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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, and welcome to the Air Products Fourth Quarter Earnings Release Conference Call. Today's conference is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Megan Britt. Please go ahead. Megan Britt: Hello, and welcome to the Fourth Quarter and Full Year Fiscal 2025 Earnings Conference Call for Air Products. Our prepared remarks today will be led by Eduardo Menezes, Chief Executive Officer; and Melissa Schaeffer, Executive Vice President and Chief Financial Officer. We have prepared presentation slides to supplement our remarks during the call, which are posted on the Investor Relations section of the Air Products website. During this call, we'll make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to, those discussed on this call and in the forward-looking statements and Risk Factors sections of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements. Please note in today's presentation, we will refer to various financial measures including earnings per share, capital expenditures, operating income, operating income margin, the effective tax rate and ROCE, either on a total company or a segment basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website in the relevant earnings release section. It's now my pleasure to turn the call over to Eduardo. Eduardo Menezes: Thank you, Megan. Hello, and thank you for joining our call today. Please turn to Slide 3. Earlier today, we reported our fourth quarter and full fiscal year 2025 results. Our numbers show consistent progress related to commitments we shared earlier this year. We delivered earnings per share of $12.03, which is above the midpoint of our full year fiscal guidance range. Our operating income margin of 23.7% and return on capital of 10.1% were also in line with our commitments for these metrics. Also, this year marks the 43rd consecutive year of increasing our dividend. In total, we returned $1.6 billion to our shareholders in fiscal 2025. I'm encouraged we are setting challenging but achievable targets and delivering on those commitments. We have taken several key actions starting in the second quarter to focus on the core industrial gas business and expect to unlock earnings growth through productivity, pricing, operational excellence and disciplined capital allocation. The last 3 quarters demonstrate that we are already making progress. Moving to Slide 4. We have 3 key priorities for 2026 that were part of the strategy we shared earlier this year. First, we expect to deliver high single-digit annual EPS growth. To be clear, our 2026 guidance anticipates additional helium headwinds in a sluggish macroeconomic environment. On our second priority, we will continue to make strides to optimize our large projects portfolio. We are working diligently to finalize our NEOM project and expect to improve our underperforming project portfolio with a goal of generating positive cash returns. On our third priority, we continue to take actions to balance our capital allocation and improve our balance sheet. We expect to reduce our capital expenditures to roughly $2.5 billion per year following the completion of several large projects. At this level of CapEx, we believe we can support our ongoing maintenance and invest in the traditional industrial gas projects while growing our dividend and longer term, returning additional cash to shareholders via share buybacks. In 2026, we expect our capital expenditures to be about $4 billion. In summary, we expect fiscal 2026 to demonstrate our commitment to continuously drive improvement in our core industrial gas business and growing alongside our customers. Please turn to Slide 5. We highlighted earlier this year that a portion of our productivity improvement will come from returning to an organizational headcount similar to what we had before we started several large clean energy projects. This slide offers a progress report on our actions in the savings that are being created. Since 2022, we have identified a total of 3,600 headcount reductions, which translates to [ 16% ] of our peak workforce. We expect these reductions to contribute approximately $250 million in annual cost savings or $0.90 per share in earnings once the reductions are complete. These cuts are not something we do lightly, but they are critical to offset inflation and adapt the organization to a lower level of CapEx spend. Our objective remains to return to staffing levels of 2018 adjusted for employee growth to support new assets, minus any other productivity we can find with new initiatives like AI. Moving to Slide 6. We have a summary of our expected CapEx expenditures after 2026. As we have previously said, we are also moving forward with several underperforming projects, giving our commercial obligations and project steps. We have roughly $2.5 billion remaining to be spent on these projects from 2026 to 2028. Though these products are not expected to contribute materially to operating income, we continue to work to improve their results through commercial negotiations, operational improvement and productivity. For our NEOM project, this slide reflects the CapEx related to our equity contribution to the overall project, which will be completed in 2027. Any further investments for ammonia dissociation in Europe will need to be approved separately. After we bring these projects on stream, we expect capital expenditures of roughly $2.5 billion per year, which can sustain both our future growth and ongoing maintenance. For our blue hydrogen project in Louisiana, we have halted making new commitments until an offtake agreement is reached. In this slide, our capital investment for this project in '26 reflects only prior commitments on the project and we have excluded any spending beyond 2026. Like in the case of NEOM downstream investments, they would need to be justified and approved based on firm offtake commitments. I'll talk more about the Louisiana and NEOM projects in our next slide. On traditional core growth, we expect to invest approximately $1.5 billion per year going forward. These are air separation hydrogen projects that we normally execute in 18 to 30 months, so there are always new products being added and completed products being removed from the list. The CapEx figures for fiscal year 2027 and beyond represents our expected average spend. Our focus will be, as always, on opportunities that meet our return thresholds with quality customers and contractual uptake. Moving to Slide 7. I wanted to close with a brief update on NEOM and Louisiana. Start with NEOM, the project is progressing well and is about 90% complete. Solar and wind power generation will be completed by early 2026, and we will start commissioning the electrolyzers and ammonia production. We expect to have ammonia production on stream with full product availability in 2027. We are, of course, following the regulatory developments in Europe. It is important to highlight that the scale of the energy transition is such that the volumes required to meet even the smaller mandates such as the Red III EU mandate to convert 1% of fuel sold to RFNBO fuels would create a green hydrogen demand equal to approximately 7x the total production of our NEOM project by 2030. Obviously, a significant part of the volume is expected to be supplied by local electrolyzers using renewable power, but it's important to highlight that our solution to bring green ammonia from Saudi Arabia for dissociation in Europe is competitive in terms of pricing and requires 0 public subsidies. As mentioned before, the market for green ammonia is also being developed, and that will be our main target for -- from the time the NEOM project starts. Additional feedback on the market development will be provided during 2026. Regarding our blue hydrogen project in Louisiana, we are evaluating proposals to divest the carbon sequestration, and ammonia production assets. We will only go forward with this project if we can sign firm offtake agreements for hydrogen and nitrogen from the facilities that will be owned and operated by Air Products. And of course, these agreements will need to comply with our return expectations with one or more high-quality counterparts. As previously committed, we expect to provide further updates related to this project prior to the end of 2025, so in less than 2 months from today. Let me finish by saying that I'm excited to launch my first full operating year with Air Products team. We have been working hard to right the ship and bring the company back to a position where we can deliver maximum value to our shareholders, customers and employees. Now I'll turn the call over to Melissa to discuss our financial results in greater depth and discuss our 2026 outlook. Melissa? Melissa Schaeffer: Thank you, Eduardo, and welcome and hello to those joining us on the call today. Please move to Slide 8 for a high-level summary of our financial results. We ended the fiscal year with earnings per share of $12.03, delivering our commitment to our shareholders and above market consensus. With respect to sales, favorable volume for on-site and non-helium merchant were more than offset by a 2% headwind from the prior year LNG divestiture as well as project exits. Volume was also lower due to the reduced global helium demand. Partially was favorable for non-helium merchant products across all regions. Operating income was down on volume and higher cost, partially offset by non-helium price. The higher costs were driven by depreciation, largely offset by productivity improvements, net of fixed cost inflation. Operating income margin of approximately 24% declined 70 basis points compared to the prior year, largely driven by higher energy cost pass-through. Return on capital of 10.1% was lower versus prior year as we continue to exit on our project backlog. Moving now to Slide 9. Our fiscal year earnings per share of $12.03 decreased $0.40 or 3% from prior year, driven by a 4% headwind from LNG divestiture and a 2% headwind from project exits. Without these discrete items, EPS would be up 3%. Additionally, we continue to see headwinds from helium, including unfavorable comparable volume and pricing across regions. Despite these headwinds, we continue to deliver on our base business with stronger non-helium pricing actions, ongoing productivity across our segments and favorable on-site and merchant contributions. Moving now to Slide 10. I will provide an overview of our results by segment for the full fiscal year. You can find additional details of the quarterly segment results in the appendix. For the fiscal year, America's results were down 3%. As a reminder, we reported a onetime asset sale associated with an early contract termination at the request of a customer in the prior year fourth quarter, which alone resulted in a 3% headwind in the Americas. Additional drivers include headwinds from project exits and helium and higher maintenance-related costs. These were partially offset by strong non-helium pricing actions, productivity improvement and favorable on-site contributions from our HyCO business. Asia fiscal year results were relatively flat, as lower helium was offset by favorable on-site, non-helium price and productivity. During the quarter, we made the decision to sell 2 coal gasification projects within Asia, which are now within assets held for sale. Europe's FY '25 results improved 4% as non-helium merchant pricing, productivity and favorable on-site contribution was partially offset by lower helium and higher costs associated with 2 depreciation and fixed cost inflation. The full year, Middle East and India equity affiliates income decreased 2% from prior year, primarily due to lower contributions from our Jazan joint venture. The full year results for the Corporate and Other segment were primarily impacted by the headwind from the prior year sale of LNG, partially offset by lower changes to the sale of equipment project estimates and lower costs with our continued focus on productivity improvements. Moving now to Slide 11. We continue to generate strong cash flows from our base business, supporting investments in both energy transition and traditional industrial gas projects. Additionally, we returned $1.6 billion in cash to our shareholders. We remain committed to disciplined cost control, a reduction in capital expenditures and strategic asset actions aimed at unlocking value and generating cash. Moving now to Slide 12. We will review our outlook for fiscal 2026. For the full year, we expect to deliver earnings per share in the range of $12.85 to $13.15, an improvement of 7% to 9% from the prior year. Despite a helium headwind comparable to FY '25, this growth is expected to be achieved through new asset contribution and continued focus on pricing actions and productivity. We also expect a 1% benefit from the rationalization of projects in large part due to the 2 Asia gasification assets we wrote down in fiscal 2025. We are focused on delivering these results in line with the 5-year road map we introduced earlier this year. For the first quarter of 2026, we expect to deliver earnings per share in the range of $2.95 to $3.10, representing a 3% to 8% improvement from the prior year. Our outlook assumes growth from continued pricing actions and productivity as well as a benefit from the rationalization of projects and lower planned maintenance, partially offset by lower helium. As a reminder, we expect our first quarter to be lower sequentially due to normal seasonality. With respect to capital, we expect to spend approximately $4 billion as we execute on our project backlog, including approximately $1 billion on traditional industrial gas projects and invest in ongoing maintenance. As we look to derisk our Louisiana projects and optimize our portfolio, we expect to be modestly cash flow positive in fiscal year 2026 and are committed to staying cash flow neutral through 2028 as we close out on several projects. Now we'll open the call up for questions. Operator? Operator: [Operator Instructions] We'll go first to Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: In your opening remarks, I think you said that you were evaluating proposals to divest the carbon capture piece of the Louisiana project, but you're still evaluating whether you would proceed with the project. So could it be that those 2 events would be linked, that is you would sell the carbon capture piece to a party, and then work with them to provide them hydrogen or hydrogen and ammonia? Eduardo Menezes: Jeff. Yes, let me try to explain that. The idea of this project is basically to transform into a regular hydrogen and air separation project where we supply hydrogen and nitrogen to someone that will produce the ammonia. The CO2 that is being produced by the facility has to be sequestered in order to -- for you to capture the 45Q credit, right? So what we're basically saying is that Air Products was developing by itself its own pore space to do that. And what we are trying to do at this point, we're evaluating proposals for someone to buy the pore spaces from us and provide the service of the CO2 sequestration or to just buy the pore space from us and provide the service from another location that this company may have. So that's the picture in terms of the CO2 sequestration. And yes, this is connected to the overall project, although if we decided not to go forward, of course, we still have this asset that is the pore space that we can try to monetize in the market. Jeffrey Zekauskas: And as for the Alberta project, because the cost overruns have been so high, why don't you simply stop the project? Or what impedes you from stopping it? And would that project have to be money losing on an EPS basis because the depreciation charges will just be so high from the cost overruns when it comes -- if it comes on? Eduardo Menezes: Yes, Jeff. This project, as I explained before, we have a long-term commitment for almost 50% of the volume with a major customer that depends on us. So we have a contractual commitment that we take very seriously. So we need to finish the project and supply the hydrogen to this customer. And we have some additional volume that we are working hard to find other ways to place in the market. As you probably know, we already have infrastructure in place in Edmonton. We have 2 other sites that are connected to a pipeline. And this third site will also be connected there. So we can move the product from these 3 sites to basically all the refineries that are located in that area. So that's the work we're doing with the additional volume, but our commitment to go forward is basically what we need to have in order to fulfill our contractual obligations. Operator: We will go next to David Begleiter with Deutsche Bank. David Begleiter: Eduardo, on the cost savings and the employee headcount, is the 20,000 headcount you're targeting a new base? Or could it go lower from there? Eduardo Menezes: Yes. This is what we are expecting to have at the end of this year. We continue to find ways to rationalize our workforce to make sure that we use all the technologies available. I think we demonstrate that we are reducing our SG&A year-by-year. And if I'm -- my recollection is correct, I think we said that our original number when we were in 2018 was close to 18,500 people. And our objective is to go back to that number plus the people that we absolutely need to operate some assets that we added since that date. So I would say that we still have some room to go, but it's an ongoing process to always optimize and make sure that you are as competitive as possible. David Begleiter: Very good. And just back on Louisiana. If you do move forward with that project with these offtaker partners you suggested, what would be the CapEx remaining to Air Products? Eduardo Menezes: Yes. We will provide that data, Dave, when we update the project. I think it's -- I hope everybody understands that what we are saying is trying to summarize that no offtake deals, no FID. So Air Products started this project without having an offtake deal. We paused the project. We're working hard to find solutions for that. The economics of the project, when you look at the natural gas price, the infrastructure that we have in place and the 45Q it is the right place to install green -- blue hydrogen and blue ammonia projects. I think both other ammonia producers and even our competitors that are doing similar projects in Texas and Louisiana saying exactly the same thing that you can be competitive even against gray ammonia in Europe. So we're working on that, trying to find a solution. I understand we are basically 45 days away from the end of the year. And if I really didn't think that we have a chance to have something, it would be much easier for me to say that today. But we still believe that we can find an interesting solution for this project, and we'll provide a full update before the end of this year. Operator: We'll go next to Duffy Fischer with Goldman Sachs. Patrick Fischer: Just want to get some insights into the growth into next year. So at the midpoint of your guide, you're up 8%, but there's a negative 4% from helium. So that's really 12%. Melissa called out one from the shutdown of the sale of the Chinese assets, which gets you to 11%. So of that 11% growth underlying, can you break that out kind of new projects, price, efficiencies, how you deliver that? And is that smooth throughout the year? Or are the oncoming projects back-end loaded? Eduardo Menezes: Yes. We expect contribution from new assets in -- both in Asia and the Americas. That can give us around 2%, 3% growth. And then the balance will come from price and productivity. I would say, half and half there. We are working very hard on the productivity side, as we mentioned on our headcount slide and on the pricing is a continuous work for us. The helium headwind that we have is very similar to what we had this year. I would say that when we say that this is the headwind for 2026 is basically agreements that we are reviewing and we're signing this year in 2025 or the previous year, now the fiscal year. Air Products, most of our volume comes from large liquid customers. As you know, our packaged gas business is basically limited to Europe. So we pretty much know where these agreements are going to be next year, and that's where they are at the fourth quarter of this year. So we're pretty comfortable that we understand well the headwind that we have in helium and in the base business, as I said, 3% of new assets and the balance coming from productivity and price. Patrick Fischer: Great. And I'm sure it's not your favorite subject, but helium was mentioned 29 times in your slide deck this quarter. What is your view on the helium industry going forward? Do you think we've stabilized at this point? So '26 will be the last year of headwind? Or do you think we continue to see headwinds in the '27 and '28 for that product? Eduardo Menezes: I didn't count the number of times, Duffy, but thank you for pointing that. Yes, it's -- we have a lot of debates on that. If we have a structural change in the market or just part of the cyclicality that you always had in helium, right? I would say that there were some significant changes in the way the market operates because of the disappearance of the BLM as a major source of helium globally and in the United States. And that took away a little bit of the inventory that you had that were able to regulate the market a little bit. I think most of the major players now, they are now installing their own storage. So we have our own cavern, our 2 competitors, they have their own caverns as well. So I hope that this will help regulate the market a little bit. And from what I see today, I see still some decline in '27, but not at the same level that we had this year. And the best guess that we have is that, that will be the lowest point and the market will stabilize. But we need to see how the sources develop and how the effect of this storage of helium will have in the overall marketplace. Operator: We'll go next to Patrick Cunningham with Citi. Patrick Cunningham: If you decide to forgo downstream investment in NEOM maybe based on unfavorable regulatory environment, whatever it may be, what do the commercial options look like? And would you expect to see any positive EPS contribution in 2027 under a scenario where you have to sell ammonia exclusively? Eduardo Menezes: Yes. We are still talking about the guidance for 2026, right? So we're going to work -- we are working on this issue. We're going to work during the year. And by the end of 2026, we'll be able to give you more guidance on that. Now, there is no question that in the beginning of this project, we'll need to commercialize the product as ammonia. The market for green and blue ammonia or low-carbon ammonia, whatever you want to call, it's developing. So I expect that we're going to have the ability to sell some of our production in the beginning of the operation as green, and that percentage will grow with time. What is exactly the numbers? As you know, ammonia, it's own market. It has different pricing dynamics. So we're going to need to wait a little bit more to give you a forecast for 2027. Patrick Cunningham: Understood. And then maybe just a quick one on equity affiliate income. We saw meaningful growth in the Americas this quarter. Can you provide some color on what was driving that and what we should sort of expect for step up or step down across all of the regions and equity income next year? Eduardo Menezes: Yes, I can ask Melissa to answer, but it's basically Mexico for us and they have been -- had a very strong second half of the year. Melissa Schaeffer: Yes. Thanks, Eduardo. So -- absolutely, so our Mexican joint venture did see improvements year-over-year. We do expect about a flat going into FY '26. However, we did see a slight decline in our Jazan joint venture in '25, and we actually look for that to be a pickup in '26. And obviously, interest rates do impact that. So as interest rates do decline, we will see improvement on the equity affiliate contributions from our Jazan joint venture. Operator: We'll go next to Josh Spector with UBS. Joshua Spector: Eduardo, I wanted to just ask you about the decision on Louisiana. I mean I think based on investor expectations, you might have had some license to maybe push out a decision there a little bit beyond year-end, but you're having the tax commitment to communicate something here in the next couple of months. So I'm just curious if you could talk about the range of scenarios there. Is that a go or no-go, meaning cancel decision? Or do you see a scenario where kind of some decision gets pushed out beyond the year-end time frame? Eduardo Menezes: Yes. I understand the curiosity, Josh. And I -- we would like to be able to communicate more at this point, but we really need to wait until the end of the year. Again, this -- I would say that if we are telling you that we believe that we have a reasonable chance to communicate something by the end of this year, it means that we have very advanced negotiations with counterparts on that, right? It is the largest project or would be the largest projects ever built or probably any other industrial gas company. So it's a very complex negotiation, and we have been working on that for several months now. I would say that from that perspective, it's going well. My main concern on this project really is on the capital estimate for the project. When you look at the slide, you can see a picture of coal box that we manufacture for this project. So we have all the major equipment done. We have all the engineering done, but we still need to do the construction. And the construction market in the United States is very hot at this point. A lot of competition from data centers and other people trying to build other structures and coming from different industries and able to pay different prices. I think this is affecting projects for the entire chemical industry. So we are looking at that very carefully, trying to understand what is real, what is not and what is a bubble with the point that if you look at our slides, you can see that we made a point about applying for a major air permit source -- air source permit there in Louisiana. And we did that because our potential counterparts asked us to have the flexibility of running the plant on a gray mold if something happens with the CO2 sequestration that we didn't expect to do or we still don't expect to do because the CO2 is a big contributor for the project. But -- it's something that the other projects are doing, and we decided to apply for that major permit. And that will take several months. It will probably take up to mid-2026. And from there, you need to do civil construction. So really, the peak of the mechanical and electrical construction would be like mid-2027. And the judgment that we need to make is how hot or not hot the U.S. construction market will be at that point. So that's where we have been working a lot of details behind that decision, and we will communicate clearly where we are in the project before the end of this year. Joshua Spector: Okay. And just a quick follow-up just with the guide for '26. Your comments are minimal volume growth to something to that extent. Just wonder if you could quantify minimal. Are we talking about near 0 growth. And basically, if we end up having a macro environment that looks like where we've been at the last couple of quarters, is that a risk to your guidance? Or is that largely baked in? Melissa Schaeffer: Yes, sure. Thanks for the question. So let's be clear. So again, as we stated, we do see several new assets coming on stream, both in the Americas and in Asia. Those will be ramping towards the back half of this fiscal year. So there is growth in volume associated to new assets. From a market volume perspective, we're not forecasting significant market growth at this time given the macroeconomic headwinds. However, if we see that improve, obviously, our results will improve. So definitely volume from new assets, but at this time, not forecasting significant market volume due to those headwinds. Operator: We will move next to Vincent Andrews with Morgan Stanley. Vincent Andrews: Just trying to reconcile the CapEx slide in this deck versus the one in the last one. It looks to us like your CapEx forecast for fiscal '26 has gone from about $3.1 billion to $4 billion. So first of all, is that correct? And secondarily, if it is, what's changed in that slide that's causing that? Melissa Schaeffer: Yes. Thanks, Vincent, for the question, and I'll take this one. So the CapEx guide that we gave in the second quarter, obviously was an estimate, right? So as we go through the year, we sit with all the regional presidents and really do a bottom-up forecast on the capital that we're going to spend over the next couple of years. So we've refined that -- we've adjusted based on new wins in all the different regions and are estimating around a $4 billion CapEx. Obviously, maintenance is a component of that CapEx. We're looking to improve on maintenance and take that down. So this could improve that CapEx number. But again, that's really a bottoms-up review that we do as part of our plan. So there was a small variance between the Q2 time frame CapEx forecast and what we're projecting right now. Vincent Andrews: Okay. And then just as a follow-up, separately in the corporate segment, which came in certainly better than what we had and I believe better than where consensus was. The slide -- and I apologize if you already spoke to this. The slide speaks to lower changes of sale of equipment project estimates. What does that mean? Melissa Schaeffer: Yes. Thank you. So we do have certain sales. It's a very small part of our business, but what we would call a sale of equipment. When we sell a project to a company that's not going to be a long-term sale of gas project. We have had some cost increases associated to certain projects that are sale of equipment that are again accounted on a percentage of completion accounting perspective. So as cost increases there, we show that in the P&L. We did have some smaller cost increases this year compared to last year, and that's really what you're seeing flow through there. Operator: We'll move next to Chris Parkinson with Wolfe Research. Christopher Parkinson: So let's talk about your base business a little bit, particularly electronics. Can you just go over kind of how we should be thinking about the intermediate to long-term growth algorithm that you have in your portfolio and how that exposure evolves with [ M.2 HBM ] growth and everything else. I'd love to hear your thoughts on that as well as where you think Air Products just broadly stands relative to peers in terms of what's embedded in, let's say, your non-large project outlook as it relates to your backlog? Eduardo Menezes: Thank you, Chris. Yes, electronics represents roughly 17% of our total sales in Air Products. It's a very important segment for us. We were really the pioneers in the area, initially with Intel, now with the other players. It's a market that is expanding very quickly. We have plants that we are commissioning right now. We have investments on other plants in Asia that we're doing, and we are in the process of participating bids for several others, right? As you know, the investment in this area has been very, very strong. So it's probably the brightest area we have for our traditional business, and it's an area that we have been focused a lot. I really -- on your point on the other products, I really would like to get a little more clarification exactly what you're asking other than the portfolio of new projects. Christopher Parkinson: Are you happy with where your existing electronics backlog exists relative to peers, given everybody has been wrong over the last few years? Or is that something you'd like to focus on as CEO? Eduardo Menezes: Yes. No, no. I will never be happy with that because I always want to have more than that. We're working very hard to get some new opportunities. We believe that there are some new projects that we will be able to announce in 2026. And I -- but I still believe that we have a very, very strong position in this market. And I have no other way to make comparisons with our competitors. I think our position on that market is stronger than it is in most markets. Melissa Schaeffer: And if I could add one point. So one of the assets that we spoke about is coming on stream this year is in the electronic space in Taiwan. So that's the starting of the ramp of that project. So that's one good example. But in the near term, where we're going to see improvements in the electronics space for Air Products. Eduardo Menezes: Yes. And the reality is in these places, it's like a continuous project because they have so many expansions and we are always building new plants in Asia, and hopefully, we will be able to move that to other regions as well as these customers, they start to invest outside of Asia. Christopher Parkinson: Got it. And just as a quick follow-up. To the extent that you can, can you talk about just kind of how we should be thinking about the run rates from Uzbekistan as well as like GCA and some of these other projects which have had some maintenance or kind of been more start and go. Could you just perhaps just give us a little framework on how we should be thinking about those as well. Eduardo Menezes: Yes. Uzbekistan is a very large syngas facility. It's operating well. We had a maintenance this year, but it was scheduled maintenance, this kind of plants you have to do that every few years. So no real issues there and the plant is running at very high rates at this point. And GCA is a project that we are still working on to basically bring to completion, and it's one of the projects that we expect to contribute this year in 2026. Operator: We'll go next to John Roberts with Mizuho Securities. John Ezekiel Roberts: Are you still anticipating doing ammonia cracking in Europe and building an ammonia cracker there? Eduardo Menezes: We are still waiting to see what the final regulation will be in Europe. As you know, they have this regulation to convert 1% of the fuels to RFNBO. This is for 2030 now. This has to be transposed by each country. There is other regulations that are probably not going to move. But this one, everything indicates that what you see in most countries, they are even proposing higher percentage than that. So I think Spain is 4%, Germany 1.5%. But all this has to be ratified and the expectation now is that we'll see this transposition of the regulations by March of 2026. So when the regulation comes out, then we're going to understand the size of the market with the best information we have today, it's not a huge percentage of the fuels. But when you think about green hydrogen volumes that are really, really small, that will generate a market. I think in our slides, we said that if the number is 1% is like 7x the volume of NEOM. At the current regulation levels that we see, that number is more like 20x. Again, these volumes, they can be supplied by local production using electrolyzers with renewable power or they can be supplied by cracking ammonia coming from a place like Saudi Arabia. So it's really a way to do some arbitrage on power prices and so forth. So we need to see how these ends. We need to see how the market develops and what opportunities we have. If the project makes sense, again, and if we have an offtake agreement, then we can do an FID and move forward with these projects. If not, will need to go in a different direction. But at this point, indications are that there will be a market, not a huge market, but very significant compared to the existing volumes in terms of green hydrogen and green ammonia. Operator: We'll go next to Laurence Alexander with Jefferies. Laurence Alexander: Earlier this year, when you put out the target of 6% to 9% growth through '29, what was your assumption around NEOM? Was it your predecessors' framework of realized prices will be roughly double the market price? Was it just a placeholder, 10% IRR? Was it -- can you give us some sense of what was embedded in that framework from the NEOM asset. Eduardo Menezes: No, we didn't add any kind of very large contribution from NEOM. At this point, we have the contribution from the JV point of view. The contribution from the product that we'll need to sell from there is something that, as I said before, we need to continue to work on to get a better understanding of what the numbers will be. But on our guidance for that high single digits between now and the '29, we count with a minimum contribution from that project. Operator: We'll go next to Matthew DeYoe with Bank of America. Matthew DeYoe: Two questions for you. I apologize, the first one is going to be a little long. So if I look at your performance versus Linde, Europe really shows the biggest opportunity for improvement. And notably, I think price there has kind of underperformed materially if you go back or look even to COVID or pre-COVID. I know helium is probably in there, but I think fundamentally, when electricity prices rolled over in '22 and '23, it looks like Air Products just like handed price back to customers and Linde didn't. And so net, you have a pretty wide margin differential between the two. I mean when -- do you kind of agree with that view, but is there an opportunity to catch up on the price differential? Or is raising price unilaterally like too difficult? And then, as my second, is there a world where you can just like monetize the $2 billion so cost in Darrow to another company that's looking to do a project along the Gulf Coast that might have maybe different strategic goals from Air Products. So I don't know, maybe you can get like 50% of that, right? Is there a way we can walk away with $1 billion and just say that's better than just a full project walk? Eduardo Menezes: Yes. On the -- we starting with the last question first, yes, absolutely. As I said, we have a lot of the critical equipment done for the project. the project has good economics. So that's definitely what would happen if we decide to cancel. We would try to monetize as much as we can. And I don't think your estimate of 50% is a bad estimate at this point. But again, this is something that you need to go and understand and see how much you can recover from that. On your first question, and I've seen your report on the prices in Europe and I think we're still trying to understand exactly the comparisons there because when you do comparisons quarter-by-quarter, not in an average for the year, you get to different results. And I think we can talk offline and explain a little bit of that to you. But when you look at performance in Europe. Yes, I understand our competitor improved a lot of their performance. I have a personal understanding for what exactly happened there. You always need to understand that Europe is -- it's easy to talk about as one market, but there are several different markets in Europe. It's easy to see that when you think about an island like the U.K. But the reality is, when you talk about industrial gases, Iberia is an Ireland, Italy is an island. And really the only large common market we have in Europe is the space between France and the Benelux in Germany. Eastern Europe also doesn't have the same geographical barriers, but the density also leads to the point that you have several different markets here. So when you think about that, and you forgot about Scandinavia, it's also a separate market. If you look at the positions that we have and the positions that our competitors have, the margins are little -- you can understand a little bit the differences in margin. I'd not say that we cannot improve our business in Europe. We're working to do that, to make it better on every line of business that we have. But I think the difference in performance is a little smaller than what you are -- you were calculating there just because of the positions that we may have or not in places like Scandinavia or Eastern Europe. But -- so that's the point I can guarantee you we're not giving -- we're not giving price back and we're working on our pricing day by day in Europe. And I look forward to have our group here reaching to you and talk about the difference on how you calculate that when you look at quarter results and annual cumulative results on pricing. Operator: We'll move next Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: Just a clarification on the helium headwind. So I think maybe this year came in just slightly below your expectations. I think you're guiding at $0.55 to $0.60, maybe that's $0.49, so maybe that was a little bit better. Maybe you can just clarify that. And then on the helium headwind for next year, it looks like Q1 is maybe a negative 6%, but then the full year is negative 4%. So that appears to be projected to get better as you move through the year. What's your confidence in that, I guess? And is there a possibility that it could get worse? And then for my second question, just on CapEx, is there a possibility that maybe -- what kind of flex do you have there? Would you go down to maybe $3.5 billion if necessary for fiscal '26? And how soon you make those decisions? What kind of freedom are you giving yourselves to or time to make some more difficult decisions, I guess, if you need to? Melissa Schaeffer: Great. Thanks. I'll take this question. So let's start on helium. So you are right. We had forecasted between $0.50 and $0.55 headwind on helium for the full year. We came in at $0.49. So a little bit better than we had forecasted, but not significantly off. For FY '26, we're looking about the same run rate as what we saw in FY '25. Obviously, there are areas that we're going to continue to look to be able to push volume and price, but this is a difficult market. One of the things that I do want to remind everybody is that in Q1 last -- or this year, we had a bulk helium sale that we disclosed. That is causing a significant headwind as we lead into FY '26. So that is the difference in Q1 that you're seeing as a year-on-year comp that is giving us a little bit of a tough headwind. But again, full year, about 4% is what we're forecasting, 4% headwind coming into FY '26. Now on CapEx. So for CapEx, it's really a component of execution against our projects, right? So as long as we're continuing to execute against the projects that we have in our backlog, we will see that $3.5 billion to $4 billion. That is not something that would significantly change or that we need to make a decision on. Now as for Darrow, we obviously have commitments on purchase orders that were continuing to progress, but no new commitments are being made. So I don't see a significant variance or decision point that would change the FY '26 CapEx forecast. So between $3.5 billion and $4 billion is a number that I am pretty confident on. Operator: We'll go next to Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Can you elaborate on the decision to sell to coal gasification projects in Asia curious about what exactly you're divesting, whether you have any firm deals in hand today? If so, cash proceeds and any impact on your sales in Asia? Eduardo Menezes: Yes, Kevin. We -- as we explained, I think, 2 quarters ago, we have 3 major coal gasification in China -- projects in China where we own and operate the coal gasification part of the project. We have several others that we have the oxygen plant, but that's a different story. Out of these 3 projects, Lu'An is the largest one, and we have absolutely no issues with this project. It's operating. It's probably one of the largest coal gasification sites in the world, and this is continuing normally. We have 2 other sites that -- those are the sites we're taking actions that we have no operating issues, but we have customer issues. And we have been trying to work these issues for some time. These projects really -- they have been a drag for us in terms of operating profit. We have been booking only the sales that they have been able to pay. So the impact on sales is not exactly very large for us. And we decided to -- after several months of negotiation we decided to set these assets aside for sale. And we are in the middle of that process. I cannot give you specific data and value of when we can close this sale and the amount of money that we're going to be able to collect. But of course, we're trying to maximize the valuation. And we believe that the entire asset may have a better owner than us and the current owner of the syngas to methanol to olefins plant. So we hope that we'll be able to find that and monetize this asset better than what we would have if we keep running these plants. Kevin McCarthy: Eduardo. My second question is a bit of an unusual one. Would you comment on the market for rare gases, like crypton, xenon, neon, are you seeing any escalation of competitive intensity in Asia? And if so, is it meaningful? Or is it simply too small to matter given the small size of those markets. Eduardo Menezes: Yes. Air Products, unfortunately, is not a big player in this market, traditionally. So it's not something that we focus a lot. We have seen some degradation in pricing and increasing in the competition level from other players. But really, it's not something that affects us that much. So I don't think I would be the right person to give you a feedback on that. Operator: We will take our final question from Mike Sison with Wells Fargo. Michael Sison: One quick one on Louisiana. If you get to partners for sequestration pneumonia who want a similar return that you would want, is there still a good return on the hydrogen that you would do longer term? I suspect that -- that's kind of what the board of partner is looking for. So maybe just flesh that out as a scenario. Eduardo Menezes: Every -- we are looking at this, Mike, as a normal hydrogen project for us. So we have our criteria. The customer has its own criteria. And it needs to work for both sides for the product to move forward. That is all I can tell you. If it doesn't work for them, it's not going to work for us. And I believe there is a room today to get to the right returns. As I said, to get the right returns, you need to have a commercial negotiation on pricing, but we also need to have a firm estimate on the capital cost, and that's also part of the equation here. Operator: And that will conclude the Q&A portion of today's call. I would now like to turn the call back to Eduardo Menezes for any additional or closing remarks. Eduardo Menezes: I would like to thank everyone again for joining our call today. We appreciate your interest in Air Products, and we look forward to discuss our results with you in the next few quarters. Thank you, and have a great day. Bye. Operator: Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.
Operator: Good morning, ladies and gentlemen, and welcome to the Slate Grocery REIT Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference over to Shivi Agarwal, Manager of Finance at Slate Grocery REIT. Please go ahead. Shivi Agarwal: Thank you, operator, and good morning, everyone. Welcome to the Q3 2025 Conference Call for Slate Grocery REIT. I'm joined this morning by Blair Welch, Chief Executive Officer; Joe Pleckaitis, Chief Financial Officer; Connor O'Brien, Managing Director; Allen Gordon, Senior Vice President; Braden Lyons, Vice President. Before getting started, I would like to remind participants that our discussion today may contain forward-looking statements. And therefore, we ask you to review the disclaimers regarding forward-looking statements as well as non-IFRS measures, both of which can be found in Management's Discussion and Analysis. You can visit Slate Grocery REIT's website to access all of the REIT's financial disclosure, including our Q3 2025 investor update, which is available now. I will now hand over the call to Blair Welch for opening remarks. Blair Welch: Thank you, Shivi, and hello, everyone. We are pleased to report another quarter of strong financial and operating results for Slate Grocery REIT. Our team continues to convert resilient demand for grocery-anchored retail spaces into robust leasing at attractive rental spreads. The REIT completed over 417,000 square feet of total leasing throughout the quarter. Renewal spreads were completed at 15% above expiring rents and new deals were completed at 35% above comparable average in-place rent. Adjusting for completed redevelopments, same-property net operating income increased by $4.3 million or 2.7% on a trailing 12-month basis. Portfolio occupancy remained stable at 94%. And our portfolio's average in-place rent of $12.82 per square foot remains well below the market average of $24.09 per square foot, providing significant runway for continued rent increases. The REIT has a weighted average interest rate of 5%, with over 90% of its debt having a fixed interest rate on a proportionate basis. This provides a stable outlook for the REIT's near-term financing costs. The REIT's weighted average capitalization rate remains well above the REIT's weighted average interest rate for outstanding debt allowing the REIT to maintain positive leverage. The REIT's attract evaluation combined with continued net operating income growth, is expected to continue increasing the value of our portfolio over time. We continue to have strong conviction in the outlook for grocery-anchored real estate and the ability of this asset class to perform in today's economic environment. Recent consumer spending data shows that the essential goods are expected to remain a top priority for shoppers over the next 3 months, underscoring the stability and resilience of the grocery sector and grocery-anchored real estate. At the same time, fundamentals remain favorable with elevated construction costs and tight lending conditions continuing to constrain new retail development and overall availability. This dynamic creates a favorable environment for landlords to retain existing tenants and achieved meaningful increases in rents as leases expire. Against this backdrop, we are seeing focus on operational execution, prudent management of our balance sheet and strong relationships with our tenants to position the REIT to deliver sustained growth and lasting value for all unitholders. On behalf of the Slate Grocery team and the Board, I would like to thank the investor community for all their continued confidence and support. I will now hand it over for questions. Operator: [Operator Instructions] Our first question comes from the line of Brad Sturges at Raymond James. Bradley Sturges: Good quarter. Obviously, the organic growth number has been trending where you expected. I think your trailing 12 months, I think you said you were 3% to 4%. Is that a level that you expect to continue -- to see continue over the course of 2026? Blair Welch: Yes, it is. I think that the moves into it are really due to expiring leases when they come on, but that sort of 3% to 4% is what we expect going forward. Bradley Sturges: Okay. And what are you seeing from like a market rent perspective? Obviously, you continue to highlight and showcase the mark-to-market available as you're able to bring in-place rents to market. But I guess what's happening from a market rent perspective? Blair Welch: Yes. Great question. I think the easiest way to point to something is we quote the -- it's just over $24 per square foot now the CBRE market average. That is increasing at the same or maybe above our in-place rents. So I would say our rental growth is very strong and the market is also growing. So I think that's -- those are both positive things. Bradley Sturges: Okay. And last question for me. Just maybe switching gears towards the investment or transaction market, any read-throughs in terms of pricing you're seeing as it relates to Slate Grocery's underlying NAV or valuation? Are there more trades starting to percolate or -- how should we think about that? Blair Welch: Yes. I would say we feel very comfortable with our IFRS cap rates, and I think we've been prudent on that. And then I think the rest of the market is kind of coming to a place where the execution where you have to do deals has moved up. I think that's what that transaction volume has been needed. So I think it's really more situational. We are looking at the pipeline of new acquisition opportunities in the billions, and that could be a platform, that could be one-off deals. But I think it really speaks to positive leverage. And if you think of Slate Grocery REIT's balance sheet, we're around 200 basis points of positive leverage from our IFRS cap rate to our weighted average cost of financing. And I think that's pretty attractive. So I think if we continue to see that with our peers and where transactions are, I think you'll see that volume pick up. And I think the U.S. market is getting -- I think if you look at other international jurisdictions, Europe is also a positive leverage situation. I think Canada is getting there, but maybe not there yet, but that's really how we look at the market. And the fundamentals of grocery-anchored real estate are extremely strong. So if you can buy an asset that's performing well and finance it well, I think that will show more volume in transactions. Operator: Your next question comes from the line of Golden Nguyen-Halfyard, at TD Cowen. Golden Nguyen-Halfyard: Just 1 question from my end. Nice to see occupancy move up a little bit in Q3. Can you talk a little bit about your progress on some of the vacancies that you had earlier in the year? Blair Welch: Yes, Golden, I'll pass it over to the team to talk about specific occupancy. But thanks for the questions. Allen Gordon: Yes. This is Allen. We continue to see a strong pipeline of new deals throughout the portfolio, both on junior anchor leasing and small shop leasing. And continue -- as you've seen, continue to do deals in both. Operator: [Operator Instructions] And at this time, we have no further questions. I'd like to turn it back over to Shivi Agarwal for closing remarks. Shivi Agarwal: Thank you, everyone, for joining the Q3 2025 Conference Call for Slate Grocery REIT. Have a great day. Operator: Thank you, everyone, for attending. This does conclude today's presentation. You may now disconnect.
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 welcome to the Air France-KLM Third Quarter 2025 Results Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Benjamin Smith, CEO; and Steven Zaat, CFO. Please go ahead, sir. Benjamin Smith: Okay. Thank you. Good morning, everyone, and thank you for joining us today for the presentation of Air France-KLM's third-quarter results. As usual, I'll start by sharing the key highlights of the quarter, and then I'll hand it over to our CFO, Steven Zaat, who will walk you through the financial results in more detail. I'll return at the end with a few concluding remarks before we open the floor for any questions you might have. This quarter once again demonstrates the resilience of our business model in a challenging environment. In the third quarter, Air France-KLM delivered a stable operating margin of 13.1%, with revenues increasing by 3% year-over-year to EUR 9.2 billion, supported by a 5% increase in passenger traffic, which reached 29.2 million passengers. The passenger network unit revenue was up 0.5% at constant currency, driven by continued strong demand for premium cabins, which I will elaborate on later. Meanwhile, our maintenance business also made a solid contribution. We managed to limit our unit cost increase to 1.3% despite higher airport and air traffic control charges. As a result, operating income improved by EUR 23 million year-over-year to EUR 1.2 billion. Our balance sheet remains robust with leverage at 1.6x. Year-to-date recurring adjusted operating free cash flow reached EUR 700 million, confirming our ability to combine financial discipline with continued investment in our future. Finally, fleet renewal continues to advance with new generation aircraft now representing nearly 1/3 of the fleet, up 8 points compared to a year ago. Now moving to Slide 5. For those of you who are following the deck here. One of this quarter's key highlights is the continued success of our loyalty program, Flying Blue, which has been named the world's best airline loyalty program by point.me for the second year in a row. This distinction reflects the trust of over 30 million members and underscores Flying Blue's growing role in strengthening our connection with customers. Flying Blue remains a powerful driver of loyalty and commercial performance, and its global recognition is a testament to the value and quality of the experience that we deliver. Let's turn now to Slide 5. We're pursuing the implementation of our premiumization road map across the group with concrete improvement throughout the customer journey. On board, we're rolling out our latest long-haul business cabins at both Air France-KLM and KLM's premium comfort class is now featured on more routes. Starting in September, Air France has been introducing high-speed Starlink WiFi on board, available free of charge in every cabin, a first for any major European airline. Almost 30 aircraft have already been equipped, and we expect 30% of the Air France fleet to feature this service by the end of 2025. In addition, we are continuing to enhance the customer experience across multiple touch points. This includes upgraded premium lounges with recent improvements in Chicago and Boston, and an enriched dining offer featuring new signature dishes from Michelin star chefs on U.S. departures and a simplified customer journey from check-in to boarding. A new exclusive ground experience has also been introduced at Los Angeles, for La Prem customers, and I'm also particularly proud to highlight that our fully redesigned La Premal cabin will be available on the Paris City G2 Miami route starting November 10, after following a very, very successful launch on our flights to New York JFK, Singapore, and Los Angeles. Altogether, these initiatives elevate the quality of our product, reinforce our positioning in the premium travel segment, and support our path to higher value revenues. Moving to Slide 6. As you can see from this slide, the mix of our long-haul cabins is gradually shifting toward higher value premium segments. At Air France, the share of La Première and business seats set to increase from 12% in 2022 to 13% by 2028, while premium economy, now rebranded as premium, will rise from 8% to 10%. At KLM, the trend is even more pronounced. Premium comfort introduced in 2022 is expected to expand to 10% of seats by 2028, while the business cabin segment will grow from 10% to 12%. In other words, by 2028, almost 1 in 4 seats across our long-haul fleet will be in premium cabins. This structural shift aligns with our longer-term strategy to strengthen our brand positioning, reflecting evolving customer demand, improving revenue quality, and enhancing the value proposition for long-haul travelers. Turning to our network. We are continuing to expand connectivity across all key markets. This winter, the group will operate a broad network across all regions with balanced capacity growth. In Asia and the Middle East, Air France will serve Phuket, Thailand, while KLM will add Hyderabad, India, to its network. In the Caribbean, Air France will launch services to Punta Cana in the Dominican Republic and KLM will introduce flights to Barbados. Across Europe, KLM is opening Kittilä in Northern Finland, while Transavia is launching new services from Deauville (Normandy) and Madinah Saudi Arabia, and Marsa Alam, Egypt will also be added. And Transavia will increase flights to Morocco, Egypt, and Finland's Lapland region as well. Looking ahead, Air France will launch flights to Las Vegas in summer 2026, further strengthening our North American offering. Altogether, these additions illustrate how Air France-KLM continues to grow strategically, improving connectivity, reinforcing its position in key markets, and maintaining a well-balanced portfolio of routes. With that, I'll now hand it over to Steven, who will walk you through the detailed financial results. Steven Zaat: Yes. Good morning, everybody, and thanks for taking the time to listen to us. I think we can say it was a tough quarter in the third quarter, especially from a revenue perspective. The impact of the situation in the U.S. regarding FISA and immigration rules starts to hurt our lower-yield segment in the long haul. And I think also the warm summer didn't help our European network and Transavia. And then on top, we had ATC strikes in July, we had ground strikes at KLM, and then all the impact from the taxes and charges which we get in France from the TSBA, and at Schiphol, the charges of the lending fees and the increase of our security charges. I think we had last year, we had, let's say, the Olympics. So I think if you look at the tailwinds, which we should have from the Olympics, a big part has been absorbed by these headwinds in this quarter. If we look at the margin, you see a stable margin of around 13%, which is the same as we had last year. On the unit revenue, if you're excluding currency, we are at minus 0.5%. And the unit cost, we had quite well under control. I guided you already that we will be at the lower end of the 1% to 3%. So we are very close now to the 1%. And if you include also the fuel benefit, you will see that actually our unit cost is coming down with 0.2%. So let's say, unit revenues and unit costs are stabilizing each other in this quarter. If you look at the left and you look at the net result, you see that it looks down year-over-year, but it comes that we had an unrealized foreign exchange result last year of more than EUR 100 million. So if you take that out on the net result, we actually improved, and we are now at an equity level above EUR 2 billion. If you go business by business, and I will come back on the 0.5% unit revenue on passenger business on the next slide, you have to see at the cargo that we see a minus 5% in unit revenues. This is related to the fact that we had more freighters in maintenance. So we plan more maintenance for our freighters at Schiphol, and it extended also more than what we expected. So this is quite a big impact on our unit revenue. If you look at the cargo contribution to our P&L, it's more or less flattish. So it's also, let's say, benefiting from a unit cost perspective over there, absorbing actually the unit revenue decline in the cargo. On Transavia, we grew capacity 13.8%, 15% in France, and 12.5% in the Netherlands. In France by taking over the slots of Air France in Orly, and in the Netherlands by upgauging our fleet. That had an impact on our unit revenue, which is down minus 2.8%. And I think also that the warm weather didn't help our local business due to the fact that the appetite to travel probably when it's hot, it's less when it is raining dogs and cats outside. So we have a stable result of Transavia of around EUR 217 million. The maintenance business performed quite well, an increase of 13% of our revenues despite the lower USD, especially on engines and components, we start growing the business. We are now at an order book of EUR 10.4 billion. We increased our order book by EUR 1.7 billion compared to the beginning of the last year. So we are strengthening this business segment. And you see also that the results are improving quarter-over-quarter now with an operating margin of 6.3%. So a very good performance on the maintenance business, where we also start to recover at the components business to drive up our margin. If we then go to Page 11, let's start with Air France. Of course, there was the Olympics last year, but we also had the DSBA impact and the ATC strikes. And all in all, Air France improved the result by EUR 67 million, having now an operating margin of 14%. KLM is especially impacted by the lower yield demand, and this lower yield, especially on the long haul impacts the unit revenues of KLM. And on top of it, we have the increase of the triple tariffs, which is really hurting KLM, including also the security charges, which are going up. So I think these 2 impacts actually explains all the KLM decline despite the fact that we continue with our back on track. And you see later that on the productivity side, the unit costs are getting better under control. And also, we see that we are getting very close to, let's say, the low limit of our guidance, and especially a big contribution coming from the productivity. On Flying Blue, a stable result of around EUR 54 million. We had last year, we -- first of all, Flying Blue is impacted by the dollar because we sell miles in the U.S. And on top of it, we had very cheap seats available for flying routes during the Olympics. So that has a positive impact, let's say, on the miles cost and which we don't have this quarter, but I think it was a very strong quarter. We grew the business again with 10.5% and the business operating margin of 24% is contributing as we expected to our business model. If we then go to Page 12, then you see the big difference, and we took out now also the premium economy. You see that there's a big difference between the premium traffic and the lower-yield economy traffic. So in the first business, we increased our load factor. We increased our capacity. We increased our yield. On the premium economy, we even increased our capacity with 10%, while at the same time, increasing the ticket prices by 5.4%. And then on the economy, there, you see it's starting to hurt. It is minus 1.5% in terms of yield and also a lower load factor. Although the load factor is still 91%, you see that it is more difficult to fill the seats. If you look, for instance, on our traffic on the North Atlantic to the U.S., there is minus 10% lower passengers from India, for instance, which is all related to the immigration rules in the U.S. If you go over the world, you see still that North America on itself is not doing that bad. We have a 2.7% increase in yield, especially driven again by the first and business class and the premium economy and also by the very strong point of sale in the U.S. Latin America is still strong, 2.8% up in yield. And we see also that in the Caribbean and Indian Ocean, we could increase our yields year-over-year. And on the long or the outlayer is a bit Africa, where we see that we have a gap on the load factor, which is especially again related to the, let's say, the political situation in Africa. but also the connecting traffic to the U.S. where there is less traffic from Africa to the U.S. due to all the immigration rules. And on the right, you see a quite positive trend on Asia, up 4.4% in yield. So we are doing quite well in that segment with a limited growth of 1.7%. On the right, you see again Transavia, which I already explained. So this is minus 2.7%. And you see this hot summer had an impact on our short and medium-haul, which was more or less flattish year-over-year. If we then go to Page 10, you see we guided you that we would be at the lower end of the 1 to 3. So we are very close to the 1 now. That will also be the case in the next quarter. We see that the unit costs are coming down as productivity is kicking in. But of course, the premiumization, which contributes 0. 6% to our unit cost, and also this increased ATC charges and the significant increase of the airport charges, especially in Amsterdam that drives actually the cost here still. But our own unit cost, which we can directly influence, you see that the labor price is compensated by 1.3% on unit cost on productivity. And then on the operations, it's still going up 0.8%, mainly driven also that we have expensive ground, and also on the maintenance side, is still quite a difficult environment. So -- but all in all, good to see that the unit cost, excluding the ATC charges and the premiumization are more or less flattish, and we see also a positive trend towards Q4. On Page 14, you see the cash flow. So a big jump positively in terms of operating free cash flow. We had a EUR 1.5 billion, where we were last year at EUR 28 million. Then we still have there in there around EUR 400 million of deferred social charges and Wax. And if you take these exceptionals and you take also the payment of the lease debt, you see that we are now at a recurring adjusted operating free cash flow of more than EUR 700 million, where last year, we were at EUR 23 million. And if you look at the right, you see that the net debt is coming up. Of course, these exceptionals of EUR 400 million are added actually at the end of the day to our net debt. And we had -- let's say, we signed a lease contract on the 787-9, where we extended the leases till the period 2033 and 2035, which had a EUR 300 million impact on our modified lease debt. But of course, that has not an impact in the coming period on our free cash flow because we continue to operate these profitable planes. If we then go to Page 15, you see that the leverage is down now at 1.6. We have EUR 9.5 billion of cash at hand, which is very stable over the year, which is well above the EUR 6 billion to EUR 8 billion target. We launched very successfully a bond of EUR 500 million vanilla for 5 years with a coupon of 3.75%. We had the lowest credit spread ever in our history of Air France-KLM. So we are extremely proud of that. And we continue to simplify our balance sheet. So we redeemed Apollo for EUR 500 million in July. We issued a new hybrid into the market, but we will also pay back the EUR 300 million of our hybrid convertible bond in the market. So in total, we are reducing this hybrid stock with EUR 300 million this year. And that with a net result generation, we see that we have continued to strengthen our balance sheet where we're now above the EUR 2 billion of equity. Let's then go to the outlook, and let's start with the forward bookings. We see that there is a gap of 3% in the long haul, 2% in the medium haul, and 4% at Transact. We have seen this every quarter. At the end of the day, we were always able to almost close completely this gap. So that is also, let's say, that is a little bit the trend that we see now in our industry. To give you a bit of an indication, if we look at the first 28 days of October, we see a unit revenue increase of 2%, excluding currency impact, with a load factor gap of 1%. And we see again a difference between premium traffic, including premium economy and the low-yielding classes in the overall long-haul network, giving confidence on our premiumization strategy. Then also, I will, for one time, also guide you on the cargo because usually, I not do that because I think we don't have a lot of bookings in -- but we had a very exceptional situation last year where we had a positive impact of the front-loading, especially related to the U.S. elections in the fourth quarter. I already indicated in our last call that the Q4 cargo unit revenues would be negative. And for the first 4 weeks of October, we see a decrease in unit revenue of 11%. Although cargo has a very short booking window than the passenger business, and it's difficult to predict the unit revenues. But in our internal forecast, we expect a double-digit decline in unit revenues compared to last year for the fourth quarter. If we then go to Page 18 on the hedge, so you see that we have hedged now 70% of '25 and 50% of '26. We are quite stable in our fuel bill. I think we last time indicated $6.9 billion, and we are now at $6.9 billion. So a very stable fuel price, if you look at it over quarter to quarter. It can go up and down during the weeks, but I think we are now reaching a kind of normal plateau for the fuel price. If we then go to Page 19 on the capacity. So we still aim at a capacity of 3% to 5% on the long haul, 3% to 5% on the short and medium haul and Transavia, especially because we had a very strong operations in the third quarter. We expect to be above 10% for the full year. But overall, we still guide at 4% to 5% versus 2024. On Page 20, you see the outlook, and it is every quarter the same. It becomes a bit boring maybe. So group capacity, 4% to 5%. Unit cost, I'm very confident in the low single-digit increase where we will see in the fourth quarter that we had a very low side of this guidance. So we are comfortable for the full year on this low single-digit increase in unit cost. Net CapEx between EUR 3.2 billion to EUR 3.4 billion, also probably more at the low end of the bandwidth and net debt current EBITDA, we will keep that between 1.5 and [indiscernible]. Then we strengthened further our position in Canada. We have a very strong cooperation with WestJet, which is the second largest airline with a leading market position in Western Canada. We already have since 2009, a codeshare and a loyalty program with them. And it's interesting to see that they are the #6 partner of our Air France-KLM-enabled revenues. So next time when we do all to Chris, I will invite you to tell me who are the #2, 3, 4 and 5. Number one, you can easily guess, but it's interesting to see that they drive really up our revenue. So we were happy that together with Delta and Korean Air, we could lock them in for our business, and we took a stake of 2.3%, solidifying our, let's say, integrated way of working with Delta and securing our position in Canada. With that, I hand over to Ben for the final remarks. Benjamin Smith: Thanks, Steven. And just to summarize and conclude the comments that we just made. So Q3, again, was a mixed quarter, softer leisure demand and operational headwinds, but we're pleased that revenue -- there was revenue growth and a stable margin, which clearly shows that we've got a resilient, well-balanced network, strong cash generation, and the outlook is reconfirmed. So altogether, these results demonstrate Air France-KLM's ability to navigate challenges resiliently while building a stronger position for the future. So thank you for your time and attention. We're now available to answer any of your questions. Operator: [Operator Instructions] Our first question today comes from the line of Jarrod Castle from UBS. Jarrod Castle: I'll ask 3, please. Just quite interested to get any thoughts that you might have at the moment on at least the direction of ex-fuel costs going into 2026. Secondly, any impact from the U.S. shutdown on your North Atlantic? I see they're going to reduce the amount of capacity flying in the U.S. Is this more domestic in your view? Or will it have an impact on international? And then lastly, just the current French economic/political backdrop. If you could just go through some of your thoughts in terms of what these budgetary pressures might mean for your business. Steven Zaat: I will take the first question, and I will take the second and the third question. Yes. So we are currently busy with our budget for 2026. But we -- of course, we -- you know we are back on track. We have the same actually measures also at Air France. So we are driving our productivity further. So let's see where that will end when I come back with the guidance for 2026, but we are, of course, aiming if you look at the full year to be lower than where we were this year. You see every quarter, the unit cost development is coming down, which has strengthened our position also for the next year. But we have to define our full year budget before I will guide you on any number. Benjamin Smith: Jared, so the U.S. shutdown from the information we received this morning, it's only going to impact domestic flights and that international flights as of today should be business as usual. On the political side in the Netherlands and in France, the main focuses for us are will there be any additional taxes or charges imposed on customers, passengers, or us directly or airports. So far, we don't see anything different or new from what we've been -- what we've seen already and what we've been lobbying to change or get rid of. Again, one of the big negatives that impact us in France are the air traffic controller strikes. So far, we don't have any visibility for the rest of the year. So we're hoping that things will stay stable. We have a new head of the government body, which oversees the air traffic controllers. He is quite close to the file. It's the #1 file today. So we're hopeful there will be some improvement because it cost us a lot of money this quarter and a lot of money this year. And the operating -- the operational impact that we're experiencing is much worse. This is in France, much worse than any other country in Europe. And so far in the Netherlands, it's a bit too early to tell whether there will be any change in policy towards aviation. Operator: The next question comes from the line of Stephen Furlong from Davy. Stephen Furlong: Maybe, Steven, you can just talk about what's going on in cargo. Sometimes historically, it's been a leading indicator, but I just like to understand because I haven't seen that level of decline from other airlines. And then Ben, maybe can you talk about Orly how the work is going there? And obviously, as you build up an entirely largely Transavia business there, I'd be interested in that. Steven Zaat: Yes, let's say, the booking window of cargo is very short. So that is always difficult to predict. as I gave you the numbers for October because I think I want to be totally transparent where we are currently. I think we will be in that range also, let's say, for the coming months. But it's very difficult to exactly explain. But we saw last year that there was a lot of upfront loading towards the U.S. in expectations for what would be the outcome of the election. So that has first already before the elections, it started. And then, of course, when Trump came into the White House or at least he was elected to be in the White House. In January, there was a lot of front-loading in that quarter. So Q4, if you still remember, we had a very good unit revenue on the cargo level, and that is going to normalize. So on itself, the demand is not weak. I think it is normal, and it's, of course, better than in the other quarters. But I think the year-over-year difference is quite difficult due to the fact that we have this positive situation in the fourth quarter last year. Benjamin Smith: Stephen, regarding Orly, if you look at the overall Air France Group, so Air France and Transavia and Hub, which is the regional carrier. So excluding the rest of the business units in Air France-KLM. So just Air France Group, we're extremely pleased with the performance of the Air France Group despite all the challenges we're having with the air traffic controllers and the rest of the operations and taxes that are being imposed specifically in France. So with respect to Transavia at Orly, it has to be taken in context with the entire Air France Group performance because we have been progressively shifting slots from Air France to Transavia. So we have half of the capacity, 50% of the slots at Orly, which is about 150 departures. And we operate about 1/3 of those in 2018 were operated by Transavia, and the rest by Air France, our regional operator, Air France Hop. Those slots there are being transferred to Transavia, and the totality of those slots will have been transferred to Transavia by April of next year. On many of those flights, it's a significant upgauge. If you take a hop aircraft, as an example, of 70 seats, and you're going to a 737 or an A320neo above 180 seats, it's a big jump. And we're cutting our domestic capacity by double digits. And so those slots are being redirected to new routes in Europe. And to start up a new route takes some time, but we do have a very, very strong position at Orly, and we do have our loyalty program, and we do have a cost structure that's similar to the competitors that we are going up against at Orly Airport. So the strategy we're quite pleased with. What is difficult to measure or to at least report out on is how the benefits flow between Transavia and Air France. So Air France has been able to shed the bulk of its domestic operation to date, and it will be the entire domestic operation in April. And that, of course, will be transferred to a lower operating unit, which is Transavia, and we will significantly reduce capacity. This being done in a very complex -- this is a project that should have been done 30 years ago. It was very, very difficult to put this into place. It impacts a lot of employees, a lot of unions are involved with this. And to be able to balance this out by saying, okay, Transavia is going to be profitable or not. I think for me, if we can get the overall Air France group along the path that we've committed to the market to get it to an 8% margin, we're on the path. Is it being divided correctly between Transavia and Air France with this transfer? I'll give you an example, whenever there is an air traffic controller strike to protect the long-haul flying, which is our #1 moneymaker, we try to shift the impact of the strikes to or the airport to impact Transavia as an example. So they take that of an example of a negative like a strike. So I think it's unfortunately, we're not able to put all that into our disclosure into our press releases. But I think that that kind of level of detail, I think if we were able to share that or we have the time to share that, it would be -- I think it would be acceptably well understood that the strategy is the right one. But it has to be looked at in context with the rest of the Air France group performance, which, as you know, over the last 2 years, we've been hitting record COI results. Operator: Our next question comes from the line of Harry Gowers from JPMorgan. Harry Gowers: A couple of questions from me. First one, Steven, I think you gave the plus 2% unit revenue remarks for October, which was for the passenger network. So maybe -- the network business, sorry. So maybe you could give us what you saw in Transavia specifically? Second question, I mean, just in terms of the French ticket tax increase, the Schiphol tariff increases, clearly, these are external headwinds, which are impacting passenger demand to a certain extent for Air France specifically. So anything you can do at all to try and offset or minimize those impacts on demand? And then third question, just on the costs. Do we have any idea yet, or any visibility on where like airport tariff increases could go in 2026? Steven Zaat: Harry, let me come back on your questions and maybe Beck will follow up on it. So let's first start on the unit revenues in -- on Transavia, I don't have any number, to be honest, on Transavia yet. So we always wait for the full closing, which we are going to do, and on the passenger business because it's the main part of our business. I get the daily report. So I have those figures actually always up to date. But I didn't hear any negative news for the moment. And probably as we see bigger demand in October, probably related also due to holidays, I expect that also to come from Transavia. On the Schiphol tariff, yes, it is a very terrible situation, what we are seeing there. We know that Sriol was the #9 in terms of cost in Europe. We could develop very strongly our connecting traffic. And of course, the fact that they increased so much the tariff, and we are a connecting airline. So we need to have lower cost than our competition. So we are working on that. So first, we are working on it in what we call back on track. And you see the productivity measures are kicking in now in our unit cost to get that down also to compensate all those increased charges, which we get at Schiphol. But -- and we have to review also what we are going to do with KLM, what is the right model, and we are working on that also close with, let's say, the Schiphol management because we cannot go on like this. The first indication, which you asked what is the airport tariffs are going to do. So at least the good news is that they are not going up, but they went already with more than 40%, but they are not going up in '26. For Schiphol, I don't have the indication for ADP yet, but usually, they are much more modest in the last years. Operator: The next question comes from the line of James Goodall from Rothschild & Co Redburn. James Goodall: So 3 for me, please, as well. So just coming back to the 2% unit revenue increase in October. Is there any color that you can give us in terms of how that's trending by region? Secondly, coming back to that chart on Page 6 on the increasing premium mix, assuming that there's sort of flat yields over the course of the next 3 years, can you give us an indication of what the RASK accretion just in terms of mix would be from that premium cabin growth over the course of the next 3 years? And then finally, with Leverage now sub-2x liquidity is well above target. And I guess with a very positive direction for free cash flow generation as the exceptionals roll through and with EBIT expansion on the back of your medium-term targets. Have you guys started to think about any potential use of that free cash flow? I guess you haven't paid a dividend since, I think, pre-GFC. Is there any potential in that restarting? Steven Zaat: So very good question. Let's first start with the coloring of October. So I think I already indicated that premium was much -- doing much better than, let's say, the lower-yielding segment. We see a very strong unit revenue actually in North America, and actually all over the world on the long haul, it is pretty strong. On, let's say, the European side, it is still going up, but it is not as strong as we are seeing on the long haul. So you could say that it is, let's say, 3% on the long haul and 1% approximately or even -- yes, 1% on the European network. So still the driving force is the long haul and the driving force is the premium traffic. Yes, that's a very good question. We are just building again the budget for that, but I would say it is around 1% increase of unit revenue. That looks modest, but it is directly -- it will bring a margin up with 1%. So I would say you have part which is in the unit revenue, but also part which is in the unit cost. And I would say, if I have to give an indication in arid because I don't have exact numbers here, I would give that it would bring at least 1% in margins on those networks. Then on the cash flow, so yes, we have indeed a very strong cash position, and we are driving up now our cash flow. We will use that to pay off our hybrids because the hybrids are more expensive than, let's say, a normal Fin loan, as you have seen what we did in August. So the first thing for the short term and the short term is for me '26 is to further pay off our hybrid stock. We have EUR 500 million to pay to Apollo next year, and we will pay that from our own cash flow. That's at least if the situation stays where we are today. And then I think the moment of dividend is more when we end actually, the era that we don't have this payback of the social charges in France and the wage tax in the Netherlands. So that's more for that time horizon. But it's not now, let's say, to disclose to the whole world. We need to first discuss that with the Board because we didn't have these discussions with the Board so far. Operator: [Operator Instructions] The next question comes from the line of Antoine Madre from Bernstein. Antoine Madre: Two questions, please. So first one regarding back on track for KLM. You mentioned the productivity is improving. So is it going faster than what you planned? And can we still expect EUR 450 million improvement this year? And second one on maintenance outlook. How do you see the current headwinds impacting tariff, FX, and issue? Steven Zaat: To start with back on track. So we are still see this contribution of back on track. Of course, that is also to offset, let's say, the triple tariffs and all those kind of increases of cost, but we are fully in sync with the back on track target, which we announced at the beginning of the year, and we will come back on it at the full year results where we exactly are. On the maintenance, we don't see any real big impact coming from the new tariffs. Usually, the parts are excluded. We know that some parts where there's a lot of metal can have an impact in terms of tariffs, but we don't see a significant increase. And you've seen the beautiful results in the third quarter from our Engineering and Maintenance business. So, so far, that impact is very, very limited and not noticeable and not material in our results. Operator: The next question comes from the line of Antonio Duart from Goodbody. Antonio Duarte: A question for me just on Transavia, if I may, and mainly in your -- where do you see strength and weakness within Europe, considering such increase in capacity? Any routes that you see special that you would like to highlight, or where you're seeing particular weakness? Benjamin Smith: So what I look at it from a different way, the strength of Paris and the fact that it's the largest inbound tourist market in all of Europe, and that the airport is very close to Paris and has now got a new direct metro line directly into the terminal, a new Line 14. It's a very attractive airport. We've not been able to exploit our position there in the past because the cost structure of Air France and Hop was probably one of the highest in Europe. And we had a limit on the number of Transavia airplanes we could operate because of the collective agreement we had in place with the Air France pilots. So we negotiated in 2019, it was not an easy negotiation to have that limit removed. We can now operate as many Transavia flights as possible. So now with a competitive cost structure, we can really take advantage of the opportunity here in Paris. So I think the Parisian market is very strong. It's showing resilience. It's actually growing. So we are trying to position all the new capacity that we're putting into Europe with a strong focus on inbound. This is new for us. It's traffic we did not have in the past. And of course, we're trying to deploy this traffic where also there's a strong outbound component as well from Paris. So the typical markets, leisure markets in Italy, in Greece, in Spain, in Portugal, are all still quite strong. But where we're seeing very, very good growth is in Northern Africa, in the Maghreb countries, in Morocco, in Algeria, in Tunisia, as well as Beirude, so in Lebanon and Tel Aviv in Israel, as well as a few destinations in Cairo. So it's quite a unique breadth of destinations that we've got. Not typical for a low-cost carrier, but the fact that it's got so many opportunities to serve the Paris market with a very competitive cost structure, plus the benefits of flying blue, not all the benefits. We don't want to bog it down with the costs that Flying Blue can sometimes entail, but there is quite an array of unique benefits that we offer to customers on Transavia. So a loyal Air France customer does have a low-cost carrier option, which is quite unique in Europe from the main base city of the full-service airline that we have. Meanwhile, at Transavia Holland, we've been trying to manage through a situation where we don't have full visibility on the number of slots and the curfew situations at Schiphol. And of course, the bulk of the Transavia aircraft at Schiphol do start their day early in the morning. So we do have, I think, more visibility than we had 3 years ago now that the Dutch government has agreed to go through the European Commission balanced approach process, which is enabling us to take some decisions on the deployment of our fleet at Transavia. And so we'll be refining the network offering at Transavia Holland, and we believe that should improve in the near future. Operator: [Operator Instructions] We have a question coming from Muneeba Kayani from Bank of America Securities. Muneeba Kayani: This is Kate on behalf of Muneeba. I have a question on unit cost, which is tracking at the lower end of FY guide. Just wanted to ask about 4Q outlook. Are you seeing the trend continue at about 1.3% year-on-year growth into 4Q? And any kind of base effect we need to keep in mind when thinking about 4Q? And then just another question on your forward bookings on Slide 17. If I'm reading the numbers right, I'm seeing about 2% to 4% kind of lower loading factor compared to 2024, but the commentary is in line bookings. So just if you could clarify that. Am I reading the slide correctly? Steven Zaat: Let's first start on the unit cost. I'm quite optimistic about the fourth quarter unit cost. I already gave the indication where we would end in the second half year. And I think Q4 will even be a better development than Q3. We see quite some productivity coming in. And with, let's say, the more modest labor cost increase and also having our operations better running, we are quite optimistic on the fourth quarter, but we don't give an exact number. We have a full-year guidance, and you can see where we will end for the full year. For the load factor, yes, I think that what you -- of course, the numbers are right. If you have followed also the previous presentations, you have seen that we have -- every time we had these kind of gaps -- and at the end of the day, we were able to close them. So in the first quarter, we were almost closing the full gap. In the second quarter, we were 0.1%. So in terms of load factor gap, so very close to 0, and we started almost the same. And in the third quarter, we also saw the same, and we closed at minus 0.5%. So I don't say that we will fully close this load factor gap. We saw a small load factor gap in October, but we saw quite some good unit revenues. But it is too soon to tell. These are the numbers. And of course, there's no mistake in it. Operator: We have a question from Axel Stasse from Morgan Stanley. Axel Stasse: I have 2, if I may. The first one is, could you maybe provide any quantitative guidance on the back on track program contribution on EBIT for 2026? Do you still expect to be on track for the medium-term guidance? And the second question is a follow-up actually on the potential French corporate tax proposals. We have heard a lot of things in the press last week, and many legislative lift hurdles before any such proposal is actually passed. But could you just provide any indication on how much of group PBT is related to France? Steven Zaat: Back on track. We will see, of course, an outflow in 2026. I'm not yet there to guide you on the cost. As you know, I say that it's coming down and coming down and coming down if you look at the unit cost increase, but we have not finalized the full guidance on it. But the program on itself is delivering, but we see now that especially the low-yielding traffic is getting worse. So that hurt especially also KLM, plus the triple trailers. And we have to review what are our next steps with our KLM operations. So that is where we are currently working together with the KLM management. The second question, I don't have any figures, but-- Benjamin Smith: Yes, it's Ben. From what we've seen over the last week, we don't have an aggregate -- any aggregate figures on that and how that could impact us. As you know, things are moving all over the place. But the current government that's sitting, I think we have a good feeling that what we had in place last year is going to be very similar to what should be in place this year. But as you know, it's not very stable here, but the big items that could impact us seem to be under control. And comment actually on the guidance. Because it was a question, we will come back on that with the full-year results. But we are still, let's say, aiming at 8% margin in the period '26, '28. Operator: There are no further questions. So I hand back over to you, Sirs, for closing remarks. Benjamin Smith: Okay. Well, thank you, everyone, for joining us today, and we look forward to sharing our results at the end of the year, the end of the fourth quarter. Thank you. Operator: Thank you for joining today's call. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to the OR Royalties Q3 2025 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, November 6, 2025, at 10:00 a.m. Eastern Time. I would now like to turn the meeting over to our host for today's call, Mr. Jason Attew. [Foreign Language] Jason Attew: Good morning, everyone, and thanks for your attention today, as I know it is a very busy reporting week. Procedurally, I'll run through the presentation, and then we'll open up the line for questions. For those participating online via the webcast, you can submit your questions in advance through the webcast platform. Today's presentation will also be available and downloadable online through our corporate website. Please note that there are forward-looking statements in this presentation from which actual results may differ. Also, all amounts presented and discussed in today's call will be in U.S. dollars unless otherwise noted. I'm joined on the call today by Fred Ruel, the company's VP Finance and Chief Financial Officer, as well as my other colleagues as indicated on Slide 3. OR Royalties third quarter of 2025 was a straightforward one with sequential quarter-over-quarter improvement with respect to GEOs earned, cash margin, cash flows as well as our overall debt reduction. OR Royalties earned 20,326 gold equivalent ounces in the third quarter, a modest 3% improvement over second quarter of this year. Based on where we sit today after the first 9 months of the year, the company is tracking towards the midpoint of its previously published full year 2025 gold equivalent ounce delivery guidance range of 80,000 to 88,000 GEOs. And this would be based on normalizing for the higher-than-budgeted commodity price ratios. In other words, gold, silver, copper and gold year-to-date. More on this in a moment. Recall that we've been very specific -- explicit about the fact that due to sequencing at some of our major producing assets, including Mantos Blancos and ongoing ramp-ups at other assets like Namdini. The second half of the year was always expected to be a little bit stronger than the first half of 2025. Consequently, and at this stage, we think it's appropriate for outside observers to infer that Q4 2025 should be OR Royalty's strongest quarter of the year in terms of GEOs earned. And thanks to improved silver grades realized quarter-to-date, Mantos Blancos will be playing a key role in supporting what should be a very solid Q4 for us. Circling back on our gold equivalent ounce guidance for 2025 and commodity price ratios. It's worth noting that through September 30, 2025, and due to the higher-than-budgeted gold prices versus both silver and copper over that period, OR Royalties is tracking approximately 2,000 GEO to 2,100 GEOs lower than its original budget. In other words, these GEOs are "lost" when not normalizing for commodity price ratios. As a reminder, in February of this year OR Royalties applied a consensus commodity pricing and notably an 83:1 gold-to-silver ratio for its budgeted 2025 GEO delivery guidance. All else being equal and based on the current commodity price volatility, this number of "lost" GEOs could either grow modestly or potentially get smaller before year-end. The key message is that the same higher gold prices that have skewed the ratios versus our original budget affecting our GEOs earned have also more importantly, translated to record revenues and cash flows from operating activities for all royalties for both the third quarter and the first 9 months of the year. For context, the average realized gold price for the first 9 months of this year was $3,188 per ounce, which is over $900 per ounce greater from the same period last year. So as you can imagine, our shareholders should still be satisfied with the outcome associated with these year-to-date price movements. In addition, we are 65% of our revenues are directly derived from gold. And speaking of cash flows, we're once again happy to report cash margins for the period of just under 97%, in line with our budget for the year. OR Royalties ended the third quarter with $57 million in cash as at September 30. We are in a debt-free position for the first time in over 10 years as the company paid down the outstanding balance of its revolving credit facility during the period. And while members of our corporate development team remain extremely busy to this day, there were no major transactions announced by -- OR Royalties during the third quarter outside of our second $10 million milestone payment released to SolGold, given the ongoing progress the new management team there continues to make in advancing a new vision for Cascabel. With the rapid increase in already elevated precious metals, in addition to recent price volatility, I continue to espouse an internal culture of capital allocation discipline. where returns on new transactions must exceed our internal hurdle rates at what we believe internally to be more realistic commodity pricing scenarios as well as contract structures that must come with the appropriate security features. Here at OR Royalties, we have the fortunate luxury to be able to walk away from transactions that we can't work for any of these aforementioned reasons, thanks in large part to our already bought and paid for organic GEO growth profile over the next 5 years or 6 years. I'll spend a little bit more time on our growth profile a little bit later. With respect to our ongoing commitment to return capital to shareholders, the company declared and paid its quarterly dividend of $0.055 per share in the second quarter, marking its 44th consecutive dividend. OR Royalty's history of progressive dividend payment serves as a testament to the confidence we have in the consistency, predictability and the anticipated growth of the current and future cash flows underpinning our business. Now moving on to the company's financial performance for Q3 '25. Quarterly revenues of $71.6 million tracked 71% higher versus the same period last year, again, largely thanks to the increased commodity prices and deliveries. And it also represented a quarterly record for the company. Net earnings of $0.44 per basic common share for the period also marked a very significant year-over-year improvement, thanks again to higher commodity prices and deliveries, but also in part due to the fact that as of August 2025, OR Royalties is no longer accounting for its equity position in Osisko Development as an investment in an associate and instead will now flow through other comprehensive income. This change in the accounting treatment of the Osisko Development investment generated a noncash gain of $54 million in the third quarter, as a result of the revaluation of Osisko Development equity investment at fair value on the date of the loss of significant influence being mid-August, which was triggered by the ODV equity financings. Most importantly, Q3 saw sizable year-over-year improvements in both cash flow per share of $0.34 versus $0.19 in Q3 last year as well as quarterly adjusted earnings of $0.22 per basic common share, again, versus $0.11 in the same period last year. Next slide, please. During the third quarter of 2025, our GEOs earned came predominantly from Canada, and we derived approximately 95% of our GEOs from precious metals, the balance coming from our direct copper exposure through our copper stream at Harmony Gold's CSA copper mine in Australia. Some comments on specific mine performances during the quarter before speaking about a couple of our more material assets in greater detail. At Agnico Eagle's Canadian Malartic complex, it had yet another solid quarter with respect to GEOs earned. A reminder that historically, we've often seen strong fourth quarters at Canadian Malartic versus the other way around. And while that should bode well for our final quarter of the year, we are mindful of an announced 4 day to 5 day maintenance shutdown at the mine during the fourth quarter. At Capstone Copper's Mantos Blancos operation, Q3 production saw a significant year-over-year jump, thanks to a couple of things. First, much improved plant throughput, still largely holding consistent at a nameplate of 20,000 tons per day; and secondly, approximately a month's worth of improved silver grades contributing to our own third quarter stream deliveries. Recall that with the 2-month stream lag, our 2025 stream delivery year for Mantos Blancos started November 1, 2025 -- 2024, sorry, and ends October 31, 2025. As noted, throughput levels remained at or above the mine's nameplate capacity of 20,000 tons per day at Mantos Blancos. And our anticipation is that silver grades should stay higher and in line with OR's expectations through the final month of our stream delivery year, which was the October that just ended. And also, as indicated in last week's Q3 2025 update from Capstone, the Mantos Blancos Phase 2 feasibility study is still scheduled for 2026, which we believe will be in the first half of the year. Finally, we've recently been really impressed with the ongoing successful ramp-up at the Namdini mine in Ghana, which based on our GEOs earned and paid year-to-date, it is starting to hit its stride after a slower start to the calendar year. We're expecting continued improvements from Namdini going forward based on the most recently -- the most recent publicly available mine plan for the asset, which was the 2019 feasibility study completed by the former Cardinal Resources, to which we understand the current operator is adhering to. Moving to Slide 7. And as I mentioned earlier, the number of currently producing assets in our portfolio stands at 22. And while unlikely to be included in any of our GEOs received this year, the next asset expected to be added to this list will be Ramelius Resources Dalgaranga mine in Western Australia, with our partner recently having released a full integration plan for the high-grade underground mine, which includes some modest gold production out of the mine in the first half of 2026. So likely beginning early next calendar year, more on Dalgaranga a bit later. On our last call 3 months ago, we went out of our way to highlight the meaningful silver exposure provided by OR Royalties, which through H1 2025 was just over 26%. If we recall the same chart from the previous slide you'll have seen that silver represented over 30% of our revenues in the third quarter. Summing this all up, we are essentially flagging that OR Royalties can provide lower risk, higher quality and meaningful leverage to silver for investors that are looking for it, especially if silver prices continue to close the gap versus gold as it has done over the past month or so. Moving on to Slide 8, which many of you will have seen many times before. Our company continues to set itself apart from the rest of its relevant peers in 2 key areas. First, as it relates to lower-risk jurisdictional exposure; and second, as it relates to our peer-leading cash and gross margins. Starting with the former. Just a friendly reminder that OR Royalties is the unequivocal leader when it comes to both net asset value and gold equivalent ounces earned from what we define as Tier-1 Mining Jurisdictions, which include Canada, the United States and Australia. And we would think that with the recent explicit plans outlined for the first time by Ramelius regarding Dalgaranga as well as other recent development advances across -- advancements across our portfolio, this exposure could very likely grow in the near to medium term. Moving to the latter. Simply put, OR Royalty's peer-leading cash margins provide our shareholders with both transparent leverage to precious metals prices as well as unmatched downside protection. Switching gears to Slide 9 and focusing on our cornerstone asset. Our partner, Agnico Eagle, provided some relevant information relating to the Canadian Malartic complex along with its Q3 2025 financial results announced on Wednesday evening last week. As it relates to operations during the period, aggregate gold production of approximately 150,000 ounces to 157,000 ounces in the quarter was higher than planned, primarily as a result of higher grades at the Barnat pit at Canadian Malartic. The higher gold grades at Canadian Malartic were a result of the continued mining of mineralized zones near historical underground stopes in the Barnat pit that returned higher grades than anticipated. Flipping to Slide 10. The Odyssey underground gold production during Q3 was slightly ahead of plan at approximately 22,400 ounces, driven by higher ore mined of approximately 3,634 tons per day compared to the target of 35,000 tons or 3,500 tons per day. Regarding the development of Odyssey Underground, the third quarter of 2025 saw mine development advance ahead of schedule with a record 4,770 meters completed. The breakthrough of the ramp to the mid-shaft loading station at Level 102 was completed in the third quarter of 2025. And the main ramp towards the shaft bottom progressed to a depth of 1,059 meters as at September 30, 2025. As previously noted by our partner and firmed up during the third quarter, Agnico Eagle approved the extension of the shaft -- the first shaft by 70 meters to a depth of 1,870 meters amongst some additional loading station adjustments. This adjustment is expected to improve operational flexibility and efficiency in the early 2030s, reducing reliance on truck haulage and further unlocking the significant exploration potential at depth. And speaking of efficiency, the sinking of the first shaft is already 2 months ahead of schedule. Looking at exploration, Agnico continues to press ahead aggressively with 29 surface and underground drill rigs operating during the period. The drilling program at Odyssey targeted the upper Eastern, lower Eastern and lower western extensions of the East Gouldie deposit. The new Eclipse zone and portions of the Odyssey deposit near the Odyssey shaft. Our partner believes this area of East Gouldie has the potential to add indicated mineral resources and potential mineral reserves to East Gouldie by year-end. The drilling success should benefit the ramping up of the mining operations and provide additional flexibility in mine development at East Gouldie, including a potential second mining area in the upper part of the mine. We touched on the following subject in our last quarterly conference call, but I think it's once again worth time to reiterate that our partner, Agnico Eagle, continues to openly discuss the concept of a second shaft at Odyssey. On Slide 9, we've provided just a small sample size of the details provided by Agnico as it relates to the current concept, including specific underground mine throughput profiles as well as aggregate potential underground production range in ounces as well as a breakdown of what is being targeted for both Shafts #1 and #2, expected grades and recoveries and finally, fairly detailed time lines to achieving all of this. What does this mean for OR Royalties? Distilling all of this down, it means that we could see an approximately additional 15,000 GEOs from a second shaft over and above what would be expected from the first shaft. The sheer amount of gold discovery to date at Odyssey Underground and more specifically East Gouldie on which we have a 5% NSR royalty and which continues to expand, continues to support our partners' plans. The current mineral inventory at the East Gouldie sits at approximately 50 million gold ounces and continues to grow. Agnico Eagle now has over 29 drills turning to expand this ounce inventory in addition to firming up the confidence of what has been previously defined. Given the sheer magnitude of the potential upside here, we can sympathize with Agnico's approach of taking a measured and methodical approach to the potential addition of the second shaft. Consequently, it is unlikely that there will be any meaningful public disclosure as it relates to specific details on the second shaft until the first half of 2027. Though Agnico has already indicated that upon release of those figures, a final investment decision would be quick to follow, if not almost immediate. Here at OR Royalties, it is our continued belief that the value of the potential second shaft at Odyssey is not currently fully reflected in our share price or even for that matter, in Agnico's share price despite the fact that we truly believe that there is little doubt that this project will eventually be sanctioned and completed. Finally, the potential second shaft only serves as a component, albeit a key one to Agnico's broader plans, which could see the entire complex produce 1 million ounces from 2030 onwards when factoring in additional regional ore sources such as Marban and Wasamac. As a reminder, Marban is subject to an NSR royalty or NSR royalties owned by OR Royalties as well as the toll milling royalty, while Wasamac ore would be subject only to the toll milling royalty. Agnico noted on their conference call last Thursday that the studies on both the second shaft and the complex's path to 1 million ounces remain on track. On to Slide 10, which touches on Dalgaranga, a high-grade underground gold asset in which OR Royalties owns a 1.44% gross revenue royalty and which was acquired just over a year ago. On July 31, Ramelius Resources fully closed its acquisition of Spartan Resources. And then just 2 weeks ago, our new operating partner provided its detailed plans of how it expects Dalgaranga to fit into this gold production growth over the next 5 years. In summary, Ramelius is choosing to operate and concurrently expand its central processing facility at its pre-existing Mt Magnet Hub in order to accommodate ore from Dalgaranga. Eventually, and within the next 2 years, the facility will be completely expanded to 5 million tons per annum and with 2 separate crushing circuits to accommodate ores from both Mt Magnet and Dalgaranga due to their respective different grind size and recovery profiles. In the meantime, higher-grade ore from Dalgaranga will be fed through the pre-existing unmodified plant with lower recovery rates expected to be achieved during this interim period. The good news out of all of this for OR Royalties is that Dalgaranga is now very likely the next producing asset in our portfolio with the first production expected in the first half of 2026, with significant step changes in growth expected after that based on Ramelius' financial year. Based on the recently provided production profile, Dalgaranga is also set to produce close to 275,000 ounces of gold in Ramelius' financial year in 2030 alone. None of these figures include any potential additional ore source, ounces sourced from Dalgaranga's Gilbeys Underground or a potential Never Never open-pit project, which serve as potential upside and on which Ramelius has also completed a PEA level scoping study -- scoping studies, respectively. And of course, this doesn't include any potential future exploration upside success within our royalties area of interest either. To sum up these points, we think that the recently released plans from Ramelius represents the first positive early indication of the true potential of this high-grade asset going forward. We'd like to extend our congratulations to the entire Ramelius team on having completed these creative and well-received integration plans in relative short order post this acquisition of Spartan Resources, and we very much look forward to Ramelius' execution going forward. Moving to Slide 13, but also staying down under. We're happy to report that Harmony Gold's acquisition of MAC Copper closed on October 24, 2025. The most immediate impact to OR Royalties and more specifically, OR Royalties International was the receipt of $49 million in cash for the 4 million shares held in MAC Copper. Even more exciting, though, is the future of this asset under such a deeply skilled underground mine operator such as Harmony. With the transaction closed, the approximate 3-month integration process of the asset is now underway. with Harmony looking to immediately execute on available synergies while also looking to maximize operational efficiencies once the integration is complete. Furthermore, Harmony has already provided a time line with respect to future catalysts at CSA, most notably an updated life of mine plan expected in August of 2026. Before that, however, will be some key interim updates in late February or early March of 2026, at which time Harmony is expected to provide a fiscal year 2026 production guidance for CSA as well as detailed updates on operational performance, key project development milestones and finally, on recent exploration activities. From our understanding, Harmony doesn't plan to deviate from either of the 2 projects started under MAC Copper, specifically the Upper Marn mine as well as the CSA ventilation project, with the latter still scheduled for completion in Q3 2026. Recall that these 2 projects are expected to get the mine to a point where it can sustainably produce at the 50,000 tons of copper per annum level, which represents a production expansion of approximately 25% of the most recently completed full year of operations in 2024. Recall the underground mine that had been the key bottleneck with the surface processing facility still having plenty of latent capacity, a facet that we expect Harmony to take full advantage of over time. Let's move to Slide 12. We're now highlighting the CSA expansion projects more explicitly in our 5-year growth outlook to 2029, alongside Island Gold, Dalgaranga and the others. As it relates to CSA, these expansions were always expected based on our exchanges with both MAC Copper and now Harmony Gold. Another minor change on this slide versus previous variations is that we've reintroduced the Eagle Mine in the Yukon back into the optionality bar, where previously it had been completely removed. And this actually provides a very good segue into Slide 13, which provides an ongoing summary of the significant progress being made on some of our key optionality assets that are currently excluded from our 5-year outlook. Though this slide might provide a good foundational preview on how to think about what might be included in our 2030 5-year outlook when released in mid-February of next year. As noted in our press release last night, we'll start with Cariboo and Spring Valley, 2 shovel-ready, fully permitted sizable gold projects that each resides in what we would define as Tier-1 Mining Jurisdictions. In aggregate, these 2 assets would be able to provide OR Royalties and their shareholders with approximately 16,000 GEOs in aggregate once fully underway. Starting with Cariboo, with another round of additional financing just completed, ODV is already moving forward with preconstruction and construction activities for the development of the project, including certain detailed engineering, procurement, underground development, operational readiness planning and other early works activities. We're expecting more news from the Osisko development team in the near term as it relates to more concrete plans and timelines for the Cariboo construction, which is set to be completed in order to achieve first gold production in the second half of 2028. Moving to Spring Valley, our understanding that Solidus and its build team are effectively ready to go as the company is keen to move forward with construction work. However, at this time, our partner is seeking final authorization of project financing via the proposed $835 million of U.S. EXIM bank facilities. So stay tuned on this one. Progress continues at pace at Agnico Eagle's Upper Beaver project in Ontario. Elsewhere, United Gold or Lydian Armenia is already drawing down on its credit facility in order to move forward with what's left to complete for the construction of Amulsar. In fact, we just had our team on site this past September, and they were very pleased to see this kind of activity there, the first of its kind in a really long time. And at South Railroad, Orla Mining should have an updated feasibility study out before the end of this year with the final record of decision expected mid-2026 and first gold and silver before the end of 2027. Finally, at Eagle, we understand that first round bids for the asset were due in the first week of September 2025, with those interested parties that made it into the second round now completing more due diligence, including site visits. The hope is that a new owner can be announced sometime in the coming months with a potential new plan of operations, including a potential timeline to restarting production following fairly soon after that. Quickly on Slide 14. On top of everything else we've mentioned, here is an updated list of key catalysts on currently producing assets on the left and key near-term development projects that fall within our current 5-year outlook on the right. I'll single out just 2 for now. Looking to the right side, one second. Looking to the right of the slide and starting with Windfall, it's likely that Gold Fields provide some updated economic numbers on the project at its upcoming Capital Markets Day scheduled for next week on November 12. Recall, the most recent fulsome update from Gold Fields provided the expectations that an updated feasibility study, along with final project permits as well as final IBAs with the relevant First Nation groups are now expected in what is shaping up to be a very busy 2026 for Gold Fields at Windfall. Second, and touching briefly on what has been and continues to be a busy year for Marimaca Copper with the MOD feasibility study now completed, it's quite possible that in the next few months, we could see additional major milestones achieved in the form of final permits for the MOD projects and our partner securing full financing to move forward with a final investment decision and subsequent project construction. Finally, we'll end on the formal part of the presentation on Slide 15, which outlines the current state of OR Royalty's balance sheet. At quarter end, we were completely debt-free and had cash of $57 million. This cash balance would have grown to approximately $106 million if we've been able to include the $49 million value of our MAC Copper shares, which are listed on this slide as investments held for sale, given this was representative as of September 30. The good news is this cash was received this past week. So factoring this all in, with approximately $1 billion in potential available liquidity at the end of the quarter, the balance sheet is looking incredibly strong. Our improved financial position is key as OR Royalty's corporate development team continues to be stretched to capacity across multiple transaction opportunities. At the same time, our robust organic growth profile and deep pipeline of tangible optionality affords OR Royalties the luxury to maintain a disciplined approach and wait for the right deal as we're not willing to sacrifice investment returns, deal economics or contract features just for the sake of adding gold equivalent ounces. As such, we plan to adhere to our time-tested strategy of measured and disciplined capital allocation in the pursuit of high-quality accretive streams and royalties that will bolster the company's current and near-term GEO deliveries as well as cash flows for the benefit of our current and future shareholders. And with that, we will conclude the formal part of today's call, and we can move forward with the Q&A. Joel? Operator: [Operator Instructions] Your first question comes from Joshua Wolfson with RBC Capital Markets. Joshua Wolfson: A couple of questions. First for Malartic, this has been a very strong year for the asset, outperforming expectations on Barnat grades. The existing mine plan in 2026 outlined a little bit lower production before, I guess, some further increases thereafter. I'm wondering how OR is thinking about the near-term outlook for the asset in the context of what next year looks like and what we should expect there? Jason Attew: Thank you, Josh. I note you had 2 questions, so we'll come back to you in a second, but I'm going to hand it over to Guy, who is best situated to answer the question for you in the audience. Guy Desharnais: Josh, we're not expecting any surprises. As you know, the grade overperformance is due to blocks that are around the underground stopes and Agnico takes a fairly conservative approach to whether those blocks appear in the resource reserve models. We continue that -- we expect that to continue into the final pits that we see there. So no expected surprises. We do get more detailed information at the beginning of the year with respect to their short-term mine plans, but we don't have those yet. Jason Attew: And your next question, Josh... I can keep going. I've got a couple of them. For Eagle, I'm wondering if OR has been involved in any part of the negotiation process with some of the parties here that have been, I guess, providing offers. So look, I think everybody is aware, there is a public process that BMO Capital Markets Restructuring Group is running. It's safe to say that, as we mentioned, the first round of indicative bids, nonbinding bids passed and they've selected a number of we would -- what we would qualify or what they've told us is high-quality operators with very, very good ESG credentials. In addition, given the fact that we are a stakeholder, given our interest, we've also signed an NDA with the group PwC, who's obviously acting for the Yukon government and BMO Capital Markets. So it's really not appropriate for us to be able to comment on, again, any discussions we may or may not have with potential operators. They are running the -- BMO Capital Markets is running a very fulsome and proper public process that you certainly and everybody, all stakeholders will be able to see in the fullness of time. All we can say is as a stakeholder, we're quite pleased with the progress that has been made. We do believe that at some point, and we'll very likely get visibility in 2026 as to what the plan of the next operator of the Eagle Mine will be -- and at that point, we will determine or decide whether we reinclude the Eagle GEOs into our 5-year outlook. So there's not much more that we can say on that, Josh, apart from we're very pleased with the quality of interest from established operators that are looking to set a base up in the Yukon. Joshua Wolfson: Great. And then one last one. I think in some of the prior conference calls, you had talked about some potential for a transaction to be announced before year-end. It sounds like the company is instituting some greater discipline. And I'm just wondering what the outlook is still for that negotiation process. Jason Attew: Yes. No, it's a really good question. I'm looking at my team around the table here. As I said in my remarks, the corporate development technical teams are just flat out right now. We're looking at a lot of opportunities. However, as I've said in the past, I mean, if our group can get 1, maybe 2 high conviction, very good returns for our shareholders over the course of 12 months to 18 months, we will do that. What we've seen in the marketplace, though, is we have not been able to conclude those transactions, both on a couple of things, as I said in my remarks, value. We're not seeing -- we've got to obviously make a spread on our own internal hurdle rate. We're not seeing deals right now that satisfy that criteria. As also, we've seen some loosening of structure, i.e., there's been a number of deals, as you would know, that are unsecured or the security instrument is not where we, as risk managers on behalf of shareholders' capital are comfortable with at this stage. So there's certainly a desire to get things done, Josh. It's just we have to remain very disciplined and really stick to and pick our spots. Operator: [Operator Instructions] Your next question comes from Tanya Jakusconek with Scotiabank. Tanya Jakusconek: Can I just continue on Josh's questions on the transaction opportunities? Jason, you mentioned on your call that you have an internal rate of return metric that you're very focused on as part of your strict valuation for all metrics for transactions and you said it's a more conservative gold price. What sort of internal rate is that? Is it... Jason Attew: It would vary, Tanya. And so maybe we can take this conversation offline because I think it is important you understand it, but I'll just talk about broad parameters. We obviously have a weighted average cost of capital within our company. That's mainly informed by a revolving credit facility. Our revolving credit facility is based on a variable rate. I think you know what prime rates and where the rates have been going down. So approximately, and it could vary over time, but approximately, it's about 4.5% in terms of our cost of capital or cost of debt if we were to dip into the revolving credit facility. So that is obviously what we need for a transaction is a spread beyond that. And what we also do is we don't do transactions and we don't look at transactions in the frame of spot prices right now. We do continue to look at consensus pricing and be informed by that. All that said, we do look at spot as a relevant benchmark. It is a very competitive sector and very competitive for deals right now. And then we have to really lean on our technical team, Guy and Brendan, in particular, to look through the asset and see what might not be publicly disclosed in terms of technical reports to look for upside, both geologically, mine life extensions and operational efficiencies. So it's a very complex -- well, it's an answer that has many different components to it. Very happy to walk you through our methodology at some point. But you can think around those parameters, as I said, a spread over that hurdle. And obviously, if we did a transaction in one of those Tier 1 jurisdictions, the hurdle or the spread would be significantly less than, let's call it, Tier 2 or Tier 3. And we've proven that in the past. Let's go back to the Cascabel transaction that we did with Franco and what the Street had suggested in terms of the internal rate of return that was mid-teens for us, 14% to 15%. So those are approximately the goalpost, Tanya. Tanya Jakusconek: Okay. So definitely over 5% spread over that. Maybe just on the opportunities that you're seeing out there. I think on the Q2 conference call, it was quite a wide spread from like $50 million to $1 billion. I mean, you can drive a truck through that. Maybe we could talk a little bit more about what are you seeing currently in the environment? Is it a much tighter spread? Is it still streams versus royalty packages? Is it still development or financing for asset sales? What exactly are you seeing? Jason Attew: The answer to all those questions, Tanya, is yes, all of the above. Again, it varies for sure. And some obviously deals that are in flight we've been working on for can be 2 years, 3 years and some obviously come in through processes of existing operators, for example, deciding now is the right time to sell a royalty package off that they've put in a portfolio many, many years ago and obviously are looking at the commodity complex and saying, is this the right time for us to extract value. So again, there's a lot of different opportunities out there for us. I think I'm consistent in saying that for us, being a mid-tier streaming and royalty company that the strike zone for us is anywhere between $50 million and $500 million. We do have ample liquidity and capacity to do that given, again, we're now 0 debt and completely undrawn on our revolving credit facility. But there is many, many opportunities out there. As I said, our team is very busy, and I will -- because I don't think it's -- I will again emphasize that for our company, given our growth profile, we just have to be incredibly disciplined around capital allocation. Tanya Jakusconek: Okay. I guess we'll get more into that at your Investor Day. Maybe just a final question. As I think about 2026, and I know pricing is important, whether you keep the 82 or 83:1 ratio. As I think about -- and you provided the 5-year 2029, you're up in that 120,000 GEO, 125,000 GEOs or thereabout. As I think 2026, would it be fair and it's just a directional situation, would it be fair to assume that '26 could look very similar to '25? Jason Attew: Yes. No, it's an excellent question, Tanya. Look, obviously, we'll provide more details when we put out our 1-year guidance in February of 2026 as well as an updated 5-year outlook. What we've been consistent in saying in the past is this growth rate, 40% over the next 5 years is not linear. You know the assets that we have in production currently. Really the only new asset that's going -- unless we actually bring an asset through an acquisition, the only really new asset coming in is the Dalgaranga that we talked about on the call. We do expect next year for Mantos Blancos to continue to have the higher silver grades that we've just recently started to experience. So those are the big drivers of growth for 2026 as well as the Namdini mine in Ghana as it hits its full stride in 2026. That's probably the best guidance I can give you at this stage. We can certainly talk about it further on Monday at the Investor Analyst Day, but we'll give all that specificity to the extent we can in February of 2026. Tanya Jakusconek: And look forward to your Investor Day. Operator: Your next question comes from Carey MacRury with Canaccord Genuity. Carey MacRury: Just a quick one for me. There was a copper buydown option on the MAC Copper stream. Just wondering if that option transfers now to Harmony and if you have any thoughts on whether they will execute that or not? Jason Attew: So really good question. Cary, effectively, you can think of everything that we had with MAC Copper as essentially being assigned to Harmony Gold. So yes is a straightforward answer. And anything that you're modeling or seeing with MAC Copper, you can just assume and because it has been assigned to Harmony Gold. There's been no changes in the structure, no changes in effectively anything commercially with respect to that -- both the silver stream and the copper stream. Carey MacRury: And that option only kicks in after -- on the fifth anniversary, they can exercise early. Jason Attew: That's correct. Operator: There are no further questions at this time. I will now turn the call over to management for closing remarks. Jason Attew: Thank you, Joel. As always, if anyone on the call or listening to this replay has additional questions, insights or observations on our business and our business strategy, please do reach out to Grant, Heather or myself, and we're more than pleased to provide more information about the bright future for our company and its shareholders. In addition, I would like to provide a final plug for our Investor and Analyst Day, which is planned to be a 2-hour session this Monday, starting at 1:00 p.m. at Vantage Venues in Downtown Toronto. My team will go through in much greater detail our assets, including the potential for growth, insights and opportunities that we do see within our portfolio. If you can make it down in person and you haven't already done so, please RSVP to my colleague, Grant Meonting. And if you can't make it in person, a live webcast link was also provided in our press release last night. We hope you can join us either way. And if not, a recording of the event will be available on our website in relatively shorter order after the event. Thank you again very much for your time, and we look forward to engaging with you in the future. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good afternoon, and welcome to the Kits Eyecare Third Quarter 2025 Financial Results Conference Call. This call is being recorded and available later today for replay. Your hosts today are Roger Hardy, Chief Executive Officer; Joseph Thompson, Chief Operating Officer; and Zhe Choo, Chief Financial Officer. Before we begin, I'm required to provide the following statements respecting forward-looking information, which is made on behalf of Kits and all of its representatives on this call. Certain statements made on this call will contain forward-looking information. These forward-looking statements generally can be identified by the use of words such as intend, believe, could, expect, estimate, forecast, may, would, and other similar meaning. This forward-looking information is based on management's opinions, estimates and assumptions in light of their experience and perception of historical trends, current conditions and expected future developments as well as the factors that they currently believe are appropriate and reasonable in the circumstances. Actual results could differ materially from a conclusion, forecast, expectation, belief or projection in the forward-looking information, and certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Management cautions investors not to rely on forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and material factors or assumptions that were applied in drawing conclusion or making a forecast or projection as reflected in the forward-looking information are contained in Kits' filings with the Canadian provincial security regulators. During today's call, all figures are in Canadian dollars, unless otherwise stated. And with that, I'd like to turn the call over to Mr. Roger Hardy. Please go ahead. Roger Hardy: Good afternoon, everyone, and thank you for joining us today. When we started Kits, it was with deep conviction and enthusiasm. We've explored several categories and potential ventures, all with intriguing possibilities, but one clearly rose above the rest. We envisioned building a new breed of technology company, one that would serve billions of people around the world who rely on vision correction to function every day. Through countless conversations with vision-corrected customers, we uncovered a critical insight. The optical industry had grown complacent. It had forgotten the people it was meant to serve. At its core, the sector relied on a century-old model, overly complex, expensive and opaque. Duopoly dominating the space had lost sight of its purpose, enabling people to see, work and live fully. The addressable market was already immense, estimated north of $100 billion globally, but the true potential was even greater because nearly everyone everywhere will eventually need vision correction of some form. Prospect of transforming such a vital category was profoundly motivating. This was a chance to create something enduring to build a company that improves people's daily lives in a way that enriches how they live, work and connect. That ambition inspired our mission to make eye care easy. Today, we set out to serve the modern consumer digital-first, informed and empowered, someone who grew up with a phone in hand and expected frictionless experiences. We imagined an end-to-end platform controlling every essential component through vertical integration from customer acquisition and retention to manufacturing and fulfillment. It was an ambitious vision, especially starting from 0 back in 2018. From time to time, I find it valuable to revisit those original ideals and ask, do they still hold true? Are we executing in line with our mission to reinvent a century-old category? One of the things I love most about leading Kits, a public company, is the rhythm, the relentless 90-day sprint. After more than 2 decades of running public businesses, it's a cadence I and my family know well and deeply value. At Kits, we operate on a nimble operating system. Every quarter, the metaphorical cannon fires and the sprint begins anew, 90 calendar days, 60 business days to deliver results. Each quarter starts with a clear list of 5 priorities that our management team aligns on. Of course, there are many other initiatives, but these 5 are the nonnegotiables. Call me traditional, but I like to keep revenue and EBITDA at the top of that list. From there, our focus turns to the customer, how we can strengthen emotional connection, personalize engagement and listen authentically to feedback. We examine our product to ensure it delights because our customers have no patience for mediocrity. They want authenticity anchored in quality, selection and affordability. And finally, we set clear technology objectives to ensure we're operating on a premium stack at the leading edge of innovation. This quarterly cadence gives us a mirror, a moment to reflect, measure and hold ourselves accountable as we strive to deliver on the bigger, longer-term mission. I'm pleased today to update shareholders and our team on another strong quarter of performance. During our last earnings call, we guided Q3 revenue between $52 million and $54 million with a targeted adjusted EBITDA margin of 5% to 7%. Proud to report that we delivered record revenue of $52.4 million, up 25% year-over-year and 6% sequentially. This marks our 12th consecutive quarter of positive adjusted EBITDA, which rose to $2.9 million or 5.5% of revenue, up 79% year-over-year, and our net income reached $1.9 million or $0.06 per share. Gross margins expanded to 34.6%, up 170 basis points from last year, a seasonally strong performance. And we welcomed 99,000 new customers in the quarter. This quarter also marked a major milestone, surpassing 1 million active customers, a testament to both our reach and the trust we've earned. It's now our third consecutive quarter averaging 100,000 new customer additions. Year-to-date, new customer growth is up 37%, reflecting accelerated awareness and adoption. The Kits flywheel is spinning faster. New customers are driving growth today and recurring value tomorrow, returning at higher rates and expanding lifetime values. We have an exceptional product, unmatched selection, a beautiful website powered by state-of-the-art technology and the fastest fulfillment in optical, all underpinned by a culture committed to purposeful execution. We're now one of the fastest-growing eyewear brands or brands in North America, $200 million business with brand awareness concentrated in just one city, Vancouver. Candidly, that underscores the magnitude of the potential ahead, a uniquely attractive growth profile with asymmetric upside as we begin to replicate our Vancouver success in other cities across North America. A particular standout this quarter was the strength of our Canadian business, up more than 38% year-over-year, powered by strong repeat purchases and a robust new customer acquisition as we tempered our investment in the U.S. this quarter. Our Kits branded contact lenses grew an astounding 380% year-over-year with gross margins exceeding 50%. Other segments of our 50-50 clubs such as our Progressive and designer collections also posted impressive gains, each with margins near or above 50%. These categories are scaling rapidly and will become increasingly influential contributors to growth and profitability over the coming years. Our glasses segment remains a cornerstone growth engine. Glasses revenue increased 25% year-over-year, driven by both new customer additions and continued premium lens adoption. Our vertically integrated model gives us a structural advantage controlling quality, speed and cost to deliver premium products at accessible prices. This translates into higher customer satisfaction and superior margins over the long term. Repeat customers accounted for 62.4% of total revenue, contributing more than $32 million in the quarter, evidence of a deepening loyalty and growing engagement. And premium lenses grew 55% year-over-year and now represent 44% of revenue, reinforcing the power of our recurring compounding revenue model. We also continued our rhythm of innovation, launching 9 new collections and 77 models across 240 color ways, reinforcing our pillars of quality, selection and affordability. The standout was the oval edit, a strategic expansion capitalizing on the surging oval trend validated by the exceptional performance of our Soren frame, our top seller. We responded with agility, introducing 15 new styles across new colors, sunglasses and shape variations, including rectangular and sport additions. We also showcased the brand through our Gran Fondo activation, a proud moment seeing Kits on the podium and across the course, worn by individuals who, like us, are motivated by purpose and progress as they race to whistler on their bikes along the beautiful Sea to Sky Highway. True to our DNA, we kept testing and learning. As a nimble vertical retailer, we can pilot new ideas with minimal risk and remarkable speed. A small 4-frame capsule for children quickly demonstrated strong traction, validating another future expansion path. That speed of iteration powered by real-time customer data is what defines Kits as a forward-thinking brand. These capsules outperformed through organic and influencer channels, driving incremental traffic, engagement and repeat purchases. Looking ahead to Q4, we expect continued momentum with revenue in the range of $52 million to $54 million and adjusted EBITDA margins between 4% and 6%. We also look forward to introducing our new Chief Marketing Officer early in the new year. With that, I'll hand the call over to Joe and to Zhe. Joe? Joseph Thompson: Thanks, Roger. The Kits team has been hard at work in the quarter, building infrastructure to deliver results for years to come. Infrastructure that tracks carrier and delivery performance and allows us to systemically shift orders to the best carrier, providing faster delivery for customers. Our systems that optimize every layer of the customer journey from how customers move through the site to how orders move through our system, increasing convenience to customers and reducing bounce rates. As we invent, large language models are helping the team build these systems even faster and with less G&A investment required. And of course, building infrastructure around our 50-50 initiatives, our top-performing innovation delivering approximately 50% growth year-on-year and approximately 50% gross margin or higher. We were delighted to recently welcome Kits contact lenses to the 50-50 club that already includes initiatives like digital progressives, premium lens upgrades and more. And the team now feels we are building what may be the biggest of these initiatives yet with the beta launch of OpticianAI. As AI is moving commerce from search to conversation within agentic commerce, Kits is helping to lead the way in eye care. OpticianAI is our digital optician designed to make buying glasses easier and faster, replicate the guidance of an in-store optician and be accessible anywhere. Still in beta, the team has rapidly iterated the technology now on version 10. The most recent release, AI vision introduced major user experience improvements. Based on customers' unique attributes, they can now receive interactive and personalized recommendations as they explore new frames. Further optimizations to our virtual try-on are creating a step change in the consumer experience with the introduction of a dual try-on view that lets shoppers compare 2 frames side-by-side and the ability to adjust color ways within seconds. It's an experience that removes the friction of in-store shopping and offers a level of confidence and convenience unmatched in traditional brick-and-mortar retail. Still in early days of adoption, these enhancements are increasing conversion, lowering drop-off rates and delivering a shopping experience that feels both intelligent and human. Consumers are the heart and soul of Kits. And as customers use OpticianAI, they help shape an even better shopping experience for millions more customers in the future. We believe there's a lot more to come from this initiative as OpticianAI continues to evolve. That's a great segue to Zhe, our CFO, to share details on our Q3 financial performance. Zhe? Zhe Choo: Thanks, Joe. Following a strong first half, Q3 results reflect our continued ability to deliver consistent growth, supported by steady execution and meaningful contributions from both new and loyal customers. In Q3, we continued to see meaningful operating efficiencies. Fulfillment expense as a percentage of revenue improved to 10.2%, down 60 basis points year-over-year as our vertically integrated lab and distribution network deliver greater productivity at higher volumes. We fulfilled approximately 266,000 orders this quarter, highlighting the operational discipline and consistency of our team. Customer acquisition continued to drive our performance in the third quarter. We welcomed more than 99,000 new customers, contributing over 37% of revenue for the period. Even with this strong growth, we reduced marketing spend by 110 basis points quarter-over-quarter, bringing it down to 14.1% of revenue. This improvement reflects the growing strength of our omnichannel platform and increased recognition of the Kits brand. Importantly, despite a higher mix of new customers, average order value rose to $197, up from $190 last year, showing continued demand for higher basket sizes and premium lenses. As these new customers return for repeat purchases, we expect to see further gains in both average order value and lifetime value. General and admin expense also improved to 5.7% of revenue compared to 6.2% last year, reflecting disciplined overhead management even as the business scales. We achieved a gross margin of 34.6%, a 170 basis point improvement from 32.9% last year, while gross profit increased 32% to $18.1 million. These results show the strength of our integrated model and our ability to fine-tune pricing, product mix and promotions to attract new customers and keep them coming back. Turning to profitability. Adjusted EBITDA was $2.9 million, representing a 5.5% margin, an improvement of 170 basis points from last year. This marks our 12th consecutive quarter of positive adjusted EBITDA, highlighting our consistent execution and focus on profitable growth. Net income increased to $1.9 million compared to $0.1 million last year, a strong improvement year-over-year. We ended the quarter well capitalized with $19.7 million in cash, giving us a strong foundation to continue investing in growth while maintaining financial discipline. We have built a strong foundation for long-term growth, supported by continued innovation in digital eye care and disciplined execution across the business. As we move into the fourth quarter, we remain confident in our ability to deliver sustained profitable growth and create long-term value for our shareholders. I'll now turn the call over for questions. Operator: [Operator Instructions] Your first question comes from the line of Martin Landry from Stifel. Martin Landry: Congrats on your results. My first question, I'd like to -- if you could discuss how the quarter evolved. Some retailers have seen a strong start of the quarter in July, and they've seen the momentum abating a little bit in September. And I was wondering if you've seen a pattern like that evolve during the quarter. Roger Hardy: Yes. Thanks, Marty. For us, it was a fairly consistent quarter on the demand side. And I think we talked a bit about it at the prerelease, but we saw in September a number of others be highly promotional. In our own case, it was fairly business as usual. So we saw heavy promotion all around us, particularly in September. As you can see from the results, our margins improved. And it was fairly consistent. Probably the one side note would be that for us, the postal strike did come in late in the Q and did have some, although nominal effect, and we don't want to really make an excuse of it, but the post office shut down for the last couple of days of the quarter, and it obviously has some effect. But no real change in full demand on that side. Martin Landry: Okay. And then I heard in your prepared remarks that you talked about -- you've tempered your customer acquisition in the U.S. this quarter. Can you expand a little bit on that? What prompted you to do that? Roger Hardy: Yes. Sure, Marty. Candidly, we've been cautious with the U.S. throughout the last quarter. Lots of moving parts there, as we know, with the border and other, I'd just say, general some uncertainties. But we're -- our view is now kind of we're returning to a bullish outlook. We feel like it's stabilized, and we're getting ready to turn back on our efforts in the U.S. We were, I'd say, basically on the sidelines for a lot of the Q waiting to see how some of the regulatory and other things might develop. And fortunately, it's not in a position to have a material or an effect on us at this point. So we're looking forward to reigniting, I would say, the U.S. And as you know, wherever we invest and focus our attentions, we tend to see results. So maybe I'll see if Joe has anything else to comment there. Joseph Thompson: And I guess maybe last thing to note is we were really fortunate as we looked at the market. We now have 2 markets, 2 business lines, both doing -- all doing very well. And we felt we had plenty of room for growth in the Canadian market. And our glasses business continued to perform spectacularly well in Canada, growth north of -- well north of 50% on glasses in Canada in the quarter. And so I guess that's part of the reason why you're hearing so much confidence that we delivered a 25% growth in spite of a reduction of glasses investment in the U.S. market. Martin Landry: Okay. Okay. So I guess that explains a little bit. That's a good segue to my last question. I mean your contact lenses grew faster than glasses this quarter. It's, I think, a first in 2 years. And I think you probably have answered that question saying that you've slowed down the marketing on your acquisition -- customer acquisition for glasses in the U.S. Would that be the explanation? Joseph Thompson: That's the key driver, correct, Martin. I think Roger pointed this out very well a few minutes ago. But where we invested, we saw strong performance. So we focus on high LTV areas like Kits contact lenses, digital progressives was, again, a big driver, well, well over 50% growth quarter-on-quarter there and the overall Canadian market with revenue up 38%. And so that was really the driver. You've diagnosed it correctly. Operator: Your next question comes from the line of Luke Hannan from Canaccord. Luke Hannan: I wanted to dig in a little bit more to the Q4 outlook, and I think you've partly answered it in your responses already. But the growth -- revenue growth this quarter is around 25%. It's a little bit lighter than that, what you expect at the midpoint for Q4. I'm sure part of that is you're facing a strong comp. It likely also has to do with the marketing efforts. But specifically, what I wanted to ask about is there was a peer of yours that mentioned earlier today that they were seeing a slowdown in spending specifically amongst the younger cohorts. So I was just looking to confirm that, that's not what you're seeing in your business right now. Joseph Thompson: [Audio Gap] the Q4 guide and then the behavior that we're seeing from consumers. I think what you're hearing from us is continued high confidence in growth on both new customers and repeat, balanced with a strong dose of conservatism. Some of this conservatism, I think, comes from the fact that Q4 is increasingly backloaded with Black Friday, Cyber Monday. It's now such a dynamic period combined with year-end, which is always very strong for us and the ramp-up of returning to more glasses investment in the U.S. So we're as confident as ever in the business, but just maybe a little conservative. Why don't I just pause there. I'll come back to -- or maybe just to address the consumer question. Correct. We are seeing consistent strength on customer acquisition. We are not seeing some of the patterns that we have been hearing about in the market. On the key inputs, new customer growth strong, up 37% year-to-date, traffic up, average order value up about 4%, now just under $200. And I guess maybe one point on that, an observation over the last 6 to 9 months in this sector and others have really -- what we've been seeing is an increase in market retail pricing in the neighborhood of 10%, 20%, sometimes more and maybe a pullback on conversion or order levels for those that have. And as we look back on our business over the last year, we've really chosen to keep pricing consistent, in some cases, even lowering a few price points. And that's really proven unique and perhaps prevented us from seeing some impact. Roger Hardy: Yes. And Luke, I'd probably just echoing Joe's comments. I mean, the way we think about our business, consumer spending is about 70% of GDP in Canada and the U.S. We're in the nondiscretionary part of where consumers play. We show up with great value, as we said, affordability. And so the risk reward in our Kits business, we think, is compelling. And we're focused on driving a compelling return. So yes, we're heads down, continuing to execute on the opportunity, not seeing that softness that you referenced. Luke Hannan: Great. Roger, I also wanted to follow up. You did talk about the Canada Post strike as well. I think it impacted you for basically the last week of the quarter. Can you quantify, if at all? It sounds like it was immaterial, but is there, call it, $1 million, $2 million that you would have lost in revenue or that got shifted from Q3 into Q4? Roger Hardy: Yes. As I said, we're not -- we don't want to pull out a specific value. We -- it's a highly complex thing we do at Kits on most days. And so that just added one more component to it. But it definitely got our team activated and finding alternative ways to get the product out into customers' hands in a timely way. So it's not -- it obviously doesn't help when the post office goes on strike or when Trump announces a new regulation at the border that even the border agents aren't familiar with. And so that also takes a couple of days to trickle down. So there's always many moving parts. Our job here is to solve problems, not make excuses. So I was kind of pointing it out to say, hey, it was a factor. It blends into that quarter. And as Joe said, from our standpoint, we're going to keep being conservative as we look out into the next coming quarters. We're confident in growth in our business right now and going forward. The business has grown 29% so far this year. Canada growing 38%. So we're optimistic. When we look at investing time and energy in different markets in different sectors, we're getting returns. So our expectation is that will continue. And we're definitely not quarter-to-quarter as focused as you are, my apologies, Luke. But we're thinking -- we take the long view, and we're kind of thinking out about next year and the next 2 to 3 years and just building consistent, great, great business. So yes, no excuses. That's a long way of saying we're not making excuses, but we'd appreciate if the post office didn't go on any more strikes, we'll put it that way. Luke Hannan: Fair enough. Fair enough. I wanted to ask also about just Black Friday, Cyber Monday expectations. I was looking around on your site earlier. It looks like there's some promotions that you already have in place right now. Can you remind us, did you -- was it this early last year that you started your Black Friday, Cyber Monday promotions? And then what's your overall expectation on the levels of promotion in the channel? You did mention some other peers, it seems like have been more promotional towards the end of Q3. Has that persisted also thus far into Q4? Joseph Thompson: Yes. Thanks, Luke, for asking about it. This Black Friday, Cyber Monday period has really kind of become a whole season in itself. And so to answer your question, yes, it's consistent with last year. We do see more customers coming into the market earlier than ever. Here we are a couple of weeks before Black Friday. And so we've seen just an incredible start to the event that the team launched on Monday, and we're just -- we're super excited for these next 2 months are just so fun. You see more customers in the market, insurance kind of -- insurance premiums for a lot of customers run out at the end of December. Folks are looking for -- to refill before they go away on holidays. So it's a really fun time for our team and for our business. Luke Hannan: That's great. Last one, and then I'll pass the line, a quick one. The OpticianAI, what's the rough expectation when you expect to roll that out more broadly? Joseph Thompson: Yes. Sure, Luke. Yes. So Phase 1 was just testing the early engagement has been very strong. So it's -- the rollout begins and continues, I would say, it's in real time. Now on version 10, the team is moving into what I would say -- the way we capture it is Phase 2, which is extending the reach into more categories, including contact lenses and in more parts of the site, including search and a full checkout integration. And then maybe even post-order experience. Longer term, maybe Phase 3, you could envision this product to be a stand-alone experience. And really, we can hardly contain our excitement on the opportunity ahead of us here. We've got over 1 million active customers, vision-corrected active customers, and we have the opportunity to offer every one of them a personalized experience with this product in addition to the millions and millions more that will come onto the platform. So we're very excited. We shared a few initial data points, which were encouraging on conversion and satisfaction with the product. Really, this product is a trust builder for customers over the long term. So it's really an LTV enabler where customers can come in, ingest their prescription, have their face shape measured and have faster navigation through thousands and thousands of frames and a more personalized experience. Operator: Your next question comes from the line of Douglas Cooper from Beacon Securities. Doug Cooper: Just a couple of ones for me. Just on the glasses side of the business -- can you guys hear me okay? Roger Hardy: Yes, we've got you, Doug. Thank you. Doug Cooper: Just on the glasses side, revenue was -- where is my -- $7.1 million, I think it was just under $7.1 million. The quarter before was $7.186 million. So it was down a little bit sequentially. So I just wanted to dig in some of your thoughts there. Roger Hardy: Yes, sure, Doug. And candidly, as we discussed, we really were cautious in the quarter given some of the rumblings coming from south of the border. We did not want to make big investments in net new U.S. customers with some uncertainty around what would happen at the border, would there be changes, additional impacts, no impact and so on. And so I think, like I said, we were cautious. We're happy to see that the growth continued in Canada that as we invest, we see customers coming. And so I think that's essentially where it is. Our expectation is that as we invest in kind of the back half of this year or this Q and into next year, we'll have lots of different opportunities to continue to grow that business. Anything I missed there, Joe? Joseph Thompson: Maybe, Doug, just to emphasize, every quarter is a bit different. We had a very strong Q2 in terms of new customer adds. Q3 revenue was still up 25% year-on-year. And we saw significant growth on unit volume up over 40%. So within the Canadian business, growth was as strong as ever, actually, I think, amongst one of the strongest quarters we've ever had on glasses, both quarter-on-quarter and year-on-year. So where we invested, we saw returns, and now we're excited to lean back into the U.S. market. Doug Cooper: Okay. So of the 99,000 new customers, what percentage of those were Canadian? Roger Hardy: It's not something we break out, but -- so yes, we're not kind of at that level of detail at this point. Doug Cooper: Just... Roger Hardy: Go ahead, Doug. Doug Cooper: I was just going to say just moving on to the Q4 guidance, 4% to 6%, the midpoint would actually be a decline in EBITDA margin sequentially. Maybe just thoughts there. Joseph Thompson: Sure, Doug. I think just to emphasize, confidence has never been higher from us in our business, both -- and we're just -- we're balancing -- what we saw in Q3 was an opportunity to onboard more new customers than we anticipated. And so with a long-term view and incredible repeat rates, we took it. And so as opposed to kind of a quarter in, quarter out look at the business, we've just said, on a long-term basis, growing new customers by 37% year-to-date is going to bode very well for 2026, 2027 and beyond. And so -- and then combined with, as we talked earlier, just a really strong dose of conservatism, knowing so much of the quarter is still ahead of us with Black Friday, Cyber Monday and the end of year peak. So just know that we're just being conservative and -- but optimism is strong, particularly on our ability to add more new customers, which does come in at a slightly lower adjusted EBITDA impact driven by slightly higher marketing. Doug Cooper: Okay. So just a final one for me then just to continue on the profitability margins. We've talked in the past about target of double-digit EBITDA margin. What is your expectation now of the timing of that? Roger Hardy: Yes. It's like it's always been, Doug, slow and steady, consistent quarter-on-quarter, year-on-year progress. And as these high-margin pillars become larger parts of our business, as we continue to gain operating efficiency as word of mouth continues to fuel our growth, that's where we see ourselves getting to. We're just steady as the business goes. We're still looking out kind of a couple of years. Like I said, we've grown 29% so far this year. We're optimistic that we'll maintain that level of growth going forward, 25% to 30% is our internal target for next year. And there's a little seasonality. So we obviously pulled forward a few orders in early Q1 last year. There's lots of 1-year people who were able to buy and take advantage of annual orders. And I think that's a good learning. But our sense is that those people will be back early in this coming year, and we've learned a lot from that. So we're looking forward to continue that growth curve. Operator: Your next question comes from the line of Matt Koranda from ROTH Capital Partners. Joseph Gonzalez: It's Joseph on for Matt. Just want to see if you guys can answer. It's good to see the good -- great contact sales here year-over-year. Anything to unpack there just in terms of the consumer? Are you guys seeing any different buyer habits such as like shortened time windows instead of -- instead of customers going for those year packs going for like the 90-day or 30-day packs, anything on there to like attribute to the strength you see in 3Q? Joseph Thompson: Joseph, thanks for the question. We're not seeing a lot of deviation from historical patterns. We track average order value. That's continued to be strong and growing on contact lenses, and that was true again Q3 and year-to-date. We also track number of units per, and again, no change there, strong and growing. In terms of where have we seen some shifts within this very big and productive contact lens business, we mentioned our own brand of Kits contact lenses, which has performed very well, well ahead of our expectations and continues to grow. So I guess that would be one. And then just what we've probably -- you've heard us talk about in previous quarters is really a continued migration to high LTV opportunities like daily modality contact lenses, and that continues to perform very well. So no real shift. Joseph Gonzalez: And kind of just -- go ahead, Roger. Roger Hardy: Yes. I mean I think just to highlight Joe's point and our previous discussion around our Kits branded contacts, it's become an interesting little pillar like we like to say, a 50% growth and -- greater than 50% growth and 50% margins. And it's one of these things that could really -- in a business like ours where the contact lens business itself continues to be, as you said, it's loyal, it's recurring. It's a very healthy annuity stream. And if we can take those margins and start to blend them with our own product at 50% gross margin or higher, it makes a compelling case for the future of that contact lens business. So -- and it also gives us a little bit of brand lock-in. The reports from our customers when they switch out of one of the other products that's a legacy product into our own is that it's a very, very comfortable lens. The initial wear reports are excellent. And so people like the lens. They stay in the lens, they come back for the lens. We often see other people get into the contact lens business, not really understanding how important the initial wear comfort can be. And if you haven't spent the right amount of time or otherwise, you're going to have those customers coming back. So it can be challenging. But fortunately, the team here did all the work upfront, and it's growing at an impressive rate. So for me, that's kind of the key -- or one of the key parts of the contact lens business. And there remain lots of other interesting opportunities as we think about colors and other value adds that Kits can do from its own platform. Joseph Gonzalez: Got it. It's impressive to see and great to hear. And then just kind of my last question here. As you guys talked about the border procedural shifts in terms of the systems and everything that goes around there. Is that all behind us now in 3Q? Or should we expect that to continue into 4Q? Just what are your thoughts there? Roger Hardy: Yes, Joseph, I mean, great question. I think if anybody knows the answer to that, it's sometimes -- there have been a number of moving parts. I think the most important thing is that the Kits team here does complex things and does complex things pretty much on a daily basis, including taking an order for something with as many possibilities as our last calculation was 192 million possible variance when we make a pair of glasses. We start making it for the customer that orders minutes after they order, finish that order 30 minutes later and get it in the box to them the next day or 3 to 5 days. So the border is generally the least of our worries. So yes, we're not anticipating any changes, but the world is a dynamic place today. And so when facing a dynamic place, you're excited to come to work with a great group of people like we work with at Kits that love solving complex problems, that love serving customers, that get up fired up to make it happen every day. So that's the best way you can hope to address the unknowns, and that's kind of how I would think about it. Operator: Your next question comes from the line of Frederic Tremblay from Desjardins Capital Markets. Frederic Tremblay: Just maybe following up on that last question on the U.S. Just curious to get your thoughts on what specifically made you more comfortable to start reinvesting more heavily in the U.S. following the Q3 pause. Is there anything logistically or internally that evolved to spark that change? Joseph Thompson: Fred, thanks for the question. We -- I think maybe a couple of comments from our side. Every day, we get -- as -- I think as Roger said very well a few minutes ago, this team just gets better every day, every week on execution, and we learn more and more. And so what you see from us and you'll continue to see from us is a cautious start and then a relatively rapid scale up on everything that we do once we have confidence and once the data supports the decision. I think this is just another example of that for us. On one hand, we saw ample growth opportunities in the Canadian market, and we took it in the quarter from new customer acquisition, from a glasses growth, from an overall market growth at 38%. And we wanted to also learn more, which we did. And so the team now has that confidence. With regards to tariffs in general, no change to our thinking here. Every quarter, every month, the situation evolves, but it evolves for the whole category. And our view continues to be that if we have a lightweight infrastructure, if we stay lean, if we keep the layers out between raw material to customer, that offers us the ability to move fast and increase the value delta that we have to the market and offer customers continuous great value. Roger Hardy: Yes. And I'd probably just say last point on this is that over the last number of months, we -- I'm kind of reminded of Elon Musk in that kitchen sink or that sink, it's like everything in the kitchen sink has been thrown at kind of Canadian -- Canadian trade policy, and we've developed so many different contingency plans. At this point, we're quite comfortable that we can handle including the kitchen sink coming flying at us. We're quite ready. So it's really just a comfort that so many things have happened. We've handled them. And then we've got a contingency plan in place with the group here to tackle just about any problem. So yes, we look forward to reporting on that progress at the end of Q4. Frederic Tremblay: Yes. Great. No, that's great to hear. Maybe last one for me. We noticed in October that you had introduced a Canadian vision credit for Canadian customers, both new and existing, which was a bit of a change from the usual first pair free approach. So I just wanted maybe to get your thoughts on that promotion and any learnings or interesting feedback from that. Joseph Thompson: Sure, Fred. Yes. No, the toolkit continues to grow for the marketing team as they continue to lead with the product and the product experience. That's really where we're excited is more customers coming in, trying more frames and having more frames with Kits on them out in the market. And you've seen all kinds of initiatives that focus on emphasizing the product, the product experience, including the value, and this was another one that was productive in October. Roger Hardy: Yes. I mean I think you point out -- you make a great point that in terms of awareness, a company at our size is always really looking to get above the noise and find ways to reach new customers in an authentic way and form a connection with them. And that's part of what I talked about upfront is that we are trying to find out what resonates best for our customer, how can we create an emotional connection with them. We care about their vision. We want them to know it. And that's really what that campaign was designed around is bringing to life a compelling offering that -- for customers to give Kits a try. Who's Kits? Well, 99% of Canadians don't even know who Kits is. There's a small cohort in Vancouver that do. And like I touched on, we're -- north of $200 million business growing the way we are with word of mouth helping, but really only known well in Vancouver. So that's what that campaign was about, trying to share with others that our mission is to help improve their vision and improve their access to vision. And so yes, we tried to bring it to life there. And I'd say, like Joe said, the team is probably still evaluating how productive it was and whether it did resonate completely. And please feel free to ask next Q, and we'll have more feedback on it given that was a Q4 activity. Thank you. Operator: Your next question comes from the line of Gianluca Tucci from Haywood Securities. Gianluca Tucci: Just one question here. Could you walk us through how you're thinking about your marketing spend into next year, just given all the moving parts out there and at the business, what -- how should we be thinking about spend as a percentage of revenue next year, guys? Joseph Thompson: Gianluca, great to hear from you. Yes. So just probably, as you expect, more of the same from us, like with the product and product experience, maintain in the 13% to 15% range as we've done this year on a fiscal year basis and continuing to see strong traction, 37% new customer growth this year. We see no fade in that opportunity as we go into 2026. But let me just see, Roger, anything to add? Roger Hardy: No, I think that's it. Just consistent. That's one of the metrics we stay -- keep tightly controlled. And yes, we'll stick to Joe's guidance there of about 13% to 15% in that range. Operator: There are no further questions at this time. I will now turn the call over to Mr. Roger Hardy for closing remarks. Please go ahead. Roger Hardy: As we close out another record quarter, I want to recognize the incredible team behind these results. Every milestone from passing 1 million active customers to delivering our 12th consecutive quarter of profitability. These moments reflect the relentless focus and execution of our team. And while we're proud of what we've accomplished this quarter, what matters most is that we're setting up Kits to perform not just for the next few quarters, but for the years to come. We continue to build a business that's proving what's possible in technology, manufacturing and customer experience all come together. That integration is what sets Kits apart. Thank you to all our shareholders and customers for your continued confidence and support. Your belief in Kits allows us to keep investing in innovation and growth, allowing us to strive towards our mission of making eye care easy for everyone. Best chapters for Kits are still ahead. Thanks, everyone, for joining us today. We look forward to reporting on future quarters very soon. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for joining us today. Certain statements made during the course of this conference call that are not historical facts, including those regarding the future financial performance and cash position of the company, expected improvements in financial and related metrics, expected ARR from certain customers, certain expected revenue mix shifts, expectations regarding seasonality, customer growth, anticipated customer benefit from our solution, including from AI, the extent of the anticipated TAM expansion and our ability to take advantage of any such expansion, our AI and our CCaaS revenue opportunities and current estimations regarding same, including the ability to leverage data in support of AI revenue opportunities, company growth, enhancements to and development of our solution, statements regarding our share purchase program, market size and trends, our expectations regarding macroeconomic conditions, company market and leadership positions, initiatives, pipeline, technology and product initiatives, including investment in R&D and AI and other future events or results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are simply predictions, should not be unduly relied upon by investors. Actual events or results may differ materially, and the company undertakes no obligation to update the information in such statements. These statements are subject to substantial risks and uncertainties that could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, including the impact of macroeconomic challenges, including continuing inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, lower growth rates within our installed base of customers and the other risks discussed under the caption Risk Factors and elsewhere in Five9's annual and quarterly reports filed with the Securities and Exchange Commission. In addition, management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results and guidance is currently available in our press release issued earlier this afternoon as well as in the appendix of our Investor Relations deck that can be found in the Investor Relations section of Five9's website at investors.five9.com. Also, please note that the information provided on this call speaks only to management's views as of today and may no longer be accurate at the time of a replay. Lastly, a reminder that unless otherwise indicated, financial figures discussed are non-GAAP. And now I'd like to turn the call over to Five9's Chairman and CEO, Mike Burkland. Michael Burkland: Thanks, Tony, and thanks, everyone, for joining our call this afternoon. We're pleased to report a solid Q3 with continued momentum in bookings, highlighted by enterprise AI bookings growing more than 80% year-over-year, contributing to healthy improvements in backlog. Subscription revenue, which makes up 81% of total revenue, grew 10% year-over-year, primarily driven by enterprise AI revenue growing 41% year-over-year in the third quarter. In terms of profitability, adjusted EBITDA grew 37% year-over-year to a margin of 25%. We also generated record free cash flow, which grew 84% year-over-year to a margin of 13%. The meaningful increase in profitability and cash flow is driven by the transformation initiatives we announced earlier this year. We continue to take action to drive operational improvements while investing in AI and go-to-market initiatives, maintaining a line of sight to our 2027 medium-term targets as we work toward the Rule of 40 and beyond. Turning now to our business updates. Today, I'd like to focus my commentary on 3 key areas. First, our significant and evolving market opportunity ahead. Second, how we believe we're uniquely positioned to win in this new market of AI-powered CX; and third, our momentum with strategic partners. We are in the early innings of an industry shift in CX, where our market opportunity is being driven by multiple growth vectors. For instance, Gartner forecasts the market for traditional CCaaS to grow at a 9% CAGR and the GenAI customer service market to grow at a 34% CAGR through 2029 to a combined annual spend of $48 billion. We believe this growth will create a powerful tailwind for category leaders like Five9 as we continue to execute against this durable multiyear opportunity. Furthermore, we believe Five9 is uniquely positioned to be the platform for orchestrating end-to-end customer experience across both AI agents and human agents. At the heart of our advantage is data. The contact center holds a brand's richest customer data, the full conversation history across every channel and every interaction. Our platform essentially remembers everything a customer has said, whether they spoke with a live agent or an AI agent through voice or digital. This creates what we call a relationship-based experience like when your favorite app [ reaches ] you by name, remembers your preferences and picks up exactly where you left off. Every engagement feels personal, contextual and connected. AI point solutions can't replicate that because they only see isolated transactions, not the full relationship. At its core, our platform is a real-time orchestration engine for every interaction across all channels, whether handled by a human agent or an AI agent. In addition to our suite of AI products, which you're all familiar with, we also infuse AI within our core platform. For example, we now have AI-based routing, which leverages AI to dynamically manage and route every interaction with context to the best human agent or AI agent regardless of channel. Additionally, our platform is uniquely positioned to deliver experiences that will allow human agents and AI agents to collaborate in real time. This can include experiences such as in queue self-service, where during a time a customer waits in queue for a live agent, an AI agent can proactively help resolve the issue, turning hold time into resolution time. Also, agent sidebar, where AI agents can quietly consult a human agent mid conversation to get help without interrupting the customer and AI barge-in, where a human can seamlessly step into an AI interaction to ensure the issue is resolved and the experience remains positive. These experiences showcase what only an end-to-end AI-powered CX platform can deliver. A continuous collaboration between human agents and AI agents, where each interaction enriches the next. That feedback loop compounds over time, creating a powerful data flywheel that strengthens performance, accuracy and personalization. In addition, we're being recognized by industry analysts for our platform-driven approach. For example, Five9 was named a leader in the 2025 Gartner Magic Quadrant for CCaaS for the eighth year, and we were also named a leader in IDC's inaugural MarketScape for European CCaaS. Analysts are recognizing us for strengths in our AI capabilities, cloud-native architecture, global scalability and strong European market presence. This dual recognition validates our strong market position, innovation and consistent customer satisfaction. These platform advantages are also driving momentum with our strategic partner ecosystem, including a major milestone we achieved in the third quarter. In September, we launched Five9 Fusion for ServiceNow, a turnkey AI-powered integration that unifies voice and digital interactions through real-time transcription and intelligent routing. This launch delivers 2 key capabilities. First, our transcript stream integrates directly with ServiceNow Workspace, enabling Now Assist to generate AI-powered summaries and resolution notes that dramatically reduce handle times. And second, our routing engine now directs ServiceNow digital channels and cases alongside Five9 channels for true omnichannel orchestration. This represents a significant milestone in our 8-year partnership with ServiceNow, and they're leaning in stronger than ever, demonstrated by our year-to-date ACV bookings with ServiceNow quadrupling with even greater acceleration in this third quarter. We are also seeing strong traction with other key technology partners, including Salesforce, where year-to-date ACV bookings grew more than 60% and Google Marketplace, where our pipeline has tripled since the announcement of that partnership in Q1. Our strategy of building meaningful partnerships remains a key strength as our long-standing alliances with key partners continue to differentiate us in the market. Additionally, we're seeing ongoing momentum, particularly upmarket, where enterprises are looking to create holistic customer experience strategies that seamlessly integrate with their core business systems. In conclusion, we're optimistic about the foundation we are building for the next decade. At our upcoming CX Summit, we will be announcing new innovations that we believe will set the stage for the next wave of growth as we continue to lead the AI-powered CX revolution with our end-to-end platform to orchestrate interactions across the continuum of AI agents and human agents to deliver what we call the New CX. Importantly, we're doing so with a balanced approach by driving operating leverage and investing in what we believe are the highest return opportunities to drive innovation and durable growth for our business. I want to thank our team of Five9ers for their unwavering dedication to strengthening our leadership position. I'm extremely excited about the future of Five9 and confident we have the platform and the expertise to drive long-term growth. Before turning it over to Andy, I'd like to provide a quick update on our CEO search. As you know, we're focused on identifying a leader with experience and a proven track record in product innovation, a commitment to operational excellence at scale and a growth mindset to further capture market share in this expanding TAM driven by AI. I'm pleased to report that the search is progressing well with our ongoing goal of announcing a successor by year-end. And with that, I'll turn it over to our President, Andy Dignan. Andy, go ahead. Andy Dignan: Thank you, Mike, and good afternoon, everyone. We were pleased to deliver another solid bookings quarter in Q3. We won the highest number of $1 million-plus ARR new logos in 2 years, and our installed base bookings hit another all-time high, driven by ongoing strength in upsell and cross-sell activities. For example, a major U.S. card servicer chose Five9 in a $3.7 million ARR deal. A multistate hospital system selected Five9 in a $2.7 million ARR deal. A leading European mobile and broadband provider partnered with Five9 in a $1.3 million ARR deal. And a global parcel delivery leader expanded their relationship with Five9 in a $3.5 million ARR deal. Looking ahead, we remain encouraged by the momentum of our business, fueled by pipeline and RFP activities sustaining elevated levels. In addition, we are increasingly winning competitive evaluation against AI point solution providers as enterprises recognize the value of our unified platform where AI is natively embedded across the entire customer journey. I'd like to talk about 4 examples of customers experiencing AI elevated CX because of the Five9 platform advantages. The first example is the global parcel delivery leader already on our core platform who is moving off an AI point solution in order to take advantage of our contextual data for hyper-personalization plus our deep integrations to their third-party systems. In addition, the efficiency gain for being able to have real-time insights across human agents and AI agents was another key reason they selected our AI-powered platform. The second example is a commercial vehicle financing provider who uses Five9 AI to support multilingual F&I servicing across North America, orchestrating seamless journeys from AI agents to human agents with deep CRM integration and omnichannel visibility. The third example is a regional digital bank who monetized their services with Five9 AI-powered routing, Agent Assist for banking integrations, enabling real-time orchestration of financial interactions while preserving full customer context across channels. And the last example is a major academic health system who replaced legacy IVRs with Five9 AI to improve patient access and scheduling, using our end-to-end platform to orchestrate voice and digital journeys with shared context between AI agents and human agents. And with that, I'd like to turn it over to Bryan to take you through the financials. Bryan? Bryan Lee: Thank you, Andy. Before we dive into our quarterly results, I'm excited to announce our inaugural $150 million share repurchase program, which is an important milestone that reflects a deep conviction in our long-term growth opportunity. We believe Five9's current valuation does not reflect our intrinsic value, particularly when considering the total platform opportunity for both our core CCaaS and AI-driven growth. The structure of the program includes an allocation of $50 million through an accelerated repurchase program, which we expect to complete before the end of Q1 2026 and the remaining $100 million balance open for up to 2 years. This program underscores our commitment to a disciplined and balanced approach to capital allocation and delivering strong returns to shareholders. Now turning to our financial update for the third quarter. Q3 revenue came in at $286 million, representing 8% growth year-over-year. Subscription revenue grew above total revenue at 10% year-over-year, driven by enterprise AI revenue growing 41% year-over-year, now making up 11% of enterprise subscription revenue. As anticipated, revenue growth was negatively impacted by approximately 5 percentage points due to a tough compare from our largest customer completing its multiyear ramp throughout 2024 and from minimal seasonal uptick compared to Q3 '24. As a reminder, subscription revenue reflects both customer growth and product expansion, including our AI solutions. Subscription revenue represented 81% of total revenue, up from 79% a year ago. And we expect this mix shift to continue as we focus on high-margin subscription dollars increasingly led by our AI solutions. Telecom usage represented 12% of revenue and professional services made up the remaining 7%. By design, these 2 categories are not growth drivers and steadily becoming a smaller percentage of total revenue. On an LTM basis, enterprise contributed approximately 91% of total revenue with the subscription portion growing 18% year-over-year. Our commercial business represented the remaining 9% and declined in the teens year-over-year as we continue to focus upmarket, which has better unit economics. The year-over-year decline in commercial is more pronounced than anticipated, but we're in the process of recalibrating and expect to get to historical year-over-year trends within the next couple of quarters. LTM dollar-based retention rate came in at 107% in the third quarter, down sequentially from 108% in Q2, which is within the small band we spoke about last quarter. This was driven by the tough compare I mentioned a moment ago regarding subscription revenue growth. In Q4, we anticipate DBRR to continue to be range bound, but expect upside in 2026. Turning now to profitability. Q3 adjusted gross margin was 63%, up approximately 100 basis points year-over-year, while adjusted EBITDA margin reached a record of 25%, up approximately 530 basis points year-over-year. This marks our fifth consecutive quarter of year-over-year expansion in both metrics. The consistent improvement is driven by our revenue mix shift toward higher-margin subscription revenue, combined with operating leverage as we scale and achieve cost efficiencies from our transformation initiatives. Additionally, we continue to boost productivity as demonstrated by our revenue per employee increasing 12% year-over-year. Q3 GAAP EPS was $0.21 per diluted share, representing 4 consecutive quarters of positive GAAP earnings, while non-GAAP EPS came in at $0.78 per diluted share. In terms of cash, both operating and free cash flow reached record highs. We generated $59 million or 21% of revenue in operating cash flow and $38 million or 13% of revenue in free cash flow. Turning now to guidance for the fourth quarter and full year 2025. For Q4 revenue, we're guiding to a midpoint of $297.7 million, which represents sequential growth of 4%. Despite our ongoing expectations of minimal seasonality, the 4% sequential growth is higher than our typical guidance pattern for Q4 due to revenue contributions from the backlog driven by both new logo and installed base bookings from past quarters that are starting to ramp. For full year 2025 revenue, we're maintaining our guidance at $1.146.5 billion, which represents double-digit growth for the full year. For Q4 non-GAAP EPS, we're guiding to a midpoint of $0.78 per diluted share, which reflects our ongoing disciplined cost management and an estimated 1.7 million shares being retired through our accelerated share repurchase, offset by lower interest income. For full year 2025 non-GAAP EPS, we're raising the midpoint by $0.06 to $2.94 per diluted share. Additionally, we're raising our full year 2025 adjusted EBITDA margin expectations to approximately 23% compared to our prior outlook of 22%. In summary, 2025 has been a year of transition, shaped by multiple financial and operational dynamics. However, I'd like to provide some perspectives on how we expect the business to inflect as we progress throughout 2026. It's important to understand the evolution we are seeing in how bookings convert to revenue, particularly for our recent installed base expansions, including more AI products. Deployment of these AI solutions and expansions into additional departments within existing customers have longer implementation cycles, typically converting to revenue over multiple quarters. This translates to a meaningful portion of the strong installed base bookings we've been achieving layering into revenue progressively throughout 2026 with the most significant impact in the second half of the year. And this is in addition to our new logos in the backlog ramping throughout 2026. Given these factors, we expect the sequential change in Q1 '26 revenue to be relatively flat, followed by momentum building quarter-over-quarter throughout the year. From a year-over-year perspective, we expect revenue to return to double-digit growth in the second half of 2026. As a result, we're comfortable with the current Street consensus revenue of $1.254 billion for 2026. On the bottom line, our historical pattern is for Q1 to step down sequentially, representing our lowest quarterly EPS of the year. And we expect that same pattern to continue in 2026. We anticipate sequential improvement in Q2 with more meaningful acceleration in the second half, particularly Q4. For the full year 2026, we expect to exceed the current Street consensus non-GAAP EPS of $3.14 per diluted share. Also, we expect annual adjusted EBITDA margin to expand by at least 100 basis points year-over-year to 24% plus in 2026. Lastly, we expect annual free cash flow to be approximately $175 million in 2026. In closing, Q3 reflects strong execution on our transformation initiatives, which are driving bookings momentum and meaningful operating leverage. We remain laser-focused on achieving the Rule of 40 in 2027 with a return to double-digit total revenue growth, driven by bookings strength in both core CCaaS and AI, coupled with ongoing margin expansion. The share repurchase program we announced today demonstrates our confidence in the team's ability to execute and create long-term shareholder value. Operator, please open the line for questions. Operator: [Operator Instructions] We will begin with DJ Hynes from Canaccord. David Hynes: Bryan, I'm going to start with you and just what happened in the quarter. I mean, look, Five9 has generally been known for being pretty measured with its guidance. I look at Q1 of this year, you beat the high end by $7.2 million. Q2, you beat it by $7.8 million. This quarter, we're only at the high end of the guidance range. So I guess it begs the question like what changed? What happened in the quarter? Bryan Lee: Yes, DJ, thanks for the question. So just a couple of points I want to make there. First of all, we're in the current growth environment that we're transitioning through. We do not expect big beats, number one. And then if you think about the quarter, I'm going to stick with subscription revenue that represents 81% of our revenue. There are 2 components. So it grew 10% year-over-year in Q3 versus 16% in the quarter before. So that 6 percentage point differential, 5 of those 6 is made up by the tough compares that we've been talking about all year long, right? We have the headwind from our largest customer who is finishing its multiyear ramp throughout 2024, making a tough comparison as well as our seasonal uptick that was very strong last year, that was very minimal at this time in Q3. And then there's a third component that was unanticipated in the sense that earlier, I mentioned the commercial revenue declining year-over-year in the teens. So that was more than what we anticipated. And there are really 2 key drivers there. One was we underallocated demand gen spend toward commercial during the quarter. And the other piece is that we had a gap in sales capacity as we promoted more commercial reps to enterprise than normal. So we're in the process of recalibrating that, and we anticipate over the next couple of quarters to kind of return the commercial revenue growth -- revenue year-over-year trends back to the historical norms. But those are kind of the puts and takes that went through the quarter. Michael Burkland: And DJ, I'll just add, promoting those reps from our commercial team to our enterprise team, that happens naturally. That's our farm system for talent internally. So again, from time to time, we get a lot of promotions that happen. And then what you have is in commercial, you've got reps that are ramping, right? So that was part of it. Operator: Our next question will come from Siti Panigrahi from Mizuho. Sitikantha Panigrahi: I just wanted to ask about this -- your installed base booking. Last quarter, it was record bookings. Again, another quarter of record bookings. Why it's taking so long to translate that to revenue? I understand it takes maybe a couple of quarters. But Bryan, based on your guidance, it appears now a little bit more like a year, like Q2 when we'll start seeing that. Can you help us understand and what can you do to further accelerate that? Bryan Lee: Yes, absolutely. So Siti, the installed base bookings, as you've heard in the last 2 quarters, have hit all-time highs, which is great. And a lot of that is through upsell, cross-sell of software, including AI and new business units that we're discovering within our existing customer base. So these kind of bookings, and we're having more and more of those each quarter, they have a ramp converting from bookings to revenue, very similar to new logos essentially. So that's why our Q4 guide, if you look at it, the sequential growth there is rounding up to 4%, which is higher than the typical guidance that we give for Q4. And that reflects the backlog of not just new logos, but installed base bookings that are starting to convert into revenue. And then not just Q4, but into 2026 as well. So this is a new dynamic, but one that we have taken into consideration for our guidance. Operator: Our next question will come from Ryan MacWilliams from Wells Fargo. Ryan MacWilliams: And look, we'd love to hear about what the bookings environment in the third quarter was like and how that's evolved with all the attention on AI now. And I know this is less a part of your business at this point, but I still have to check in just on the holiday season usage in terms of how we could see seasonal hiring for seats there, both for open enrollment and retail customers. Michael Burkland: I'll start, Andy, feel free to chime in and Bryan, too. But good to see you, Ryan. Look, some highlights for the quarter. AI bookings up 80% year-over-year. We're really, really pleased with that. And again, the momentum in AI is continuing. But I'll add that our non-AI bookings in enterprise was actually a Q3 record as well. And again, as these worlds come together over time, we're still breaking out kind of our AI products from our non-AI products for you all in terms of revenue and bookings commentary. But look, it's a good bookings environment. As we just talked about, there's a little lag in the engine given the character of the bookings. But look, highest number of $1 million-plus logos in 2 years, that's great and an all-time record for installed base bookings. So all in all, we're really pleased with the bookings momentum, but didn't mean to steal your thunder. Ryan MacWilliams: No, no, that's fully... Bryan Lee: Let me touch on seasonality real quick, Ryan. So -- it was actually quite a few interesting dynamics that we saw. And I'm going to focus -- if you recall, we surveyed our top seasonal customers back in July, and I'm going to stick with the consumer vertical with those customers because it's a good proxy. So on the subscription side, we saw that it was minimal seasonality as they had anticipated. But on the telecom usage side, we did see a slight uptick. And so we went back to those customers, and they actually observed the same in terms of volume of interactions coming into their contact center where they saw a small uptick. So they're in the process of monitoring that really closely to see if in the back part of November and December, we see a much stronger uptick then, in which case, they will, to the extent possible, expand their seasonal business with us. So right now, the way the guide is set up, we're still expecting minimal seasonality, but there is -- if there is that uptick, then that would be potentially a small upside for us. Operator: Our next question will come from Catharine Trebnick from Rosenblatt. Andrew King: Andrew King here on for Catharine Trebnick. Just wanted to double-click on the international really quickly. Good to see that IDC report out. Just wanted to hear what you see your differentiator as over in that market? And how is that BT relationship helping you progress over there? Andy Dignan: Yes. The BT relationship continues to be strong for us. I mean, obviously, they bring to bear sort of the reseller type market. They bring their services to bear. And so we continue to have a lot of success there. And look, we've been saying it, international has a lot of upside for us, and we continue to lean heavily on the partner go-to-market. We still have direct business. And so we feel good about how that's tracking and again, continue to invest in that space, both obviously, in our core business, but then AI and digital as well. As many of you might know, in the international space, digital is sort of a key technology area. So if we continue to expand that business, it's going to pay off for us. Operator: Our next question is from Terry Tillman from Truist. Connor Passarella: This is Connor Passarella on for Terry. Just wanted to kind of follow up on the Salesforce relationship, particularly on the drivers of the booking strength that you called out there. Is there a way to maybe frame the performance across the 2 opportunities that you have within that ecosystem being Agentforce and Service Cloud? Andy Dignan: Yes. What I would say would be -- so Service Cloud is obviously a key focus for Salesforce and us. We have over 1,000 joint customers, and we partner in every opportunity together with Salesforce to make sure that we're moving that forward. That's really why we came up with sort of the Fusion framework, which that Fusion framework is just sort of our framework for how we integrate the CRM, whether that's Salesforce, ServiceNow or others. And so we're having a lot of success in that route to market sort of the self-service arena. sorry, the Agentforce is the second opportunity. Look, I think it's still early days for Agentforce. And when we go into an opportunity, we want to win the core CCaaS. Obviously, Salesforce has CRM and like the best solution for the customers where we align on. And again, back to that Fusion, it's really about customers wanting to understand what they get, what's the benefit out of us coming together. And I think that's been -- has helped drive opportunity because our sales teams and Salesforce sales teams are all essentially saying the same thing in terms of the benefits to the customer. Michael Burkland: And I'll just add that the momentum with Salesforce and our joint customers is very, very strong. I talked about the 60% year-over-year growth in bookings year-to-date. Operator: Our next question will come from Raimo Lenschow from Barclays. Raimo Lenschow: A question from me. If I look into the data -- the call center space, sorry, there's a lot of -- there seems to be -- especially on the higher end, there seems to be still a lot of like on-premise old technology stuff. And I know everyone is focused on AI at the moment, but it does feel almost like we're doing step 2 before we do step 1. Can you see a little bit what you see in your conversations? Does that kind of -- are people realizing they actually need to move and you guys obviously have been moving kind of higher, you were a cloud vendor from the very beginning. Can you see that in the conversation and in the pipeline? Michael Burkland: Yes, for sure, Raimo. And again, I'll let Andy kind of chime in after me. But look, at a high level, you're right on. I mean, look, we're still 40-plus percent cloud, and that means 60%-ish on-premise. You're right on. There's still a ton of kind of core contact center that's on-premise that has to move to the cloud. But as you know, I mean, AI has become so front and center for every CEO. And therefore, all their CIOs are out looking at AI and sometimes AI first is the way they're making decisions. And we're -- we've now adjusted our go-to-market motions to actually be part of those discussions with an AI-first go-to-market motion where we may start a sales cycle with AI and then pull the CCaaS through as a second decision. It's just an evolving market. But in the end of the day, look, these enterprise brands know that they've got to go to the cloud to get all the benefits of AI, right? And so they go hand-in-hand. But in some cases, the order of the decisions might change. And it's playing out just pretty much as we expected and very favorable for us. Andy Dignan: Yes. I mean I think if you look at -- it's kind of like there's customers in 3 camps. You've got the ones who are already made the shift to cloud and they're looking at AI, then you have the customers that are -- they have an RFP from prem to cloud, looking at doing both, AI and CCaaS. And then some of the customers that we're seeing is they know they have to move to the cloud. But if they're looking to get that immediate benefit, to Mike's point, we do have an AI-first sort of strategy for those customers. Sometimes those customers go down that path and ultimately, they go, "Hey, look, it's just better to do this all at once." But again, we're starting to see more customers kind of lean in to say, "hey, let's do AI first" and we support that motion with a fast follow with CCaaS. And I think that's an exciting time for us because, again, we can support all 3 of those routes to market. Michael Burkland: And I'll add one more thing. We're winning because of that end-to-end platform. It's not like these are 2 separate things. We talk about them separately as AI and core CCaaS. But look, we've got one platform that orchestrates interactions, whether they're handled across -- it's across the continuum of AI agents and human agents, for example, right? So it's not a separate thing. It's really one platform that most enterprise brands are looking for. And that's why we're winning. That's why we're winning in this market right now, and it's why we believe we'll continue to win in AI. Andy Dignan: And sorry, to add one more. It's just like that parcel delivery company, right, that we -- they're a core CCaaS customer of ours, right? They chose a couple of years ago to go with an AI point solution. Here we are 3 years from now, replacing that solution. And that's again because they've got to the point where they see the value of, obviously, our AI kind of stand-alone. But to Mike's point, having that continuum of AI agents and human agents is the end-to-end platform that they're looking for. Operator: Our next question will come from Elizabeth Porter from Morgan Stanley. Elizabeth Elliott: I was hoping to get an update on just the competitive environment. I think we've seen Zoom up a little bit more in our mid-market checks and Amazon Connect reportedly just crossed $1 billion of ARR. We've seen several splashy headlines around AI native companies. So curious if you're seeing any sort of change in behavior or win rates or buyer dynamics as these players start to get more headlines? Andy Dignan: Yes. I mean in terms of the competitive dynamic, I mean, just pure CCaaS, it still continues to be us and our 2 biggest competitors. You mentioned the hyperscaler. We do see them. We like to say sometimes if we're in the same deal, one of us is probably in the wrong deal. Just 2 different kind of solutions customers are looking for. So not a huge change there. We do see Zoom in the mid-market, but our win rates continue to be strong, and we feel really good about where we're at in the core CCaaS platform. And obviously, when you look at both CCaaS and AI together and certainly our AI-first go-to-market, I think, we continue to have success. So not -- I wouldn't say any major changes in the competitive dynamic. Operator: Next question will come from Jackson Ader from KeyBanc. Jackson Ader: I had a question on the layering in, in of some of these -- of some of the -- either the enterprise deals or the AI deals. Is there anything that you can do? Is there anything within either your control or maybe partners' controls that you would say, all right, can we accelerate the time to actually get some of these products implemented and generating not just bookings, but revenue ahead of what's happening right now? Andy Dignan: Yes. So as Bryan mentioned and Mike, we have this situation where a lot of the changes we've made in our installed base, we're selling 2 quarters in a row of record bookings. There is still that lag, right? And I think we've -- and we talked about this previously, we've added some new functionality certainly within our AI products where you're leveraging generative AI to deliver faster, right? It's less about the work -- building the workflows and more about just doing essentially prompt engineering. And so we can move faster, and we're certainly doing that. We're seeing that within our customer base. A lot of times, though, we're part of kind of an overall AI transformation across the company. A lot of times they're doing -- they have to get their data to a good spot. And again, companies have gotten much better there. But we still see some of that dynamic where it is kind of like a new implementation. But I do think that as we get further into this, more and more customers are going to be more comfortable leaning further into that true GenAI agent versus some of the markets like health care and financial services that are still a little bit behind. But the good thing is we can service -- we talk about our trust and governance that the dial of trust. Some customers want to do just purely sort of workflow driven. We are seeing companies go faster towards the, let's go all in with generative AI. So I think we're well positioned for it, but that's going to be the #1 thing is sort of adoption of customers wanting to go faster and have trust in the platform. And we've done a lot of things within the platform sort of reducing hallucinations and things like that. The team has done a great job. And so that will demonstrate customers starting to move faster in terms of deployments. But we always hit those challenges and customers just aren't ready to fully ramp yet. Operator: Our next question is from Samad Samana from Jefferies. William Fitzsimmons: This is Billy Fitzsimmons on for Samad. Obviously, the business is still growing at a good clip. You're adding revenue. You called out record enterprise bookings. If we go back a handful of quarters ago, there was a period where you had a string of kind of several quarters where you announced a variety of mega deals. There's the health care one, the logistics one. And correct me if I'm wrong, but now it's been kind of another handful of quarters since that $50 million ARR financial services deal. And just wanted to get your view on why you think that is. Is there any impact at all from maybe like slower on-prem conversions or maybe even like decision fatigue because of AI? Or is this more just a function? I know there were some sales org changes about a year ago where -- and I'm paraphrasing here, there was more incentivization. You were incentivizing kind of dolphin sized deals over, call it, like the whales. And is it a function of, hey, we're just going after more dolphins now? Michael Burkland: Yes. Billy, I'll start. Look, the pipeline for megas is still very, very good. These take time. I mean that's the answer. They just -- the sales cycles are long, and it's really a function of that. We've said this all along that it's going to be lumpy. And therefore, let's make sure that we have this flywheel of dolphins that are coming through our sales funnel. And we talked about it. It was the record -- not record, but highest in 2 years number of $1 million-plus new logo wins. So again, the dolphins continue to be the more important metric, I guess, is the way for us to think about it. But look, there's a nice pipeline of megas out there, and we're very well positioned, in some cases, with very, very strategic partners of ours, too. Andy Dignan: And in terms of the sales changes, we didn't make any -- we put focus back on to the dolphins, but we kept a dedicated team. It's actually even bigger than it was before with not just salespeople, but solution consultants and experts and services team. So we continue to double down on the market. But to Mike's point, it's just lumpy and takes time. But we feel good about that space. Operator: Our next question will come from Will Power from Baird. Ioannis Samoilis: Yanni Samoilis for Will Power. So I noticed that Q4 revenue guidance is a $6 million range top to bottom, which is a bit wider than the range that you normally give or guide to for a given quarter. And I was just curious if there's anything that might be driving the wider range of outcomes that you're forecasting there. And then on the flip side, I appreciate the color on your early expectations for 2026. But what's giving you the confidence to comment on next year with that level of precision giving the wider guidance range for Q4? If you could just help juxtapose that for us. Bryan Lee: Yes, absolutely, Yanni. So the $6 million range for Q4 is mainly based on the fact that we beat Q3 by $1.3 million, and we actually held that back because of the commercial revenue decline that was bigger than what we anticipated. And so that was for prudent reasons. And while we're recalibrating and we expect the normalcy to happen over the next couple of quarters, and we're expecting some partial recovery in Q4, we just wanted to have a little bit of a wider range there to allow for that. Now going into 2026, we have built contingencies into our outlook there. But if you think about 2025, there's -- it's been a year of transitions and a lot of operational and financial changes, a lot of tough compares that we were going through, which we expect to lap fully by the end of the year. But then we're starting out with a strong backlog of not just new logos, but installed base bookings that Mike and Andy talked about as well. So with those ramping starting in Q4, but mostly in 2026, that gives us that comfort around that Street consensus of $1.254 billion. But we'll provide more details next quarter when we give formal guidance for next year. Operator: Our next question is from Rishi Jaluria from RBC. Rishi Jaluria: Nice to see continued AI adoption. Maybe I want to think a little bit one step deeper and think about kind of the current state of enterprise adoption. Look, I get that you have a lot of the tools to be the trusted AI partner in terms of governance and security and data privacy, and you've been a trusted partner with critical data over the years. So I totally understand your positioning. What we've been seeing, and I'd be curious to hear what you're seeing is a lot of enterprises are maybe slowing down the rate of AI adoption as they try to figure out the right use cases and one of those being customer support. But maybe just any color you can give in terms of what you're seeing broadly within your base of kind of the state of enterprise AI demand today versus how it had been maybe, call it, 6 months ago. And as we think going forward, right, getting that greater uptick in AI throughout your customer base, what are things that you have in your power and your control to work with those customers to just kind of get over a lot of those hurdles that are holding back AI demand in the enterprise? Michael Burkland: Yes, I'll start, Rishi. Look, the AI demand is so strong. I think what we're seeing is just a continued improvement, quite frankly, in appetite and demand and willingness by the larger brands out there to do more than proof of concepts to actually deploy AI. It's being proven. And there -- again, their appetite is also shifting toward the platform players like Five9 for that AI. I think they're realizing the limitations of these point solutions in some respects, right? So that's the flip side. But what they're seeing, and it's why Andy talked about that one case where one of our largest customers that had a point solution for AI basically is replacing it with our AI because it's all part of our platform. So I think there are 2 very different things happening here. I think the demand is very high across the brands for AI. They're getting more comfortable with it, but they're getting more comfortable with it from platform players like Five9, and that is a good thing for us. Andy Dignan: And in terms of what's in our control, we've talked about in the past our AI blueprint strategy. So we have the ability to go into our installed base, right? We're having a ton of success, right, as you see in the numbers in terms of installed base. We know the types of calls they have. They have their recordings, right? We're working with the customers. Obviously, they have access to all of this. So our teams can come in and take a very data-driven approach on, hey, here's the use cases that we see that would have high ROI upside. And we've done a lot of work on the back end to have essentially prebuilt type both go-to-market and implementations to deliver on those quickly, right? So I think that's an area where we continue to double down on. And we're -- the other thing is our product team and engineering team in terms of AI, they work closely with our services teams and our sellers and our customers to say, "Hey, like what are you seeing out of these blueprints? What are the things that we could build into the product to even accelerate some of that demand." So it kind of gets that flywheel going on the opportunity that we have the customers' data, right? Obviously, their data is their data, but we have the knowledge and working with them to be able to deliver that. So that's what we can control. Operator: Next question will come from Peter Levine from Evercore. Peter Levine: Maybe to piggyback off of an earlier question around the competitive landscape is, I mean, are you seeing any pricing pressure on your core live agent seats at renewal, meaning as you see some of these competitors come in, trying to gain share, are your customers at renewal perhaps maybe fighting or pushing back for higher discounts? So maybe the question is just like what's your discipline on pricing for core agent seats given just the escalation in terms of the competitive landscape? And then second, can you just remind us how you charge for AI and the revenue recognition behind that? Andy Dignan: Yes. So I'll take the front part of that. So what we're seeing at renewal time is we aren't seeing pricing pressure on our core business. What we are seeing with customers is they want to make sure that they -- that we have pricing models built in for them to take advantage of AI. Last quarter, we talked about a couple of big expansions to health care companies. And that was that renewal time where they said, "Hey, look, we've been leveraging our platform for multiple years, and we were able to renew at a higher level and then build into that renewal both AI and agents." So we don't see that kind of pricing pressure. But I don't know, Bryan, if you want to comment on the revenue side. Bryan Lee: Yes. Definitely on the revenue side, the pricing model for our AI products is either capacity or consumption-based. And whichever model it is, it's usually a block of units that you're getting and then overage if you go beyond that. So it works pretty much like a commitment model plus overage charges. Operator: Our next question will come from Arjun Bhatia from William Blair. Arjun Bhatia: Okay. Perfect. Just took some time. Can we just go back to the commercial business for a second? Obviously, it seems like that caught you off guard a bit. What is sort of the remedy? Is it just allocating more sales and marketing spend? And then how do you think that might evolve next year? Like can that get back to growth? Or is that a little bit too ambitious for 2026? Michael Burkland: Yes, Arjun, I'll start. Look, we did over rotate in terms of demand gen allocation to enterprise and majors, which, again, we're always trying to crack the code there because, look, it's 91% of our revenue is enterprise, and it's the bigger market opportunity and so forth. But I've encouraged the team to just be careful not to over rotate. We've already corrected some of that allocation of demand gen spend back to commercial. And the good news about commercial is it's kind of a real-time indicator, right? I mean it's -- things move -- deals move through the funnel quickly and they turn to revenue quickly. So while we had the impact of that in Q3, we've rectified that, and I believe we'll be right back to where we have been in commercial within the next quarter or 2. Now at the same time, just keep in mind, that is not a growth vector overall for the business. But at the same time, we don't want it to become a headwind like it was in the quarter. And this sales capacity that we talked about earlier in commercial is also something that we've got to just anticipate. Again, sometimes it's going to be a little lumpy. In this case, it was lumpy where we had several promotions. We just got to manage that a little bit better. So in our control. Operator: Our next question will come from Tom Blakey from Cantor. Thomas Blakey: Just wanted to maybe talk a little bit more about competition. I think there was a question earlier. Just looking at the dynamic growth of some of these conversational names like Sierra and Decagon. I mean, are you seeing these guys currently in the market? Are they disrupting in any way? I think just given the dynamic growth there, I think, we should address that. And just maybe a housekeeping item for Bryan. Was the 5-point headwind from the large customer from 3Q '24 like different from where you implied in the guide? Was it more of a surprise or kind of in line, that will be great? Bryan Lee: No, the 5 points, that was in line. So that was exactly expected. But I'll turn it over to Mike. Michael Burkland: Yes. And you can talk to Sierra and Decagon. I mean they're getting a lot of limelight these days, right? And limelight, they're not very large companies yet. But look, they're getting a lot of press. And this gets back to what I said earlier about kind of point solutions versus platforms. And most of these large brands, they want to look at the hot stuff, so to speak. They want to take a look. But in the end of the day, a lot of these decisions are made based on the end-to-end platform capabilities because providing that connected contextual personalized experience between AI agents and human agents is only possible. It's only possible if you have an end-to-end platform like ours. So again, I'll let Andy chime in, you want to talk about... Andy Dignan: I mean we see them, I wouldn't say consistently, but we come across them. A lot of times, there's pilots. And certainly, we're in there, like it could be in one of our own customers, right? They've just made their way in. Obviously, they're getting a lot of publicity in the market. But this is where we lean into what we've been talking about, right? It's that sort of continuum of being able to deliver to both AI agents and human agents. And if you look at where they've started, and again, I'm sure they'll comment on they're going to go down the voice path. It's largely been digital, right? That's been the focus of a lot of these point solutions. Voice, as we've talked about, is a strength for us, right, and a very big strength for us that's hard to replicate. So you add those things together, we feel strong about where we're competing on those use cases, and we're going to continue to get better. Operator: This concludes the Q&A portion of our call. I will now hand the call back over to CEO, Mike Burkland, for closing remarks. Michael Burkland: Thanks, everyone, for joining us. We look forward to keeping you updated as we close out the year and enter into 2026. Exciting times. Thank you very much for joining us.
Operator: Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2026 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Ari Danes, Senior Vice President, Investor Relations and Treasury. Please go ahead. Ari Danes: Thank you. Good morning, and welcome to MSG Entertainment's Fiscal 2026 First Quarter Earnings Conference Call. On today's call, David Collins, our EVP and Chief Financial Officer, will provide an update on the company's operations and review our financial results for the period. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the Investors section of our corporate website. Please take note of the following. Today's discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On Pages 4 and 5 of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure. And with that, I'll now turn the call over to David. David Collins: Thank you, Ari, and good morning, everyone. We are several months into fiscal 2026, and I'm pleased to say we are off to a strong start. We continue to see broad-based strength across our business, most notably for bookings and this season of the Christmas Spectacular, both of which I will discuss in more detail shortly. And in light of the demand we're seeing, we are increasingly confident in our ability to drive solid growth in revenue and adjusted operating income this fiscal year. That confidence in both the near- and longer-term outlook for the business was behind our decision to repurchase approximately $25 million of our Class A common stock this past quarter as we continue to deliver on one of our core capital allocation priorities. Now let's review some first quarter operational highlights. During the quarter, our venues welcomed over 900,000 guests across 140 events. That includes a new record for the number of concerts in any quarter at The Garden as we hosted a number of sold-out multi-night runs and welcomed new headlining acts to the arena this past quarter. From a consumer demand standpoint, the majority of concerts across our portfolio of venues were again sold out during the first quarter. In addition, food and beverage per cap at concerts at The Garden were up, while per cap at our theaters were down as compared to the prior year quarter, which we primarily attribute to the mix of events. Looking ahead, we are booking events at a steady pace and remain on track to grow the total number of events at our venues in fiscal '26. This reflects our expectations for growth in concerts this year, including at The Garden. On the family show front, Cirque du Soleil's Twas the Night Before will begin its holiday season run at the Chicago Theater and the Theater at Madison Square Garden next month. And in terms of marquee sports, next week, we welcome UFC Back to the Garden, which will be followed next month by the return of the Garden Cup, marking the second consecutive year of tennis at the Arena. With regards to the Knicks and Rangers, the teams recently began their '25, '26 seasons at The Garden. This fiscal year, the cash component of the Arena license fees will be $45 million and will continue to grow at 3% each year through fiscal 2055. And while still early, we are seeing positive momentum across our share of food, beverage and merchandise sales at Knicks and Rangers home games. Turning to the Christmas Spectacular. The 92nd holiday season kicks off later today with 215 shows planned for this year's run. This compares to 200 performances last year. We continue to embrace new technologies, and this year's production will utilize Sphere Immersive Sound, the cutting-edge audio system we recently installed at Radio City. The introduction of this technology is the next evolution in the venue's nearly 100-year legacy and will elevate the audio experience for artists and guests alike. Guests will experience the Christmas Spectacular with a new clarity and purity of sound that fully envelops the audience, and the system rolls out in January for all future events. In terms of advanced ticket sales, we continue to pace ahead of where we were at the same time last year. And based on the demand we are seeing, we anticipate once again welcoming over 1 million guests to the Christmas Spectacular this holiday season. We also continue to expect higher per show revenue, which combined with the increased number of shows, puts us on track to deliver another year of record revenues for the production. Turning to our marketing partnerships business. As you know, around this time last year, we made the decision to bring our sponsorship sales effort back in-house. With our internal sales teams now largely in place, we believe we are well positioned to capitalize on upcoming opportunities in fiscal '26 and beyond. And in terms of premium hospitality, we continue to see strong new sales and renewal activity for our suites. We also recently completed the renovation of several Lexus level suites and are seeing the benefit of incremental revenue from these enhanced spaces. Now let's turn to take a look at our financial results. For the fiscal '26 first quarter, we reported revenues of $158.3 million, an increase of 14% versus the prior year quarter. This reflected an increase in revenues from entertainment offerings and to a lesser extent, higher food, beverage and merchandise revenues. The increase in revenues from entertainment offerings primarily reflected growth in the number of concerts at the company's theaters and at The Garden as well as higher per concert revenues. In addition, revenues from other live entertainment and sporting events increased year-over-year, primarily due to an increase in the number of events at The Garden. The increase in food, beverage and merchandise revenues mainly reflected higher F&B sales at concerts due to higher per concert revenues as well as the impact of more concerts at our venues. F&B sales at other live entertainment and sporting events also increased year-over-year. First quarter adjusted operating income of $7.1 million increased $5.2 million as compared to the prior year quarter. This primarily reflects the increase in revenues, partially offset by higher SG&A and direct operating expenses. I would also note that the first quarter operating loss results include a noncash impairment charge of $13.8 million related to the company's operating lease at 2 Penn Plaza. Turning to our balance sheet. As of September 30, we had $30 million of unrestricted cash, while our debt balance was $622 million. This reflected $602 million outstanding under our term loan and $20 million drawn on our revolving credit facility. Since the end of the quarter, we have paid down the full $20 million revolver balance, and we continue to expect to generate substantial free cash flow as we progress through the year. This reflects the following expectations for fiscal 2026: solid growth in adjusted operating income; ongoing net interest payments related to our national properties debt, which totaled $45 million in fiscal '25; our status as a full cash taxpayer; and capital expenditures, which will include incremental spend related to certain suite renovations at The Garden as well as enhancements at the Beacon Theatre and Radio City Music Hall, where we recently installed Sphere Immersive Sound. As I mentioned earlier, during the quarter, we repurchased approximately 623,000 shares of our Class A common stock for $25 million. Following these repurchases, we have approximately $45 million remaining under our current buyback authorization. And going forward, we will continue to explore ways to opportunistically return capital to shareholders. So in summary, we're seeing positive momentum across our business. We are increasingly confident in the company's trajectory this fiscal year, and we believe we are well positioned to drive long-term value for our shareholders. I will now turn the call back over to Ari. Ari Danes: Thanks, David. Operator, can we now open up the call for questions? Operator: [Operator Instructions] Your first question comes from the line of Stephen Laszczyk of Goldman Sachs. Stephen Laszczyk: Maybe starting first with the Christmas Spectacular. Just with the show kicking off today, would love to get your latest thoughts and views on how sell-through and pricing are trending heading into this holiday season? It seems like there's no shortage of debate around the consumer at the moment. Would just be curious what you're seeing in terms of demand out there and if there's any pockets worth calling out on either the positive or negative side? And then I have a follow-up. David Collins: Sure, Stephen. Thanks for the question. A few things to note about the Christmas Spectacular. First of all, this year's production is seeing very strong demand, and we're pleased to say that we expect to again host over 1 million guests at the show this holiday season. I want to also note that the Rockettes are celebrating their 100th year anniversary this calendar year, which is helping us to drive increased interest in the show for both our guests and our partners. Advanced ticket revenues are currently pacing up double digits as compared to this time last year, which reflects both higher individual and group ticket sales, and that is being driven by both higher volume and average ticket yield. So the progress in advanced tickets puts us almost halfway to our ticket revenue goal for this year already. In terms of show count, we've added 4 more shows since our last earnings call, which includes 2 shows that were added just early this week due to the demand we've been seeing. And we now have 215 planned performances as compared to 200 last year, and that translates into a high single-digit percent increase in show count. And finally, Stephen, I would say the Christmas Spectacular is a premium entertainment product in the market and is still well priced, still -- I mean, priced well below average ticket prices for comparable entertainment options. And we are always strategically managing and pricing our ticketing inventory to maximize revenue for every show. So with all that said, we remain confident in our ability to deliver very strong growth with Christmas Spectacular this year. Stephen Laszczyk: That's great. That's all helpful. And just a quick follow-up on the show count point, adding 4 shows to 215 this year. Just would be curious, given the calendar this year, is there any opportunity to take that higher from this level? What would you need to see to maybe slot in a few more? David Collins: Yes. I mean we certainly are always open to looking. We'll see how sales go, but we are certainly always looking for that. And the way the demand is going, that's something we would consider for sure. Operator: Your next question comes from the line of Peter Henderson of Bank of America. Peter Henderson: Can you just provide updated thoughts on concert bookings for The Garden and the other properties? And also where you stand on bookings now relative to this point last year for fiscal 2Q, 3Q and 4Q? David Collins: Sure. Thanks, Peter. As I had mentioned earlier, we had a robust fiscal first quarter here at The Garden, setting a new record for the number of concerts in any quarter at the venue. looking ahead, we are booking events at a steady pace and remain on track to increase the number of booking events across all our venues in fiscal '26. In terms of concerts, we are pacing up on a full year basis versus fiscal '25 at both The Garden and our theaters. And in fact, we have already booked more concerts at The Garden for fiscal '26 than the actual number of concerts held at the venue all of last year. And across our venue portfolio, we are now nearly 85% to our concert booking goal for the year. So as we look to the rest of the year at The Garden, we currently expect to be down in the December quarter at The Garden in terms of number of concerts. However, we view that as just timing of where concerts are landing during the fiscal year. And I would say we are pacing up for both fiscal third and fourth quarters. At the theaters, we currently expect to be up in number of concerts in the December quarter. And for the third and fourth quarters, we are currently pacing behind. But with that said, typically, the lead time for our theaters for bookings is 3 to 6 months. So we still believe we have time there. So I would say, overall, we feel really good about our start and remain confident in our path to growing the number of events at the venues this year. Operator: Your next question comes from the line of David Karnovsky of JPMorgan. David Karnovsky: On a prior call, you had noted some work to book major residency acts for '27 or fiscal '27. So I wanted to check in on where things stand with that. And then as a follow-on, just given the recent share repurchase activity, maybe you can update on how you're thinking about capital returns or allocations from here. David Collins: Sure, David. Thanks for the question. As far as the residency, we are definitely making progress to finalize a residency for next year. And we expect that we'll have more to share in the coming months. As we mentioned on our last call, and I will reiterate here, this residency would include a substantial number of dates at the arena and would create the potential for concert growth at The Garden in fiscal '27, which would be following what we expect is going to be a strong performance here in fiscal '26. So we look forward to sharing more details when we can and as soon as that's appropriate on that front. Talking about the capital returns, as you've heard us discuss before, we have 3 key priorities in terms of our capital allocation and the first being that we like to ensure that we have a strong balance sheet. At the quarter end, we had net debt of approximately $592 million, which translates into net debt leverage of approximately 2.6x. As I mentioned earlier, we also -- at the end of the quarter, we repaid back $20 million we drew on our revolver during the quarter. So we should be able to continue to naturally delever the business as we grow. I would say our second priority is to ensure that we do have the appropriate flexibility to pursue compelling opportunities if and when they arise. In terms of capital projects, there aren't any major ones to flag at the moment as we look out for the rest of the fiscal year, but we'll always be on the lookout for that. And our third priority remains to opportunistically return capital to our shareholders. As we had said, we repurchased $25 million of stock during the fiscal quarter, and we have $45 million remaining under our current buyback authorization. So going forward, we will continue to explore ways to opportunistically return capital to our shareholders. Operator: Your next question comes from the line of Peter Supino of Wolfe Research. John Stid: Jack Stid did here on for Peter. My question is, with Christmas Spectacular show count now at all-time highs, what's the next meaningful growth driver for that business? And longer term, is it feasible for the show to expand to future mini Sphere venues? David Collins: So thanks, Jack. And we definitely see a runway of growth across a number of areas related to Christmas Spectacular. As you mentioned, the show count going from 200 to 215, which is still below our highest level in years past. We also are continuing to get smarter about optimizing the calendar. So we think there's some more room to grow beyond that. Secondly, we continue to see opportunities to improve the show -- the per show revenues. As I mentioned earlier, the Christmas Spectacular is a premium product and it is still priced well below other comparable entertainment options in the area, and we continue to strategically manage and price our ticketing inventory. So we expect to see continued yield upside from here. We also see opportunities to drive revenue growth in areas such as F&B, merch and sponsorship as the Rockettes brand continue to grow. For example, we recently named Sephora as our first-ever official beauty retailer of the Rockettes and Christmas Spectacular and also welcomed Dove as an official partner of the Rockettes and the Christmas Spectacular. And I would say, lastly, we remain focused on operating the show more efficiently, including levering technology, which will allow for margin expansion. As far as what you had mentioned about the Sphere and other productions, I would say, at this time, we have no plans to develop new productions, but we'll always consider opportunities that make sense for the business. And we truly believe we have a unique franchise in the Christmas Spectacular, and we are focused on growing it over the long term for sure. Operator: Your next question comes from the line of Cameron Mansson-Perrone of Morgan Stanley. Cameron Mansson-Perrone: Just one for me. Wondering if you could elaborate on transitioning that and sponsorship business back in-house. I think you mentioned that, that was done, but I wanted to confirm that. And just any color around how it's gone so far, how we should think about the kind of related cost and opportunity going forward from that change? David Collins: Sure. Thanks, Cameron. Yes, you heard correctly. As I mentioned, our internal sales team is now largely in place, and we believe we are well positioned to capitalize on opportunities in this fiscal and beyond to drive growth. So I would say, first of all, we have several premium sponsorship assets available, which include our naming rights at the theater at MSG, some notable presenting partnerships across the venues as well as a good inventory of outdoor signings. So we believe we have shown significant progress in this area of our business. For example, as I noted, in the prior question, we recently named Sephora as the first-ever official beauty retailer of the Rockettes and Christmas Spectacular, which is a great example of a new category for our sponsorship business, which is leveraging our unique assets. And we similarly recently welcomed Dove as an official partner of the Rockettes and Christmas Spectacular. So one other thing I'd mentioned, we also have a number of renewals coming up and are very optimistic about those. So I would say, overall, we're seeing positive momentum in this area of our business. Operator: Your next question comes from the line of Joe Stauff of Susquehanna. Joseph Stauff: First question is with the new mayor, I was just trying to properly calibrate any new risks of higher taxes for MSG. David Collins: Okay. Sure. Thanks, Joe. I would say at this point, we are not going to speculate about hypotheticals regarding a new administration. But what I would say a few things, though. As it relates to city income taxes, I would note that any change would require action by the New York State legislature and the governor as well. Similarly, I would say that any repeal of The Garden property tax exemption would also require action by both houses of the New York State legislature and the governor. So as I said, we're not going to speculate on hypotheticals, but I just wanted to point that out. Joseph Stauff: Got you. So structurally, it does require the state. It's not something that can be done specifically from the city. David Collins: Correct. Joseph Stauff: And then maybe just a follow-up. I know you had answered in various ways, maybe questions on the consumer. But just wondering if you see any slowdown really in the buckets where maybe you would, which would be concessions and sales of merchandise. Just wondering if you see any pattern where -- whether it be recently or a trend where maybe that's softened up a bit. David Collins: Sure, Joe. We keep a close eye on the macro environment. And I have to say that we continue to see strong consumer demand. A few factors to point out that support our view. As I had mentioned earlier, we are seeing very strong demand for the Christmas Spectacular holiday season this year. And our advanced ticket revenues are pacing up double digits compared to this time last year. I would say in terms of our bookings, the majority of our concerts at our venues were again sold out this past quarter and a number of upcoming acts across our venues have added additional shows in the coming quarters due to strong demand. And when we look at the next 2 quarters, the sell-through rate for concerts is currently pacing in line of where it was this time last year. So as I mentioned, we keep a close eye on it, but we continue to see strong demand from consumers. Ari Danes: Thanks, Joe. Operator, we have time for one last question. Operator: Your last question comes from the line of David Joyce of Seaport Research Partners. David Joyce: A couple of questions, please. First, do you have any updates on the redevelopment and renovation of Penn Station? And secondly, if you could please comment on the bookings growth by event type, family versus sporting events versus concerts? David Collins: Sure, David. Thanks for the questions. As far as the redevelopment plans for Penn Station, let me just say that the U.S. Department of Transportation and Amtrak's announced in August a project schedule that includes select being a master developer by May of 2026 and beginning construction by the end of 2027. And that's the time line they reiterated last week. So from our perspective, as invested members of our community, we remain committed to improving Penn Station and the surrounding area. And as we've said before, we and our guests are already seeing benefits of some of the recent improvements, which have taken place in the surrounding area in The Garden. And as this redevelopment of the area continues, we are committed to collaborating very closely with all the stakeholders. And I would say that's all we'd probably say at this time. From your question on the bookings growth, we continue to expect growth driven primarily by concerts, family shows and sports properties in our business. And as we've discussed, our concert category, we returned to concert growth at The Garden as well as continued increases across our theaters. And as I also mentioned earlier, we have already booked more concerts at The Garden for fiscal '26 than the actual number of concerts held at the venue last year. So feeling good about that. Looking at the rest of the bookings business in terms of our family show category, I would say, while we're not currently expecting growth in the number of events, we expect to see improved financial results, which is helped by the return of Cirque du Soleil for the holiday season at both the theater at MSG and the Chicago Theater next month. And in terms of marquee sports, while we expect to see modest event growth this year, we are expecting another robust year of college basketball and boxing. And I would point out, that includes St. John's, who is ranked #5 in preseason college basketball rankings, and we have 13 games planned with St. John's at the arena versus 9 last year. And lastly, I would just say in terms of special events, we are expecting a modest increase in the number of events in fiscal 6 (sic) [ '26 ], but I would point out that we do face a tough comparison in this category in terms of financial results because of the absence of SNL's 50th anniversary special, which took place last year. But I would say, overall, we continue to expect growth across a number of our bookings category, and we feel good about our calendar for fiscal '26. Operator: That concludes our Q&A session. I will now turn the conference back over to Ari for closing remarks. Ari Danes: Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day. Operator: This concludes your conference call. You may now disconnect.
Operator: Good afternoon, and welcome to Research Frontiers investor conference call to discuss the third quarter 2025 results of operations and recent developments. The company will be answering many of the questions that were e-mailed to it prior to this conference call, either in their presentation or as part of the Q&A session at the end. In some cases, the company has responded directly to e-mail questions prior to this call or will do so afterwards in order to answer more questions of general interest to shareholders of this call. Some statements today may contain forward-looking information identified by words such as expect, anticipate and forecast. These reflect current beliefs, and actual results may differ materially from those expressed due to various risk factors, including those detailed in our SEC filings. Research Frontiers assumes no obligation to update or revise these statements. [Operator Instructions] The call is being recorded and will be available for replay on Research Frontiers website at smartglass.com for the next 90 days. [Operator Instructions] Now I'd like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir. Joseph Harary: Thank you, and hello, everyone, and welcome to our third quarter of 2025 investor conference call. Automotive and total royalties were up year-over-year and sequentially when we back out onetime events from 2024. As of the end of the third quarter, we remained debt-free with over $1.1 million in cash and our working capital position remains solid. Our architectural retrofit system debuted this week at GlassBuild 2025 in Orlando. The show ended earlier today, so my voice may be a little horse from speaking with customers since Tuesday. We had an outstanding response. John Nelson had asked by e-mail a few questions about the show. What was the response? Were there any orders obtained for either the retrofit or the IGU products? We had a steady stream for all 3 days of interested parties, John, and they were amazed at SPD's performance and the ease of installation and elegance of the design of the system. Full spec sheets for different configurations of SPD windows for architects, designers and facility managers were handed out. John also asked, how are you planning to market these products and to whom were any orders obtained? Initial customers are expected to be the government buildings through AIT Group's status as an approved GSA vendor, embassies across the world and commercial buildings such as high rises and office buildings. Homes are possible as well, and we are working together on some high-end projects there as well. We've also identified and are discussing specs for at least 2 major and highly visible projects. The idea for GlassBuild and all of the shows and conferences we attend is to get the conversation started and for AIT Group, Gauzy and RFI to have real-world demonstrations underway. We and our licensees plan to build on that momentum through major trade shows early this year and even at the GLASSTEC 2026 show in Dusseldorf. That show is only held once every 2 years and is the largest glass industry event in the world. With respect to cars, we will also similarly build on momentum in the automotive market. As I noted on our last conference call, the bankruptcy of the original licensee supplying Ferrari and the shift of that business to another one of our long-standing licensees caused royalty income from strong Ferrari sales to be mostly absorbed by the high minimum annual royalties be paid by that new supplier at the start of 2025. In real terms, because of the prepaid minimum annual royalties from 2 licensees absorbing the Ferrari sales royalties, and this was something that only first happened this year in our history, the switch from one licensee to another from an accounting standpoint reduced our reported automotive royalties this year by 6 figures. Even so, our royalties in Q3 and for the 9 months after the onetime events are backed out from 2024 are higher than last year. And even with this and the Ferrari business split between 2 licensees for the first half of this year, because of the sales levels achieved in Q3, the MARs for this licensee have now been exceeded in Q3. So some of our royalty income comes from this licensee in the third quarter and all of the royalty income generated by Ferrari in the fourth quarter will now become recordable in full in the fourth quarter. We expect revenue in all market segments to increase further as several new car models and other products using the company's SPD-SmartGlass technology are introduced into the market. Turning to our financial condition and liquidity. We continue to manage our resources effectively. As of September 30, 2025, we held approximately $1.13 million in cash and had working capital of $1.4 million. We remain debt-free. One shareholder, Jared, asked if we plan to raise additional capital. We do not currently plan to raise additional capital, assuming that we don't have a repeat of the Q2 licensee bankruptcies and none are expected, by the way, and we collect what is owed to us. We have had interested investors approach us, so capital is available if we ever need it, but there's no current plans to raise funds. We continue to see progress and significant developments across our markets. Our SPD Smart technology is licensed or used by many major companies in 5 areas: aerospace, architectural, automotive, marine and display products in almost every region of the world. And we have had some very key developments within our industry since the last conference call. I can say we never had a more full pipeline of projects and opportunities. Some are medium term and some are near term with the timing and ability to announce more in our control. A good example is the architectural retrofit system. I was at GlassBuild in Orlando for its launch there this week by AIT. Show is outstanding. AIT Group, Gauzy and RFI received enthusiastic responses to this, and we're working together to announce more details. In the architectural market, we will be following it up with major shows in January, February and perhaps several other shows after that, culminating with the GLASSTEC show in Dusseldorf in October. That show is the world's largest event for the glass industry and is held every 2 years. It gets considerable attention just like GlassBuild in Orlando did. We also expect to have SPD-SmartGlass for the automotive, architectural and aircraft markets in January at CES. And in addition to all this, there is something really exciting later this month. As we announced in yesterday's press release, I am the keynote speaker at the Automotive Glazing Conference in Detroit, November 18 and 19. After being selected to give the keynote on SmartGlass, I am also quite honored to have also been named the Chairman of the conference as well. And I'm looking forward to an illustrious group of automakers, suppliers and colleagues presenting and attending that conference. These include executives and engineers from General Motors, Ford, Volkswagen, Stellantis, Lucid Motors, Jaguar Land Rover, Corning, Kuraray, Carlex Glass, Saint-Gobain Sekurit, NSG Pilkington, Fuyao, Guardian Industries, Renault, Webasto and others, representing the entire automotive glazing value chain from OEMs to Tier 1 suppliers and glass innovators. As I mentioned, we included some questions previously sent in by our shareholders in our presentation today. I'll now answer some additional questions that have been e-mailed to us. Jared emailed in 3 questions. Are there any SPD retro wall installations? Is there a capital raise in the near future? And how does Gauzy's prefab lam stack benefit SPD? Well, I answered Jared's first 2 questions in my presentation earlier. Regarding the Gauzy prelaminated stack, it benefits the SPD industry in multiple ways. It promotes consistency and quality among different manufacturers with different capabilities. It helps the customer be more able to easily interchange suppliers because of the consistency, and it also enhances performance by using a combination of materials in conjunction with the SPD film to create an optimized stack in terms of UV and IR protection and optical clarity. It also speeds up production times by our licensees, minimizes costs from wasted materials and other similar efficiencies of scale. Some other questions from John Nelson that were e-mailed to us prior to the call. Any update on the sun visor, either aftermarket or built in the windshield? Well, John, since our last call, we've had more customer inquiries about this and some OEM activity as well. SPD Black development status. John, I'll be talking about this in my closing remarks later. Is there much interest by automakers in developing SPD for side windows? Yes, John. Apart from Mercedes concept van earlier this year, there is interest. This is one area that can greatly benefit from the black SPD. The Sapphire Blue SPD is perfectly fine for sunroof, but I believe that the automakers want black or a more neutral colored SPD, which is better suited for side windows. Steve [ Azer ] asks, it was nice to see some price action in the stock of reefer a few weeks ago. Are we still lagging the market? And what will we need from REFR to see higher valuation going forward? Well, thanks, Steve. And as a shareholder myself, I too want to see higher stock prices. However, just one of the assumptions you made. When you back out the Magnificent 7 stocks, we're not lagging the small cap market. Over the past 6 months, is as of yesterday, Refer outperformed U.S. micro caps. We were at roughly 68% in the last 6 months versus 38% for the general microcap market. Next question from Steve [Azer ]. Is anyone replacing Michael LaPointe from his recent retirement? We're not replacing Mike. He did a great job for us as VP of Aerospace Products and got many programs underway to the point where our licensees in the aircraft market and their teams of people are now able to carry the ball beautifully. Mike and I have spoken often in the past 2 months, and he's enjoying retirement and keeping busy, but he still keeps a close eye on things at Research Frontiers. I'll now ask our operator to open up the conference to any additional questions people participating today might have that we haven't already covered. We ask that you please keep your questions brief and limited to questions of general interest. If you want to get into more specifics, we can certainly do that by e-mail or by telephone later. I plan to also cover a lot of exciting information and developments in my closing remarks. So I may be addressing your question in more detail actually in my closing remarks, and we'll let you know if that's the case when you ask your questions. Operator: [Operator Instructions] Our first question comes from James Leo of RBC. James Leo Carlisle: So I mean this call is kind of like Groundhog Day. I mean it's the same call over and over again. I look at the 5-year growth rate of the company at minus 3%. And I'm just curious where are all these car sales that you've been saying we're going to be coming? Joseph Harary: Okay. Well, I try to go into a little bit of it, James. Ferrari has been doing very, very well for us, increasing. James Leo Carlisle: We know about Ferrari already, right? Joseph Harary: Yes. But the accounting treatment, when you had a licensee go bankrupt in the second quarter and another licensee step in and have to meet their minimum royalties before you can book new income as part of it. But I expect -- and in my closing remarks, I'm going to talk about some exciting things about what's coming in the automotive. James Leo Carlisle: I mean, how many quarters ago did you announce that there was going to be a high production car coming out? Was that 2 years ago? Joseph Harary: And we'll be talking about that. Things take a while in the automotive industry, and we do it right as I think history has demonstrated. But if you wouldn't mind holding the rest of your question for the closing remarks, and if I haven't answered them, you could always call me. I'm happy to talk to you. Operator: Next, we'll hear from John Nelson, an investor. John Nelson: Joe, just an idea kind of afterthought. Since the retrofit product is so, I would call it, revolutionary and since it is -- you've indicated it is production ready, would it make any sense to see if any of the new shows or podcast would be interested in profiling your product? Joseph Harary: Yes. And we actually have a couple of those in discussion right now. What I want to do, I mean, the best way to experience the retrofit, John, is to actually see it work because it's incredibly easy and elegant. I mean it's -- they did -- the AIT Group, which owns LTI, our licensee, has really just worked out so many, what I'll call subtle details. For example, you pop this into a window frame and you want to make sure that you're getting a good seal. You want to create an air space to create even better energy efficiency. You want to make sure that there's no moisture in there that gets trapped. So a lot of things and of course, the wiring. And we actually are developing several different methods of wiring, including what I think is really, really exciting and quite doable, which is an autonomous window. What I mean by that is it's self-powered. So you pop this into the window frame and you don't have to call an electrician and everything is there. When I was at the show in Orlando, as soon as I walked in, I was handed a maybe a 1.5-inch long key fob remote control. It's a 10-volt remote control, no wires, and I was able to control the SPD windows and dim them and do all of the things. And this was off-the-shelf controller, which means you can actually substantially reduce cost by not requiring specialty electronics and also more easily integrate into building control systems. And a lot of people use [ Lutron ] systems. So the fact that it works with the low-voltage Lutron stuff is very important, too. So these are the kind of things that we want to get -- make more visual for people so that people could actually see how easy it is to work with. And the hard work -- the harder you work, the easier and more elegant it looks, and there's been a lot of hard work that Gauzy and AIT Group and Research Frontiers has put into this to make it look easy. John Nelson: Are AIT Group and/or Gauzy producing a video demonstrating the product's qualities? Joseph Harary: Yes, they will be doing that and also appearing on podcasts and industry things. So we hope to have some nice visual assets to kind of help spread the word better. But also one of the things that I found interesting at the GlassBuild show, first of all, it's extremely well attended by the right people. But when you walked over to actually do the retrofit replacement where you took out -- in this case, they had a large and heavy bullet-resistant glass window. And you could just walk over. I saw one guy who was maybe half my size, easily put this in. So what -- where the real benefit is, and that's -- it's kind of an interesting observation is you can go in there in the course of a weekend and totally upgrade all the windows on a couple of floors of a building. And they did one. It wasn't SPD, but it was for the White House. And unfortunately, you can't close down the White House during the day. So they had -- they said they had to go in there at 5:00 and work till 2:00 a.m. and the secret service was there with their guns ready, but they were able to upgrade the executive building in the White House with this system. So it's quite, quite easy to work with. And we talked about distribution, which I think was one of your earlier questions about how we're going to market and deploy it. We talked about the marketing, but the deployment can be done with pretty much any installer. It's not a high skill to put this into a building once the system -- because of the system. So you could have groups of people in all over the country just go do this. And it's -- think of it as like a very elegant storm window maybe. Operator: Next, we'll hear from an investor, Francis Altera. Francis Altera: The installation in the White House, what was the actual product that they installed? Joseph Harary: That was an anti-eavesdropping bullet-resistant glass. So bullet-resistant, you understand, and they can now do Level 10, which means they could stop a 50-caliber round. And they had some there. I wouldn't recommend sending near this stuff when it's being shot at. But the anti-eavesdropping, you can shine a laser on a piece of glass. And if you and I were talking in a room, the glass would vibrate and someone from the outside might be able to shine a laser on the outside of the window and turn the vibrations back into sound, which is sometimes what's done in [ Spycraft ]. So this special film that AIT Group and LTI can put in their windows, and they've done it for the CIA and others. And for Embassies prevents that from happening. Francis Altera: Okay. It's pretty cool. Is that glass capable of having SPD on it? Joseph Harary: Yes. So that's a great follow-up question. So the way it would work, let's say, I'm a facility manager or in charge of an Embassy somewhere, the building of an Embassy and we have existing glass, and I want to make it upgraded. What I would do is go on the GSA schedule, which is basically if you're a GSA-approved vendor, the government can buy directly from you. And it's almost like a Chinese menu. So the plan with this is to have AIT Group have a whole different bunch of options for the retrofit. So for example, if I particularly wanted bullet-resistant glass and I wanted bullet resistant up to Level 8 or Level 6 or Level 10, and I wanted it to have the anti-eavesdropping glass and I wanted it to have SPD. I just check a couple of boxes and order it. And that's the idea. It's like a Chinese menu. If I didn't want the anti-eavesdropping, but I want the bullet resistant in the SPD, I would just check those 2 boxes. And obviously, there's different prices for different things. But that's the idea is to make it very easy to deploy across the U.S. government. Francis Altera: How capable is the supply chain setup for the architectural market? And is it right now being focused on the blue tint or the black tint? Joseph Harary: Right now, everything is focused on the existing commercial film, which is the blue, Sapphire Blue. One of the nice things about this retrofit system is, let's say, next year, the black comes out, and I happen to upgrade my Embassy or my building with the blue. And I said, money is no object. I really want the black. Someone comes in and within the course of a weekend can redo the whole building with the black. So it's really -- it makes it future-proof, which is great. Francis Altera: How far along is the black? Joseph Harary: I'm going to talk about that in my closing remarks, but it's very, very far along. Francis Altera: Okay. Now you mentioned increasing sales with Ferrari. Whatever happened to Hyundai? Joseph Harary: I'm going to talk about that also, but it's still moving forward. Francis Altera: Still moving forward. What caused them or whomever it was to totally not fall through -- follow through with the 2023 projection of us being greatly rewarded. What happened there? Joseph Harary: My understanding is it was partly because of the car itself, not the SPD part. And I suspect that if you know that a black is coming and you're not -- you don't have a gun to your head to put the blue in the car, you might wait. Some automakers have expressed that and some haven't. So it might have unintentionally caused a slowdown in some areas. For the most part though, the sunroof for the most part, the sunroofs are fine with the blue. Things like side windows would prefer black. Francis Altera: Is there any difficulties in producing it? Do you have a good sense. Joseph Harary: You mean the black or the retrofit? Or both? Francis Altera: Retrofit. Joseph Harary: No. No, no. A matter of fact, AIT Group has an entire building devoted to just the framing system for the retrofit. Francis Altera: What about the supply... Joseph Harary: That's building #3. And I'm told that building #4 is waiting when they -- if they hit capacity in building #3. So they have expansion room, too. Francis Altera: Yes, but that's the frame. What about prior -- the glass... Joseph Harary: Well, they can do glass all the time. Francis Altera: The lamination. Joseph Harary: Yes. That's what AIT and LTI do is they have a tremendous operation in -- outside of Tampa in Largo, Florida, and they have another tremendous and even larger operation in Pittsfield, Massachusetts. Francis Altera: Does [indiscernible]. Joseph Harary: They do it. Francis Altera: Lamination inhouse -- the lamination is done in-house with... Joseph Harary: Yes, that's their specialty. Laminated Technologies, LTI is the part of AIT Group that does and has done SPD lamination for our licensees for a long time. They have very good experience. Francis Altera: So Gauzy makes the film, ships it to them and they do the rest. Joseph Harary: They laminate it. Right. Francis Altera: Right. Joseph Harary: And Gauzy was at the show yes, Gauzy was at the show along with AIT and of course, me. Francis Altera: On our last conference call with Gauzy, they never even discussed SPD. Why did they not even address that? I found that to be somewhat odd. Would you have any [indiscernible]. Joseph Harary: Yes, I've had this discussion with Gauzy. There's a very sexy high-growth part of their business. That's their switchable film division. And they have a very bread-and-butter part of their business, too, things like the Safety Tech division, which does the cameras for trucks and things like that. And as a new public company, I guess they were advised stick to kind of the more traditional way of presenting your company, which is here are your revenues in each division, here's your EBITDA in each division, and they have about 5 different divisions. So they devote some time to it. From a shareholder value standpoint, I believe they would do much better focusing on the growth areas like SPD. And I've expressed that to them, and I think they're getting that message. Operator: [Operator Instructions] We have no questions at this time. I'll turn it back over to you for any additional or closing comments. Joseph Harary: Okay. Thanks a lot. And if we haven't fully answered anyone's questions, either live or by e-mail, please feel free to e-mail us, and we're happy to talk to you. And I'm going to put a lot more detail in my closing remarks. So I think a lot of the questions that have been asked, you'll get a little bit more meat and flavor from it. Success rarely comes in a straight line and how you navigate that path frequently determines the outcome. And some of our competitors never even crossed the finish line and went bankrupt. On our past conference calls together, I've told you about our retrofit application and about how the automotive industry views SPD as the best performing and most reliable switchable tin technology. You're now seeing proof. What we discussed on earlier calls is materializing, sometimes not on the exact time frame we were told, but consistently moving forward. The architectural retrofit application was presented this week at the most prestigious U.S. Glass conference and will appear at additional major events worldwide. Our customers for the retrofit include both government and commercial entities. Direct adoption by the government offers a large opportunity. The GSA is the largest customer in the world, and the government also promotes use of SPD Smart Glass in the private sector through tax incentives, such as the Dynamic Glass Act, which provides 30% to 50% credits. Both of these should accelerate use, especially now with the ease and speed that an existing window can be made SPD Smart. Yesterday's announcement about the Detroit conference, which incidentally is the same venue where we landed Cadillac years ago, and my selection as keynote speaker and Chairman highlight our growing credibility in the automotive industry. Multiple markets and industries are now connecting the dots and they've responded positively to SPD Smart Glass technology. This industry isn't easy. Automotive makers demand the best and misinformation and overpromising and underdelivering from competitors is common. We counter that with the worldwide network of dedicated companies and the highest performing smart glass technology. In the past year, 2 competitors went bankrupt. Another performed a cumulative 4 million to 1 reverse stock split, yet its stock still trades for pennies, was delisted and they recently lost their CFO and COO. Another competitor was not able to supply an electrochromic sunroof that was announced by the car manufacturer with great fanfare. That roof option is still on "production constraint, and my visit to the dealership to see it resulted in the salesperson wondering if the roof was actually switching tint at all because of the very slow switching speed. He said at the end that I might be able to get the option on a car in "a couple of months. On October 24, 2025, so not too long ago, on the third quarter earnings call, the COO and CTO of Gentex Corporation, which incidentally is a company that I respect very, very much, noted the following, and it's worth my reading his public comments in detail to understand the real challenges that companies face in trying to get a switchable tin product into the automotive industry. Customer interest for dimmable sunroofs and visors continues to grow, and our teams have been working incredibly hard to continue moving this product from single unit production into more mass scale capability. As noted in prior calls, this is an incredibly complex and challenging manufacturing process. To date, we've been utilizing partners to execute part of the process while we get our larger scale production equipment in-house and operational. The target is to have this in-house operation running in late Q1 to early Q2 2026. As with any new product or process launch, there will be challenges. But with the manufacturing capability we have at Gentex, I remain confident in the team's ability to bring this product into the market in the next 1.5 years. The question was then asked of Gentex, what's left to be done in terms of achieving commercial viability? Where are you and what's left to do? I know there's a lot of technicals that go into getting that OEM certified. And Gentex's response, yes, there is some -- there are still some of the bigger challenges, the requirements of taking that technology into automotive and meeting the environmental temperature, all of the above process requirements as well as when you have a really large piece of glass with a darken surface. It's easy to see small issues in the process that the dimming materials put down. So that's the big part of the Q1 and Q2 of the next year as we are getting that capability in-house so that we can get better control on that process quality. So with those, I think those are some of the biggest hurdles that we still have got in front of us. There's a lot of little challenges that we fight every day, but the team has been doing a great job keeping those little challenges down and trying to get focus on some of the bigger ones. So they're not even at the bigger challenges yet. They're on the smaller ones. [indiscernible] let's contrast that -- and this may somewhat answer the question of why does it take so long. Research Frontiers overcame these same challenges 15 years ago. We brought SPD-SmartGlass into mass production with 4 automakers and multiple models. We expanded business with Ferrari and other brands whose customers love the option. And even after 2 supplier bankruptcies that we endured, which is a testament to the strength of our business model, planning, technology and partners. Our mission has never changed. We pair the best-performing smart glass technology with a low-risk, asset-light business model. This approach keeps expenses predictable, preserves our upside and supports global diversification. These achievements are all beginning to be publicly recognized. At the Detroit Automotive Glass Conference in less than 2 weeks, I'll present a comparison of all the major glass technologies and their relative strengths and weaknesses. I'll explain why SPD alone is already proven across tens of thousands of cars, yachts, aircraft, trains and architectural projects, real projects used by real people every day. We continue to compete against PDLC in privacy and in projection uses where SPD outperforms in clarity, shading and control. We also outperform electrochromics in nearly every large area application, sunroofs, panoramic roofs, architectural windows, yachts, cruise ships and museums, delivering faster response, better shading and greater durability. And you will note the recent comments by Gentex about the challenges that they are still facing with electrochromics and their arduous tasks for the years ahead. SPD has always been the high-performance alternative, not the low-cost one. History shows that high-performance products are the most profitable and the most enduring. We have already solved the challenges of performance, durability, mass production and supply chain. And we and our licensees keep improving every day with continuous innovations such as Black SPD. As mentioned on prior calls, our recent focus was on cost and color. As the Black SPD film is expected to be out of development and in production and use shortly, cost is the next frontier. On prior calls, I mentioned new car models in Asia, Europe and in the United States. These are still moving forward. And since our last call, we have been asked to bid on new multiple major car models. As part of that high-volume quote process, we were given very aggressive price targets, which were based on prices for other competitive technologies. And I'm pleased to report that we're able to meet it. And maybe cost is not really such a big frontier ahead of us. Our next investor call is not until March. So I encourage people to keep these things in mind. Perhaps reread the transcripts from this in prior conference calls. And of course, we expect fairly significant developments to announce between now and then. I want to share my thoughts with you now as a fellow shareholder. Things have taken too long. They take longer than they take, but we do it right. One thing I'm especially proud of is how we derisked the smart glass industry for investors, licensees and customers alike. If you agree that the pipeline, especially for architectural and automotive is as large as we are predicting, then the only real risk here is whether it's going to take a little bit longer than whatever your personal time horizons are. On the other hand, if you believe in smart glass, we are the most focused way to participate in that market. And on top of that, we are diversified across major industries for smart glass and not just focused on one. In September, JPMorgan Chase calculated that 75% of all gains in the market since ChatGPT got started are coming from AI-related stocks. Well, we're not an AI company, but this certainly shows that certain sectors can go from nonexistence or obscurity to highly relevant. And I'm not giving portfolio allocation advice, but if you have small-cap and micro-cap companies allocated for your portfolio, we are one of the least risky business companies because of the combination of a high-performing and mature technology that has proven itself to be the best performing and most reliable, combined with a very modest asset-light business model that creates a meaningful participation in the upside for Research Frontiers and our shareholders through a 10% to 15% royalty based on revenues, profits from sales of licensed products. We maintain low operating costs and license our technology to global partners who build factories, hire employees and expand distribution, all multiplying our reach without heavy capital outlays by us. Through their success, we all benefited. Even though these people are not on our payroll, they essentially all still work for us. We're in a tough industry, but as history shows, we're tougher. That persistence is now being rewarded as new products reach market and recognition grows. While others in this industry are still struggling to even bring basic dimming functions to the market and several other notable ones have shut their doors completely, SPD-SmartGlass is already in tens of thousands of vehicles from Mercedes, Ferrari, Cadillac and McLaren, HondaJet to Boeing and to Airbus, and they're expanding. Architects, automakers and airlines are reaching out to us because they realize that SPD uniquely combines reliability, clarity, speed and durability. And with the retrofit, its ease and speed of installation, lower cost and high performance and energy efficiency, that's a combination of benefits that no one else can offer. As the leader in the smart glass industry, conferences are reaching out to us to speak and educate. With Ferrari's program fully transitioned, the retrofit launch underway and multiple new car model introductions ahead, Research Frontiers is positioned for meaningful growth. The outlook for the smart glass industry remains extremely promising, at least when it comes to Research Frontiers and our licensees. We stand at the forefront leading this industry with growth driven by our superior technology, increasing demand and regulatory support, continuous innovative breakthroughs and excellent global industry recognition. We look forward to sharing upcoming developments with you, our loyal shareholders. We created the smart glass industry. We've helped shape it, and we will continue to make the world better, more energy efficient, safer and more enjoyable. Thank you all very much. Operator: That concludes our meeting today. You may now disconnect.
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: Good day, and welcome to the Third Quarter 2025 Harvard Bioscience Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Taylor Krafchik, Senior Vice President at Ellipsis TA. Please go ahead. Taylor Krafchik: Thank you, operator, and good morning, everyone. Thank you for joining the Harvard Bioscience Third Quarter 2025 Earnings Conference Call. Leading the call today will be John Duke, President and Chief Executive Officer; and Mark Frost, Interim Chief Financial Officer. In conjunction with today's recorded call, we have provided a presentation that will be referenced during our remarks that is posted to the Investor Relations section of our website at investor.harvardbioscience.com. Please note that statements made in today's discussion that are not historical facts, including statements on management's expectations of future events or future financial performance are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the current views of Harvard Bioscience's management, and Harvard Bioscience assumes no obligation to update or revise any forward-looking statements. Actual results may differ materially from those expressed or implied. Please refer to today's press release, the Harvard Bioscience Form 10-Q and other filings with the Securities and Exchange Commission for additional disclosures on forward-looking statements and the risks, uncertainties and contingencies associated therewith. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to our financial condition and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered a substitute. Reconciliations of GAAP to non-GAAP measures are provided in today's earnings press release. I will now turn the call over to John. John, please go ahead. John Duke: Thanks, Taylor, and good morning, everyone. I'm pleased to speak with you again as we report our third quarter results and continue to execute on our 2025 priorities. This quarter reflects operational progress, consistent execution and tangible improvement in several key areas of our business. After being appointed CEO in late July, I outlined 3 priorities for 2025: number one, maintain financial discipline and positive cash generation; two, accelerate product adoption across our core growth platforms; and three, strengthen our capital structure through a successful debt refinancing. I'm encouraged to report that we've advanced meaningfully on each front. First, the financial results. We delivered revenue of $20.6 million at the high end of our guidance range and with a slight sequential increase in what historically is a cyclically soft quarter. Gross margin of 58.4% improved sequentially and exceeded our guidance range. This margin expansion reflects disciplined execution, operational efficiency and an improved mix towards higher-margin products. Adjusted EBITDA was also up sequentially to $2 million. Our cost structure remains lean, and we generated another quarter of positive operating cash flow. Customer engagement remains high across our platforms. Q3 marked the first time in more than 12 months that we saw a quarterly order growth on a year-over-year basis. Going into the fourth quarter, our backlog has reached its highest level in nearly 2 years as demand has picked up considerably heading into the end of the year. Turning to our products. The SoHo Telemetry rollout has expanded into additional key accounts, and we've begun to see increased recurring consumable demand. Our Biochrom amino acid analyzer for bioproduction continues to perform well, and we remain on pace to exceed last year's consumable revenue. This quarter, we announced the launch of the Incub8 Multiwell System, our new smart microelectrode array platform designed to bring real-time monitoring to organoid and cell culture workflows with precise environmental control. Incub8 further strengthens the growth of our existing electrophysiology portfolio by expanding our reach into high-throughput applications, including drug screening, safety pharmacology and disease research modeling research. Initial customer response has been positive as we have already received orders and shipped our first system. In addition, we expanded our distribution agreement with Fisher Scientific, significantly broadening access to Harvard Bioscience products across North America. This partnership deepens our commercial reach within academic and pharmaceutical research markets and enhances visibility for our full portfolio, particularly our cellular and molecular technology products through one of the most trusted laboratory distribution channels in the world. Adoption of our Mesh MEA organoid platform continues to build momentum, supported by regulatory initiatives promoting new approach methodologies. On our capital structure, we continue to make constructive progress and remain in active discussions with our lenders and advisers regarding our assessment of the potential options and proposals that we have received. The process remains on track to complete the refinancing or repayment of the existing credit agreement in the fourth quarter. Our operating performance and consistent cash generation have improved our position as we move toward completion. The management team and the Board of Directors are aligned and remain committed to strengthening the balance sheet and positioning the business for long-term success. NIH funding for the 2025, 2026 budget is taking shape. We're also monitoring the ongoing government shutdown, which may impact the timing of NIH funding distribution. In the coming weeks, we'll have more clarity. In China, orders were flat sequentially. The most recent developments in trade talks late last week give us optimism that the worst of the tariff disruption is behind us, and we'll see increased activity moving forward. We also saw a strong uptick in order volume in Europe, contributing to our increased backlog heading into the fourth quarter. Looking ahead, we anticipate continued momentum in the fourth quarter as product adoption and the demand uptick support revenues into the end of the year. Our priorities continue to be financial discipline, driving demand in our high-value products and strengthening our capital structure. Harvard Bioscience is a fundamentally stronger company today than it was to start the year, leaner, more focused and better aligned with long-term growth opportunities. Our third quarter results demonstrate solid improvement over the first half of the year, and we look forward to continued improvement heading into 2026. I'm proud of our team's progress and grateful for the continued partnership of our customers, shareholders and employees. We appreciate your support as we continue to execute our plan. And with that, I'll turn it over to Mark, who will go into more detail on the financials. Mark? Mark Frost: Thank you, John. I'll start my remarks with our third quarter 2025 financial results, the details of which can be found on Slide 4 of the earnings presentation that we posted to our IR site. Revenue was $20.6 million at the high end of our $19 million to $21 million guidance and below the $22 million we reported in the prior year's third quarter. Gross margin was 58.4% versus 58.1% in the third quarter of 2024 and exceeded our guidance of 56% to 58%. Operating expenses declined $1.4 million from prior year, driven by actions taken in 2024 and the first quarter of 2025 to: one, move to one U.S. ERP system; two, lean out our SG&A organization; and three, reprioritize NPI projects. These actions led to an improvement in adjusted operating income of $1.5 million versus $0.8 million in quarter 3 '24. Adjusted EBITDA was $2 million versus $1.3 million in quarter 3 '24, with the major driver being the reduction in operating expenses, which more than offset the volume impact from the lower year-over-year revenue. Now looking at Slide 5, I will outline the revenue results for the quarter by product family and region. Overall revenues in the third quarter showed a slight increase from quarter 2, finishing at $20.6 million compared to $20.5 million in the prior quarter '25. Notably, this is a positive trend as we historically see a decline from quarter 2 to quarter 3. Now turning to the geographical results, starting with the Americas. Revenue in the third quarter increased sequentially by 3.6% and was down 4.4% versus the third quarter of last year. As shown in the light blue on the slide, CMT saw sequential and year-over-year decline. Our preclinical sales increased sequentially and year-over-year due to increases in telemetry and respiratory product lines. Now moving on to Europe. Overall revenue in Europe in the third quarter increased 0.3% sequentially, reflecting stronger preclinical academic shipments. Compared to quarter 3 last year, European revenues were essentially flat. Cellular and molecular sales decreased sequentially 0.7% and year-over-year 13%. Now our quarter 3 preclinical sales increased sequentially and year-over-year. Now moving to China and the Asia Pacific. In the third quarter, we saw improvement in APAC, excluding China. With China, revenue was down sequentially 6.3% and year-over-year 19.6%. With last week's news, we expect tariff headwinds to subside going forward. Now cellular and molecular APAC products were flat sequentially and decreased year-over-year. Preclinical APAC products also declined sequentially and year-over-year. Now I'll move to Slide 6 to discuss further financial metrics. Looking at gross margin first. Gross margin during quarter 3 2025 was 58.4% compared to 58.1% in quarter 3 2024 and up 200 basis points sequentially from 56.4% in quarter 2 '25 despite the flat revenue. The gross margin expansion compared to last year quarter 3 was mainly due to better absorption of fixed manufacturing overhead costs and the leading out of our manufacturing cost structure. The sequential margin increase was due to improved mix of higher-margin revenue, in particular, telemetry as well as better absorption of fixed manufacturing overhead costs. Now if you refer to the top right graph, our adjusted EBITDA during quarter 3 increased to $2 million versus $1.3 million in last year's third quarter. Compared to the prior year, lower gross profit of $0.7 million was fully offset by the $1.4 million reduction in operating expense. And moving to the bottom left, where we show both reported and adjusted loss earnings per share. As I've mentioned in the past, typically, the difference between GAAP EPS and adjusted EPS are the impact of stock compensation, amortization and depreciation. These differences between net loss and adjusted EBITDA are highlighted in the reconciliation tables on Slide 10 and are all noncash items. Now moving to the bottom middle graph. year-to-date cash flow from operations was strong at $6.8 million compared to negative $0.3 million in the same period with $1.1 million of operating cash generated in the third quarter. The primary drivers for the improved cash flow from operations were working capital management and operating expense reductions. We expect to see positive operating cash again in the fourth quarter. Now net debt was down over $6 million from year-end '24 to $27.5 million from $33.8 million. This reflects our quarterly principal payment of $1 million and improved operating cash flow. Now with respect to our credit facility, as John noted, we have made progress or in the process of reviewing the multiple proposals we have received. We are negotiating towards the most favorable deal for our company and our shareholders, and we expect to have resolution within the fourth quarter. We will provide more information when we are able to. Now I'll now move to Slide 8 to discuss our outlook for quarter 4. A key factor supporting our guidance is mid-single-digit order growth in the third quarter year-over-year and 4 consecutive months of year-on-year growth. This result has positioned the company with our strongest backlog since the first quarter of 2023. We are guiding to a range of $22.5 million to $24.5 million revenue, resulting in potentially flat revenue for the fourth quarter at the high end of the range. The lower end of the range reflects the potential risk of a prolonged U.S. government shutdown lasting through year-end. Now we expect a corresponding improvement in gross margin in quarter 4 from the higher volume and are guiding to a gross margin range of 58% to 60%. Improved demand and a strong backlog support our confidence to project continued sequential improvement in the fourth quarter. And I'll now turn the call back to our operator to take questions. Operator: Our first question comes from Lucas Baranowski with KeyBanc Capital Markets. Lucas Baranowski: This is Lucas on for Paul Knight at KeyBanc. First off, when we look at the uptick that was seen in preclinical systems during the quarter, was that primarily driven by CROs gearing up to run more studies? Or was it some other factor that was driving the uptick? John Duke: Thank you for the question. We benefited from broad uptick in demand for our telemetry products, and it was not just in one region, it was across regions as well as across different customer groups. Lucas Baranowski: Excellent. And in the press release, you had a comment about backlog being the highest in 2 years. When you look at that backlog, would you say the mix is similar to your existing product mix? Or is there a product like, say, Mesh MEA that's a disproportionate percentage of it? Mark Frost: Yes, Lucas, as John indicated, we had broad-based increase in orders across geographies and products. And we did see an improved benefit from all the NPIs we've launched in this year. So -- but it wasn't one specific product or region that drove the backlog. It was just uniform increase across our geographies and products. Lucas Baranowski: Excellent. And then maybe just one final question. Some of the larger tools companies have noted that they're seeing early signs of improvement in the academic and government market. What are you seeing on that front? John Duke: Yes, we have seen improvement, which is reflected in our Q3 results as well as in our strong backlog going into Q4. Now as we -- as Mark has stated regarding our guidance for the fourth quarter, some academic institutions are dependent upon NIH funding. And we have planned in our guidance depending upon how long the government shutdown goes and how that will flow through to our Q4 results. Operator: Our next question comes from Bruce Jackson with The Benchmark Company. Bruce Jackson: If we could just dive into the NIH funding a little bit more. So the guidance, do you -- are you contemplating an end of the government shutdown during the fourth quarter? Mark Frost: Yes, Bruce, this is Mark. We have built in to the lower range that if it does go to the year-end, that would be the potential benchmark, no pun intended, benchmark we would get to in the quarter. So we have assumed some impact from that in our guidance, Bruce. Bruce Jackson: Okay. And then if the funds don't get released in the fourth quarter, then would you anticipate getting that -- those funds flowing through sales in the first quarter of next year? Mark Frost: Yes, Bruce, yes, as you probably well know, the funds are not lost. It's a timing impact that it just moves out of quarter 4 into '26. So we would expect the orders. And depending when the orders come in, it would come in, in first quarter or second quarter next year. Bruce Jackson: And then last question on NIH. Do the customers have visibility on the funding? So do you feel like you've got good line of sight on the projects and that the customers also have line of sight on the funding? John Duke: It's customer-dependent. I mean, some customers have shared with us that there's no one even to talk to at the NIH right now. And so they're still trying to get visibility, whereas others do have visibility and they're just waiting for their funds to be released. Bruce Jackson: Okay. Great. And then if I may, just one question on the ERP project. Where are you in that project right now? And how should we be thinking about either the spending for additional ERP work or the flow-through from the benefits? Mark Frost: Yes. We actually finished the project in quarter 4 and moved to one U.S. platform. We actually did the same thing in Europe, which I didn't mention, and that was completed in quarter 4. So the benefits have started to roll through both our manufacturing side and our G&A side in '25, and it's contributing to why we've been able to reduce the expenses this year, Bruce. Operator: There are no further questions at this time. This concludes our question-and-answer session. You may now disconnect. Everyone, have a great day.
Operator: Hello, everyone, and welcome to the International Seaways Third Quarter 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I would now like to hand you over to your host, the General Counsel, James Small, to begin. Please go ahead when you're ready. James Small: Thank you, operator. Good morning, everyone, and welcome to International Seaways Earnings Call for the Third Quarter of 2025. Before we begin, I would like to start off by advising everyone with us on the call today of the following. During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude and product tanker markets; changes in trading patterns; forecasts of world and regional economic activity; forecasts of the demand for and production of oil and petroleum products; the company's strategy and business prospects; expectations about revenues and expenses, including vessel, charter hire and G&A expenses; estimated future bookings, TCE rates and capital expenditures; projected dry dock and off-hire days; new build vessel construction; vessel purchases and sales; anticipated and recent financing transactions and plans to issue dividends; the effects of ongoing and threatened conflicts around the world; economic, regulatory and political developments in the United States and globally, including the impact of protectionist trade regulations; the company's ability to achieve its financing and other objectives, and its consideration of strategic alternatives; and the company's relationships with its stakeholders. Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including experience and perception of historical trends, current conditions, expected and future developments and other factors that management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the company's control that could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks and uncertainties that could cause the company's actual results to differ from expectations, include those described in our annual report on Form 10-K for 2024 and our quarterly reports on Form 10-Q for the first 3 quarters of 2025 as well as in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. Now let me turn the call over to our President and Chief Executive Officer, Lois Zabrocky. Lois? Lois Zabrocky: Thank you so much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the third quarter of 2025. On Slide 4 of the presentation, which you can find in the Investor Relations section of our website, net income for the third quarter was $71 million or $1.42 per diluted share. Excluding gains on vessel sales, adjusted net income for the third quarter was $57 million, or $1.15 per diluted share with adjusted EBITDA $108 million. Today, we also announced a combined dividend of $0.86 per share to be paid in December, as you can see in the upper right section of the slide. This is our fifth consecutive quarter with a payout ratio of at least 75%. We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy. We also announced the extension of our $50 million share repurchase program to the end of 2026, as we believe repurchasing shares is an option as an addition to our payout ratio. On the lower left part of the page, we took delivery of 2 of our 6 LR1 vessels. The Suez Alacran delivered in the second half of September and the Seaways Balboa delivered on October 30. In connection with the deliveries, we borrowed $82 million, or $41 million per vessel on our new Korean export agency-backed financing that we put in place during the quarter. On our last call, we announced the ECA financing for up to $240 million with a blended 20-year amortization profile and a margin of 125 basis points with a 12-year maturity. The balance of the financing will be drawn upon delivery of each new building vessel in 2026, and the company has only $30 million of additional liquidity required to complete the program. During the third quarter, we sold 5 vessels with an average age above 17.5 years old for proceeds of $67 million. Another 3 of our oldest MRs with an average age close to 19 years old have been agreed to be sold in the fourth quarter for proceeds of about $37 million. When these transactions close, we expect to record a gain on the sale. Also in the fourth quarter, we expect to date delivery of our 2020-built scrubber-fitted VLCC, which we will utilize our available liquidity to pay the remaining $107 million due since making a deposit of $12 million in the third quarter. Overall, in 2025 through the end of October, we sold 8 vessels for proceeds of around $100 million, and we'll be purchasing this eco, modern VLCC in the fourth quarter for close to the same amount. Fleet renewal is always part of our strategy, and we expect to execute sales and purchases throughout the tanker cycle. We continue to work through our time charter book as well. While we did not execute any fresh charters this quarter, and even though some have rolled off, we will have over $230 million in future contracted revenue with an average duration of about 1.5 years. We continue to work with the market for opportunities as we believe generally a portion of the fleet will remain on fixed chart. On to the balance sheet in the lower right part of the page. We continue to explore and execute options to enhance our capital stack. After executing the ECA facility documents to fund our LR1 new building, the team went back to work on a knock bond opportunity as an option to pay for our upcoming purchase option that we declared on some of our sale leasebacks. I'm very pleased with the execution to secure a coupon as one of the lowest for first-time issuers in the tanker space. Due to the strength in demand, we increased the size of the bond to $250 million, which is nearly equal to the amount needed to repay the leases. We're very grateful to welcome in our new credit investors, and quite proud of the success in the execution of the bond. Due to the timing of the settlement of the bonds in the third quarter and repayment of the leases in the fourth quarter, we ended the third quarter with $985 million in total liquidity with $413 million in cash and $572 million in undrawn revolver capacity. Net debt at the end of the quarter was under $400 million, which on over $3 billion in fleet value, our net loan-to-value is a very low 13%. Turning over to Slide 5. We've updated our standard set of bullets on tanker demand drivers with the subtle green up arrow next to the bullets representing positive for tankers, the black dash representing a neutral impact, and a red down arrow meaning the topic is not good for tanker demand. Without reading each bullet individually, we believe demand fundamentals are solid and continue to support a constructive outlook for seaborne transportation. Oil demand growth remains healthy at 1 million barrels per day of growth for this year and next. OPEC+ is supplementing 1 million barrels per day of production growth from outside the group with their own production increases that we have not seen the full scope of what could be on the water soon. Some countries in the cartel had penalties for overproduction during the cuts and others were using some production increase in country for power generation. The fourth quarter looks to be the environment where the increased production is hitting the water. For now, it's much needed after the inventory levels have been near their historic lows, as you can see in the chart on the lower left. We are still monitoring how these increased barrels on the water can affect the tanker markets in the longer term. The geopolitical intensity on tankers remains strong with port fee discussions altering trade routes and working through a multitude of scenarios that could impact our business. On the lower right-hand chart, sanctioned barrels out of Russia and Iran have historically been transported to India and China. Lately, we've been seeing more pressure on those exports on those 2 specific countries, in particular, along with more sanctions put on the tanker fleet. Both effects could be positive for international tanker markets, and we expect more development in time, as we have had over the last few years. Moving on to the supply side on Slide 6 of the presentation. It remains one of the most compelling cases for tanker shipping. Orders have slowed in 2025 following a surge in 2024, as you can see on the lower left-hand chart. Tankers on order represent 14% of the fleet that deliver over the next 4 to 5 years. Over a 25-year life of a vessel, we would expect as much with a 4% increase per year of removal candidates multiplied by the 3 to 4 years it takes to deliver a new ship. In practicality, based on actual ship deliveries, there is a significant number of removal candidates that were built in the golden age from '04 to 2010. By the time the order book delivers fully in 2029, nearly 50% of the fleet will be over 20 years old and likely excluded from the commercial trade. There is simply not enough tankers to replace the current aging fleet, as we show in the graph on the lower right-hand side, less than 800 ships are delivering over the next 4 years, representing 1/3 of ships likely to face challenges in securing tonnage for the global trade, not to mention further sanctions or environmental regulations. We also highlighted in dark blue as sanctioned vessels in the chart, which currently tops the number of vessels on order. We believe these fundamentals should translate into a continued up cycle over the next few years and Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and to adapt to industry conditions with a strong balance sheet while returning to shareholders. I'm now going to turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff? Jeffrey Pribor: Thanks, Lois, and good morning, everyone. On Slide 8, net income for the third quarter was $71 million or $1.42 per diluted share. Excluding gains on vessel sales, our net income was $57 million or $1.15 per diluted share. On the upper right chart, adjusted EBITDA for the third quarter was $108 million. In the appendix, we provided a reconciliation from reported earnings to adjusted earnings. On the lower left chart, I would like to point out that our TCE revenues from crude and products have been evenly balanced over the past year. Our revenue and expenses were largely within expectations for the third quarter. We're pleased with our cost management, particularly with vessel expenses. The lightering business generated approximately $9 million in revenue in the third quarter and contributed nearly $1 million in EBITDA after $3 million in vessel expenses, less than $4 million in charter hire, just over $1 million in G&A. During the summer, the number of jobs decreased, but we're pleased that since September, activity has picked back up again. Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $790 million, composed of $149 million in cash, $560 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first had $108 million in adjusted EBITDA for the third quarter, plus $22 million of debt service and another $22 million of dry dock and capital expenditures. We therefore achieved our definition of free cash flow of about $63 million for the third quarter. This represents an annualized cash flow yield of nearly 10% on today's share price. We received $67 million proceeds from the sale of the 5 vessels Lois mentioned earlier. We also paid a $12 million deposit for a 2020-built VLCC, which delivers in the fourth quarter. We paid about $36 million in LR1 newbuilding installments, net of the $41 million drawn down from our new ECA facility. We repaid $27 million on our revolver during the third quarter, of which $15 million offset our capacity reduction, increasing our undrawn revolver capacity to $572 million. Net of fees, we received $247 million of proceeds from our issuance of senior unsecured NOK bonds. The remaining $38 million represents our $0.77 per share dividend that we paid in September. The latter few bars on the chart reflect our balanced capital allocation approach, where we utilize all the pillars, fleet renewal, balance sheet optimization and returns to shareholders. In summary, the result of our activity this quarter yielded a net increase in cash of $264 million. This equates to ending cash of $413 million with $572 million in undrawn revolvers for total liquidity of nearly $1 billion. Naturally, this is impacted by the timing of the settlement of the NOK bond proceeds and the $258 million of purchase options that we will execute on the Ocean Yield leases during the fourth quarter. Now moving to Slide 10. We have a strong financial position detailed by the balance sheet on the left-hand side of the page. Pro forma cash and liquidity remained strong at $727 million when including the impact of payment in the Ocean Yield purchase options. We have invested about $2 billion in vessels at cost on the books currently valued at about $3 billion. And with under $400 million in net debt at the end of the third quarter, our net loan-to-value is approximately 13%. Shown on the lower right-hand table of the page, we have included the pro forma impact of our debt till the end of 2026. Gross debt at the end of September was $804 million. We'll repay the Ocean Yield leases in November and add another $200 million of debt in connection with the LR1 newbuildings in the K-SURE ECO facility. Mandatory debt repayments through the end of 2026 are $33 million, giving us a little over $700 million in debt by the end of 2026 based on our latest balance sheet initiatives. We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth as well as returns to shareholders. Our nearest maturity in the portfolio isn't until the next decade. We have 31 unencumber vessels on a fully delivered basis, and we have ample undrawn RCF capacity. We continue to explore ways to lower our breakeven cost even more and share in the upside with substantial returns to shareholders. On the last slide that I'll cover, Slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot cash breakeven rate. Starting with TCE pictures for the fourth quarter of 2025, I'll remind you that actual TCE during our next earnings call may be different. But in the fourth quarter, we are now seeing the impact of the elevated rate environment we began to see in late Q3. We currently have a blended average spot TCE of about $40,400 per day fleet-wide, 47% of our fourth quarter expected revenue days. On the right-hand side, our expected 2026 breakeven rate is about $14,500 per day compared with roughly $13,100 per day when we last presented a next 12-month view. On a comparable next 12-month basis, the breakeven remained about $13,500 per day with that difference primarily reflecting higher operating costs and the roll-off of time charter volume. The higher -- full year 2026 figure is mainly driven by timing, specifically higher dry dock costs in the fourth quarter of 2026 compared with the fourth quarter of 2020. Based on our spot TCE book to date and our spot breakeven, it looks like Seaways can continue to generate significant free cash flows during the fourth quarter, and build on our track record of returning significant cash to shareholders. In the bottom left-hand chart, we provide some updated guidance for our expenses for the fourth quarter and our preliminary estimates for 2026. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks. I'd now like to turn the call back to Lois for her closing comments. Lois Zabrocky: Thank you, Jeff. On Slide 12, we have provided you with Seaways' investment highlights, which I encourage you to read in its entirety and summarizing briefly here, over the last 9 years, International Seaways has built a track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder return represents over 20% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old in what we see as the sweet spot for tanker investments and returns. We've invested in a range of tanker-class to cast a wider net for growth opportunities and to supplement our scale in each class by operating in larger pools. We aim to keep our balance sheet fortified for any down cycle. We have nearly $600 million in undrawn credit capacity to support our growth. Our net debt is under 15% of the fleet's current value, and we have 31 vessels that are unencumbered. Lastly, we only have our spot ships earned under $15,000 per day to breakeven in 2026. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders. We want to thank you very much. And with that said, operator, we'd like to open the lines for questions. Operator: [Operator Instructions] And our first question comes from Omar Nokta with Jefferies. Omar Nokta: Obviously, it looks like things are continuing to work out quite nicely for you guys, and you're doing a bit of everything. You're growing, rejuvenating the fleet, strengthened balance sheet, lowering your breakevens and obviously paying out capital. I wanted to just ask a couple of questions, more market-related, just based on what we've been seeing here recently. And I like your slide, on Slide 4, you showed the table of your achieved rates so far in the fourth quarter. There's quite a bit of a step-up, you'd say, across all the different segments from what you've earned during the prior 4 quarters. And I think in general, when people have been thinking about this market with OPEC and all that, it's been viewed that the VLCCs are going to lead the way, and certainly, we're seeing that. But we're also seeing some strength in the other classes, especially the Suezes and the Afras. And just wanted to get a sense from you, given your vantage point, is the midsized tankers, are they benefiting from what's going on with the VLCC? Are they getting pulled into those trades? Or is this a shift in cargo flows for those vessels that maybe has to do with Russia? Lois Zabrocky: So I'm going to have Derek Solon, our Chief Commercial Officer, attempt to tackle that one. Derek Solon: Great. Thanks, Lois. Omar, this is Derek. Thanks for the question. I mean you're, of course, right. The fourth quarter has been a lot stronger than the prior quarters. And a lot of that is OPEC+ sort of removing some of their voluntary cuts and kind of returning to a tanker market, a more normal tanker market where the VLCCs would lead the way on the big crude. So when the Vs are strengthening, what we see is they're doing a lot less of the business that they have done since post Russia, meaning fewer transatlantic cargoes that were really cannibalizing off the Suez and the Aframax. So now that we've got the VLCCs with healthy rates back in more of their normal trades, that naturally benefits the Suez and the Afras. To the point now where we're seeing, the Suezmaxes try to start to cannibalize back on the VLCC trade, right? So with that healthy V market, you're going to have a healthy midsized crude sector. Omar Nokta: Okay. So it's a bit more -- it's a pull basically upwards by the VLCCs, which is the old-fashioned way as you're kind of hinting at. And, I guess, maybe as we've seen this big move up in crude spot rates, products seem to have lagged and been held back. Is this normal? Do you think crude is leading the way, eventually products will get there? But here, obviously, I'm looking at your MR performance, and it's at 29,000, still fairly strong, quite a bit stronger than, say, indexes. But I guess maybe the indexes have lagged the crude. Do you think that's a lag? Or is this one of those things where maybe product fits this one out, and it's really more of a crude trade here in the next few months? Lois Zabrocky: So, yes, Omar, imagine that we earned just shy of 26 a day in the third quarter on MR and earning 29 a day in the fourth quarter for days booked, and that we think that's lagging. So that is just stunning stellar outperformance continued, I think, on the MR sector. Derek, could you add on that? Derek Solon: On that. Sure. Look, I mean, obviously, the MR rates are very healthy. I think our third quarter is strong. Our fourth quarter to date is very strong. A lot of that has to do with where we trade here in the Americas with a substantial portion of our MR fleet. But Omar, I think it's also -- it's certainly not that the MRs are sitting it out because the market is strong, but there's just different geopolitical factors impacting the MRs on the positive side. So you kind of talked about Russia in the bigger crude, but I talked about Russia more here on the clean sector, because a combination of things happening between stronger newer sanctions on Russian oil companies and Ukraine upping its attack on Russian oil infrastructure, we see a lot less diesel exports from Russia. So that void is being filled by the U.S., by some Latin American stuff. And the benefit to us, and a lot of our peers, is also that those are barrels that the compliant fleet can move, not the dark fleet, not the gray fleet, but the combined fleet. So that's part of why you see -- where we see the MRs pretty helped. Omar Nokta: Okay. Yes. And certainly, you can see from your results, definitely a fairly strong, I would say, outperformance in that segment. Operator: The next question comes from Chris Robertson with Deutsche Bank. Christopher Robertson: Just wanted to turn to the current crude inventory levels and get your thoughts around how that inventory building cycle will play out here? And do you think given the current forward oil curve, will this incentivize any offshore storage opportunities in the coming quarters? Or is the curve not steep enough yet to kind of incentivize that? Lois Zabrocky: It's interesting for sure. What we're seeing at the moment is that there's a lot of oil on the water. We don't really see heightened inventories yet onshore. So we speculate that some of these barrels that are on the water are not sure where they're going to land yet as a home. So it may be somewhat sanctions-impacted. And we're watching the forward oil curve very carefully. It's pretty flat. So this is definitely not a steep contango situation that we are involved in right now. So it seems a little bit more, you've got a lot of oil on the water, disagreements between IEA and OPEC and on just how much production is out there. So it's really interesting times for us. Christopher Robertson: Just turning to the S&P market, given the recent momentum in rates and things, as part of your normal fleet renewal strategy, are you seeing an increase in opportunities here to potentially divest further older assets? Or are rates sufficiently high at the moment that you might want to slow down on divesting assets at the moment? Lois Zabrocky: Well, on those older MRs, we've had a high degree of success, and we are starting to see asset values pick up, reflecting increased rates. We will continue to judiciously upgrade the fleet going forward. So in 2026, it will be more of the same of some disposals of the older vessels, and then we want to high-grade the fleet so that we really improve our earnings capability. Operator: [Operator Instructions] And as we have no further questions, I will hand back over to Lois for any final comments. Lois Zabrocky: Thank you very much. We appreciate it, Carla, and I want to thank everyone for tuning into International Seaways' quarterly conference call as we continue strong rates into the winter. Thank you. Operator: Thank you, everyone. This concludes today's call. You may now disconnect. Have a great rest of your day.
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 welcome to the Velocity Financial, Inc. Third Quarter 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Oltmann, Treasurer. Please go ahead. Christopher Oltmann: Thanks, Chloe. Hello, everyone, and thank you for joining us today for the discussion of Velocity's Third Quarter 2025 results. Joining me today are Chris Farrar, Velocity's President and Chief Executive Officer; and Mark Szczepaniak, Velocity's Chief Financial Officer. Earlier this afternoon, we released our third quarter results. You can find the press release and accompanying presentation that we will refer to during this call on our Investor Relations website at www.velfinance.com. I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For a discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Please also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials on our Investor Relations website. Finally, today's call is being recorded and will be available on the company's website later today. And with that, I will now turn the call over to Chris Farrar. Christopher Farrar: Thanks, Chris, and we appreciate everyone joining the call today. Our third quarter results were fantastic as we've achieved another record quarter in terms of pretax earnings, which were up 66.5%, production volumes of $739 million and new applications, which exceeded $1.4 billion for the quarter. Looking forward, the markets remain strong, and this momentum has continued into the fourth quarter as we gain market share and expand our reach. From a credit perspective, we remain disciplined as evidenced by the decline in the weighted average portfolio loan-to-value to 65.5% and our coupons remain on target at 10.5% generating attractive risk-adjusted spreads and stabilizing our attractive NIM and core pretax ROE of 24.1%. Our asset managers have done a great job of resolving NPAs consistently above par for net positive gains. Plenty of capital available for REOs that are priced properly and expect the real estate markets to continue to perform well within our niche. Most unique event in Q3 was the closing of our first ever single counterparty securitization of new production with a top-tier money manager. This strategic partnership allows us to reduce transaction costs, execute at similar levels to our regular, widely marketed deals and diversify our long-term funding options. We're proud to partner with this world-class firm and expect the transactions to continue as evidenced by a second transaction that closed in early October. Obviously, the fixed income markets are very supportive, and we intend to maximize our opportunities there. As usual, I give full credit to our outstanding team members that work so hard to deliver these results, and we will continue to create shareholder value wherever possible. With that, I'll turn over to the presentation and begin discussing Page 3. In terms of earnings, obviously, a great quarter, net income up 60% year-over-year and core diluted EPS of $0.69 a share. Portfolio NIM was very stable at 360 basis points above our target of 3.5%. Moving to Production and the Loan Portfolio. I mentioned record level of production of $739 million, 32% net increase in the portfolio year-over-year after netting out prepayments. In terms of nonperforming loans, that portfolio was pretty stable, 9.8%, down from 10.6% and within our expected range. As I mentioned earlier, we continue to see positive gains on resolved NPAs of $2.8 million, and our team has done a fantastic job there. Turning to financing and capital. I mentioned that first ever single counterparty transaction. We were approached a quarter or 2 ago by a large party and with the interest of developing a consistent outlet for our product and very pleased with the way that transaction -- both those transactions executed. And we expect it to be an additional diversification of our funding sources going forward. In terms of liquidity, we have plenty of cash and available borrowings, and you can see over $600 million of warehouse capacity at the end of the quarter. So all in all, in shape there. Turning to Page 4. I want to reemphasize our strategy of compounding earnings by taking all of our earnings and investing them back into the platform and the portfolio. As you can see, we've had outstanding results, and we think this is a great opportunity for investors to get exposure to our earnings and the compounding of capital. So very pleased with how we've transacted over the last couple of years and expect this to continue going forward. With that, I'll turn it over to Mark on Page 5. Mark Szczepaniak: Thanks, Chris, and good afternoon and evening, everyone. On Page 5. As Chris mentioned, Velocity had a new record for loan production in Q3. The loan production for the quarter was $739 million. That included $23.9 million in unfunded loan commitments. The $739 million again demonstrates our continued strong demand for our product. In Q3, the loan production broke the previous quarter's record of $725 million. There were a total of 1,778 loans originated in the third quarter. The strong production growth in Q3 included the weighted average coupon on new held for investment originations continuing to come in strong at 10.5% and the weighted average coupon on our HFI originations for the last 5-quarter average trend was at 10.6%. The growth in originations in Q3 was also very tight credit levels with the weighted average loan-to-value for the quarter being at 62.8%, which is right on top of the last 5-quarter average weighted average LTV trend of 62.8%. As a result of the continued robust growth in production, take a look at Page 6. It shows the overall growth in our Q3 for our overall loan portfolio as we retain these loans in our portfolio. Our total loan portfolio as of September 30 was just under $6.3 billion in UPB. That's a 7.1% increase from Q2. And I think as Chris mentioned, a 32% increase year-over-year, even netting out prepayments. The weighted average coupon on our total portfolio as of September 30 was 9.74%, which is 7 basis points above Q2 and 37 basis points in terms of portfolio yield over Q3 -- I'm sorry, year-over-year. The total portfolio weighted average loan-to-value remained consistently low at 65.5% as of September 30. If you go to Page 7, we maintained a strong portfolio NIM at 3.65% in Q3, and that's consistent with our last 5-quarter average portfolio NIM of 3.62%. On the right side of that page, you can see the breakout of our yield as well as the cost of funds. Our portfolio yield for the quarter was at 9.54% and the cost of funds at 6.27%. We've maintained a nice healthy spread over several periods. On Page 8, our nonperforming loan rate at the end of Q3 was 9.8%. That's down 0.5 point from Q2 and 80 basis points year-over-year. We continue to see, as Chris mentioned, the strong collection efforts by our special servicing department that have resulted in favorable resolutions of our nonperforming assets and the NPAs are comprised of our nonperforming loans as well as REOs. Page 9 shows the continued positive results of our NPA resolution efforts. Our Q3 NPA resolution gains totaled $2.8 million or 2.6% of the $108 million in UPB resolved. And on a trend basis, we've averaged 3.8% quarterly NPA resolution gains over the last 5 quarters. Turning to Page 10. The top part of the table on the right-hand side shows our CECL loan loss reserve. The bottom part shows the net loan charge-off and gain loss on REO activity. In terms of the CECL reserve at September 30 was $4.6 million, or 22 basis points, and that's on our outstanding amortized cost HFI portfolio. And that 22 basis points is consistent over the last 5 quarters, we've averaged around 20 basis points of CECL reserves. So not much of a change there. And keep in mind, the CECL reserve does not include held -- I'm sorry, fair value option loans. It's only our held for investment amortized cost. The bottom part of that table shows that for Q3, our net gain loss from loan charge-offs and REO activities. We had a net loss of $1.6 million, mainly as a result of REO valuations. Page 11 shows our durable funding and liquidity position at the end of Q3. Total liquidity at September 30 was just under $144 million, and that's comprised of about $99 million in our cash and cash equivalents and almost another $45 million in available liquidity on our unfinanced collateral. As of September 30, our available warehouse line capacity is just a little over $600 million with a maximum line capacity of $935 million. And that's a $125 million increase in max line capacity over Q2. So we went from $810 million maximum capacity at the end of Q2 to $935 million and some of our warehouse lines are increasing their capacity. That concludes my Q3. Our debt-equity ratio on a recourse basis stays consistent though it's at 1x, has been between 1.5x, 1x for the last 5 quarters. So Chris, with that, I'll turn it back to you to present an overview on our outlook and key business drivers. Christopher Farrar: Thanks, Mark. Appreciate it. Just to sum it up, we're very positive about the future. We think markets are healthy. Our credit is performing well. Our capital markets are extremely robust, especially on the fixed income side. And we believe that our earnings are going to continue to grow and expect positive results going forward. So with that, I'll open it up for questions. Operator: [Operator Instructions] The first question comes from Steve Delaney with Citizens. Steven Delaney: Gosh, excellent quarter. It sounds repetitive, but you guys put the numbers up every quarter and just whether it's production gains, everything that you've summarized on Page 3. So tip my hat to you on that for sure. A little concern on not so much REO resolutions, but just in terms of, as you show on Page 10, the charge-offs are up quarter-over-quarter for sure. And this quarter, I know REO gains can be a little fluky, but we went from a nice gain on REO in the second quarter to -- or excuse me, last year third quarter to the loss this year. And I guess the number that jumps off the page because primarily, I don't understand it. Chris, if you could help me understand the REO valuations on a net basis, the negative $6.3 million. Just explain that if that was a -- do you book the REO at where you think it should be or based on your loan balance? And then as you study the market and get feedback on property valuation, then you have to adjust. Just curious why that big number of negative $6.3 million. Christopher Farrar: Thanks for the question, Steve. In terms of the REO valuation, I'll walk you through the detail. But just from a high level, if you look, you'll see it in our Q that gets filed later today, year-to-date, our REO activity is basically on top of last year, $3.2 million gain, I think it is. So there's some noise just in timing issues here. In terms of the REO valuation expense that we recognize, that happens after we've taken a loan from -- off the books and put it into REO. And then it's -- as it sits on the balance sheet, we adjust market to market realities. I would say in this $6.3 million, you've got some cases where maybe the property has deteriorated, maybe worse than what we thought when we originally foreclosed. You have some cases where we actually end up just selling the REO a little less than where we thought we were going to -- where we had it marked. So it can be driven by a number of different things. But I would say, from our perspective, we don't see it as like a worsening trend and much more of just kind of a quarterly timing issue. I expect that number, you'll see it kind of go up and down quarter-by-quarter. Mark Szczepaniak: And I'm sorry, Steve, this is Mark. If I could just add to what Chris said, it is really a timing item. The main thing to look at is the NPL resolution table, the final resolutions. For example, I got $6.3 million. What could happen is when we first foreclose on a property and set the REO up, the REO has to go up at its fair value. We'll keep in mind, since we've got the loans at basically 63%, 60% LTV, if you have a $500,000 loan, now you're going to write off the loan and put the REO on the books for, say, $800,000 because the loans at 65% LTV. So you put the REO on your books at $800,000. So that's what's in that gain on transfer to REO, that top number. Then maybe 6 months down the road, you get an offer, it's not $800,000, it's $700,000. And you say, okay, we got an offer for it. That's the new fair value. We're going to take the offer. So you write it down from $800,000 to $700,000. Well, in that period, which might be 6 months later, 8 months later, it looks like a $100,000 REO loss. The reality that $700,000 you're writing it down to is still $200,000 more than the $500,000 loan you had. So overall, if you sell it at that $700,000, you're still going to have an overall gain on resolution. It's just a timing of when you first put the REO on and then maybe you write it down because you're going to decide to take less to sell it. But what you're selling it for is still more than the loan that you took off the books. Steven Delaney: Got it. So I think you're telling me -- you added $4.6 million as a positive number when you took it into REO. And then when you understood the property or developed the marketing plan or looked at offers or something, then you had to just -- you reverse some of that. Mark Szczepaniak: That's exactly correct. And that $6.3 million, remember, it's different periods. So the $4.5 million, that's all new REO that came on in that quarter. The $6.3 million is probably something that maybe in those quarters, it went on for $8 million or $9 million positive, and now we're taking $6.3 million of it back, if I'm saying. Steven Delaney: Got it. Got it. Okay. Understood because you have the gain, it's more of an accounting gain when you take it into REO the first time. But then once you understand valuation, it sounds like that can be a little lumpier in terms of when that valuation adjustment is made. Mark Szczepaniak: That's correct. Steven Delaney: All right. That's helpful. Well, obviously, the positives in the report far exceed the negatives, but I just wanted to bring that up. And one final thing. What is your headcount currently or at 9/30? And how has that changed over the last year? Christopher Farrar: Yes. So we're at like 347 people at 9/30, and that's up about 82 heads. Steven Delaney: Okay. Congrats on another great quarter and I guess we'll do this again in 3 or 4 months. Christopher Farrar: Thanks, Steve. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Chris Farrar for any closing remarks. Christopher Farrar: Great. Thanks, everybody, for joining, and we'll speak to you in a few months. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, good morning, and welcome to the HELLA Investor Call on the results for the 9 months of fiscal year 2025. This call will be hosted by Bernard Schaferbarthold, the CEO; and Philippe Vienney, the CFO of HELLA. [Operator Instructions] Let me now turn the floor over to your host, Bernard Schaferbarthold. Please go ahead. Ulric Schäferbarthold: Good morning to everybody. Very warm welcome to our 9-month results call. And I'm here together with Philippe Vienney, our CFO; and Kerstin Dodel, our Head of IR. So starting off the presentation on Page 4. So if we look at our sales development, we are at end of September in line with what we expected. So positively, our electronics business is continuing to grow. We had a growth now in the first 9 months of 8.3%, specifically our Radar business, but as well our business in our product center, energy management is continuing to grow. On the Lighting side, we are not growing. So we are down 8.4%. We mentioned also earlier mid of the year that the end of some larger projects, but also the reduction on volumes on some programs in our order book is the reason for that. And I will come back to that and actions we have now taken for Lighting. On Lifecycle Solutions, our business is still down in the 9 months. But positively, we have now seen in the third quarter that we are back to growth. We had quite a decent development in that segment in Q3. So overall, sales is quite stable, FX adjusted. So a slight growth of 0.4%. And considering or looking at reported sales, we are at minus 1.1% considering the strong FX headwind we had. On our operating income margin, we are at 5.8% in the first 9 months. Overall, I can state we continue to have a strong cost discipline. We are implementing the structural programs we have initiated in the last 2 years. So overall, considering the environment, we are in line what we planned also in our budget. Net cash flow has improved on a year-on-year comparison is at EUR 68 million to the end of the year, 1.2%. We have reduced CapEx. And within that number, if we look at factoring, the increase in factoring is at EUR 23 million in comparison to last year, EUR 30 million less. If we move on to the order intake, we are good on track. The third quarter was again a good quarter in terms of order intake. We had a strong momentum, especially in the lighting business, 2 areas where we wanted to grow. More broadly in the U.S. and also in Asia and specifically China, we could win important programs. But as well in Europe, we were quite successful. We are now attacking the market as well in the mass market, so in the volume markets, and we were able to win significant program volumes for the European regions in the third quarter. On the electronics side, we continue to be very successful. So we are highlighting here some of the programs. But what I can state overall that within our Electronics business, we continue on a strong growth path, and this should also support our growth trajectory in the upcoming years. And to finish off, our Lifecycle was also quite successful in the last month. We are highlighting here some of the programs. So bus, agriculture remains important business areas and customer segments for us to continue to grow and as well here also to highlight to get broader in terms of our market reach. So we are happy to win also projects outside of Europe and to gain market shares there as well. So overall, we are on track in terms of our order intake achievements after 9 months. Going to Page 6, some highlights. So on the Lighting side, we continue to see that we are differentiating with our lighting technologies. We are present also in different -- on the different shows and fairs. Here, we are highlighting one, and we are advertising and showing our newest technologies also to the different customers. I think from my perspective, feedbacks are quite good. We are getting. So this should support our growth we are envisaging in the upcoming years. In the electronics, one important milestone now we had is the launch of our iPDM, so of our eFuse technology in one large platform. We are engaging ourselves much stronger now into the whole sonar architecture of the car. And this technology, which manages the power in the car and which is embedded in the sonar architecture and in the new E/E architecture overall of the car is a big milestone for us. And this is one very important technology we envisage will give a strong growth potential in the upcoming years, and this is why we are highlighting it here in a strong way. The other thing I want to mention is on the structural changes. So I mentioned we continue to reduce our cost base. In the last month, we announced the structural change in one of our plants in Germany, which now we are going into execution. Other than that, we are now in execution in terms of our new SIMPLIFY program. So this is a global program where we are reducing in all white-collar functions in the upcoming 3 years, around 15% on headcount. And so we are well on track. We already started on that program. The target is to be at least at 20% of reduction to the end of this year and around 50% on the reduction to the end of next year. And I can say that we are ahead of the target as of today, and we are trying to accelerate on that as well. And you can see that as well in the headcount development. If you only look at the last 9 months, we have already reduced close to 5% on headcount as of today in comparison to the start to the year at a quite comparable sales level, and we will continue on these adaptions. If we move to Page 7, let's say, one of the big challenges we are facing actually is the crisis on the shortage on Nexperia. So it's clear that if we look at our portfolio of products, we have a lot of Nexperia parts in our products. So in general, I can say we are strongly impacted. So we have organized our way -- us in a way also with task forces and are managing the situation in the way that we are building up the alternative suppliers. And in the meantime, for sure, we use -- we still use Nexperia parts. So our relationship today with Nexperia China is still stable, and we also managed to buy broker parts, which in the meantime, supports our supply. So far, I can say that the month of October was in line with our plan. So there was little impact. The start into the month of November showed a little more impact in terms of the full coverage against the plan. And the most difficult weeks now from our side will now be the next ones where in the meantime, where before being able really to ramp up the second sources, we are seeing some of the shortages. So we are working intensively also on the application on export licenses and also taking advantage and the support also on the OEM side, which are going for these applications as well. So this could help to support also on parts we have in China who could be exported to the U.S. and Europe and help there on the shortages. So far, China for us is not impacted. We have enough parts. So this is something difficult to quantify overall. But as I said, so far, the impact was very limited, and we have now to see how next weeks will be and specifically if with -- on the Chinese authorities, the customs and MOFCOM, we are able now to get the necessary applications to the exports to support Europe and the U.S., as I said. But as you can imagine, a lot of intensive work we are doing and managing the situation to keep our delivery promises to the customers. So having said that, we will move on with some more details on the financial results. Philippe will take over. Philippe Vienney: Yes. So good morning to all. So looking at the sales, so we are publishing sales at EUR 5.868 billion, so which is representing a decrease of 1.1% versus prior year. And excluding the exchange rate, this would be at plus 0.4% versus last year and versus the market, which is showing a growth of 3.8%. So here again, as I said, we have a good momentum in all region on electronics, whereas we are suffering on the lighting side with lower sales, which are affected by end of production on some programs and mainly in North America and Asia. And Lifecycle was reducing -- showing reducing sales, but which we are also -- where we are also seeing a good momentum in Q3 with some slight recovery. So looking at the sales per region and versus the market. So Europe, where we still have more or less 56% of our sales, we have a growth of 1% versus the market of -- which is showing a decrease of 1.7%. So we are overperforming versus the market for Europe. For Americas, where we have sales which are above the 20% of our sales, we are seeing a decrease of our sales of 1.1%, slightly impacted as well by the FX impact versus the market, which is reducing by 0.5%. So here also, we have the -- again, the impact of lighting, where we have this impact of some end of production series, which are not fully compensated by new launches. And we have Asia, which is also a bit above 20% of our sales. where we have a decrease on our published sales of 6.4%, also slightly impacted by the FX versus a growth in this region of 7.2%. So here again, we have the same topic on end of production of series project in lighting, but not fully compensated by new sales and new launches with local OEMs in Asia. And we still have, again, growth momentum in China on the electronics with radar and battery management. So now looking at the profitability per segment. So lighting, we are at EUR 2.7 billion of sales, which is representing an organic decrease of 7.3%, excluding the exchange rate. So here, I said again, we have the impact of end of production of some series projects in China and North America. We have some increase on the headlamps and rear combination lamps in Europe and Americas, but which are not enough to compensate the drop that we are seeing in Asia and North America on the rundown programs. So the operating income for Lighting is at EUR 73 million or 2.7%. So here, we are impacted by the volume drop, which is clearly impacting the gross margin and the operating margin, which we are partially compensating by lower material costs, also some reduced R&D cost and SG&A costs, but not enough to compensate the volume drop that we are facing where we still have to reduce and continue to reduce our fixed cost to absorb this and face this volume drop. Electronics. So we are publishing sales of EUR 2.5 billion or EUR 2.6 billion, which is representing plus 9.5%, excluding FX rates on an organic basis. So here again, we have growth in all regions and growth -- thanks to the radar business. We have also growth in the car access system in Europe and Asia. And we have also some growth, thanks to the battery management system as well in Asia. So good momentum on the sales in Electronics. And this is leading us to an operating income of EUR 196 million or 7.6% of operating margin. So here, we have the benefit of the volume, which is helping the gross margin and the operating margin. And we have been able to be stable on the R&D spend and also thanks to reduction of external spend and external provider. And we have also been able to maintain or even reduce the SG&A percentage in this segment. So all in all, leading to the 7.6% of operating margin. The Lifecycle, where we have sales of EUR 739 million, which is representing a decrease of 1.5%, excluding FX rates. So yes, as we said, we have a low demand, especially coming from the H1 and especially on the commercial business vehicles. But we see some recovery, a slight recovery in Q3. So especially also on the commercial business with some stable business on the after market. And this is leading us to an operating income of EUR 74 million or 10%. So here, we are impacted also slightly by the volume. And we have been able to maintain or even decrease the R&D expense and with SG&A, which are slightly increasing mainly due to distribution costs. Profit and loss for HELLA? Yes. So we have a gross profit of EUR 1.3 billion, which is 22.8% versus 23.2% last year. So here, we have the weight of the volume decrease in Lighting and Lifecycle, which is impacting us and not fully compensated by the improvement on the Electronic segment. On the R&D side, we are at 9.4% versus 9.8% last year. So here, we continue to see the benefit of our adjustment and structural adjustment on the R&D side and cut on the external provider, as I mentioned, for Electronic. On the SG&A, we are at 7.7%. So here, we see a decrease on the administration costs, where we have a slight increase on the distribution costs. So I think the good trend is the administration costs which are decreasing and showing some effect of the program which have been launched to reduce this cost. On the earnings before tax, so we are reaching EUR 208 million versus EUR 409 million last year. So here, we have the impact -- negative impact of all the restructuring programs, which are booked and are part of the EUR 129 million. To mention that last year, we also had some restructuring costs, but which were more than compensated by the sales of the BHTC business and the net gain that was booked last year. And this is leading us to a net income of EUR 108 million versus EUR 310 million last year. On the net cash flow, we are at EUR 68 million, so versus minus EUR 8 million for the same period last year. So here, we are increasing our net cash flow. So we have higher cash from operations. We are also having a good momentum on the working capital with some negotiated and good payment terms with suppliers. And we are also reducing our tangible CapEx. You can see that we are at minus 23% versus what was cash out last year and spent last year for the same period. So this is benefiting to our cash flow, leading us to have a EUR 68 million cash flow for the 9 first months of the year. With that, I think we are finishing the financial details, and we can go to the outlook. Ulric Schäferbarthold: Thank you, Philippe. So on the outlook, so on Page 17, if we look at volumes, so the actual outlook on S&P is 91.4 million cars. I would expect that specifically on Europe and Americas, we would see some reductions in the fourth quarter due to the shortages on Nexperia parts. China is quite stable in terms of volumes. This is also what we see actually now in the fourth quarter. On Page 18, so we confirm our outlook in terms of sales in the range of EUR 7.6 billion to EUR 8 billion. On the operating income (sic) [ operating income margin ] 5.3% to 6% and the net cash flow of at least EUR 200 million. We are stating that this assumes a sufficient supply situation on -- especially in Nexperia parts. As I said, in terms of -- today, if I look at the month of October and the start into November, the impact were limited, but I also mentioned that the next weeks will be the crucial ones. So summing it up on the key takeaways. So, so far, looking at the 3 quarters, from our point of view, a robust sales development in line in terms of profit and net cash flow, what we expected, strong focus on the structural changes we have done and still a good momentum on the order intake side. So we -- outlook I mentioned, we see us on track for the guidance we have given. And if it comes to the top priorities, so we continue to work on the structural programs. One important new program we have now initiated is in the lighting area. We have started a transformation program now with -- starting into the second half of the year. Mainly, we focus on 3 big topics. One is on the business growth. So we need to come back to growth again for that. We are broadening our reach and focusing significantly also on the regions where we see a strong potential, especially the U.S., but also beside of China, Japan, Korea, India. And we already see now in the third quarter, the first successes and programs we could book in quite a sizable numbers. So first, let's say, proof points are given, but I think this is a very relevant point to come back to growth. And on top of that, we are -- we have initiated the operational transformation. We see significant potentials in terms of reductions on our footprint or on our costs within the operations, including also the supply side and logistics. We have initiated a structured program on that, which is specifically for Europe and also for our Mexican operations. And the third element is the improvement in D&D productivity and efficiency where as well we initiated a program also with a focus on cost reductions on our technology, where we see also a big potential to reduce on the cost side as well here, too. So this should help to bring our Lighting business into a much better profitable situation in the years to come. Having said that, we are happy to take your questions. Operator: [Operator Instructions] And the first question comes from Christoph Laskawi from Deutsche Bank. Christoph Laskawi: The first one, coming back a bit to what you just said on the Lighting performance. Obviously, Q3 margin around 1% is very low. When you've implemented all the measures that you talked about, what do you think is in the midterm a realistic margin potential? Could it be around 5% plus? Or any thoughts on that would be appreciated. And then in contrast to that, electronics is actually quite strong in Q3 with 9% plus margin. Was there any specific one-timers in there or just really capitalizing on growth and showing the margin potential of that business? And then the third question would be on Nexperia. It sounds like you didn't face production shutdowns on your own yet, and you haven't cost any so far. Still you're expecting production cuts to come. Do you already see that in the schedules? Any volatility you can highlight there? And then just on the cost of going to brokers and others, those have been quite high in the semi shortage. Is this something which could be a meaningful impact on earnings in Q4, just the sourcing alternatives? Ulric Schäferbarthold: Thank you for your questions, Mr. Laskawi. So on the Lighting performance, our target is to come back to 6%. But this will not be possible on the short notice. So this is a target we have set ourselves. It will take until '28, '29. So before we are at this 5% level, you said, probably '28, '29 to come closer to the 6%. So we have now seen that, as I said, so we are struggling a lot because, first of all, we are not growing. Secondly, we have also been impacted now in the second half by a warranty topic, which was quite significant as well. So it is partially in the third quarter and will also hit the fourth quarter. So this is a topic which lasts now from the years '22, '23, where now finally, we got to an agreement with -- and the settlement with the customers. So we are close to, but this was an impact as well. And overall, on the full, let's say, second half, it will have an impact of around EUR 25 million, which is quite significant for the Lighting business. But the overall, let's say, if I look at Lighting, we are -- the business is declining. And this is something which will also continue into the next years and will be a headwind also in the next year before now we see with the momentum we have on the order intake, we will be able to grow again in the -- starting from '27. What I have to say positively is that in lighting, we are very strong in China. So the transformation also we need to do for Europe and specifically also our Mexican operations, we already have done in China and also the adaption to competitiveness. So I see us very strong in Asia today. And now we need to do the work we have -- we need to do in Europe and also South America. So we changed also the responsibility. So I have taken over in combination of tasks now from the 1st of July. And so we are now starting on this transformation program, as I said. On Electronics, I'm very pleased about how our business is developing also in terms of performance. So what we now see is basically that we see now the payoff of the business now where we see now the growth coming with the launches and the new programs, which are going into serial production. So the growth supports the profit development. And what we as well see is that the structural changes we have done in terms of -- on the cost side helps as well. So with that, we see immediately a very strong profit development. There was no really specific one-off in the third quarter. So -- but it was quite a good quarter. So I wouldn't say now every quarter will be the same. So also no negative impact, I have to say. But I have to admit also, it's a good development, and we are building on that and trying to continuously to improve on that. On the Nexperia, so I think that -- I stated so far with the coverage or with the stocks we had, with the coverage we had. We also bought some -- quite early on some broker parts. So this helped really to cover the period of time until now. We see now that some shortages on some products, they are already there. On the call offs, basically, you do not see yet that customers are changing anything. But for sure, on the -- in the systems, but for sure, we are in very intensive discussions with all of our customers. And today, the situation is as follows that the weekly -- the decisions are taken now on a weekly base, what can be produced and how much reduction will we see. And I mentioned the next weeks will show reductions. And the magnitude is still not absolutely clear. So what is in the next, let's say, 3 to 4 weeks. And it certainly will now also depend on how -- are we now able really to get exports on Nexperia parts with these exemptions or with export licenses granted now to the OEMs or to us. And we are already trying out the test shipments and working with MOFCOM and the customs, as I said. So there is some hope that now it should work and that certainly will help a lot immediately. But this is the uncertainty we have. If this is not working, I mentioned it, then the reductions on the volumes in the next weeks will be much higher. And on the cost side, on the broker so far, I would say, for sure, it goes fast. The last broker -- broker offers I saw between factor 600, factor 800, also factor 1000 I already have seen. The difference to the semi is that the original price is much lower. So there, we are only talking cents, but sure, if we are talking factor 500, 600 or higher, then you talk immediately some millions. So far, it has not such a big impact. The market today is still -- there are not so many volumes any longer in the broker market. So I would not expect that this should have such a hit, which is comparable to the semi today or to the semi crisis we had some years ago. But it's -- again, still we are talking some money. It's some millions we are discussing. That's for sure. But not comparable, as I said, to the semi crisis. Operator: And the next question comes from Sanjay Bhagwani from Citi. Sanjay Bhagwani: Maybe to begin with, so on the Nexperia situation, this morning, there seems to be several articles suggesting like -- so yes, I mean, on the Nexperia situation, this morning seems to be like several like constructive articles typically like quoting some of these Dutch ministers that things will be okay in the coming weeks and chip supply should resume. Is that providing some comforting messages to you as well? Maybe let's say, if there is a disruption, there can be just 1 week disruption or something like that? Or it's probably too early to look at these headlines or something like that? Ulric Schäferbarthold: So there are 2 things for me. One is does China now allow that Nexperia China -- the parts which are still produced at Nexperia China that we can export these to Europe. And this -- we are still working -- I mentioned it. We are still working on how process-wise, the application and the export needs to be executed. And this is where I said we are now just running now with custom, the discussions we have with MOFCOM doing these test shipments to try out how we have now to handle and practically do it. And there are some signs now. This I can at least also confirm that -- I hope that it will be possible soon. Let's put it like that. Still today, it has not worked out, but we are getting signals that there is hope that it could be possible. So that is one thing. So I would take that as a positive note, but still to be seen if then really it works out. Because just practically, I can tell you the custom were not aware that they are allowed to do. On the other hand side, MOFCOM is allowing it. So I think we are still, let's say, it's an administrational point, but you never know. So that is one thing. The other thing we are also working on, and this is as well, let's say, a critical path, we are still getting a lot of parts from Nexperia China, and they are dependent still on the wafers they get from Europe. And there apparently, they are not coming along. So that these wafers, which are needed for the further production, if they -- if China do not have any longer wafers from Nexperia Europe, they couldn't continue on their production. And they will run out at a certain point of time if there is no agreement. And this is the second path we are working on to get a solution between the 2, Nexperia Europe and China, to stabilize the situation so that Nexperia China is able to continue to deliver. And this is important because, as I said, we are working on the alternative suppliers. And for most of the suppliers, it can be -- we can find, let's say, good agreements and to ramp up quick. But for some of the parts, it will take a little longer, and this is why it's important to have a stability on Nexperia China as well. Sanjay Bhagwani: That's very helpful. And I think on the broker parts, you mentioned that so far, this has not been a major impact. But in terms of the pricing pass-throughs, I understand in the previous like chip crisis, you had to actively go and negotiate the price increases. In this case, is it easy to like kind of have some sort of indexation for these components now? Or this again, will be subject to negotiation if the, let's say, inflation becomes material? Ulric Schäferbarthold: So in the actual situation, because we need to be quick, we take the decision with the customer, so with our customer, with the OEM together. And the agreement is that in terms of who takes which part, we agreed that this will be then discussed later. But it's clear that we will have a comparison as it was in the semi crisis where we agreed on the, I would call it, pain share, who takes which proportion. So you can assume that what we have seen similar in the semi crisis should -- at least from our perspective, should also be true now for this one. Sanjay Bhagwani: And then my final one is on the Q3 margins. Just a kind of follow-up to Christoph's question, but more at the group level. So Q3 group margins have like sequentially gone down to, I think it's 5.3% versus H1 was 6%. So are you able to provide some color in terms of the Q4? Is it sequentially looking better as of now? And in terms of divisions, how the Q4 versus Q3 margins are looking? Ulric Schäferbarthold: So month of October was okay. It was in plan. So -- and normally, the months, October and November are very strong in the industry. So we have seen quite a good month in October so far, even we had this Nexperia situation. So the month of November will certainly be impacted now. And it's difficult to say on the margin -- so really to say now what does it now mean for the full quarter because it will depend on volumes at the end. And we will lose volumes. The question is how much. So I would not feel so comfortable now to say how it will go. I think in terms of our cost savings, all what we are doing there, we are in plan. At the end, it will depend on sales. Operator: [Operator Instructions] So it looks like there are no further questions at this time. So I would like to turn the conference back over to Bernard Schaferbarthold for any closing remarks. Ulric Schäferbarthold: So thank you to all of you who participated, and thank you to showing the interest on HELLA again. And I wish you a pleasant remaining day and after that, a good weekend. Hope to see you and speak to you soon. Bye-bye.
Operator: Good afternoon. Welcome to the Amprius Technologies Third Quarter 2025 Earnings Conference Call. Joining us for today's presentation are the company's CEO, Dr. Kang Sun; President, Tom Stepien; and CFO, Ricardo Rodriguez. [Operator Instructions] Please note that this presentation contains forward-looking statements, including, but not limited to, statements regarding our financial and business performance, our business strategy, future product development or commercialization, new customer adoption and new applications, our growth and the growth of the markets in which we operate and the timing and ability of Amprius to expand its manufacturing capacity, scale its business and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties and other important factors that may cause Amprius' results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. For a more complete discussion of these risks and uncertainties, please refer to Amprius' filings with the Securities and Exchange Commission. This presentation includes a non-GAAP financial measure, which is adjusted EBITDA. This non-GAAP financial measure does not replace the presentation of Amprius' GAAP financial results and should only be used as a supplement to, not as a substitute for Amprius' financial results presented in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies. A reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure is included in our shareholder letter, a copy of which is filed with the SEC and posted on our website. Finally, I would like to remind everyone that this conference call is being webcasted, and a recording will be made available for replay on the company's Investor Relations website at ir.amprius.com. In addition to the webcast, the company has posted a shareholder letter that accompanies these results, which can also be found on the Investor Relations website. I will now turn the call over to Amprius Technologies CEO, Dr. Kang Sun, for his comments. Sir, please proceed. Kang Sun: Welcome, everyone, and thank you for joining us this afternoon. On today's call, I will begin with a brief company overview. After that, our President, Thomas Stepien, will recap our third quarter performance and the key accomplishments. Next, our CFO, Ricardo Rodriguez, will discuss our financial results for the period. I will share some closing remarks before opening the call for questions. Let's begin. Amprius is a pioneer and leader in silicon anode battery space with over a decade of development experience and a proven track record of commercial success. At Amprius, we develop, manufacture and market high energy density and high-power density silicon anode batteries with applications across all segments of electrical mobility, including the aviation and light electric vehicle industries. Today, Amprius has the most complete commercially available portfolio of silicon anode materials system in the industry and commands performance leadership with its combination of battery energy density, power density, charging time, operating temperature range and safety. Across our battery portfolio, we believe we offer unmatched performance among the commercially available batteries. Amprius has been delivering commercial batteries to the market with up to 450 watt hour per kilo and 1,150 watt hour per liter, 10C power capability and extreme fast charge rate of 0 to 80% ste of charge in approximately 6 minutes, the ability to operate in a wide temperature range of minus 30 degree up to 55 degrees Celsius and safety design features that enable us to pass the United States military benchmark nail penetration test. Each of these performance parameters is critically important to real-world electric mobility applications. Not only do our batteries empower certain drones, satellites and vehicles to maximize performance, we also enable our customers to achieve their economic targets as well. In addition, Amprius has developed a 500-watt hour per kilo and 1,300-watt hour per liter battery platform that has been validated by an independent third party. It's our belief that there are no other commercial batteries on the market that can perform at this level today. In the third quarter, we continued to execute against our strategy of developing leading battery performance, converting that innovation into customer wins and scaling our manufacturing through a capital-efficient contract manufacturing model. With that, I will now turn the call over to our President, Tom Stepien detail the highlights of our record quarter, Tom. Thomas Stepien: Thank you, Kang. Amprius finds itself at a very fortunate point in time at the intersection of a fast-growing electric aerospace market with an industry-leading set of battery products. This advantaged situation, coupled with strong execution by our team, allowed us to achieve record revenue in the third quarter. We attracted new customers, continue to optimize our operations and release compelling new products. Let's start with updates on our commercialization strategy and share execution details. In the third quarter, we shipped batteries to 159 end customers, 80 of whom are new to the Amprius' platform. The remaining 79 are repeat customers. Now to be clear, we don't ship to every customer in every quarter. We do expect to gain new customers every quarter, albeit not always 80 new ones, but we expect to gain new customers nevertheless. Since the first quarter of 2023, Amprius has built relationships with hundreds of companies and ship batteries to a total of 444 end customers. This strong and expanding customer traction comes from the superior performance of our batteries compared to traditional cells. As we continue to move new customers through the qualification process, you're also seeing that we have plenty of room for expansion orders within our existing agreements. In the third quarter, our revenue totaled $21.4 million, a 42% increase from the second quarter and up 173% from Q3 2024 a year ago. Our second-generation SiCore batteries led the revenue charge in Q3 with a greater than 4x increase in shipments compared to Q3 2024. SiCore is a proprietary silicon anode that uses standard lithium-ion processing equipment. In August, I visited a couple of our contract manufacturing partners. At one, they were making conventional graphite cells in the morning and in the afternoon, they were producing our SiCore silicon cells. Same line same equipment. SiCore standardization helped us enable a second consecutive quarter of positive gross margin. Ricardo will provide more context here when he reviews our financial highlights next. Looking at our customer base, about 75% of our revenue in the quarter came from the aviation segment, led by unmanned aerial systems, or UAS, market. Remainder of our Q3 revenue was primarily derived from the light electric vehicle sector, which remains healthy but has a lumpier profile due to the customer's variant product introduction cycles. The LEV market tends to have short design in cycles, and we believe our drop in replacement batteries can help us succeed in gaining market share in this growing market. From a geography standpoint, 75% of our revenue came from outside the United States on a ship-to basis. Our strong customer diversification supports steady growth even amid uncertainty driven by U.S. tariffs and customer delays related to the U.S. government shutdown. One of our major wins this quarter was a $35 million purchase order from a leading UAS manufacturer, which we announced in September. This order is a follow-on purchase from the same customer that placed a $15 million order earlier this year. While we continue to grow our customer base across geographies, applications and budgets these kinds of large repeat orders underscore the built-in growth engine that we have within our growing customer base. It also highlights a proven performance at scale of our batteries. During the quarter, we also deepened our relationship with another key customer AeroVironment. As a part of the U.S. Army's xTech Prime program we shipped samples of our ultra-high energy cells for evaluation in a variety of applications. These cells reach up to 520-watt hours per kilogram and vastly improved endurance, payload capacity and mission economics for high-altitude platforms. Another key Amprius partner in the drone segment is Nordic Wing in Denmark. In Q3, they chose our SiCore cells to power their UAV platform after an extensive qualification and evaluation period. Their Astero ISR is a fixed-wing craft with a wing span of about 2.3 meters. In its standard configuration, it weighs around 4.5 kilograms. ISR is an acronym for Intelligence, Surveillance and Reconnaissance. In drone speak, intelligence is the collection, processing and analysis of information to support decision-making. For example, drone cameras will see the beginnings of the forest fire and the built-in smart analytics will make a decision to send a dispatch signal to the appropriate firefighting equipment. Surveillance is the systematic observation of an area, person or activity over time, continuous monitoring of a border or a convoy route, for example. Reconnaissance is a specific mission-focused gathering of information, usually short term and targeted. Is the fire really extinguished? The Astero ISR with the Amprius SiCore batteries flies 90% longer than with standard cells, 90% improvement, almost twice the flight time. Astero stays airborne longer, covers more ground and delivers real-time intelligence without interruptions. This enhanced endurance doesn't just improve performance. We believe it redefines what's possible in every mission and can mean the difference between success and failure. Looking a bit further out, we continue to make inroads in our relationship with Amazon. After being selected for the inaugural Amazon Device Climate Tech Accelerated (sic) [ Amazon Devices Climate Tech Accelerator ] cohort in July 2025, we successfully advanced to the integration assessment phase. This stage involves comprehensive testing of feasibility, customer value proposition, sustainability impact and supply chain readiness. We are excited about this opportunity to continue working with Amazon in this next phase, and we'll share further updates as we are able. All of these recent customer wins further demonstrate our ability to scale up to meet volume purchase orders, which we believe will continue to increase as we expand our customer funnel, and continue to extend the state-of-the-art that our cells provide. State of the art includes external testing. We rigorously test new products both internally and send them to external labs where they are tested against international safety standards. These include United Nations 38.3 standards maintained by the International Electrotechnical Commission and for our customers in India, the Bureau of India Standards. This quarter, we introduced 2 new SiCore pouch cells and 3 new SiCore cylindrical cells that are optimized for unmanned aerial systems high-altitude platform systems and the electric airplane duty cycles. We call these balanced power and energy cells. Electric aerospace platforms typically require balanced cells. You need high power, high sea rate, capability for takeoff and landings and you need the high energy to enable long range. Products like these balance cells further differentiate Amprius from traditional battery players. Many of our end customers participate in shootouts and fly-offs competing for their own contracts. They need to demonstrate best-in-class performance. We help them win. Our batteries give them more kilometers, allow additional kilograms and provide more watt hours that support their onboard intelligent components. We believe that the electric aerospace is on the cusp of a multiyear transformation propelled by defense and commercial demand for a new era of AI-driven autonomy. McKinsey estimates this market is $40 billion to $50 billion today, growing to $80 billion by the end of the decade. About 10% of that market and 10% of the drone's bill of materials is for batteries. Recent regulations and policy changes appear to be market accelerants. The U.S. executive orders over the summer that promote domestic drones is one piece of evidence. A second is the proposed changes to the Beyond Visual Line Of Sight rules that the U.S. Federal Aviation Authority is debating. BVLOS is a significant unlock for drones. We expect these policy actions will accelerate adoption time line and open new opportunities across the board. We've already experienced strong traction from the defense market and expect growing interest from these customers in the year ahead. Estimates show that the more than $10 billion from the One Big Beautiful Bill will be allocated to defense and unmanned systems, and we believe that we are well positioned to benefit from this increased funding. Anecdotally, we have already seen optimism surrounding the government funding translating to strong buyer intent. Last month, we exhibited at the AUSA Conference in Washington, D.C. where we met with dozens of defense contractors that are either interested in or already using our products for their drones. We also attended U.S. and international conferences. Commercial UAV Expo in Las Vegas, Defense and Security Equipment International in London and the DroneX Expo also in London. At all of these events, we heard a similar message, "drones are an important part of the future, and Amprius batteries are at the forefront of innovation to power them." As a key component supplier for unmanned drone systems, we have had our own success working with the U.S. government. As we discussed during our August 2025 call, we are working closely with the Defense Innovation Unit. Our DIU contract gives us funds to increase the capacity of our Fremont, California pilot line to 10-megawatt hours and expand our capabilities to support quick turn SiCore customer prototypes. Since our last update, we have received an additional $1.5 million follow-on contract, bringing our DIU contract total to $12 million. Our program mandate includes qualifying individual lithium-ion battery components from National Defense Authorization Act, NDAA, compliance suppliers, which will allow us to work more seamlessly with the DoD. This includes considerations of the anode and cathode-active materials electrolyte and separator. This effort is part of a large momentum shift to U.S. domestic production of batteries. As we work on building out an NDAA compliant supply chain and production capacity for our customers that require it, we have continued to utilize our contract manufacturers to support our rapid growth. As a reminder, we have over 1.8 gigawatt hours of capacity available to us through our partners, including our most recent added partner in South Korea. Let's put that 1.8 gigawatt hours in context. Our SA08 cell is our best-selling battery. It has an energy rating of 38-watt hours. 1.8 gigawatts over 30-watt hours works out to be about 50 million cells per year. We have tremendous headroom on our manufacturing capacity. This capital-efficient model provides production-grade calls for qualification today and supports our ramp to volume while still allowing configuration control and aerospace aligned quality systems. We are also opportunistically sourcing additional partners to provide us with greater geographic diversification and operating flexibility. As we head into the tail end of the year, we've carried our momentum into the fourth quarter. A few weeks ago, we announced that ESAero another leading UAS company, chose our SiCore SA08 cell to power the group 1 and group 2 UAVs that support defense, security, logistics and public safety applications. They chose us because in their words, "Amprius offered the best combination of advanced battery technology, production readiness and cost competitiveness to meet the program demand." We have talked extensively about our defense applications for our batteries. We see a large and growing opportunity in the public safety markets also. According to a Police1 article, more than 1,500 U.S. police departments have DFR programs, Drone-as-First-Responders. Their systems are tied into the 911 emergency systems and are dispatched to help find a lost child, monitors smash and grab suspects and understand if a fire is a spark or an inferno. We look forward to continuing to support the drone sector as it scales and evolves into more mission-critical and business-critical use cases. On a final note, we also made the exciting announcement that Ricardo Rodriguez has joined Amprius as a new financial officer. Ricardo has a proven track record of driving growth with financial discipline in high-performance markets, and you will serve as a valuable guide as we expand our commercial reach, scale global manufacturing and reinforce Amprius' leadership in the advanced battery technology. Since he joined on October 6, exactly one month ago, we have aligned on objectives, agreed strategies and developed plans. He is a tremendous addition, the right person at the right time. I look forward to working with and learning from him. Ricardo, it's all yours. Please share our financial results for the third quarter. Ricardo Rodriguez: Thank you, Tom, and good afternoon, everyone. I'm really happy to be on board and reporting our quarterly results on behalf of our team for the first time. After several weeks on the ground working in Fremont, getting to know our team, meeting some of our customers at AUSA and reconnecting with many familiar faces in the investment community that are interested in supporting our company and strategy, I could not be prouder of wearing the Amprius shirt. In the third quarter of 2025, we delivered $21.4 million of revenue. This translates into 42% growth over the second quarter, following the previous quarter's 34% quarterly growth. This is also a 2.7x multiple of the team's revenues during the same quarter last year. Echoing Tom's remarks, our revenue growth was driven by the addition of new customers combined with larger orders from existing customers. Within our customer base, only one customer accounted for more than 10% of our revenues in Q3. Going forward, we plan to continue adding to our customer mix to diversify our revenue base. And we believe that as we develop more diversified contract manufacturing capacity, additional demand can potentially be unlocked. At the end of Q3, we had $53.3 million of orders, including the $35 million order that Tom mentioned, to be fulfilled in the near term. This backlog is 83% higher quarter-over-quarter and it highlights our team's ability to drive demand. Our cost of goods sold at $18.1 million in Q3 did not increase at the same rate as our revenue, thanks to a favorable product mix and higher volumes. This, in turn, enabled gross profit margins of 15%, which is a significant improvement over our gross margins of 9% in the previous quarter. As I discover what makes our team unique, I continue to be impressed by its resourcefulness to make the most with what we have, and that is evident in our quarterly operating expenses of $8 million in Q3, which were down very slightly relative to the previous quarter. The year-over-year increase in quarterly OpEx of $1.9 million was driven by targeted investments in our sales and go-to-market efforts along with the reallocation of some R&D expenses from cost of goods sold to OpEx as development service agreements are completed. These expenses bring our operating loss to $4.7 million compared to an operating loss of $6.8 million in the prior quarter, shrinking our operating loss by over 30% quarter-over-quarter. Our GAAP net loss for the third quarter was $3.9 million or negative $0.03 per share with 126.6 million weighted share -- weighted average shares outstanding. Our adjusted EBITDA in Q3 was negative $1.4 million compared to negative $3.8 million in the previous quarter, thus reducing our adjusted EBITDA loss by over 60%. We define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation and other items that we do not believe are indicative of our core operating performance. In Q3, these adjustments included $1.2 million of depreciation, $1.8 million of stock-based compensation and $450,000 of interest income. As of September 30, we had 130.4 million shares outstanding, which was up by 5.4 million shares from the previous quarter. The change includes approximately 2.2 million shares issued from option exercises and RSU vesting along with 3.2 million shares issued under our at-the-market offering program. Now turning over to cash flow and the balance sheet. We ended the third quarter with $73.2 million in cash and no debt. The main drivers of cash flow in the quarter were $9.2 million used on operating cash flow, which was mainly driven by a near-term $11.2 million increase in accounts receivable at the end of the period due to our increase in sales, $400,000 of CapEx invested at our facility in Fremont, California and lastly, $28.7 million from financing activities consisting of $25.9 million from the issuance of common stock under our aftermarket sales agreement and $2.8 million of proceeds from option exercises. We still have approximately $20.1 million left available on the at-the-market offering facility as of September 30, 2025. Before I turn over the call to Kang, I would like to take a moment to discuss our outlook for the remainder of the year. We have made a decision to strategically invest in diversifying our supply chain and expanding manufacturing capacity within our Fremont facility to include electrode manufacturing. We are doing this in collaboration with the U.S. Government Defense Innovation Unit and have secured a contract for $12 million awarded in the third quarter of this year. With what we know today, we expect this funding to cover the majority of our capital investments over the next several quarters as we work to develop a growing and resilient source of supply in a dynamic trade environment. As we previously stated regarding the Colorado facility, the designs for the project are effectively complete and we are continuing to monitor the larger industry dynamics associated with building a factory in the United States. Changes in demand, supply, battery cost structure, government incentives, trade tariffs and other considerations, including the timing and availability of funding, will influence our decision on next steps and near-term timing. We have secured adequate capacity for the foreseeable future through our contract manufacturing network and plan to further expand that without deploying additional capital. We also believe that our current revenue levels and even slight improvements from these can put us on a path to mainly consume cash for working capital versus funding operating expenses in the near term. With that, I'm happy to turn the call over to Kang for his closing remarks. Thank you very much for your attention and continued support. Kang Sun: Looking ahead, we remain focused on delivering next-generation lithium-ion battery performance that raises the bar for energy density and the sustained power without compromising safety or reliability. We are also broadening our product portfolio to better align with the customer requirements and unlock new market opportunities, while converting a growing number of customer engagements into formal qualification and the deployment, particularly across mobility-centric platforms. As demand scales, we will continue to leverage our contract manufacturing partners' capacity to efficiently translate that demand into revenue with disciplined quality and minimal additional capital investment. We are excited about the future ahead and looking forward to meeting and reconnecting with many of you as we attend several upcoming investor conferences. Thank you for your continued interest and support of Amprius Technologies. With that, I will turn it back to the operator for questions. Operator: [Operator Instructions] And the first question comes from the line of Colin Rusch with Oppenheimer & Company. Colin Rusch: Congratulations on all the progress. Just on the U.S. capacity. Could you talk a little bit about the cadence of how that will come up and how much capacity it will actually be and where that electrode will ultimately end up getting turned into batteries? Are you looking at potentially qualifying some incremental contract manufacturing in the U.S.? Or will that electrode end up getting shipped overseas and return back to the U.S. as batteries? Thomas Stepien: Yes. Thanks, Colin, this is Tom. The answer is that we will have in the future, both a U.S. contract manufacturer and contract manufactures in what we are -- what are called NDAA compliant countries, and that includes Korea. We have a contract manufacturer already today in Korea. We announced that in May. So you will see over time both for pouch cells and cylindrical cells additional partners in this network as it continues to expand. Colin Rusch: That's super helpful. And then being able to qualify different configurations of performance, whether it's through different electrolyte or different balances within these cells is pretty substantial accomplishment. Can you talk a little bit about the cycle time and how much work you've done previously to be able to get some of those different battery configurations? And just so we have a sense of how quickly the platform is evolving from a technology perspective going forward. Thomas Stepien: Yes, to fully qualify the 11 major components that make up our battery, it will take us -- we've started that already. It will take us to next summer. That's largely being done in cooperation with the $12 million DIU contract that we have. We are turning up. As of today, we have 5 of those 11 components fully qualified NDAA compliant. We're turning the knob on the other 6, and we think we'll do that between now and next summer. Colin Rusch: And just one last one from me. Just in terms of the cadence of how you're moving customers through the sales funnel, as folks have had these batteries for a fairly substantial period of time here? And you guys have talked about kind of roughly 18-month qualification period sometimes longer, sometimes shorter for customers and you've been sampling now for about 7 quarters out of some of these facilities. Are you seeing folks move towards purchase orders a little bit faster than they have in the past or moved to larger purchase orders? Just want to get a sense of how we can think about some of this pipeline moving into backlog and production? Thomas Stepien: It's pretty distributed, some qualification happen within 2 quarters. Some take more than a year. It really depends on the complexity of the components at the end and some are larger, some are [indiscernible] per yacht and the other one. So it did across all the 400-some-odd customers that we have. Operator: The next question comes from the line of Mark Shooter with William Blair. Mark Shooter: Congrats on the great execution this quarter. The new customers was a big way and a nice jump. It's almost doubled the normal cadence in the past few quarters. So I guess I'd like to dial in on what led to that big step-up in new customers this quarter. Did we get a capacity or a yield breakthrough at the silicon supplier or your battery contract manufacturers that allowed you to ship to more cells? Or did you see an actual 2x increase in demand this quarter from last quarter? Thomas Stepien: We're definitely seeing an increase in demand as the awareness of Amprius gets out there as we attend more conferences, as we have more wins like we talk about. It gets the attention of other folks. The 80 that we have -- the 80 new that we added this quarter was a little bit of timing. Some of those seeds were planted, as I said to Colin's question, more than a year ago and now are coming through and turning into real purchase orders, other ones were planted earlier this year. So it's a combination of those factors that's leading to the uptick. Mark Shooter: Great. That's very helpful, Tom. Ricardo, one for you. Congrats on joining Amprius, especially this quarter. Ricardo Rodriguez: Thank you. Mark Shooter: I'm hoping if you could just -- of course. Question for you. I'm hoping you could shed some light on the gross margin. The improvement this year has been great, specifically this quarter. Going from 9% to 15%, could you try to break that down to maybe how you see the improvement if you put in the buckets? Is it -- and as I'm thinking about a higher revenue or product mix? Or are you able to maybe raise price in this quarter, seeing the performance of your batteries and the demand for your batteries in the marketplace? Ricardo Rodriguez: Yes. I mean I think mix was the main driver of the increase from 9% to 15% quarter-over-quarter. If you look at the 15%, I mean, it's in no way where we believe it needs to be, right? A lot of the battery peers even at higher scales are above 20% on the gross margin line. And our goal is obviously to get there and even higher. On pricing, I do feel pretty good about where the pricing levels were for the SiCore product. And that in combination with just a larger share of our revenues being SiCore is what drove the increase, plus, of course, the run rate itself contributed to that. But I think the biggest contributor was really mix because of our contract manufacturing model, right? Operator: The next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: My congrats to Ricardo as well. I'm just hopping on the call just now, so my apologies if any of these have been asked. The second-generation SiCore, what's the margin profile of that battery? Ricardo Rodriguez: We haven't laid out explicitly, but the goal is to get that north of 20% at closer to 80% of our capacity, which we still haven't reached, right? So -- but our goal is to just keep pushing that and we're, frankly, testing where that should be as revenue materializes. Derek Soderberg: Got it. And what are some of the trade-offs between the first gen and the second gen, what might slow down that path to 80% mix of the second generation? What are some of the trade-offs from your customers' perspective? Kang Sun: We refer first gen the SiMaxx -- SiMaxx is our first-generation product and SiCore is our second-generation product. We don't have... Derek Soderberg: Okay, so it's not second generation SiCore. Kang Sun: No, we don't have -- we keep improving. We could say we have second generation, but we may have a third generation already in the lab, but we don't separate it that way, okay? We consider SiMaxx is the first-generation Amprius product and the SiCore is a second generation. Derek Soderberg: Got it. Okay. That's helpful. And then could you just give us an update on the time line to cash flow breakeven? I think, previously, you guys were expecting that to happen sometime in 2026 potentially or maybe even early '27. But it feels to me like the company is growing faster than expected. You've got quite a bit of scale to work with here and it seems like the customer growth is quite a bit ahead of at least my expectations. Can you just provide an update on path to cash flow breakeven? Ricardo Rodriguez: Yes. I mean, I think it's tough to pin down a specific quarter for that. But if you take our results from here the most recent quarter, with another $10 million of revenues, we would have had positive EBITDA. And our EBITDA is a very good proxy for cash flow, right, given that it's pretty clean. D&A is not huge and in essence, only the stock-based comp, and we have no I and not T in there. And so it's really just a matter of time for us to get that incremental revenue. And at that point, we can be not just EBITDA positive, but also pretty closely behind cash flow positive as well. Operator: The next question comes from the line of Ryan Pfingst with B. Riley Securities. Ryan Pfingst: I'm jumping around calls, so apologies if anything repetitive. But on the margin side, Ricardo, another nice jump quarter-over-quarter here in the second quarter. Just curious if you could give some color on what you expect as we continue to see revenue expand on the margin side? Ricardo Rodriguez: Yes. I think it's again echoing my earlier point, it's really more driven by mix. We do believe that incremental revenue, depending on the mix of that and the customers that it goes to could be accretive beyond where we're currently at the gross margin level. I'd love to get the company 20% and above here as soon as we can, but obviously, understanding that there are quite a few puts and takes, especially as we look to make a larger portion of our revenues come from the SiCore product versus SiMaxx. So I think as we manage that transition, you'll see us pick up a couple of points of gross margin here. One thing to note is that this is -- this will be lumpy, right, given the not just the customer diversity, but also the product diversity. I do think it's -- we're not totally out of the woods of having fluctuating gross margins. And so I would caution here on modeling something that's just straight up into the right on gross margin as we pick up incremental revenue because there are quite a few puts and takes within it, mainly mix driven that we certainly keep in the back of our minds to make sure that these expectations are realistic, right? But kind of going back to what I said earlier, like, frankly, I'm more focused on the EBITDA margins. And even if gross margins stayed where they were with another $10 million of revenues, we would have had positive adjusted EBITDA, and that's very meaningful progress. And I think it puts us well ahead of our peers, well ahead of anybody scaling a similar product, and this is a testament to the team's focus on having the leanest cost structure possible at the OpEx level. Ryan Pfingst: Appreciate that detail. And then turning to your manufacturing capacity update, which I know you touched on in the prepared remarks. But curious how important it is to establish contract manufacturing capacity in the United States for certain customers, maybe on the defense side or otherwise related to national security. Does that make it more of a near-term priority for you guys? Or are you able to be patient here with establishing something in the U.S.? Thomas Stepien: It is important [Technical Difficulty] so they don't have again, sort of ahead of [indiscernible] certain data in 2026. But we know we're [indiscernible] domestic batteries and we [Technical Difficulty]. Kang Sun: Since you cannot hear from Tom clearly, let me elaborate a little bit more. Develop -- we have a fraction of the customer that demand the product made in United States. Currently, the driver for our activity in the United States, primarily from this DIU program. So the DIU program, the Department of War, grant up certain -- $12 million contract require us to build advanced battery silicon anode-based battery pilot line, okay? You can call pilot line, you can cause small production line by next summer. Majority of our customers still oversee customers. Operator: The next question comes from the line of Chip Moore with ROTH MKM. Alfred Moore: I wanted to ask maybe on the $53 million in orders, near-term orders. Maybe you could put a finer point on that? Should we think about next couple of quarters potentially on that? And then Ricardo, to your point, around mix and potential for some lumpiness or margin impacts, just anything to call out there? Ricardo Rodriguez: Yes. I mean, maybe I'll start with the second part of the question, if that's okay. I mean really nothing much beyond what I've already mentioned, Chip. I think we have to work through this backlog, obviously, and that will keep building up. But at the same time, we also need to have the supply in place to fulfill it, right? And that will ultimately be the decade of what the revenues can be in the near term. And on the gross margin side, I'll just echo what I said before, right? I think you can still be lumpy. We do expect progression as we sell more scores a proportion of total sales. And I mean if we would have had another $10 million of revenue that we could have fulfilled, we would have had a breakeven or slightly positive adjusted EBITDA in the quarter. Thomas Stepien: On the first part of the question, Chip, hopefully, I'm coming through here, is a -- the large purchase order is for a year. It's not necessarily in year that they don't want $35 million divided by 4 every quarter, but there's these different layers of revenue that we're building in, and the backlog is going in the right direction. So that's -- so we like to see that versus some of the quick turn purchase order comes in and we ship within the quarter. So we're building some customer-facing muscle, and we're getting into these longer-term contracts. And they're really synchronized with the customers' end use, right? They have deliveries to their customers of their crafts, and that's really what sets the rhythm of when we deliver cells. Alfred Moore: That's great. That's helpful. And maybe, Tom, just a follow-up there, sort of the flywheel effect of repeat orders. You had a nice 1 year. It feels like you're starting to hit critical mass. Just understanding things will still be lumpy, but how are you thinking about potential for these repeat orders to keep coming in and get bigger? Thomas Stepien: We are incredibly optimistic, right? I mean we have a great product. It's industry-leading. The market is strong. There's a number of data points there. So we feel good about what we've got. We feel good about where we're going. This is a tricky quarter because of Thanksgiving and Christmas here in the U.S. Next quarter, we'll have some lunar holidays. So we got to work through some of that, but we feel good about where we are. Alfred Moore: Perfect. If I could maybe ask one last one, related. I guess you talked about some funding anecdotally seen some interest out there on defense and drones. Just any more detail there and then government shutdown. Is that another thing you have to navigate that could slow things down? Thomas Stepien: Yes, we're seeing some announcements. One of our customers announced today that they won an Air Force shoot-out, and we're obviously very excited to hear that. So it's starting. And if you take apart the Beautiful Bill as a couple of analysts have, these numbers are 4x, 5x in 2026 budget on what they were in previous years. So that bodes well for the future, and we're trying to make sure that everyone is aware of what we got, doubling flight time, extending payloads, that all is very meaningful in the eyes of our customers. Ricardo Rodriguez: And if I may add just one last thing there, addressing your point on the shutdown, Chip. Our DIU contract has been getting paid on schedule even through the shutdown. So we feel confident about that. Operator: The next question comes from the line of Sameer Joshi with H.C. Wainright. Sameer Joshi: It was good color in the prepared remarks and some good questions as well. I would just like to dig into the pipeline -- dig a little bit deeper into the pipeline over the next, say, 4 to 6 quarters? And see whether it is mostly UAS-related or LEV is part of that mix as well? And then in relation to that, how does the margin profile -- the gross margin profile change? I know Ricardo, you had very exhaustive discussion about the lumpiness that we can expect over the few quarters. But does this product mix or end customer mix make a difference in the gross margins? Ricardo Rodriguez: Yes. So maybe I'll address that latter one, and then I'll let Tom address the points on the pipeline. I mean I think I would look at the current gross margin that we have as a good base to build on with much of the variations are happening above this level, especially if we're able to get incremental revenue. So we're not concerned on falling below the current levels on mix above the current revenue levels, right? But definitely, some of the longer, larger volume agreements have different pricing than shorter-term very specialized applications. And that's what will drive the potential fluctuation in the gross margins. And then at the same time, we're managing obviously a pretty dynamic tariff and logistics environment where fortunately, we're able to price for a lot of the stuff but that can drive lumpiness in this as well. Thomas Stepien: Yes. On the first part of your question about the complexion of the pipeline, it's strong, as we mentioned, and it's growing. This quarter, we said it was 75% aerospace, right? That includes these high-altitude platform systems, drones, electric aircraft, both the conventional wing and the vertical takeoff. That 75% was actually down a little bit on a percentage basis compared to Q2, but the revenue was up by the 42% that we talk -- that we spoke of. So I look at that as a better balance between some of the other segments that we're serving, especially light electric vehicles. So it will be similar, maybe a little bit higher, a little bit lower in terms of that 75% next quarter, but better balance, I think, would be my main message there on the pipeline. Sameer Joshi: And just to make sure, the margin profile for these 2 sectors is different, right? Or is it -- are you maintaining the margins for the LEV as well? Thomas Stepien: The margins are similar for the LEV as for the aviation market. Yes. Sameer Joshi: Yes. And then just a clarification or maybe a little bit color on this Amazon Devices Climate Tech Accelerator program, how significant should we consider this to be for you as a company going forward? Thomas Stepien: It's a multi-phase program that we're in, and we've made it to the second, third round. We're actually up in Seattle today, as a matter of fact, talking to them again. We think of it as having a seat at the table. It's sometimes hard to break into some of these large companies. But when you get invited in, as we have, you get quick access to the engineering folks and you're able to tell your story more efficiently. So look, we still got to do a lot of work, and we still have to win their trust and their business. But we have a seat at the table. Sameer Joshi: Ricardo, congrats on joining the company. Ricardo Rodriguez: Thanks so much. Happy to be working together. Operator: The next question comes from the line of Ted Jackson with Northland Securities. Edward Jackson: I'll try to run through a quick. I know we're coming to the end of the call. Just a housekeeping one. With regards to revenue, did you have any design service or government grant revenue in the quarter? And if so, what was it? Ricardo Rodriguez: The government grant was actually in our other income, and it was roughly $400,000. Edward Jackson: You introduced 5 new SiCore sales during the quarter. I mean the last time you gave any kind of color with regards to the number of SKUs the company had was at 14. Where are you at with the SKU count right now? Thomas Stepien: We have 20 SKUs, more coming, but the catalog today shows 20. Edward Jackson: You kind of backed into your capacity saying that you had about 50 million cells of capacity based upon your most popular cell which begs the question with -- I don't know if we could talk about the quarter, year-to-date, however, kind of what's your run rate with regards to that capacity? If you can make 50 million -- theoretical 50 million cells like your, call it, $21 million of battery products that you sold in the quarter, what would that be on an annualized run rate? Thomas Stepien: Yes, I don't think... Ricardo Rodriguez: Yes, that one is tough to pin explicitly because given the different SKU count, right, and the fact that... Edward Jackson: No, I'm asking if you assumed that it was just the same battery. You see what I'm saying like -- I'm just trying to get a sense with regards to you've got this much capacity, like where are you in terms of filling it, where we get to the thing that your margins are going to be north of 20%, you're at 80% of that capacity. You see where we're going in terms of the thought process. So how far -- where you are right now? How far are we to getting to that 80% because then it gets -- kind of when you think about well, that's where we can think about your margins. So I'm not asking -- I'm just kind of asking like if you assume that you were -- I don't know, but you keep on going. Ricardo Rodriguez: Yes. I mean it's a highly theoretical question because in reality, it's not working that way, but it would be a couple of hundred million dollars, right? Thomas Stepien: Yes. I remember we said -- Yes, I think we said, it was the Kang in our May call that if we actually utilize that 1.8 gigawatt hours of capacity, we'd be a $1 billion company. Kang Sun: Right. You use our ASP today times the capacity availability, we are going to be a $1 billion business. Edward Jackson: Okay. A little nuance question with regard to the gross margins. You're at the point now where you're taking a lot of your engineering work at a cost of goods and bringing it down engineering. It's just kind of part of the process of the growth of the company. That happened this quarter. Do we have to see -- are we going to see more of that in periods to come? And was that something that we're not going to see as much of an impact with regards to the margins? What kind of noise will we see with that in the coming quarters or the coming year? Ricardo Rodriguez: Very little. I mean, that adjustment here quarter-over-quarter was just a couple of hundred thousand dollars. It was not -- it didn't cross the $1 million line within our cost of revenue. Edward Jackson: Okay. And then I'll ask one more that's more front because these are all kind of little pivot ones. With regards to -- you're being funded to build a pilot line with this DIU contract. And then what's the end game with that? So then you have this pilot line that you put together, done a proof of concept for the government that you can make, what does they want? I mean is that something then that they have the process and then they're going to fund you to make a bigger factory that then they're going to go out and bid for someone else to do it. I'm saying like where does that -- what's the vision for that, assuming that it goes forward and you get success? Thomas Stepien: Yes. Let me take that. So the DIU, a couple of points here. First and foremost, it was a competitive solicitation. I think there were 7 or 8 other companies that took a swing and they chose Amprius. We have a pilot line in Fremont. The dollars that we have received helps increase the capacity of that pilot line. And then, as Ricardo mentioned in his part of the script, also the capability, we are adding electrode manufacturing. That part of the factory of our pilot line did not exist. Their interest, the DIU's interest is domestic batteries. And they see us as in the front of the pack, and they want to encourage us to make those available. There are certain sizes that are very popular. I mentioned the SA08, that's a very popular size. They want us to make those and the idea of a pilot line, of course, is that we have those capabilities for many of the defense customers and whether it's primes or the folks who the companies that serve those primes. Edward Jackson: But I mean like -- I mean a pilot line is still not making -- it's not a production level facility. I mean the goal is for them to -- goal that clearly is for them to develop a domestic battery production capability. I mean do you ever have any discussions with them with regards to what that might look like as they go forward with a larger factory? Does Colorado come into play? Would they -- if you go proof all this out, would they want you to go license your capabilities, you see them going like what's the kind of the longer end game with it? I mean unless you don't... Thomas Stepien: Sure. Yes. We're very close with the DIU and the DoD generally. Their interest is, as you say, domestic batteries. They have said publicly that there are solicitations that are coming out early in this fiscal year, probably delayed here because of the shutdown, but I think we'll see some specific additional solicitations related to domestic production. Edward Jackson: Okay. Well, it's 5 O'clock. I could keep going. Congrats on the quarter. Super exciting to cover you. So talk to you on. Thomas Stepien: Thank you. Operator: Thank you. At this time, this concludes our question-and-answer session. If you have any additional questions, you may contact Amprius' Investor Relations team at IR@amprius.com. And now I'd like to turn the call back over to Dr. Sun for his closing remarks. Kang Sun: Thanks again, everyone, for joining us today. As a reminder, you can find out more about our company, receive additional updates and learn about the upcoming events from the Investor Relations section of our website. We look forward to updating you on the exciting progress we are making in transforming the electrical mobility market. Finally, I'd like to thank our employees, partners and the shareholders for their continued support. Operator: Thank you for joining us today for Amprius Technologies Third Quarter 2025 Earnings Conference Call. You may now disconnect. Have a good day.