of high-value solutions, and continued margin expansion. Our third-quarter financial results exceeded our expectations. We benefited from favorable timing of some product shipments in the BDS segment that were previously scheduled to occur in the fourth quarter. Relative to the same period last year, we also faced headwinds from foreign currency and certain tariff costs that were not mitigated, which tempered margins in the third quarter. These impacts were already assumed in our guidance. As a result, we remain on track to meet our 2025 guidance. This underscores the momentum we are experiencing from executing our strategic road map as we leverage and scale up our growth investment in capacity expansion to meet the increased demand for high-value products. Third quarter revenue increased by 9% year-over-year, driven by the continued strong performance of our BDS segment, which grew by 14%. This was primarily fueled by demand in our core drug containment business. As expected, revenue from Engineering segment declined as we continue implementing our business optimization plan. Our solid performance in the third quarter was underpinned by a remarkable 47% growth in high-value solutions, driven primarily by Nexa syringes and to a lesser extent, EZ-fill vials. The Nexa platform is optimized for sensitive biologics, and its high mechanical resistance makes it ideal for the seamless integration of auto-injectors. Our core pillar of our long-term strategy is built around meeting the demands of a high-growth market, such as injectable biologics, which require premium containment and delivery solutions. These are often sensitive drugs that require specialized glass or ready-to-use containers to maintain stability, and integrity, and ensure patient safety. Our EZ-fill portfolio and our ongoing investments in growth capacity are intended to support customers' innovation programs in drug development and life cycle management. As the pharma industry shifts to ready-to-use platforms that deliver superior quality, simplify processes and enhance operational flexibility, our EZ-fill cartridges are setting a new standard. Most recently, they were selected by a leading manufacturer for use with a GLP-1 biosimilar for type 2 diabetes, one of the first to receive FDA approval and launch commercially in United States. Engineered for optimal performance in handheld injection devices, EZ-fill cartridges offer seamless compatibility with pen injector systems, helping accelerate time to market while ensuring reliability and patient convenience. The continued growth in biologics, rising pharmaceutical innovation, and the increasing trend towards self-administration of medicine remain strong secular tailwinds for our business. Solid demand for high-value solutions and collaboration with customers on ready-to-use products illustrate why we believe we are well-positioned to meet evolving industry demands and support patient-centric solutions. Turning to the Engineering segment. The team continues to make meaningful operational progress against our business optimization plan. Over the past year, we have been squarely focused on executing effectively and meeting our customer commitments. While the steps we have taken have yielded operational improvements, our financial performance is below our expectations. We believe that getting the segment back to historical performance levels is going to take more time as we refresh the workload with new projects and reposition the segment for stronger profitability. We have a healthy pipeline of new opportunities across the Engineering segment. However, converting that pipeline into new orders has been slower than we anticipated. First, as I mentioned during the last call, we are strengthening the sales organization with fresh expertise and refining our commercial processes. We expect to harvest the benefits of these initiatives in the coming quarters. Second, several pending opportunities in our pipeline are repeat orders from existing key customers. The good news is that we have received positive feedback on the performance of recently installed manufacturing lines. So we are cautiously optimistic that the current slowdown in order flow is only temporary. We believe the long-term demand landscape for our manufacturing technologies remains strong as the industry expands its capacity to satisfy growing demand for injectable biologics and devices. Customers are investing in new capital projects as they onshore more core operations in the United States and upgrade their technology to meet higher quality standards and more stringent regulations, such as Annex 1. Many major pharmaceutical players have announced extraordinary investments dedicated to the U.S. manufacturing operations. This, coupled with organic growth from on-cycle investments and growth in emerging markets, provides us with added confidence in the demand outlook. Let's turn to an update on our capital investment projects in Fisher and Latina. In Fishers, we have several syringe lines running commercial production at various stages of ramp-up. At the same time, we will continue to install additional syringe lines and validate customers for the rest of this year and throughout 2026. Our first vial lines are being installed and qualified, with customer validations expected to begin in mid-2026. We are also advancing the build-out for contract manufacturing activities in support of a couple of large device programs. The new clean room is nearly completed. The first injection molding machines are on site and scheduled for installation in the coming months. We still expect commercial activities to begin at the end of 2026 or early 2027. In Latina, we are scaling commercial production for Nexa Syringes, which will continue into 2026. Preparations are underway for the next phase of EZ-fill cartridge production to meet the rising demand for ready-to-use cartridges. This next phase will be powered by our new R400 EZ-fill cartridge lines. They have a fully automated, ready-to-use process designed to ensure aseptic integrity, increase production capacity, and provide superior container quality. Our capital investments are helping us meet the rising market demand for our core drug containment products amid the growth in biologics, which continue to become a large portion of our portfolio each year. Before closing, I would like to thank our teams around the world on our important ESG milestone. We were recently awarded the EcoVadis silver medal. This puts us in the top 15% of companies assessed globally and the 92nd percentile in our industry. This recognizes our strong performance and reflects our commitment to embedding sustainability into our operations and strengthen our ESG practice. I will now turn the call over to Marco. Marco Dal Lago: Thanks, Franco. Before I begin, I want to clarify that all comparisons refer to the third quarter of 2024, unless otherwise specified. Let's start on Page 9. Revenue for the third quarter of 2025 grew 9% to $303.2 million, driven by a 14% increase in the BDS segment, which offset a 19% decline in the Engineering segment. As Franco mentioned, foreign currency translation was a headwind, and on a constant currency basis, revenue grew 11%. Overall, financial results were better than expected in the third quarter, primarily due to a favorable timing of product shipments in the BDS segment, which were previously anticipated to occur in the fourth quarter. Revenue from high-value solutions grew 47% and represented 49% of total company revenue. Strong performance in the BDS segment led to a 240 basis point increase in consolidated gross profit margin, reaching 29.2% in the third quarter of 2025. This was due to a favorable mix of more accretive high-value solutions, the expected financial improvements at our Latin and Fishers facilities as we scale our multiyear investment plan. While both sites are currently margin dilutive, we expect to continue to gain operating leverage as volume and revenue growth, and the ongoing recovery in vial demand as the effects of destocking abate. These positive trends were partially offset by a lower gross profit from the Engineering segment and to a lesser extent, the impact of currency translation and certain tariff costs that were not mitigated. In the third quarter of 2025, operating profit margin increased to 17.4%. And on an adjusted basis, operating profit margin rose 220 basis points to 18.5%. This improvement was driven predominantly by an increase in gross profit. Net profit totaled $36.1 million with diluted EPS of $0.13. On an adjusted basis, net profit was $38.5 million and adjusted diluted EPS increased 17% to $0.14. In the third quarter of 2025, adjusted EBITDA increased to $77.8 million, and the adjusted EBITDA margin improved 280 basis points to 25.7%. Moving to segment results, starting with the BDS segment on Page 10. In the third quarter of 2025, our BDS segment delivered strong results with revenue rising 14% to $266.7 million. On a constant currency basis, BDS revenue grew by 17%. The segment outperformed our expectations by approximately $10 million in revenue from product shipments that we previously expected to occur in the fourth quarter. Top-line growth was driven by a record level of high-value solutions, which reached $147.9 million and represented 55% of segment revenue for the third quarter. This was underpinned primarily by strong demand for high-value Nexa Syringes, along with the continued recovery in EZ-fill vials. Meanwhile, revenue from other containment delivery solutions decreased by 10% to $118.8 million due to a decline in low-value syringes and in vitro diagnostics as we transition to a larger portfolio of high-value projects. This was partially offset by growth in bulk vials and contract manufacturing activities for drug delivery devices. In the third quarter of 2025, gross profit margin increased 400 basis points to 32%. Margin expansion for the BDS segment was driven by the favorable mix of high-value solutions, the financial improvements in Latin and Fishers as the site scale, and the market recovery in vial demand. These tailwinds were partially offset by the impact of foreign currency and certain tariff costs, which were not mitigated. As a result, operating profit margin for the BDS segment rose to 22.1%, up from 16.9% in the same period last year. In the third quarter of 2025, revenue from the Engineering segment decreased 19% to $36.4 million. This was driven by lower revenue from glass conversion and assembly lines. This offset revenue growth in visual inspection and after-sales services. As expected, the segment's gross profit margin declined year-over-year to 10.4% due to a lower revenue and the current project mix, which included a higher proportion of revenue from the complex legacy projects in Denmark and fewer new orders. In the third quarter, operating expenses were higher due to certain R&D activities. This was tied to the ongoing development and launch of our next-generation EZ-fill cartridge lines at our Latina plant. As a result, segment operating profit margin was negative 1.1%. Please turn to the next slide for an overview of the balance sheet and cash flow. As of September 30, 2025, the company had cash and cash equivalents of $113.3 million and net debt of $333 million. For the third quarter of 2025, capital expenditures totaled $54.9 million. Net cash from operating activities increased to $47.2 million. Cash used for the purchase of property, plant, equipment, and intangible assets totaled $48.4 million for the third quarter of 2025. The improvement in net cash flow from operating activities and lower capital expenditures in 2025 led to a positive free cash flow of approximately EUR 260,000 in the quarter and EUR 16.9 million on a year-to-date basis. We believe we have adequate liquidity to fund our strategic priorities and satisfy our working capital needs through a combination of cash on hand, cash generated from operations, available credit lines, and our ability to assess additional financing. Please turn to the next slide for guidance. Despite the larger unfavorable impact from currency, we are reiterating our fiscal 2025 guidance and still expect revenue in the range of $1.16 billion to $1.19 billion, adjusted EBITDA between $288.5 million and $301.8 million, and adjusted diluted EPS between $0.50 and $0.54. I want to call out a few updates to our assumptions for the full year guidance. First, with the strength of high-value solutions, we now expect the revenue from high-value solutions will range between 43% and 44% of total revenue compared with our prior assumption of 40% to 42%. Currency translation was worse than anticipated in the third quarter, and we now expect that the impact from currency will be approximately $15 million to $16 million compared with our prior range of $12 million to $15 million. We have fully offset this with higher organic growth. Thank you. I will hand the call back to Franco. Franco Stevanato: Thank you, Marco. In closing, our year-to-date performance demonstrates the strength of our long-term strategy and business fundamentals. We continue to deliver solid results, driven by growth in high-value solutions, innovation in drug containment delivery, and meaningful progress across our investment projects. While challenges remain within the Engineering segment, we've taken decisive steps to improve execution, reinforce our commercial teams, and unlock long-term value. Our commitment to supporting the evolving needs of our customers, especially in high-growth areas such as injectable biologics and [indiscernible] medicines, positions us well to meet the rising demand and deliver differentiated value. The strategic investments we have made, the innovation we have delivered, and the trust we have built with our customers are the foundation of the strong momentum as we look towards fiscal 2026. With a healthy pipeline, strong market tailwinds, and our clear strategic focus, we are confident in our ability to drive growth, enhance patient outcomes, and deliver lasting value for our customers, employees, and shareholders. Thank you again for your time and continued support. Operator, we are ready for questions. Thank you. Operator: [Operator Instructions] First question is from Larry Solow, CJS Securities. Lawrence Solow: This is Charlie Strauser for Larry. Could you perhaps give us some more color on the $10 million outperformance in the quarter and on the top line, and then also talk a little bit more about the mix? Marco Dal Lago: Yes, sure. Marco speaking. Thank you for the question. So the $10 million is an acceleration to accommodate customer supply chain needs of sales that were previously expected in Q4. So basically, based on the needs, we decided together with the customer to ship in Q3. Everything is BDS, predominantly in high-value solution, high-performance syringes. Lawrence Solow: And then high-value solutions. What drove the strong growth in the quarter? And how does the trajectory look going into next year? Marco Dal Lago: I will start with saying that we see strong demand in high-performance syringes, particularly Nexa, as Franco was commenting. Also Alba has good traction, and also important to underline the fact that we can see some recovery in sterile vials following the last year destocking. We see traction in physical vials that is improving compared to the same period last year. Those are the main drivers for high-value solution growth. And this is also the main reason why we decided to update our guidance with respect of high-value products. We now expect high-value products share between 43% and 44% of company revenue. Franco Stevanato: This is -- if I can complement, Marco, we see that the trajectory is robust. Our big international clients, in particular, the bio customer, also many relative biosimilars. They have a strong demand, in particular, on EZ-fill products like Nexa syringes. We see more and more interest and traction on Alba syringes. And more and more, we see a lot of increase in demand for the cartridges ready to fill on the different format from 1 ml up to 10 ml because they are perfectly fitting for their self-administration for their auto-injector or wearable devices. Operator: Next question is from Matt of William Blair. Matthew Larew: On the margin improvement story here, last quarter, you referenced that Latina was positive gross profit margins, but Fishers was not yet those seeing quarter-on-quarter improvement in both. I was wondering if you could update us as to where those stood today, if Fishers had crossed over to gross profit margin positive yet. Franco Stevanato: Well, overall, we are happy about the execution of the 2 plants. We keep on improving quarter after quarter. As you remember, we started commercial production in Latina in Q4 2023. While in Fisher, we started about 3 quarters later. In Latina, we keep on improving also the financial performance beside the operational KPIs, and we are getting closer to a normalized gross profit margin compared with the segment, still dilutive. About Fisher, as mentioned, is we started commercial production 3 quarters after Latina is a bigger plant, is a greenfield. We are keeping on improving every quarter. We are not positive yet in Fishers in Q3. We are continuously improving also the financial performance, installing more line and better leveraging our fixed expenses. And we plan to go to positive gross profit margin towards the end of this year. Matthew Larew: And then on engineering, last quarter, you called out sort of a KPI site acceptance has significantly increased. It seems like maybe a positive indicator. I think now you're saying it's going to take more time to get back to historical performance. What's the right timeline to think about a return to growth? Can that segment grow in 2026? And if not, does the recovery period look like flat revenue? Or does it look more like the down 20%-ish that you guided to in the back half of 2026 -- 2025? Marco Dal Lago: Yes. If I can start from -- on the bigger picture of the engineering on the Q3 of last year, we shared with all of you that the engineering was coming from a big record high in terms of orders. This has also generated also an increase in complexity. So immediately with the leadership team, we launched a sort of what we call optimization plan, in particular, in order to resize the 2 operation plants. One is related to Italy, other one was related to Denmark because at that time, we received a lot of orders for Cal in Denmark. So today, we continue to make meaningful positive operational progress from operational point of view. We further enforced the leadership. We increased the execution on supply chain after service, in particular on project management. So this was translated in Q1, Q2, and Q3 in evidence increase of number of positive site acceptance tests that we have delivered to our customers that have outpaced the number compared to last year. Even more the positive signal that our customer, once they're starting to run the line, they see -- they give a very positive feedback to all of us today, where we are. The pipeline that we have with our clients, both on historical clients and also new clients is healthy, all the pipeline. What we see, however, that is a slow delay in the conversion into orders for mainly 2 reasons. To our big clients, key customers, they were waiting the final positive acceptance test of the line #1 before to place the order #2 and #3. Second, also, we start to see some of our customers that are taking a little bit more time to reevaluating their manufacturing footprint. So all overall, this temporary headwind of the engineering, we see that is month after month progressing even more from execution point of view, also looking the pipeline that we have with our customers is giving very positive feedback for the future. Just to underline the last comment, the industry in this moment is very dynamic. We see more and more big customers expanding capacity. We see even more -- a lot of clients all over the world upgrading their technology because the new reglementation mostly linked to our next one. And also, we see this we want to take even more benefits. So thanks to the onshoring in United States, some customers are going to add even more investment. So this is a good environment where we continue to grow in the next quarters. Operator: Next question is from Michael Ryskin, Bank of America. Michael Ryskin: In your prepared remarks, I think you made a callout about a biosimilar opportunity or essentially winning some biosimilar business, specifically for GLP-1s. I was wondering if you can talk bigger picture about biosimilars and how you see that opportunity contributing to Stevanato's growth in the coming years. Specifically, if you could talk to what part of the portfolio benefits that? Does that tend to be high-value Nexa? Or does that tend to be more bulk products or more routine products, standard products, whether that's incremental margins or top line? And just broadly, how important are biosimilars to you today? Franco Stevanato: Yes. So usually, when biosimilars are entering into the market when the product is going out of patent, usually is a benefit for a company like Stevanato because this can help to enlarge revenue in the single therapeutic drugs. So on the strategy of Stevanato always was extremely important to be part of the originator from the very beginning. This was valid on insulin, on heparin, anesthetic, mass, and also even more on GLP-1s that our big historical insulin customer engaged us many years ago, and we are deeply engaged with all our product portfolio with our originator. But also in parallel, Stevanato is extremely active with all the -- with our tech center, both here in Italy and Boston to try to maximize the validation in all the biosimilars. In fact, today is exactly what is going to happen. We are deeply involved with all our EZ-fill high-value product platform. We have a program of Nexa syringes. We have a program on cartridges ready to fill. In fact we were just sharing that we win a big program. Even more, we have on biosimilar on JP-1, new program on pipeline for our Alina Pen. So to your question is, yes, biosimilar helping to further increase the revenue. Usually, when the product is going out of patent, 70%, it will be revenue around originator, 30% historically revenue that will move inside of the biosimilar is exactly the strategy of Stevanato to be present in everything that is injectable, originator, and biosimilars. Michael Ryskin: And then a follow-up, if I can, on the guide for the year, and you called out FX currency is a little bit more of a headwind by, I think, EUR 2 million at the midpoint. It sounds like our assumptions for engineering should be a little bit worse, and you talk about organic offsetting it. So just kind of means that BDS is coming out a little bit better. You saw the pull forward into 3Q, but am I interpreting correctly that we should expect a little bit of a better pull forward and better result in BDS 4Q as well, even despite the pull forward just to offset currency in engineering? Marco Dal Lago: Very good points, Michael. We are reiterating our guidance. Nevertheless, there are some moving pieces. You mentioned a couple of million more headwinds in currency effect because Q3 was average EUR 1.17, the euro-dollar exchange rate, a little bit higher than our expectations. We are doing better in high-value products. We expect now to have high-value products as a range of overall revenue between 43% and 44%, so significantly higher than after second quarter. On the other side, we are giving priority to high-value syringes rather than accelerating the non-value syringes. And this is also moving the mix. As Franco mentioned, orders intake in Engineering is not at the speed that we were anticipating. So in our model, we took into account of the risk of softer second quarter, but we prefer to adjust our model with a couple of million less. So all overall, we see impact from currency, some slowdown in engineering, and acceleration in high-value products, bringing more margin to BTS segment. Operator: The next question is from Paul Knight, KeyBanc. Paul Knight: Could you tell us what is utilization rate in Fishers and utilization rate in Latina? And with it how many years to get to full capacity, if that's possible to answer? Franco Stevanato: In Latina, we are continuing -- sorry, in Fishers, we are continuing to install high-speed line for syringes. Practically, we install the line. We do the internal validation. We do the customer validation, we start to ramp up. And this installation of the line, we will continue throughout also 2026 to '27. On the top of this, we are starting also to add capacity for Via in both bulk EZ-fill configuration and next year, we are adding capacity. We will add capacity for Alba technology. And like we already mentioned to you, we are extending a big program in our building for hosting a production of auto-injector in the next year. So in the next 1 to 3 years until end of 2028, we will continue to ramping up capacity. The goal is to be in the full potential at the end of 2028. You remember, we -- the goal was to invest $0.5 billion to translate end of 2028, $0.5 billion of revenue. Paul Knight: And the -- you're mentioning onshoring quite a bit. I guess what you're hearing is that because of tariffs and pricing, et cetera, your customers are evaluating where their factories may be in the future, but it seems like it's a step higher, I guess, possible demand? Franco Stevanato: Yes. We start to see starting from -- after this year was end of March of 2025, many clients that came in to raise interest to our U.S. facility with 2 type of interest, or because they were reevaluating their footprint, because maybe the region they were looking to produce in a different region of the world. And now they are thinking to put capacity in the United States, they are even more interest to boost and speed up the validation of our plants. And this is, let's say, what was already inside of our guidance. The good news is that we see more and more clients that are looking to totally change their supply chain, and this is going to become more new opportunity for Stevanato because we are already in a very advanced stage of ramping up capacity in Fisher, and they like the idea to speed up the validation of our plans in Fisher in particular for our EZ-fill product. Operator: Next question is from Mac Etock, Stephens Inc. Steven Etoch: Maybe just a follow-up on the order pull-through. Can you confirm if that's a single customer that's pushing forward $10 million in orders? And secondly, as you look towards 4Q, do you expect those volumes to continue from there? Or is that more of a onetime item? Marco Dal Lago: No, we are not confirming that. We are not so concentrated as a customer revenue. It's a bunch of customers in the -- especially in high-value products that are accelerating some supply chain needs, but it's not a single customer. Lisa Miles: I'm sorry, Mac, I missed the second part of your question. Steven Etoch: I was just curious if those orders are going to repeat in 4Q, just given the pull forward. Lisa Miles: I see. No, that's not expected. It's a pull forward from Q4 into Q3 on that batch of orders from those customers. Steven Etoch: And then secondly, on engineering. You mentioned the United States manufacturing announcements. I'd just like to get a sense of what you're hearing within your Engineering segment and the customer conversations you have there, and when that might translate to more meaningful order growth for engineering and maybe also the BDS segment as well. Obviously, these are longer-dated opportunities, but I just want to get a sense of what you're hearing. Franco Stevanato: On Engineering segment, what we see that certain -- there are, again, very similar to the question that Paul asked to us. Certain clients, they are reevaluating their footprint. Maybe originally, we were looking to invest capacity in Europe or through certain CMO, and now they are seriously reevaluating or they have already approved to extend their capacity in the United States. And this is why also one of the reasons why we are taking a little bit more time to confirm the order and the specifications. Other customers, they are also changing their type of supply chain. Maybe they are starting to further increase the outsourcing through U.S. CMO, or to use to further increase the capacity of their existing plants. So all overall, we see a positive trend in the United States where customers are starting to more and more increase their platform for fill in United States. Automatically, once they will build the factory, there will be even more opportunity for our Fisher plants because automatically, we will have more opportunity for syringes Nexa, syringes Alba via EZ-fill devices. Operator: Next question is from David Windley, Jefferies. David Windley: I wanted to follow up on Paul's question on capacity, put maybe a slightly different spin on it. On the HBS guidance for the year, the previous guidance for the year at, I believe you said 40% to 42% and 1Q started off pretty favorable to that. And I think at the time, the commentary was that your ability to see HBS continue to rise as a percentage from that first quarter favorable level was somewhat gated by capacity and when lines were coming on. So this quarter, obviously, you were able to pull that $10 million forward. The trends have been pretty favorable. I guess I'm coming back again to Paul's question about capacity and utilization. Are lines in place to continue to support HBS outperformance, but for the pull forward, I guess, in the near term? Or are you kind of in a position where you have to wait for additional lines to be validated before you can see HBS continue to move higher? Franco Stevanato: Today, David, the demand -- let's say, in the last years, most of our investments were just fully dedicated to build capacity in high-value product, both in Italy in the 2 plants in the United States. Today, is it true? We -- the demand is really driven by the capacity that we have put in place in all the locations. And most probably, we will continue in this way. What is important to know that there is an intense program continues to install capacity in all the format just to translate in fact. In Latina, we continue to install capacity for syringes Nexa. In Latina, we will install capacity for syringe with double chamber. We have this huge program to install several hundred million for capacity for cartridges ready-to-fill. In Fisher, it is the same. We continue to add capacity for Nexa syringes. We will add capacity for Alba, and we will adding capacity also via Ready-to-Fill. This is only for EZ-fill. On the top of this, in Germany, we are launching a new big-sized clean room that is going to host produce Alina Pen. And also, we have space to further duplicate in the future in the United States. So we are so focused to intensively execute all our investment. We will add several hundred million of additional capacity in the high-value product until 2028 in order to really meet all the program and execute the contract that we have with our customers. David Windley: Follow-up question around vials. So you had highlighted that the particular pressure on vials, I believe, if we go back to '24 was acute on your margin and kind of post the pandemic and post the decline in vaccine-related activity. You're seeing recovery in that. I'm wondering what the drivers are of recovery in vials. Is it kind of the recovery of orders from your traditional clients? Or are you seeing new products, perhaps participation in GLP-1s or something like that, that are driving an uptick in vial orders? Franco Stevanato: Yes. David, let's make a parallel. Bulk via, you have to consider like a big ocean with several hundred customers that in the last 2 years, they started to normalize their inventory. And today, since the last 4 quarters, we continue to see positive signal to go back on the normalization. And in fact, I think throughout 2026, most probably we can say that we'll be back to pre-pandemic period for Bulk via. EZ-fill via is more a niche. It's more, let's say, we have some big commercial customer, but it's where we see new molecule launching on the ready-to-fill vial. So we also have seen a positive traction with particular also increase of orders with new customers on EZ-fill via because remember, we shared that the customers were looking to clean the inventory of bulk via, and then because they have the EZ-fill flexible line for filling EZ-fill vial, they are starting to place new orders. So all overall, bulk, we are moving to a normalization. On EZ-fill, we see also a new molecule that are going to use this type of primary configuration, EZ-fill. Operator: Next question is from Doug Schenkel, Wolfe Research. Douglas Schenkel: So you had a really strong high-value solutions quarter that was partially offset by standard bulk coming in a bit light of our model. I'm just wondering, based on your commentary, it seems like this is just timing. Is that right? Or is there some other more durable shift in mix and demand that we should be contemplating as we update our models? Marco Dal Lago: Besides what Franco just said about the long-term view and the adoption of the sterile configuration for the year, there are a couple of factors to be mentioned. First of all, we mentioned the acceleration in the BDS volumes previously expected in Q4. This is mainly in high-value products. So it's a pull forward from Q4 to Q3. Then in Q3, we mentioned also the fact that other containment delivery solutions are going down compared to the same period last year. And this is mainly driven by in vitro diagnostic and non-value syringes. More specifically, on syringes, we have some flexible lines. So our priority is to switch the production and the revenue to high-value syringes rather than staying in the low-value syringes. So we have this type of acceleration in Q3 with the Nexa syringes and EZ-fill vials recovery compared with the same period last year. Franco Stevanato: If I can add a little bit more in a broader picture, the goal of Stevanato in the next 5, 10 years is to become a fully solution provider to our customer, where we want really to sell the fully integrated system. This is the reason why, for example, the Planto Fisher is a campus that is going to provide multi-capability all in high-value product. Also, this is in combination with the fact that in the last year, most of our investments are fully dedicated to high-value products. So you can see some fluctuation quarter-by-quarter, but the clear goal of Stevanato in the next years is really to be laser focused on serving the full system on high-value products to our clients. Douglas Schenkel: I was trying to parse out trend versus transitory. So that's great. An unrelated follow-up. There have been a number of recent headlines around large pharmaceutical companies essentially making deals with the U.S. government around drug pricing. And recently, it's been speculated that Lilly and Novo may announce a deal as soon as today. Is it logical to assume that a significant price drop and thus some elastic response in terms of market expansion via Medicare and Medicaid could be an absolute good guy for packaging suppliers? I'm just wondering, as you think about these settlements potentially leading to an increase in volume, wouldn't that, by extension, be good for Stevanato? Franco Stevanato: Yes. We saw this announcement also today, we letter today, there will be further announcement. What we can say is very similar to the question that we received before about the biosimilar. Every time that biosimilar is coming on board, this can help to further enlarge revenue for all the industry. Usually, what we say, just to put in the Stato position, with our clients, we have a long-term contract in place. The cost of primary packaging also is product or auto-injector is really minor compared to the overall cost of good of the drugs. So usually, this we see more like a net positive effect for company like Stemato because it will translate in more orders for our products. Operator: Next question is from Patrick Donelly, Citi. Patrick Donnelly: Franco, maybe to follow up on Dave's question on the vials. Can you just talk about where we are on the inventory side? I mean it feels like destocking far less of an impact. Are we fully past that? What's the latest you're hearing from customers on that front, and confidence on the go forward there? Franco Stevanato: What we see that all overall, they are starting to normalize their inventory. In fact, this will translate in more normal forecast to -- from our customers. Usually, with our customers, we work with what we call 3 to 5 years agreement. Then we have 12 months forecast, 3 months confirm order if more bulk-related, 6 months confirm order if it's more EZ-fill related. So today, all overall, we see that clients are starting to normalize. One KPI that I can share with you, if you really compare last year with this year, the revenue around vial, if you can take a blend between bulk and EZ-fill, we increased 12% compared to last year. So we see continued month after month positive signal practically everywhere. We are talking about Europe, United States, Latin America, and Asia. We have a portfolio of 700 customers, but all overall, the macro trend is moving slowly in a good normalization direction. Patrick Donnelly: And then I guess looking at next year, I know you guys LRP is out there at kind of that low double-digit range. It sounds like throughout this call, it's been a lot of positives between some of the regulatory stuff, obviously, destocking behind you guys. The new facilities ramping. Any reason why next year wouldn't be in that low double-digit range? I think the Street is around 10% next year. I just wanted to take your temperature on that. Marco Dal Lago: As you know, we will be providing our detailed guidance for 2026 next quarter. Nevertheless, what we can tell you is that we see today positive trends for high-value solution adoption. We see Fishers and Latina ramping up in the right way, in line with our plan. We are executing our plan in engineering. So we have a positive approach towards 2026. We need, obviously, to finalize our internal budget and objectives, but this is what we can tell you today. Operator: The last question is from Curtis Moiles, BNP Paribas Exane. Curtis Moiles: So first, I wanted to just maybe get a little deeper into the High Value Solutions guidance for the year. On my kind of rough math, I think it implies for Q4 a range of 39% to 42% of revenue versus 45% year-to-date or so. So could you maybe just give a little more color around the assumptions you have there? And is that kind of based on customer orders or anything else to be aware of? Marco Dal Lago: Yes, correct. Our guidance are implying 40% to 41% in Q4, and this is driven by the backlog we have in our hands, and by the fact that, again, we have been able to accelerate some revenue in Q3 that were previously expected in Q4. So as Franco was saying, there can be some quarterly fluctuation or acceleration depending on the mix of orders we have in that specific quarter. Nevertheless, in the medium term, both in the in the past, we saw a steady growth of the share of our high-value products, and we expect to keep on installing capacity and keep on growing in the share of high-value products. Franco Stevanato: If I can also maybe add a little bit more color from product customer, and therapeutic area point of view, we see that we are growing in biologics a lot. And inside the biologics, we see traction on Nexa syringes where clients is using some autoinjectors. We see more and more increased demand from product in Phase II and Phase III, but also commercial on Alba. This is where we are extremely excited because they have a superior performance in the result of reduction of release of visible particles, Cartridges to fill on different formats from 1 ml up to 10 ml are good because it's very easy to be insert in the complex device cartridges. Also our Alina Pen is starting to feel good pipeline, new prospect on particular on biosimilars. So what I would like to share with you that the pipeline is spread with a very nice number of clients and therapeutic drugs in all our product portfolio. We are not just localized in one product or one customer. Curtis Moiles: And then quickly on contract manufacturing. I know the press release called out strong growth in Q3. And then you mentioned Fishers should start commercial activities for contract manufacturing, I think, end of '26, early '27. So can you maybe just give some high-level thoughts about how we should think about this going forward? Is that going to become a more meaningful growth driver for the business? Franco Stevanato: So we are building in Fisher this production department dedicated for one high runner for auto-injector for one of our big customers that already buy from us the Nexa syringes. Today, our strategy, our approach on drug delivery system is our main goal is to deliver our IP product to our Alina, Aidaptus, and Vertiva products. This is why we're building this big clean room in Germany that we have already -- we have to execute the pipeline with our customer. It's also true that we have going to -- we have already contracted in a selective way that we can provide the auto-injectors or some pen to some customers that they own the AP and when we are already the supplier with our Alba syringes of cartridges to fill off syringe Nexa, practically in order to have more bigger contract, we are also serve this product in a form of CMO business model. Operator: There are no more questions registered at this time. Thank you. Lisa Miles: And that concludes our call for the day. So thank you for joining us, and we appreciate the support. Have a great day. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Hello, everyone, and welcome to today's TBC Third Quarter and 9 Months 2025 IFRS Results Conference Call. My name is Sam, and I'll be the call moderator today. [Operator Instructions] I'd now like to hand you over to today's host, Andrew Keeley, Director of Investor Relations, to begin. So Andrew, please go ahead. Andrew Keeley: Thank you very much, Sam. And welcome, everybody, to our third quarter results call. I'm joined on today's call by Vakhtang Butskhrikidze, our CEO; by Giorgi Megrelishvili, our CFO; and by Oliver Hughes, our Head of International. As usual, we'll have a presentation, and then we'll run through and have a Q&A session afterwards. And with that, I'll hand over to Vakhtang. Thank you. Vakhtang Butskhrikidze: Thank you, Andrew. Hello, everyone, and thank you for joining us today. I am pleased to present another highly profitable quarter with record quarterly earnings. As you can see, our group's net profit in the third quarter reached GEL 368 million, up by 6% year-on-year, while return on equity was 24.4%. Our revenue growth was very respectable, 7% year-on-year growth. In Georgia, we had a strong and stable quarter with 24% plus return on equity, 9% growth in our loan book and net interest margin reaching 6%. Over the same period, Uzbekistan’s, net profit was GEL 41 million, up by 30% year-on-year with return of equity exceeding 23%, while the loan book has almost doubled year-on-year to close to $1 billion. Our digital ecosystem continued to expand its reach with registered users totaling almost reached 22 million, up by 28% year-on-year. As a result of our strong operating performance and a solid capital base, the Board has declared a quarterly dividend of GEL 1.75 per share, bringing the total 9 months of 2025 dividend to GEL 5. Now turning to Georgia. Georgia's economy continued to perform strongly. Real GDP growth stood at 6.5% in the third quarter, bringing 9 months growth to 7.7%, while our macro team has revised its 2025 GDP growth forecast upwards to 7.3%. The inflation rate reached 4.8% in September, surpassing the National Bank of Georgia's 3% target, but we expect this to ease slightly over the next few months. Next slide highlights the highly consistent performance of our Georgian Financial Services business as we continue to deliver close to mid-20s return on equity. The reason for this consistency, as you can see that we continue to be a leading player across most of the key banking segments in Georgia. In the third quarter, our gross loans were up by 9% year-on-year. And I'd like to highlight particularly strong performance in fast consumer lending, a key focus for us where our loan book portfolio grew by 42%, and we have gained 3 percentage points of market share over the past year. Meanwhile, our Georgian customer deposit increased by 11% over the same period. We continue to maintain a strong position in both lending and deposits while constantly improving how we serve our retail and business clients. Next slide illustrates the growing digital engagement among our retail customers in Georgia. By the end of September, our digital monthly users reached 1.2 million, accounting for 2/3 of our active customers. And our digital MAU continues to increase by around 50,000 users per quarter. What's also important is that our digital users are highly engaged with us on a daily basis as it reflected in a very impressive 46% DAU to MAU ratio. The increasing take-up of digital banking by our customers is also reflected in the very high levels of digital loans and deposit issuance. Now let's turn to our Uzbekistan business. Starting with the economy, much like Georgia, the Uzbek economy also remains highly dynamic with real GDP growth of 8.2% in the third quarter, bringing 9 months 2025 growth to 7.6%. What is very encouraging is that inflation is also easing dropping to 8% in September and even lower in seasonality adjusted terms, supported by tight monetary policy, and we have also seen local currency strengthening this year. Next slide provides an overview of the progress that we have made over the past 2 years across all major metrics. We have almost 22 million unique registered users, out of which almost 6 million are monthly active users. Our loan book continues to almost double year-on-year and now tops $970 million, while our deposits increased by 71%, reaching over $540 million. Our operating income reached a record $70 million in this quarter and increased by 69% year-over-year. In the third quarter, net profit of our Uzbekistan business reached $15 million, up by 30% year-on-yea. Now let's turn to some of our recent business updates in Uzbekistan. We continue to expand our digital banking in the third quarter. We -- in the third quarter, we announced our planned acquisition of majority stake in OLX, the country's largest online classified platform. This will unlock powerful synergies with our financial services platform and help increase our share of customer retention. We also saw a great progress in the uptake of Salom card. By the end of September, we issued 700,000 cards, of which 500,000 have been funded as customers are increasingly choosing TBC for their daily banking needs. In addition, we have been deepening customer engagement in Payme with Payme Plus subscriptions reaching 300,000 MAU. We keep scaling the use of AI throughout our business. As a result, we have reached 90% automation in early-stage delinquency cos, and we have conducted over 100,000 sales per month with our AI voice chatbots. Evidence of the popularity of our ecosystem can be seen in it being the top of mind brand in Tashkent and #3 in Uzbekistan as a whole, a great achievement in just a few years of operating. Next slide shows our increasing market share and contribution to the group. By the end of the third quarter, market share of our retail loans and deposits stood at 4.9% and 4.2%, respectively. In the third quarter, Uzbekistan contributed 11% of the group's net profit, while the contribution in operating income was 21% . Next slide provides an update on the targets we set ourselves for Uzbekistan business. I think it is worth stepping back for a moment and considering what we have achieved in Uzbekistan over the past 6 years. During this time, we have built one of the fastest-growing digital banking ecosystems globally. Our registered users have increased tenfold to 22 million, and we have built a $1 billion loan portfolio. Our digital bank broke even in the just 2 years and is already generating 20% return of equity despite being a early stage business. This year, we have scaled up launch new products and announced highly value accretive M&A with BILLZ and OLX, and we are a top 10 player in retail banking and even the top of mind bank in Tashkent. But of course, there has been some challenges this year. As you know, we had issues around fraud and asset quality in the first half, while in the second half, we had pivoted our business from micro loans to SME lending more quickly than we had anticipated, in line with the changing regulatory agenda. As a result, we expect to below our 2025 net profit guidance. I firmly believe that we have a flexible and resilient business model and an excellent team that will enable us to adapt quickly to the evolving environment, and we remain highly positive on the long-term growth opportunities in the country. Finally, I'd like to provide an update regarding group's targets. First of all, I'd like to stress that the group's overall performance remains strong and resilient. Our return of equity has consistently been running ahead of the challenging 23% target. And since the start of 2023, we have almost doubled our digital MAU to close to 7 million as our customers choose TBC. Over the past 3 years, we have increased gross profit annually by 10% despite investing heavily in building out Uzbekistan. However, given that we are running below our profit targets in Uzbekistan, group's net profit was slightly below our GEL 1.5 billion target. As a group, we are well positioned for the future. We combine consistently and proven leadership in Georgia with a dynamic digital ecosystem in Uzbekistan that is well placed to capture the huge opportunity available and remain highly positive on the long-term growth opportunities in both markets. With that, I pass over to Giorgi. Giorgi Megrelishvili: Thanks, Vakhtang, and thanks all for joining our quarterly call. Now I will go into more details for our financial performance, and we'll start with Slide 18. So it has been a strong quarter with a record profit, as Vakhtang mentioned, with GEL 368 million. That is up 6% both quarter-on-quarter and year-on-year basis. Our 9-month profit surpassed GEL 1 billion threshold, and that's actually again 6% up compared to the same period last year. So that translated into a very nice and strong 24.4% ROE. So if you go to next slide, Slide 19, I would like to discuss the drivers of this performance. As you can see, our top line growth has been very strong, 17% year-on-year. That was mainly driven by our net interest income growth, [ 24% ], really solid growth. Our noninterest income also grew by 6% on quarter-on-quarter and 3% year-on-year. This, I would say, slowdown in growth driven mainly by 2 factors, fee and commission income in Georgia because of the increased card network fees. And also, we do invest a lot into our TBC card, cash backs, loyalty that becoming a go card, and we do expect this trend to continue. The second reason is that Lari has been very stable this year, a good sign. However, the margins compressed significantly compared to last year. But despite that, we still delivered and we were flat as last year for the 9 months. So Andrew, if you go to next slide, Slide 20. So and if we look now our NIM dynamics, we are very pleased to see that we retained 7% level and we expect to stay at this level for a while. And actually, another nice development is that in Georgia, we are back to 6% handle from 5.9% last quarter. And also, we do expect to retain around this level in Georgia, maybe high 5s, low 6%, but more or less the level we are in Q3. So let's move to Slide 21. Our cost dynamics. Our OpEx was up by 18%, probably the trend we have seen nothing unexpected because we do continue to invest into our businesses in both countries, particularly into Uzbekistan. However, our cost/income ratio remains broadly very stable. So it was 37.7% more or less the same as in Q2 last year and also 9 months trend is kind of more or less the same and in line. Now if we go to Slide 22, turning there, our credit quality. Cost of risk remains the same for the group and for Georgia as well. For group, it was 1.6%, for Georgia, 80 basis points. So that's the level we have seen for the last few quarters, a very good level. We are very comfortable with this level with our credit quality. Uzbekistan cost of risk ticked down slightly, 20 basis points to 9.7%. However, we still do see the less impact of our thin file consumer segment and long tail post merchant. So we do expect this trend to remain for a quarter or 2 going forward. Now going to Slide 23. Our balance sheet growth, it was very healthy, 13% for the group, both for customer funding and loans. However, I would also like to comment on Georgian growth that was a bit subdued this quarter. That was driven by one-off, a large repayment in our corporate business. In Q4, we do expect to go back to our normal growth mode, and we do expect this year to be double-digit growth. Now turning to Slide 24. I mean our capital positions, they remain very strong in both countries. We are well above our regulatory limits in both countries. And exactly the strong capital levels, if you go to Slide 25, turn to that, will allow us to continue returning capital to our shareholders. We repaid GEL 1.75 in Q3. That brings our overall distribution to GEL 5 this year. and that combined with GEL 75 million buybacks that's still ongoing, we are more than halfway through. So on this note, I would like to thank you, and now we can deep dive more into our TBC Uzbekistan business. Oliver, please go ahead. Oliver Hughes: Thanks, Giorgi. Yes. So I'm going to give you a bit more color on what's happening in Uzbekistan and what's been happening over the last 3 quarters. As you know, it's been a mixed year for TBC Uzbekistan in 2025 with lots of positive developments happening operationally, but a fair number of challenges as well. This sometimes happens in business and the important thing is how the team reacts to these situations when they arise. I'll start with the positives. We've scaled our business considerably and launched new products. Our loan book has grown by over 90% year-on-year and isn't far off $1 billion. We are now a top 10 retail bank in Uzbekistan in both lending and deposits. We've made great progress in building one of the best consumer daily banking offerings in the market. We already have over 700,000 issued and 0.5 million funded Salom cards, which is our flagman debit card. We've launched business lending, which already accounts for above 10% of our loan book and digital insurance with over 300,000 policies issued. We've announced 2 great M&A deals, as Vakhtang mentioned, a partnership with BILLZ, which gives us access to a huge network of retailers and the acquisition of a majority stake in OLX, the country's largest online classifieds, which will unlock powerful synergies with our own financial services platform. These deals help us deepen our relationships with our B2B and B2C customers. We've made great progress in building an AI-powered bank with our proprietary AI stack and our own AI voice assistant coming soon. We more than doubled our gross revenue year-on-year in 9 months to $350 million. And despite investing heavily in all aspects of the business, we've also increased earnings by almost 30% year-on-year with close to 20% ROE, which isn't bad for a digital bank that has just celebrated its fifth birthday. We've also had several challenges, which I will describe in brief here. In quarter 1, we were hit by an external market-wide fraud. The P&L impact was $9 million. We owned it, dealt with it in quarter 1 by provisioning the loss and moved on. In quarter 2, our cost of risk increased mainly from tests that we've been conducting to find new segments and channels in which to grow our business going forward. There were also some scaling-related issues in collections. We made adjustments to our operations, took a more conservative approach to underwriting, and we believe that our credit risks have now more or less topped out. The loans that we booked were overwhelmingly NPV positive, but we understand that optics are also important. Also in quarter 2, the regulator tightened the KYC requirements for payments platforms, meaning that in effect, we had to reregister all of our 3.9 million Payme MAU. Not only did this cause a dip in MAU, which is now recovering, it also led to a slowdown in payments volumes and fee and commissions income. In quarter 3, in line with the regulator's agenda of pivoting the national loan book towards SME, we had to slow down our disbursement of micro loans or unsecured personal loans. This, in turn, has had an impact on cost of risk because the front book is not growing as planned, which means that the risk in the back book is not being diluted as quickly as anticipated. This also hit our revenue and in turn, our bottom line. As we have been highlighting, retail lending and particularly unsecured consumer lending is at a very early stage of development in Uzbekistan. Total retail loans to GDP are just 12%, while unsecured consumer loans to GDP are just 4%, albeit this has been the fastest-growing segment over the last past couple of years. Back at the end of last year, we were working under the assumption that consumer-facing products, including unsecured consumer loans of different types, will be a key driver of our portfolio growth for the next few years. However, since the beginning of this year, there has been a major change in the regulatory agenda in favor of promoting SME lending whilst becoming increasingly negative towards consumer loans, in particular, micro loans, which are perceived as inflationary and something that the population is not yet ready to adopt widely. After the shift in the Central Bank's agenda, a fairly rapid but nonetheless staged market rebalancing from consumer lending to SME lending was implemented through the announcement of market-wide portfolio caps to be introduced by the 1st of January 2029, as we discussed on our first quarter call. Over the past couple of months, the regulators requested that we accelerate our disbursement of business loans. In addition, the CBU has recently proposed new risk weights on unsecured consumer loans. These risk weights are based on the portfolio share of unsecured consumer loans, micro loans, credit cards and overdrafts and will be introduced from the 1st of July 2026. According to the CBU letter, which could still be subject to change. If a bank's share of micro loans or credit cards is higher than 25%, the risk weights applied to that part of the unsecured consumer loan book will vary from 150% to 250% depending on the share of these unsecured loans in the total loan book. As things stand, we expect to have 50% to 75% share of micro loans in the loan portfolio. It now stands at 79%, which would imply 200% risk weighting for the micro loan book. If introduced in the current form, this would, a, have a negative impact on our capital ratios and b, worsen the economics of micro loans. So this is the regulatory environment in which we are working. As you know, in response to the CBU's introduction of portfolio caps and strong desire for the market to recalibrate, we accelerated the launch of SME lending in April. This now accounts for around 15% of our total loan book, and we are ramping up this business. However, it is now clear that we will have to further pivot away from unsecured consumer lending to business lending and secured lending. As Vakhtang covered earlier on this call, this all means that while we are on track to hit our 5 million MAU guidance and 80% loan CAGR targets, we're going to be below the highly ambitious net profit guidance we set ourselves back in 2023, for which I apologize. As you know, we will be holding a Strategy Day in late February, on which we will update the market on our longer-term outlook, but it feels appropriate to outline some of our very initial thinking on 2026. First of all, we still see massive long-term potential in Uzbekistan as we continue to build out the largest digital banking ecosystem in Central Asia. As previously communicated, the SME banking opportunity is huge in Uzbekistan. This will be a key business priority in 2026 and beyond, providing us with new sources of growth as well as aligning us with the priorities of the government and the regulator. We will look to move into new business lines in secured lending in 2026. We have the expertise and platforms to do this, and it provides another large opportunity in the country. We will continue to grow our loan book in segments of unsecured lending, such as credit cards and BNPL or installment loans. We have already issued 85,000 Osmon credit cards, accounting for 5% of our loan book. In 2026 and beyond, we hope that Salom card will become the go-to product for affluent and mass affluent customers to conduct their daily banking. We will further integrate our 2-sided ecosystem, connecting our 22 million registered users on the one side with our exposure to tens of thousands of enterprises on the other. In 2026, we will integrate our CRM and loyalty platforms and start leveraging the opportunities created by our acquisitions of BILLZ and OLX. We have a strong, largely proprietary tech platform, including our speech tech platform on the base of which we're launching a range of interesting AI-driven services over the coming months, including first and foremost, our own in-app voice assistant called Lola. Last but not least, we have an amazing experienced and ideas-driven team that has been through many different situations in many different markets. We know how to build good product and [ CX ], which is exactly what we will continue to do. So thank you. And now over to Q&A. Andrew Keeley: Thanks very much all of you for the presentation. Okay. So we can start with questions. I think first up is Piers Brown from Investec. Piers Brown: Can you hear me okay? Andrew Keeley: Yes, we can. Piers Brown: Yes. So I have one on Uzbekistan and one on Georgia. So this is probably one for Oliver. Thanks for all of the background information on the risk rating changes, Oliver. That was very helpful. I'm just thinking in terms of the -- I mean, you mentioned this increase up to, I think you said 200% on the micro loans. How impactful is that for your capital ratio in Uzbekistan? And I guess the question is, do you have sufficient capital in place currently to absorb that level of risk weighting increase? And then allied to that, how likely is it these caps may be amended or the risk rating proposals may be amended -- and are you still covering your cost of capital at that level of risk rating? So those are my questions on Uzbekistan. I don't know should I ask the question on Georgia? Would you like to address that first and then. Oliver Hughes: Let me answer the Uzbek piece first, yes. So thanks for the question Piers. So the first question was on the impact on the capital ratio of the proposed risk weights, which we have been notified will come into effect from the 1st of July next year. And the answer is we have capital to cover it. So the way this works is that it's based on the share in the loan portfolio, in the loan book. So our share of micro loans, which is obviously -- so these are unsecured personal loans or cash loans is going down because our share of other products is going up, first and foremost, SME, which is growing at a clip. And we will be accelerating that. We're gathering data, we're getting better at it. We're learning how to do the job, which will bring our share of micro loans as they call in Uzbekistan, down below 75%. And depending on how it goes, maybe below 50%, maybe not by the 1st of July because that's only in 7, 8 months, but certainly not long thereafter. So there will be a reduction in our capital adequacy ratio for a period of time. But as our share of micro loans goes down, then it will reset. So there will be a period of time from the 1st of July, let's say, for a few months, while we're still above 50%. But then micro loans will go below 50% and our capital adequacy ratio will go up organically as the risk weights run off. So that's how you should think about this. We don't need to inject additional capital. So that is on the risk weights. And just maybe another piece of relevant information is that 1.5 years or so ago, the risk weights were 200%. They were reduced down to the current level, which is around 100% based on PTI. But now the Central Bank with its revised agenda in terms of driving SME and reducing consumer lending or slowing the pace of consumer lending growth across the system has now put them basically back up to where they were. But if we have a very high share, i.e. 75% or more than it's up to 250%. So that's the [ live of land ]. Could these be amended further? I think it's unlikely because these have been communicated, but you can see that the Central Bank in Uzbekistan is -- has a very firm stance on where it wants to see consumer lending and what it wants to see happening with SME lending. So I can't rule it out completely, but I think it's unlikely. Andrew Keeley: Piers, do you want to ask on Georgia? Piers Brown: No thanks Oliver, that's very helpful. Yes. So on Georgia, I guess this is for Giorgi. I think you mentioned a NIM sort of guidance level or realistic level of somewhere in the 5 highs or maybe 6%. I'd just be interested in the components of that because I guess if I look at the Georgia business, the portfolio growth is coming mostly now in the very strong growth in the fast consumer loans. So I guess structurally, that's shifting the margin higher. But just if you could give some insights on to the components of NIM over the next year or so, that would be very helpful. Giorgi Megrelishvili: Yes. Thanks Piers. Good question. So there are different dynamics from currency [indiscernible] from Lari and FX. If you consider Lari over time, we are still in quantity easing cycle, we do expect the [ FX ]rate to come down. Maybe it's paused a bit. So that probably will put additional pressure. However, it's more than compensated, as you rightly mentioned, like the change of our portfolio structure. That's number one. Also change of our FX composition. Now our Lari is going up. We have more focus on Lari loans that also have higher yields. On FX side, we do also see the benchmark rates coming down. That's maybe marginally negative. However, we also -- like on the FX, we have our wholesale funding more on a floating basis. Therefore, we are more hedged on that side. So overall, that's what I saying that taking into consideration all these components, growth and our plus, we do expect to remain high, as I said, high 5s, like around 6% level. Andrew Keeley: Okay. Next up, we have Stuart from Peel Hunt. Stuart Duncan: Hopefully, you can hear me. I've got 2 questions as well, actually almost similar to Piers. The first one on Georgia. Giorgi, you sort of mentioned about some of the pressures on the fee and commission income. I'd just be interested to know whether these trends continue and persist or whether at some point you start to see some sort of reversal and you start to see growth in that line again? And then the second question is on Uzbekistan for Oliver. And you've obviously spent quite a bit of time talking about some of the regulatory interventions, a fairly detailed regulatory agenda. I'd just be interested if there's any sort of other potential implications you see over the next 12 months or so from a regulator, which feels like it's doing quite a detailed work around the sector. Giorgi Megrelishvili: Probably fee and commission income is the outcome of our strategy, and I hand back to Vakhtang to kind of elaborate more wider. But generally, what I can say, our focus on top line growth given, we do expect our top line like gross NII and net fee and commission income combined to grow at healthy levels, maybe mid-teens, but there will be a composition change for which I'll pass to Vakhtang to elaborate more. Vakhtang Butskhrikidze: Yes. As you understand, main drivers of our fee and commission income, Georgia, is the debit cards and after that coming other type of income. So on that side, you know that at the end of the last year, we began to issue new type of the TBC card, and we are doing very well. So until today, we already issued more than 800,000 TBC cards and this is a very good tool for us to attract and to bring new customers on the one hand, new customers to TBC or passive customers who did not use historically our debit cards. So on that side, we are looking that it's a good tool for us to bring them and this TBC card is mainly has a free of charge on some of the operations. But indirectly, it's very valuable for us because a lot of consumer loans or the credit cards -- by the way, we are doing very well for the mortgages, other type of the loans. It's a very tool just to bring it up to us to offer different kind of the products. And to summarize my answer, so we will continue to issue more and more TBC cards, which is very important to bring new customers. And we want to build on that to sell more different kind of the products, especially where we have a high profitability such as credit cards or consumer loans to these new customers. And to summarize, so probably we could not see growth in fee and commission income during 2026, but indirectly, it will influence our high growth in most profitable segments such as credit cards, consumer lands -- loans. And indirectly, it means that we will increase materially our net interest income in 2026. Oliver Hughes: And taking your question on Uzbekistan, could there be more regulatory changes, Stuart? So the answer is obviously, yes. So I would preface my answer by saying that the regulatory framework in Uzbekistan is pretty well formed as we've been saying a lot over the years. So on the consumer lending side, they have risk weights, PTI regulation, rate caps, ban on FX lending to consumer. So I think it's unlikely that major new changes to the regulatory framework are going to be introduced. But it's clear that the regulator has particular objectives that it's following that it's trying to achieve in the near to medium term. So it's trying to change the shape of the national loan book and push SME lending, get banks to focus their efforts on pushing SME lending as opposed to unsecured consumer lending. And part of this is inflation targets. Part of it is making sure that the national loan book is balanced in the way that the Central Bank wants to see. So if they see the consumer lending growth and SME lending growth are not in the proportions that they want, then it's possible they will do more. But right now, we can't tell you what else they might do given that there's already quite a lot being done. So we'll keep you informed, obviously. Andrew Keeley: So we have next up from Simon at Citi. Simon Nellis: Maybe just one more for Oliver. I mean the risk cost has remained elevated. How much of this is kind of testing your kind of micro loan client segments? And how much of it is testing the SME? And I guess going forward, if you have to accelerate faster in SME, is it fair to assume that continued testing is going to lead to continued high risk costs for quite some time? Oliver Hughes: So our loan book is predominantly unsecured consumer loans. It's mainly what they call micro loans, which is unsecured personal loans. And there that's as a result of the tests predominantly, as we said earlier. Obviously, there's the fraud hit that we took in quarter 1, but it's mainly tests, which matured a little bit of operational stuff in quarter 2 and quarter 3. Our SME loan book is growing from 0 fairly quickly. And there is definitely elevated cost of risk, but that's not what you see coming through the numbers there because it has very little effect because it's a small share of the loan book. As we change the proportions going forward, obviously, we have to do a lot more testing to understand what lies where in micro business, small business and let's say, the larger end of SMEs who will be tackling predominantly through bills. We will obviously try and manage risk in a way that doesn't affect the numbers. We think that we'll remain -- in the corridor that we communicated earlier, 7% to 10%. Certainly, the consumer lending book has topped out, and we think that will start coming down as we go into the beginning of next year. But in SME, depending on the pace of growth, obviously, you'll see some risk coming through that. So I can't guide you in any numerical way at the moment, but we will have to keep on top of that. Andrew Keeley: Thank you, Simon. There's a couple of questions that come through on the chat. One is about coming back to Uzbekistan, I think you've more or less answered on the kind of cost of risk about kind of normalized cost of risk, but also should we expect revisions to longer-term targets after the challenges that the bank has faced in Uzbekistan? And then a question on Georgia was just why was Q-on-Q growth -- loan growth in Georgia so muted. We've kind of covered that already, but you may want to add some more. Giorgi Megrelishvili: Maybe I'll answer the third question about the growth. So in Georgian operation in our CIB business in corporate business, we have 2 big one-offs and that influenced our growth. Others, if we extract the one-offs from the corporate business, we are following the growth of the total bank, especially for us, very important that we are winning market share in the consumer loans and credit. Oliver Hughes: And on the Uzbekistan question about longer-term outlook. So we reiterate our confidence in the potential in Uzbekistan and our ability to capture that potential medium to long term. But as you can see, right now, we've got a lot of moving parts. And so it's very difficult to give any meaningful guidance until things settle down into some kind of more predictable pattern, which we hope will happen in the next few months. So by the time we get to February next year on the Strategy Day, we hope the dust will have settled, and we'll be able to give some more meaningful longer-term projections. But right now, it's moving around. Andrew Keeley: And Oliver, maybe just another one for you about the micro loans and whether we can classify micro loans sort of maybe to very small businesses as SME kind of loans to help kind of grow the share of the SME loan book that way? Oliver Hughes: Sure. And it's a great question, absolutely the right question. So we have so far 2 lines, let's call them, business lines in SME. So there's, if you like, a true origination of SMEs who are new to bank. And that's a business we're learning. It's at the moment, it's working capital loans. We want to try and test secured loans to SMEs, and we'll start doing other stuff as well as we go through the year next year. And then there's what you can maybe term as kind of business consumer or consumer business loans, which is your question, where generally in an unsecured mass market consumer loan book, you'll have 25% to 30% of those customers wearing a consumer hat but actually borrowing for business purposes. And that will be a big driver of our SME lending growth next year. So basically, we're hiving off some of the cash loan or the ICL business and reclassifying it as SME because these are either individual entrepreneurs or self-employed customers who indicate that the loan they're taking for business purposes, which means that they will be classified as SME from Central Bank reporting purposes. Andrew Keeley: Thanks, Oliver. Simon has his hand raised. I don't know if that was -- Simon, do you have another question? Simon Nellis: Yes, I do actually. Just I was hoping you could elaborate a bit on the insurance business in Uzbekistan. You've booked some revenue there this quarter. Is that expected to grow nicely going forward? I assume it is. And then maybe just on the Georgian business, I think the FX revenues went up quite nicely in the quarter. If you could comment on that and how sustainable that is? Oliver Hughes: Would you like to take Georgia first? Giorgi Megrelishvili: Okay. I was [indiscernible] but I can take. So business, as I mentioned, like generally, margins this year went down significantly. The Lari has been very stable. It's just seasonality. So if you look how the flows are. So it has been higher flows during Q3, also a bit higher margins. Generally, what we can say is that 9 months is like truly conservative run rate for us on FX because with the subdued margins, we still delivered that level that as I mentioned during my call was flat compared to 9 months last year. Vakhtang Butskhrikidze: But in addition to that, what is Giorgi saying, we have very comfortable level of growth of the transactions in FX. But as Giorgi said, margins went down dramatically compared to 2024. And as you know, we have a very stable exchange rate during this year. So that influenced the FX. Otherwise, the transactions in the number and the volumes of transactions we are doing very well. Oliver Hughes: And very briefly on insurance, TVC, [indiscernible], which is the word for insurance. It's new. So we launched it basically in March, April this year. It's captive insurance. So basically, these are products which we are selling to our existing customer base, credit linked, but we have ideas, obviously, to add new insurance products and sell them to our existing customer base, which is obviously very large in Uzbekistan and growing. And then at some point, we will get around to selling insurance products into the market, which are not captive insurance products. But at the moment, that's where we're starting. Simon Nellis: So that's credit protection primarily. Yes. Great. And who's your partner there? Oliver Hughes: So it's our in group. Simon Nellis: In-house. Okay. Andrew Keeley: Thanks very much, Simon. Sam, are there any calls on the phone lines? Operator: There are not, no. Andrew Keeley: No. Okay. We don't have any other questions at this time. Yes, nothing coming through. So I'd just say thank you all very much for joining this call. As always, we are around and available to answer any follow-up questions that you have. And I'm sure we'll be meeting and catching up over the coming months, and we'll be publishing our full year numbers in February next year. So thank you very much, and goodbye. Giorgi Megrelishvili: Thank you very much. Operator: This concludes today's webinar. Thank you all for joining. You will now be disconnected. Have a great day.