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Rebecca Morley: Good morning, and welcome to the Enbridge Inc. Third Quarter 2025 Financial Results Conference Call. My name is Rebecca Morley, and I'm the Vice President of Investor Relations and Insurance. Joining me this morning are Greg Ebel, President and CEO; Pat Murray, Executive Vice President and Chief Financial Officer; and the heads of each of our business units: Colin Gruending, Liquids Pipelines; Cynthia Hansen, Gas Transmission; Michele Harradence, Gas Distribution and Storage; and Matthew Akman, Renewable Power. [Operator Instructions] Please note, this conference call is being recorded. As per usual, this call is being webcast, and I encourage those listening on the phone to follow along with the supporting slides. We will try to keep the call to roughly 1 hour. And in order to answer as many questions as possible, we will be limiting questions to one plus a single follow-up if necessary. We'll be prioritizing questions from the investment community. So if you are a member of the media, please direct your inquiries to our communications team, who will be happy to respond. As always, our Investor Relations team will be available following the call for any follow-up questions. On to Slide 2, where I will remind you that we'll be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures summarized below. And with that, I'll turn it over to Greg Ebel. Gregory Ebel: Well, thanks very much, Rebecca, and good morning, everyone. Thanks for joining us on the call today. Before we start, I'd like to take a moment to congratulate Cynthia, who announced plans to retire at the end of 2026. Her outstanding leadership and dedication to Enbridge over the past 25 years is inspiring, and I'm grateful that she'll be continuing to provide guidance to our executive team through the end of next year. I'd also like to congratulate Matthew, who will transition to President of our GTM business at the end of this year as well as Allen Capps, who has been appointed to succeed Matthew as the Head of our Corporate Strategy Group and President of our Power business. As we've said before, and it remains true today, our investment in people creates a deep bench of executive talent to ensure a smooth transition and strong leadership as we move forward. Now moving on to our agenda for this morning. I'm excited to share another strong quarter and highlight the significant progress we've made throughout all segments of our business. It has been a busy quarter for us with new projects serving a wide range of customers across our core franchises. We're going to start today with an update on our financial performance, execution of our increasing number of secured growth projects and prospects. And I'll also highlight the strong returns and stability our business continues to demonstrate and provide an update on each of our four franchises. Pat will then walk through our financial results and capital allocation priorities. And lastly, I'll close the presentation with a few comments on our First Choice value proposition before we open the line for questions from the investment community. We had another strong quarter of results, including record third quarter adjusted EBITDA. That growth was driven by incremental contributions from a full quarter of U.S. gas utilities and organic growth within our gas transmission business. This keeps us on track to finish the year in the upper half of our EBITDA guidance, and we expect to land around the midpoint of our DCF per share metric. Our debt-to-EBITDA is 4.8x for the quarter and remains within our leverage range of 4.5 to 5x. Our assets remained highly utilized during the quarter with the mainline transporting approximately 3.1 million barrels per day, a third quarter record, thanks to strong demand. We reached positive settlements at both Enbridge Gas North Carolina and Enbridge Gas, Utah, which we expect to drive growth as rates begin to take effect. We're still on track to sanction Mainline optimization Phase 1 this quarter and Phase 2 next year, and we'll get into more details on those projects during the business update. Over the quarter, we added $3 billion of new growth capital to our secured capital program, showcasing continued execution on the commitments we laid out last Enbridge Day. In liquids, we sanctioned the Southern Illinois Connector, adding incremental egress out of Western Canada and providing a new long-term contracted service to Nederland, Texas. In Gas Transmission, we sanctioned expansions of our Egan and Moss Bluff storage facilities to support the LNG build-out along the U.S. Gulf Coast. And in the deepwater Gulf, we're expanding our previously approved Canyon system to provide transportation services for bp's recently sanctioned Tiber Offshore development. And earlier in the quarter, we sanctioned the Algonquin Gas Transmission enhancement project in the U.S. Northeast as well as the Eiger Express gas pipeline out of the Permian. And finally, we have advanced a joint venture with Oxy to develop the Pelican CO2 hub in Louisiana. These projects demonstrate the competitive edge from our all-of-the-above approach and our ability to meet growing energy demand across all parts of our business. Now let's look at our value proposition and recap our year-to-date execution before diving into the business updates. Enbridge's low-risk model continues to deliver superior risk-adjusted returns in all economic cycles. Our cash flows are diversified from over 200 high-quality asset streams and businesses that are underpinned by regulated or take-or-pay frameworks. Over 95% of our customers have investment-grade credit ratings. We have negligible commodity price exposure and the majority of our EBITDA has inflation protection. All of this results in Enbridge's industry-leading total shareholder return while maintaining lower volatility compared to peers and broad index constituents. Looking ahead, Enbridge's utility-like business model remains well-positioned and policy support for new investment in critical projects is improving, creating a business environment that incents coordination, dialogue, and growth. And I'm very pleased with how the team continues to grow the business and excited by the opportunities ahead for Enbridge. With that said, let's jump into the business unit updates, starting with Liquids segment. Mainline volumes had another strong quarter, delivering a record 3.1 million barrels per day on average for Q3. The system was a portion for the entire quarter, reflecting continued strong demand for Canadian crude and the need for reliable egress out of the Western Canadian Sedimentary Basin. Given the continued strong demand for the Mainline this year, we expect to reach the top of the performance color ahead of when we initially anticipated. This is a great sign for us and our shippers. We're achieving the maximum allowable returns under the mainline tolling settlement, delivering competitive value to our shareholders and our alignment with customers incentivizes us to move the increased volumes and provide them with access to the best markets. This leads in well to mainline optimization projects that I'll discuss shortly here, in addition to the previously announced projects like Mainline capital investment. In the U.S., we sanctioned the Southern Illinois Connector project, which is backed by long-term contracts for full path service from Western Canada to Nederland, Texas. Once complete, the new pathway will add 100,000 barrels per day of contracted full path capacity to the U.S. Gulf Coast via a 30,000 barrel increase per day on Express-Platte system, 56 miles of new pipeline between Wood River and Patoka, and utilization of 70,000 barrels per day of existing capacity on the Spearhead Pipeline. Looking ahead at additional egress projects, we are continuing to advance approximately 400,000 barrels per day of incremental capacity to the best refining markets in North America via mainline optimization Phase 1 and 2. MLO1, which will add 150,000 barrels per day of incremental egress is entering the final stages of customer approvals. and we are still on track to make FID this quarter and place the project into service in 2027. MLO2 has made significant progress as well, and that project could now add another 250,000 barrels per day of additional capacity in 2028. This second phase of mainline optimization will utilize capacity on the Dakota Access Pipeline, and we're happy to announce that we're teaming up with Energy Transfer to make that happen. So stay tuned for more on MLO2, including an open season announcement early in the new year. Relative to potential greenfield projects that would require significant energy policy change, these brownfield opportunities offer the quickest and most cost-effective way to adding close to 500,000 barrels a day of capacity to satisfy the near-term production increases forecasted out of the basin. Finally, for liquids, we added the Pelican sequestration hub to our backlog, a project in Louisiana, which will provide transportation and sequestration for 2.3 million tons per year of CO2 and is underpinned by 25-year take-or-pay offtake agreements. We will partner with Occidental Petroleum to advance the hub with Enbridge managing the pipeline infrastructure, while Oxy develops the sequestration facility. Now let's turn to our gas transmission business. This quarter, we've sanctioned an additional capital-efficient connection to our Canyon pipeline system to support bp's Tiber development in the deepwater Gulf. Originally announced last October, the Canyon system will transport both crude oil and natural gas under long-term contracts with the Tiber system expected to cost USD 300 million, taking the total Canyon pipeline development to about USD 1 billion and entering service in 2029. In the U.S. Northeast, the AGT Enhancement will increase capacity of the Algonquin pipeline, providing additional natural gas to the critically undersupplied U.S. Northeast, serving local utility demand and reducing winter price volatility. That project is expected to cost USD 300 million and enter into service in 2029. Switching over to the Permian. The Eiger Express Pipeline is a 2.5 Bcf a day Permian egress development running adjacent to the operating Matterhorn Express system and is now sanctioned and expected to enter into service in 2028. Since our initial 2024 investment in the Whistler joint venture, which holds these pipelines, we have invested $2 billion in operating assets and sanctioned another $1 billion of capital expected to enter service through 2028. Also in the Gulf region, we've sanctioned two natural gas storage expansions to support the market, which continues to tighten due to increased LNG, Mexican exports, and regional power demand. Egan and Moss Bluff storage systems, both salt caverns with exceptional connectivity and withdrawal rates are being expanded to offer a combined 23 Bcf of incremental capacity. We expect to invest approximately $500 million in these facilities at 5 to 6x EBITDA builds and come into service in phases through 2033. It's worth taking a moment to dive a little deeper into the growing North American storage market and how we are positioned to serve our customers. Between Moss Bluff and Egan as well as the expansion of Aitken Creek announced last quarter, Enbridge is now set to add over 60 Bcf of new natural gas storage directly adjacent to the major LNG centers in North America. These expansions will come in a timely manner as there is over 17 Bcf per day of additional LNG-related natural gas demand expected to enter service by 2030. This demand dramatically shifts supply economics and increases the importance of strategically located storage capacity. We are connected to all operating U.S. Gulf Coast LNG terminals and continue to invest heavily in infrastructure to enable the future growth of North American LNG. To date, we have sanctioned over $10 billion in projects with direct adjacency to operating or planned export facilities. There is a growing storage deficit across the U.S. Gulf and British Columbia coasts and having existing assets with the opportunity to execute brownfield expansions is incredibly valuable to our customers and investors. Through acquisitions and expansions, we have positioned ourselves as an industry leader in the storage space. With more than 600 Bcf of storage across our North American businesses, we can strongly support our customers as they continue to build out North America's LNG capacity and navigate the overall power demand growth we are expecting in the future. Now let's spend a few minutes recapping all the work we've done in Gas Transmission segment since Enbridge Day earlier this year. At our Investor Day in March, we shared Enbridge's $23 billion gas transmission opportunity set, noting the potential to FIT up to $5 billion in projects within 18 months. This opportunity set has grown since then. And today, a little over 6 months later, we've already announced over $3 billion of new projects across our footprint, serving all pillars of natural gas demand growth, including reshoring, LNG, coal-to-gas switching and data centers. With over 23 Bcf a day of new gas demand coming online by 2030, critical investment will be needed to ensure reliable service for customers. And with this list here, you can see we are doing our part, deploying capital to meet the significant increase in natural gas demand across North America regardless of the end-use market. Now let's turn to our gas distribution business. The GDS segment is yet another way for us to capitalize on power demand theme. We've seen data center and power gen opportunities continue to be a tailwind for the segment with over 50 opportunities that could serve up to 5 Bcf a day of demand, including almost 1 Bcf per day of demand for already secured projects. During the quarter, we also reached positive rate settlements with two of our U.S. utility regulators, which are currently being reviewed for final approval. In North Carolina, allowed return on equity increased to 9.65% on an equity thickness of 54%, resulting in a revenue requirement increase of some USD 34 million. The settlement also introduces additional rate riders that allows for quick cycle return of capital for our major projects in North Carolina. These rates came into effect on an interim basis on November 1. In Utah, we filed a settlement for a revenue requirement of USD 62 million, which supports continued investment at attractive returns. We are expecting a rate order before the end of the year with rates to come in effect on January 1, 2026. Both these rate cases showcase the importance of natural gas as a safe, reliable source of affordable energy. Now I'll continue with the power demand theme with our Renewables segment. As you can see from this slide, renewable projects have been a great place to invest in the last few years, driven by strong PPA prices, decreasing supply costs, and the associated tax benefits. The four projects on this slide showcase over 2 gigawatts of power backed by agreements with some of the largest technology and data center players in the world, including Amazon and Meta. Fox Squirrel and Orange Grove are currently operational. Sequoia Solar will fully enter service in 2026 and Clear Fork will follow entering service in 2027. Looking ahead, we still have a number of projects in the queue that we're advancing. But as always, we'll remain opportunistic and continue to stand by our strict investment criteria. With that, I'll now pass it to Pat to go over our financial performance. Patrick Murray: Thanks, Greg, and good morning, everyone. It's been another strong quarter across all four business units, thanks to continued high utilization of our assets as well as recent acquisitions. Compared to the third quarter of 2024, adjusted EBITDA is up $66 million, DCF per share is relatively flat and EPS is down from $0.55 to $0.46 per share. The decrease in EPS is primarily due to the profile change associated with our gas utilities, where Q3 tends to be a softer quarter for EPS as EBITDA is seasonally lower, but items such as interest and depreciation remained flat quarter-over-quarter. In Liquids, despite the strong mainline volumes, contributions from the Mid-Con and U.S. Gulf Coast segment are tracking lower due to tighter differentials and strong PADD II refining demand. In Gas Transmission, we experienced a strong third quarter with favorable contracting and rate case outcomes on our U.S. gas transmission assets and contributions from the Venice extension and the Permian joint ventures we added since last year. The Gas Distribution segment is up relative to last year, thanks to a full quarter contribution from Enbridge Gas North Carolina as well as benefit of the quick turn capital we experienced within our Ohio utility. In Renewables, results were up from last year with higher contributions from our wind assets and from the Orange Grove solar facility recently placed into service. Higher financing and maintenance costs from the acquisition of the Enbridge Gas North Carolina assets kept DCF per share relatively flat year-over-year. I'm pleased to once again reaffirm our 2025 guidance and growth outlook across all metrics. Our resilient business model positions us to deliver strong and predictable results through all cycles. We remain confident we will achieve full year EBITDA in the upper half of our guidance range of $19.4 billion to $20 billion, but don't expect to exceed the top of the band. As we mentioned on previous quarterly calls, due to higher interest rates, particularly in the U.S., we continue to expect DCF per share at the midpoint of our $5.50 to $5.90 per share guidance range. Mainline volumes, FX rates, and the acquisition of an interest in the Matterhorn Express Pipeline earlier in the year continue to be the tailwinds to the full year guide. This is partially offset by higher interest rates, along with tight differentials and strong PADD II refining levels, which are expected to continue into the fourth quarter and thus have been reflected as an additional headwind relative to our assumptions heading into the year. Now let's quickly discuss our capital allocation priorities. We remain firmly committed to a thoughtful capital discipline process, remaining within our $9 billion to $10 billion per year annual growth investment capacity as we pursue the wide suite of opportunities ahead. Our highly contracted cash flows support a growing and ratable dividend within our 60% to 70% DCF payout target range, ensuring long-term shareholder returns. We've grown our dividend for 30 consecutive years, a real testament to the stability of our business and the fundamentals that underpin it. On the leverage front, our consolidated net debt to adjusted EBITDA remains comfortably within our target range of 4.5 to 5x. This quarter, we saw $3 billion of newly sanctioned capital advanced. As I've mentioned in the past, I like the fact that we're generating opportunities in all of our businesses, supplementing the next few years with accretive projects while also adding visibility into the back part of the decade with opportunities like our gas storage expansions and our offshore gas transmission projects, which we've announced this quarter. Our capital allocation focus will remain with brownfield, highly strategic and economic projects supported by underlying energy fundamentals, and I'm excited to see this opportunity set materialize into the future. With that, I'll pass it back to Greg to close the presentation. Gregory Ebel: Thanks very much, Pat. It was indeed a busy quarter on the growth capital side, and I'm extremely pleased with the progress we've made since Enbridge Day in March. The North American energy landscape continues to evolve with energy demand driven by LNG development, power generation, data centers and baseload growth. Enbridge will continue to play a pivotal role in that growth within a disciplined framework that delivers consistent long-term shareholder value. Our low-risk utility-like business with predictable cash flows is underpinned by long-term agreements and regulatory mechanisms that has allowed us to increase our dividend for 30 consecutive years across a wide range of economic cycles and conditions. Going forward, we expect to achieve 5% growth through the end of the decade, supported by our $35 billion in secured capital. Our scale offers optionality that few in our industry possess, and we'll continue to evaluate accretive investments across our footprint. Lastly, I'll just point out one housekeeping item. As has been typical, we intend to issue our '26 guidance for investors in early December. So please watch for that announcement on December 3. With that, I'll open the call to questions. Operator: [Operator Instructions] Your first question today comes from the line of Spiro Dounis from Citi. Spiro Dounis: I wanted to start with gas distribution and storage. The release mentioned seeing an acceleration there in commercial activity and it sounds like demand from data centers and power being those initial expectations. So just a multipart question here, but curious what's suddenly driving that acceleration, if there's a particular region where you're seeing it? And how are you thinking about the time frame for when these could start to materialize? Michele Harradence: Sure. So it's Michele Harradence here, Spiro, and happy to discuss that. And I would say we're seeing it across the board. I mean that's the real value of the diversity of the utilities we have. So -- when we look at about the projects that make up that 7 Bcf or so of data center opportunities that we're talking about, we divide that aspect into what I'd call our baseload demand, our data centers itself and the coal to gas. So it's a lot about power generation. It's the electrification tailwind that we've talked about. So you could bucket that, I would say, the baseload demand is there in Ontario, it's there in Ohio, it's there in Utah, data center growth, lots of early-stage developments in Ohio and Utah in particular. I would say we're seeing up to 8 gigawatts between the two of them. And that's some of the early-stage developments we're seeing. And then the mid-stage stuff, we're estimated to be serving over 6 gigawatts in those two jurisdictions alone. And Ontario has a lot of growth as well. And then finally, coal-to-gas conversion, again, to support power generation would be in North Carolina. But really, when we look across all the capital opportunities we have for GDS, that's maybe 20% of what we're looking at is the data center and power generation opportunity. I mean just the good standard core utility growth, leveraging our modernization program, still lots of opportunity there. We're seeing a lot of what I'd call major projects. We just put our Panhandle regional project into service. That's close to $360 million in Southwest Ontario. We have our Moriah Energy Center, the LNG plant in North Carolina. We have 215 Phase 1 and 2 in North Carolina. That's -- those two combined are USD 1.2 billion alone. We're doing a reinforcement project in Ontario up in Ottawa. That's another $200 million. I mean, there's a lot of growth and opportunity going on in the utilities. And then our residential growth, although it softened in Ontario, continues to be strong in places like North Carolina and Utah, where there's a lot of folks coming. And finally, we're looking at our storage opportunities, and there's a good chunk of our capital that continues to go to storage for us. So a good suite of capital there, but hopefully, that answers your question. Gregory Ebel: Yes. Good upside, Spiro, from what we thought when we bought the assets 2 years ago. We didn't -- a lot of the folks hadn't seen the data center, particularly in places like Ohio, we knew Utah and North Carolina would grow nicely. But Ohio, the opportunity there that's happening on the industrial side and the power side and data center related is really great. I think people are kind of forgetting the fact it's not just about power right across the board, not only the secondary benefits, i.e., industrial growth, caterpillars, GEs, et cetera, having to build things and equipment, there's tertiary growth associated with DC and AI, which is really going to drive all these commodities, including oil, as you see, higher GDP, higher industrial growth. Who's building all this stuff? They're using gasoline, they're using diesel, they're using oil. And that -- so I see it right across the entire system. Spiro Dounis: Great. That's helpful color. Second question, maybe just going to Line 5. You all recently received a favorable decision from the Army Corps there. And it sounds like you expect state permits to be confirmed soon. So just curious how you're thinking about starting construction on that segment? And how do the outstanding item in Michigan play into next steps here? Colin Gruending: Sure, Spiro. It's Colin here. So I'll try to abbreviate this answer, sometimes Line 5 questions get a little longer. But I would say that the permitting on both the Wisconsin reroute and the Michigan tunnel are regaining momentum, obviously, with the White House and energy security and just getting things done. So I would say that we are -- in Wisconsin here, we're awaiting the administrative law judges findings on the hearing that we've recently completed should have that soon. And we'd look to complete the Wisconsin reroute in 2027 and the tunnel is a few years behind that. Operator: Your next question comes from the line of Aaron MacNeil from TD Cowen. Aaron MacNeil: It's great to see the new disclosure around Mainline optimization Phase 2. Am I right to view this as an acceleration in terms of the cadence that you're planning to offer expanded egress to Canadian producers? And if so, what's driving that expedited timing? Is it customer demand? Is it sort of a race to be first to market? How should we think about it? Gregory Ebel: Well, maybe I'll start with a little context because I think you're right. This is maybe not one some people expected, although I'd say people have always underestimated what we can do with that super system. So remember, first of all, you got customers out there that are in particular Canadian customers looking at from an oil sands perspective, you don't have the type of depletion issues that are going on in some of the shale plays. You've got a strong U.S. dollar, which is critical, driving netbacks. So you got quite a different environment going on, obviously, in Canada and some other jurisdictions that analysts may focus from that perspective. But really the attitude of customers and what we can offer. But Colin, do you want to talk about that super system element of it? Colin Gruending: Yes. I think -- I don't know that it's an acceleration here per se. I think it's being game on here for a while here. And I think the Canadian basin, as Greg was saying, is it turns out relatively advantaged compared to other basins. So maybe we have lost focus on it, but our customers haven't. And we've been all over the fundamentals, we see that 500,000, 600,000 a day of supply growth by the end of the decade. And I think our announcements here line up with what we talked about at Enbridge Day generally. I mean, the team is working hard on this, and I'm very proud of them, the engineering and commercialization of it is very creative and trying to seize the moment. Yes, if there's bigger policy unlocks, there could be much more upside to monetize the trillions of dollars of value up in Northern Alberta. But even under the base case, the 600,000 a day is significant. We have, I think, consistently talked about our southbound playbook. And again, if there is an unlock much bigger, then the West solution can come into focus, kind of a companion to that unlock. But in the base case, South is where it's at. Our customers prefer that direction, integrated business models, lots of big efficient, long-lived refineries that are very competitive and of course, less competition now from Venezuela and Mexico, inbound heavy. So Canadian Oil will gain market share in that basin. I think our solution set is unchanged. We're proud to sanction Southern Illinois Connector. Maybe in baseball terms, that's our leadoff hitter, and it's now on base. We've sanctioned this. This is a dual flow path, 30,000 new egress on Platte and the other 700 coming down our spearhead pipeline existing capacity, and we're going to move that on ETCOP with our -- which we partially own with our partner Energy Transfer. MLO1 is at the plate right now, and we expect to make commercializing announcement here in the next couple of months before year-end. Again, that's 150 a day. I think that's well chronicled. It's capital efficient. permit light using existing pipe in a right of way. And recall, we've already successfully run an open season on the Flanagan South path through Seaway with our partner enterprise products. So that's well advanced. So MLO2, continue the analogy here, I'd say is in the batter's box. And as Pat and Greg mentioned, it's got a bigger bat than we thought we had before. We've upsized that from 150 to 250 a day. And again, similar to MLO1, existing pipe and right of way. And so again, using joint venture partners, this is all coming together nicely, not an acceleration, but I think continuing through here and hopefully get the basis loaded. Gregory Ebel: Yes. I hope -- and obviously, not lost on you, Aaron, but as Colin goes through that, you just tick off all those pipeline systems. And it's not just about the mainline. You got Express-Platte, you got ETCOP, you got DAPL, which we own all of our parts of right through the whole system. So there's multiple ways for us to serve our customers and multiple ways for our investors to win. And that's the pretty exciting part that I don't always feel gets fully valued in the market for sure. Aaron MacNeil: That's a ton of great context. As a related follow-up, a significant portion of the $35 billion of secured capital comes into service in 2027. As we think about all these liquids projects that you just outlined, continued success in GTM, steady growth across the utilities. Do you see sort of a, I guess, what I'll call a high plateau in terms of capital entering into service towards the end of the decade? And do you see any timing or capital sequencing issues to maintain the spend between $9 billion and $10 billion? Gregory Ebel: Maybe Pat will want to add to this, but I don't think so. I mean, we're constantly adding to the back end. Look, I think that's not unusual for companies like ourselves. Just go through the stuff that Colin went through, right? You're talking '27, '28 and then '29, '30, you'll see additional pieces as well. The gas trend deep Gulf stuff is all '29. Storage piece comes in some late '29, '30. So I think it will stay up at that amount. That's what gives us the confidence on 5% growth. It's a bit of a flywheel that's going on right now, which is quite positive. But from a balance sheet perspective, we feel very good about that 9 to 10. Pat? Patrick Murray: Yes, I think so at the end of the day, we've got a pretty fulsome '26 now. We've reserved some capacity for these MLO 1s and 2s. I mean, 1, we'll have some spend in '26; 2, probably not as large as it's a little later, but we'll reserve some capacity given how confident we now are in those moving forward. And then as Greg said, we're really happy to continue to build out the back part of the decade. And hopefully, that's adding a lot of clarity into the growth that the enterprise can have. And I think it's pretty common in our infrastructure business where you got -- you have secured some capital for the next couple of years. It's kind of close to or just below your kind of capacity in any out years you're filling up. And I think the team has done a great job in the last 6 months of doing that. So we're very comfortable. Operator: Your next question comes from the line of Jeremy Tonet from JPMorgan. Jeremy Tonet: Just want to kind of maybe follow up a little bit on the last line of questions there with regards to growth over time and having talked about this 5% EBITDA growth potential over the medium term post '26. And I know you're not going to give us the December update today, but just wondering any foreshadowing you might be able to provide us here or thoughts into how we should be thinking about how that update could unfold? Gregory Ebel: Yes. I'm not sure we are going to give you much of that right now because as you say it's December. But look, I think -- look, you've heard what we've been able to do on the gas side today with announcements. The liquid side, Michele gave you a good tour to tab on that side as well. And despite what some people have looked at, we've even done a number of things on the renewable power side in the last year. So I think it's the benefit of the portfolio. And again, those secondary and tertiary benefits of everything from power demand, from policy changes, from GDP growth that actually give us that confidence, and we see growth right across the system. So if your question is, do we see pullbacks in areas? No. In fact, we see acceleration even the renewable stuff that we have, a lot of that stuff is a long ways down the trail and anything we do sanction would have already been in a good spot from a policy perspective. So -- and as Pat just mentioned, we've got the balance sheet capacity, internally generated cash flow to be able to meet those demands. And obviously, every dollar of EBITDA we add adds another $4 or $5 of capacity. So we're very focused on that. So it's probably where I'd leave it today. I don't know, Pat, would you add anything further? Patrick Murray: Yes. I mean I think our message, if you remember back 6 months ago at Enbridge Days was that the whole goal here was to add clarity into that back end of the decade growth rate. And I think it's fair to say that we're doing a substantial amount of projects that should help to clarify that. So we're confident in the growth rates that we've put forward, and we'll continue to add to this backlog. We know there's more to come in really every business, which is what I like the most about it. We've got a very diverse set of opportunities over what really turns out to be a 5- to 7-year time line now. So yes, we're feeling good about the growth rates. Jeremy Tonet: Fair enough. I figure it's worth a try. Just wanted to dive in a little bit more into Western Canada and gas storage there. With LNG Canada ramping up. Just wondering if you could provide maybe a little bit more color on the tone of customer conversations there. It seems like the market is going to need a lot more logistics. You're expanding gas storage capacity there. Just wondering if you could elaborate any more on how you see this unfolding. It seems like these would be fundamental tailwinds to rates and economics overall, but just wondering what you guys are seeing. Cynthia Hansen: Yes. Thanks, Jeremy. It's Cynthia Hansen. I would agree with you that we are having these tailwinds, particularly when it comes to storage. Of course, in the last quarter, we'd announced our expansion, a significant expansion of our Aitken Creek storage. We are the only storage in that BC area. So we currently have about 77 Bcf of storage there, and we announced another 40 Bcf. So that will -- we'll start construction of that in the first part of next year, and that will be in service in a couple of years following that. When we have the conversations, it was -- when we announced that opportunity, we had 50% of that storage signed up right away in a long-term contract. So -- our customers understand that there is that opportunity and they're willing to back that kind of expansion. As we continue to look at other opportunities, the current discussions about LNG Canada Phase 2, all of that creates an opportunity, not just for our storage, but for the opportunities to expand our West Coast system. We've announced earlier this year the Birch Grove, which is an expansion of T-North that ties into that, too. So strong opportunities, but I would say that we'd like to continue to see that growth of those opportunities for LNG export. That will need the support of the BC and Canadian government as we go forward to make sure that we are positioning those projects to attract the capital they need in the long term to support that opportunity. Operator: Your next question comes from the line of Robert Catellier from CIBC Capital Markets. Robert Catellier: I'd like to go back to the Data Center and Power Generation opportunities. Obviously, that's a hot part of the market right now. And I think your own gas distribution business is advancing more than $4 billion of related projects. Can you provide some detail on how you're managing cost risk, in particular, in areas like that, that are hot and where there's a lot of competition, supply chain constraints and customer focus on time to market? Gregory Ebel: Yes. Obviously, several areas there. And as they relate to the gas distribution side, obviously, prudency kicks in. But recall, those are rate base type driven setups, right? So you're getting on a capital structure, call it, 10% return in the U.S. on about 50% equity. So as long as we're being prudent, I'm not feeling too concerned about that. Now that being said, given the size of the company, we are actively and we're out there doing that, making sure that we've got good alliance agreements with various contractors, giving us the best rates, actually going forward and even stockpiling, if you will, compressors and things like that. And remember, on the inflationary side, I'd say about 30% most of these large projects would be CapEx related to equipment and things like that. So those relationships are really critical. And a lot of them, obviously, we're avoiding tariff structures through contract mechanisms as well. So far, so good. The biggest concern I have is on the people side of things and just getting the time and equipment in place. So we're pretty good at that. I think we feel in terms of those long-term relationships with contractors and stuff like that. But Rob, it's something definitely we're watching closely. It's also why I love some of the projects that we announced today that are all relatively small, as Colin said, singles and doubles and quick cycle, relatively speaking, so that you don't have long drawn-out processes. And then the last piece is, as you know, a better attitude with policy around permitting and acceptance of these critical projects. And that takes a risk off the table from a CapEx perspective as well. Robert Catellier: Okay. That's very helpful. And then a bit of a regulatory question here for Colin, and maybe we'll have to take this offline. But I'm curious about the Mainline optimization too and the interplay with the Dakota Access Pipeline, given there's still some lingering permitting issues there. So maybe, Colin, you could walk us through whatever relevant regulatory updates on DAPL that relate to the Mainline optimization too. Colin Gruending: Yes. Sure, Robert. And it's a good question and one we've thought through. So we don't need a new presidential permit across the border. And we're confident that the DAPL EIS will come through in the spirit of energy security and energy dominance. So we're confident in that line of thinking. Operator: Your next question comes from the line of Rob Hope from Scotiabank. Robert Hope: You've mentioned a couple of times that the policy environment is getting better for energy infrastructure. In Canada, how are you interfacing with the Canadian major projects office? Enbridge has over, we'll call it, $8 billion of projects in development in BC. You could do more on the liquid side there as well. Is there a way to get incremental support to further derisk these projects? Gregory Ebel: Yes. At this point in time, we haven't put projects through the office. It's great that it's set up. Hopefully, that will be helpful for those national interest projects. But most of the things or all the things we're talking about are short cycle, relatively permit light. And so we haven't seen the need to go down that route. But that being said, we've had several conversations with them. Obviously, Don is well known in the industry and respected and has been very good to don't hesitate if you need some help around permits, et cetera, and working through the lab of the Canadian government. So we won't hesitate. But to date, and I don't see that actually on any of the projects that we have. As you know, we have several billion dollars of projects being done in BC, things Colin's talked about today. But a lot of them are relatively permit light and even not giant CapEx as individual chunks. So I just don't see us using the major project office at this point in time. Robert Hope: Appreciate that color. And then maybe just going back to the Mainline. I appreciate all the details on further expansions, Colin. But maybe to dive in a little deeper, and I know it's early days, but what would an MLO3 look like? And how much more incremental capacity do you think you can get out of the basin without, we'll call it, a good amount of large diameter pipe? Colin Gruending: Robert, you're reading my mind. So we've got some hitters warming up in the dug out. MLO3 and 4 are stretching. Our engineers are looking at that as well because there is a scenario here, right, where Canada and the U.S. do a bigger trade deal and energy is part of it. And the imperative may accelerate further. So we do have some, again, in-corridor in fence line solutions for that. But it's premature for us to probably talk about those. Operator: Your next question comes from the line of Manav Gupta from UBS. Manav Gupta: We are actually seeing a lot of resurgence in solar stocks in the U.S., and you actually have a very strong solar portfolio. But because you have everything else, which is also so good, sometimes it's underlooked. So can you talk a little bit about your renewables portfolio and solar in particular and more deals like Clear Fork with Meta, if you could talk on those points, please? Matthew Akman: Sure. Manav, it's Matthew here. Yes, you're quite right. I mean I think investment discipline is the order of the day in renewables, given some of the cross currents in the policy landscape, but we have to keep our eye also on the opportunity here because the customer demand for this remains very, very strong. We are still in the window where we've got interconnection-ready projects that are in fantastic locations with strong local support and great resource while the production tax credit window remains open. And so there's definitely a lot of interest from customers on the data center side around that, in particular, on our solar portfolio. We've talked about Project Cowboy out in Wyoming. We are building a lot of stuff, as you know, you mentioned Clear Fork with Meta and ERCOT. But that Wyoming project has a tremendous amount of interest. and is potentially a very big one and is well advanced. And so again, we're going to be navigating carefully, but there should be win-wins here because customers know that there's this window. And there aren't that many projects that can actually get in into their windows and they need the electrons, and they want it, if possible, lower zero emissions. So I think we're really well positioned. But again, we'll be navigating this and with a very close eye on our risk profile and making sure that we are consistent with our low-risk business model across everything we do. Manav Gupta: Perfect. My quick follow-up is your partner, Energy Transfer, talked about the Southern Illinois connector, exactly the kind of crude that U.S. refiners need. Can you also highlight some of the benefits of this project? And can you confirm if this is probably 2028 start-up, if you could talk a little bit about that? Colin Gruending: Yes. Thanks, Manav. Yes, I agree with your thesis. And what else can I tell you here? This is a new market off our mainline system to Nederland, Texas. And yes, you can imagine we've got a map of all the refineries, and we're trying to feed all of them. We've got about 75% of U.S. refineries connected to our Mainline system. So this isn't a new market for us. technically not super complex using existing capacity on spearhead, just longer hauling that capacity. It used to go to the Patoka area, now that 100 -- of the 200 on Spearhead will go down in Nederland, Texas, and we're expanding the Platte system, I think pretty simple scope there, pump refurbishment. So high confidence execution. And so yes, the time line should work. Operator: Your next question comes from the line of Sam Burwell from Jefferies. George Burwell: Some of this has been touched on already, but just a quick one on Southern Illinois and the whole path. So I mean the Mainline optimization seem like they're on the right track and Mainline volumes were 3Q record. But downstream of that, low volumes in 3Q, and it seems like it's going to be a headwind in 4Q as well. So just curious if you have a view on when that could improve? And then is there anything to read into the 100,000 barrels a day capacity on Southern Illinois because I think the open season figure was higher than that, like 200. So just curious on your thoughts on full pass volumes improving over time. Colin Gruending: Sure. I can take that. So I think it's a temporary anomaly here. That path on our liquid system south of Chicago down to the Gulf has been pretty robustly used for a long time. It's been recently weaker, still pretty good, but a little bit weaker as you saw in our disclosures, Pat talked about it. That is due really not the weakness the South per se, but more so that, that demand, that upper PADD II demand has been unusually strong in the last quarter or 2. So higher absorption of that high Mainline throughput, just a bit further North. And so double-click on that, why is that? A couple of reasons. One, our product levels were lower given fuel demand. And so those refiners were running pretty hard, so higher utilizations to replenish those inventories. And secondly, they had I would say, higher than average just uptime. And so the combination of those two factors kept a lot of that mainline oil at home, so to speak, in the upper PADD II market. I think Q4 should be maybe a little better than Pat suggested. We've seen some early quarter improvements here. And then moreover, I think just longer term, we've got a lot of confidence in that path. In fact, we just have successfully run two open seasons for that path, both have been oversubscribed to expand it. So I'd say it's a temporary effect. You also asked about 200 versus 100, yes, pardon me. So yes, we we're pretty happy with the 100 with our partner there. We actually had oversubscription for the 100, but we end up settling it at 100. It's just the most efficient kind of sweet spot on that project for economics overall. Operator: Your next question comes from the line of Ben Pham from BMO Capital Markets. Benjamin Pham: I wanted to touch base first on the Woodside LNG project. Could you remind us going forward how the mechanism works on the contract as you close on the in-service dates? Gregory Ebel: Yes, I think you mean Woodfibre. Cynthia can take that, right? You mean... Benjamin Pham: Woodfibre, sorry. Cynthia Hansen: Yes. Yes. Thank you. Yes. So the way our contract works is that we will be setting that final toll closer to the in-service date. So with our contract terms, we will get our return based on that toll structure that's finalized at that date. So we continue to benefit from the delay in that term as the cost increase and that will allow us to actually have limited exposure to some of these cost overruns that we're starting to see on that project. Now -- we are really excited, though, that we're 50% complete overall on the construction, and we believe that there's a really strong path to getting us to the 2027 in-service date. Gregory Ebel: Now the other thing, we'll have to see how it plays out, but the Canadian budget did have some accelerated bonus depreciation for LNG projects that have low emissions. And I think as we've talked about before, this will be amongst, if not the lowest emission LNG project globally given how it's getting its power. So we'll watch for that, which should be helpful from a return perspective as well. Benjamin Pham: Got it. And I have to chuck when I said Woodside because I do have a follow-up question on that partnership more specifically. Just think about your investments in on the BC Coast. And I'm curious just with LNG additions ahead and some of the strategic partnership you've seen with Williams in particular, is there appetite for Enbridge, may not something specifically like that, but maybe just appetite for LNG beyond what we have right now. Gregory Ebel: Yes. Ben, we're not opportunity light. We are opportunity rich. So us taking on -- I can't see us taking on an LNG facility with commodity exposure, which is what some other folks that you mentioned have done. We'll get done the Woodside opportunity here, and then we'll see. Obviously, there's a lot of water still to go under the bridge about getting things built in off the BC Coast. So let's continue with our Woodfibre project. Sorry, I said Woodside. Now you got me saying it. The Woodfibre project before we look at other ones. And Look, you saw us announce today those storage projects are serving LNG on the Gulf Coast. Aitken is going to serve LNG in BC. A lot of the projects that Cynthia mentioned, the pipeline project, that's the stuff we know and know very well and earn solid regulated rates of return on. I think in this environment, that's probably a better setup for us. So we'll always look. We get an opportunity to take a look at everything, but I don't think our investor proposition is open to taking on a bunch of commodity exposure. We don't want to. Operator: Your next question comes from the line of Maurice Choy from RBC Capital Markets. Maurice Choy: First question is about your crude oil production growth projections. I remember back in Enbridge Day, you've made a forecast that you may see more than 1 million barrels a day of growth through to 2035. Assuming that projection was made based on the landscape at that point in time, how would you view this growth now given what appears to be a supportive regulatory and political landscape in Canada? Colin Gruending: This is Colin. Yes, great question. And I think our -- I think both of those projections are, I think, internally consistent, and I think our view of that is stable. There is an upside scenario here that if Canadian federal policy comes through on this vision of a global energy superpower, which we believe in strongly. We have a unique perch on that. I think there is upside -- there's for sure upside in that scenario. But it's an if at this point. So we've calibrated our business plan to the base case and are -- to a question a few minutes ago, are generating further solutions if the upside comes to be. Gregory Ebel: You're going to get a good insight on that, I think, as well, Maurice, right? Because if the policy conditions form in Canada that ensure that as a producing nation, it's actually competitive. The first sign of that is going to be our producers and then being more optimistic about production, and then we'll be able to react as capital forms. So -- but at this point in time, we wouldn't change the million by 2035. And the MLOs and the Southern Illinois Connector and our Mainline investment capital is all consistent with how we see that rolling out between now and the end of the decade, all other things being equal. Maurice Choy: That makes sense. If I could finish off with a question on the Pelican CO2 hub. Oftentimes, these types of projects are perceived to have a lower return than the 4 to 6x build multiple that you can deliver within liquids pipeline outside the Mainline. Recognizing that you do have an internal competition for capital among your various businesses, I wonder if you could comment on the returns here or just more broadly about lower carbon opportunities, how do they compete for capital internally? Gregory Ebel: Yes. Look, I think both ourselves and Oxy are pretty darn careful on this front. If this project didn't earn at least the returns that we get from other Liquids projects, as you say, outside the Mainline, it wouldn't have got sanctioned. So obviously, I would even argue there's always some policy risk, so you want to make sure you get this right. So this is very much in that wheelhouse, if not a bit better. And obviously, the tax incentive structures, we've got a lot more clarity on that out of the OBBB bill that came out so that we know exactly what our tax incentives are on that. And it's got a long-term 20-, 25-year contract with offtake player. So I would say returns are at least, if not a little bit better than what we're seeing in this world. Policy support is there where it may not be for some of the other unconventional investments. And we love our partner on this front who has very similar return type parameters. Maurice Choy: I might just add on that. Colin Gruending: I was just going to layer on that it's a very selective investment. We're going to take a crawl, walk, run approach to developing low-carbon infrastructure. I think the pace of it generally is a lot slower than most observed a few years ago. So we're going to take a very careful and disciplined approach here, as Greg mentioned. Maurice Choy: It's great to hear. My -- I guess, all the best to Cynthia on your retirement, and congrats to Matthew in your new role. Cynthia Hansen: Thank you. Matthew Akman: Thank you. Operator: Your next question comes from the line of Theresa Chen from Barclays. Theresa Chen: I would also like to congratulate Cynthia on her retirement. Thank you for all your insights over the years, and I'd like to congratulate Matthew as well on his new role. Going back to the discussion around the Mainline expansion. So when it comes to resourceful solutions for moving incremental WCS barrels to the U.S. Gulf Coast, leveraging your JV system with Energy Transfer is certainly a capital-efficient approach. And as the downstream southbound capacity fills up over time, have you or would you also consider partnering with other pipelines such as topline, which also runs from the upper Mid-Continent to the Gulf Coast and currently has available capacity? Colin Gruending: Yes, Theresa. And I think joint ventures are a big part of Enbridge's playbook. Cynthia has got a bunch, Matthew's got a bunch. We've got a bunch in our portfolio, and we're proud to partner with basically everyone in the industry. And I think that's going to be a part of everybody's playbook going forward. We also partner with enterprise products on Seaway. We've gone from 0 barrels a day through that system to what's going to be not far from now, 1 million barrels a day. So I think we've utilized joint ventures extensively. We've got a whole bunch of others across the system as well. So we're open to that. I think teamwork makes the dream work here in an exciting environment. Theresa Chen: Got it. And looking at your medium-term outlook, not asking you to front run the guidance update to come, but just looking at what's already out there, how do you plan to align DCF per share growth with EBITDA growth over time, that 5% -- given that DCF per share has recently trailed EBITDA growth, what are the key drivers in bridging the two over time? Patrick Murray: Yes, it's Pat. Thanks for the question. Yes, I think we have been pretty clear that the reason they kind of disconnected over the last couple of years was primarily related to cash taxes, and we see that plateauing. We've seen some pretty positive tax decisions made in the U.S. There's lots of conversations about things that could happen in Canada. But generally, we just see that the cash taxes are returning to be more in line with -- not having the growth that it had over the last number of years. So that's why those two primarily converge as you move later into the decade. Operator: Your next question comes from the line of Praneeth Satish from Wells Fargo. Praneeth Satish: On the Egan and Moss Bluff gas storage expansions, can you break down how much of the 23 Bcf of capacity is already committed under long-term contracts versus any shorter-term contracts or merchant capacity? And then given that you're moving forward with the expansion, I assume pricing is favorable, much higher than historical levels. But can you provide some color on the contract durations? Is it kind of in the typical 3- to 5-year range? Or are you able to get something longer in this environment? And then I guess as a follow-up to that, like how do you think about the trade-off between locking in longer storage term contracts versus keeping them shorter so you could potentially benefit from higher recontracting rates in the future? Cynthia Hansen: Thanks, Praneeth. It's Cynthia. I would say that where we are right now, we have Egan, the first cavern that we're developing there is about 50% contracted and we'll, over a period of time, lag into that. We're managing these assets. It's an existing portfolio. So we're going to manage those contract terms consistently with how we've operated those assets. When we look at the overall contract terms, it is a speed from that 2- to 5-year kind of average overall. We always look for those longer terms as to be part of that portfolio. But as you noted, just with the opportunities right now as we continue to see the demand for storage increase, and we've seen some strong pricing associated with that, that's really supporting this ongoing development that we're doing. We want to try and manage the portfolio to really optimize that structure as we go forward. Gregory Ebel: Yes. And that 3 to 5 years, 2 to 5 years is pretty typical the way that we've done it historically. And look, I think we've got a super high level of confidence in the LNG coming in on the Gulf Coast. So that probably lets us leg into the contracts and we want to. But it depends on the location, right? Like, for example, the Aitken Creek contract, I think we took about half of that and have it under a 10-year contract. So it just depends on the situation, and it's worked extraordinarily well. I'm glad you raised the storage question because we got 600 Bs or so across North America, all with great optionality outside the regulated piece. But we're adding just the announcements in the last 12 months, 10% to that number. So it's a big uptick for us at the right time in the market, and I feel very good, as Cynthia says, the way we'll leg into this. Praneeth Satish: And then I'm sure you saw that Plains recently announced the acquisition of the remaining interest in the EPIC Crude pipeline. They've talked about potentially expanding the pipeline, may or may not do it. But if they do, it seems like it could be a positive for your Ingleside assets. So just curious if you have any thoughts on that deal or just the overall landscape now at Corpus and the puts and takes for your Ingleside and Gray Oak assets. Colin Gruending: Yes, it's Colin here. Yes, and we've observed that, obviously. And we're partners with Plains on Cactus II already. I'm sure there's more work we can do together to the spirit of the question a couple of minutes ago on teaming up. Our franchise is remains a work in progress, but it's still really a good one. Ingleside is the #1 export terminal on the continent. It's poised to grow all the advantages it has, Gray Oak. It's great. So we're pretty confident with our system there and hopefully can do even more with Plains going forward. Operator: And that concludes our question-and-answer session. I will now turn the call back over to Rebecca Morley for closing remarks. Rebecca Morley: Great. Thank you, and we appreciate your ongoing interest in Enbridge. As always, our Investor Relations team is available following the call for any additional questions that you may have. Once again, thanks so much, and have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and thank you for attending the Alta Equipment Group Third Quarter 2025 Earnings Conference Call. My name is Harry, and I'll be your moderator for today's call. I will now turn the call over to Jason Dammeyer, Vice President of Accounting and Reporting with Alta Equipment Group. Please go ahead. Jason Dammeyer: Thank you, Harry. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's third quarter 2025 financial results was issued this afternoon and is posted on our website, along with the presentation designed to assist you in understanding the company's results. On the call with me today are Ryan Greenawalt, our Chairman and CEO; and Tony Colucci, our Chief Financial Officer. For today's call, management will first provide a review of our third quarter 2025 financial results. We will begin with some prepared remarks before we open the call for your questions. Please proceed to Slide 2. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including statements about future financial results, our business strategy and financial outlook, achievements of the company and other nonhistorical statements as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties and assumptions, including those related to Alta's growth, market opportunities and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan. Ryan Greenawalt: Thank you, Jason, and good afternoon, everyone. I appreciate you joining us to review Alta Equipment Group's third quarter 2025 results. I'll begin with an overview of our performance, highlight trends across our business segments and share why we're optimistic headed into Q4 and 2026. Our team once again demonstrated focus and discipline through what remains a turbulent macro environment. Despite persistent headwinds related to tariffs, manufacturing softness and customer caution, Alta employees continue to perform exceptionally well, demonstrating our culture of accountability, customer focus and operational excellence. While equipment sales were challenged this quarter, the underlying tone of demand improved steadily through September and into October, which turned out to be our strongest month of the year for new equipment sales, predominantly within our Construction Equipment segment. Our Construction Equipment sales in October alone topped $75 million, which is nearly 60% of our entire equipment sales in Q3. With that, we believe the pattern witnessed in the third quarter reflected a shift rather than an indication of softness as customers seemingly elected to push purchases from Q3 into Q4 as they awaited more definite signals on interest rate direction and year-end tax benefits under the One Big Beautiful Bill Act. That timing dynamic, coupled with greater confidence in backlogs and financing sets the stage for what we believe is the beginning of a fleet replenishment cycle. As we sit here today, our backlog in Material Handling remains over the $100 million mark, helping to provide visibility for the next several quarters. Even with muted volumes during the quarter, productivity and cash flow remained resilient. SG&A is down roughly $25 million year-to-date, driven by structural cost savings, improved efficiency and a disciplined execution. Those efficiencies are now embedded in our run rate and provide for operating leverage as the market rebounds. Turning the focus now to our Construction segment. Our Construction Equipment segment performed admirably given continued tightness in private capital spending. Demand from customers tied to long-term fully funded infrastructure work remains strong. In Florida, permitting activity on large DOT and Corps of Engineers projects has accelerated, translating to greater deliveries early in Q4. In Michigan, the legislature's record $2 billion road and bridge funding package is already driving new bid activity and multiyear visibility. These are durable tailwinds that reinforce our position as a key equipment partner on essential public works projects. Taken together with rate relief and the tax incentives of the Big Beautiful Bill, we see construction entering a healthier demand phase. Industry data suggests we're bottomed -- we've bottomed in the general purpose construction markets throughout our various APRs, positioning Alta for growth as replenishment gains momentum in 2026. In this regard, we've prepared a new slide this quarter, Slide 7, which shows the industry volume disconnect we've experienced from our regional norms, specifically in the last few years. We believe a reversion to normal industry levels in our APR can quickly return some of the volume losses we've experienced. And given some of the tailwinds we see, the environment is prepared for a rebound. Turning over to our Material Handling segment. Industry volumes have also exhibited multiyear softness as illustrated on Slide 7. Material Handling revenue was essentially flat year-over-year. The Midwest and Canadian markets remain soft, primarily due to automotive and general manufacturing weakness. In contrast, our food and beverage and distribution customers continue to perform well. We're seeing early signs of recovery in automotive demand, the ongoing -- sorry, automotive demand, the ongoing reindustrialization of U.S. key regions, particularly the Great Lakes Mega region is creating powerful long-duration demand tailwinds across Alta's end markets. As manufacturers, logistics, operators and infrastructure investors expand capacity in these high-growth corridors, the need for reliable material handling, construction and power solutions continue to rise. Nowhere is this more evident than in the power and utility sector where investment in grid modernization, renewable integration and data center infrastructure is accelerating. Alta is uniquely positioned to capitalize on this trend, combining our deep regional footprint, OEM partnerships and product support capabilities to serve the expanding industrial base and the critical infrastructure that underpins it. During the quarter, we completed the divestiture of our Dock and Door division, another deliberate step in sharpening our portfolio and focusing resources on our core dealership operations. This transaction reflects our commitment to capital discipline and reinvestment in higher return areas of the business. Alta's business optimization efforts are centered on strengthening the company's flywheel, delivering the right product to the right customer executed by the right people, while deepening the resilience and profitability of our core operations. Through disciplined execution, we are streamlining workflows, sharpening accountability and improving customer cost to serve across every business line. Product Support remains the engine of Alta's value creation model, driving reoccurring revenue and lifetime customer relationships through best-in-class parts, service and rental solutions. At the same time, we are refining our product portfolio to concentrate capital and talent around the brands, segments and geographies that align most directly with Alta's long-term strategy and OEM partnerships. Together, these actions form a cohesive approach to business optimization, reinforcing operational excellence, advancing our unified strategy and accelerating the virtuous cycle of customer intimacy and sustainable growth. In closing, as we enter the fourth quarter, we're seeing tangible signs of recovery across our business. Deferred demand from the third quarter is now flowing into the pipeline, supported by a steady acceleration in infrastructure and public works funding across our key markets. At the same time, recent interest rate reductions and the incentives introduced under the One Big Beautiful Bill are beginning to restore contractor confidence, creating a more constructive environment for capital investment and sustained customer activity heading into year-end. In short, we believe this -- the industry is turning the corner, and Alta is exceptionally well positioned to capture that upswing. Before turning it over to Tony, I want to thank all 2,800 members of team Alta for their focus, execution and commitment to our purpose of delivering trust that makes a difference. Your resilience and customer dedication continue to define who we are and how we win. With that, I'll hand it over to Tony Colucci to walk through the financials in more detail. Anthony Colucci: Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our third quarter 2025 financial results. Before getting into the quarter, I want to begin by recognizing our employees, customers and partners for their support in Q3. Our business model is resilient, but it takes commitment, collaboration and trusting partnerships to execute on that resiliency day-to-day. Thank you to all. My remarks today will focus on 3 key areas. First, I'll present our third quarter financial results, which reflect a challenged equipment sales and rental environment overall, although we believe some of these challenges may be dissipating. As part of that discussion, I'll give a brief financial overview of the quarter for each of our 3 segments. Lastly, I'll touch on the balance sheet and cash flows for the quarter. Second, I'll be presenting what we believe to be the company's bridge back to $200 million of EBITDA and the factors impacting that bridge. Lastly, I'll discuss our expectations for the remainder of the year on both adjusted EBITDA and free cash flow before rent-to-sell decisioning. Throughout my remarks, I'll be referencing information presented on Slides 10 through 21 in our earnings deck. I encourage everyone to follow along with the presentation and review our 10-Q, both available on our Investor Relations website at altg.com. First, for the quarter, the company recorded revenue of $422.6 million, a 5.8% organic reduction versus last year. Revenues retreated sequentially in the quarter, mainly on equipment sales. However, Product Support remained steady and was up sequentially versus Q2 as I'll remind investors that our parts and service departments continue to act as an annuitized and stable cash flow stream in what is clearly a volatile equipment sales environment. As it relates to equipment sales, as mentioned, we believe that similar to last year, customers pushed off capital spending in Q3 for more clarity on interest rates and their own business' annual performance relative to the tax incentives available in the Big Beautiful Bill. Both of those factors, we believe, helped drive our highest equipment sales number of the year in October and provides a tailwind for Q4 equipment sales overall. Lastly, rental revenues are down $5.3 million year-over-year, but up $2.1 million sequentially, with the year-over-year decrease largely related to our strategic decision to reduce the size of our rent-to-sell fleet as we focus on better utilization and ultimately enhance returns on investment in rental fleet. Now focusing in on the segments for the quarter. First, Material Handling. As mentioned previously and as presented on Slide 11, new and used equipment in our Material Handling segment were down a modest $1.6 million year-over-year. But notably, the line was up on a sequential basis. As despite industry bookings for new forklifts continuing to run below historic norms, we have been able to keep pace with the prior year through selling allied lines and tariff-free used equipment to our customer base. Also important to note, and as Ryan mentioned, that despite demand challenges for the industry, Alta continues to carry a healthy backlog of equipment, over $100 million worth of new allied and used equipment into Q4. In terms of Product Support revenues, while we continue to run behind last year's pace in parts and service, most predominantly in our Midwest and Canadian geographies, I mentioned on our Q2 call that we believe that we have found a bottom in these departments, and that dynamic played out in Q3 as Product Support revenues in material handling outpaced the second quarter by nearly 4%. As noted on Slide 11, adjusted EBITDA was up year-over-year and sequentially versus Q2, coming in at $17.5 million in Q3 for the segment. On to our Construction segment and as highlighted on Slide 12. As a precursor to my comments, I would reset for investors that equipment sales in our CE segment can be and have historically been volatile, especially when compared to equipment sales in our Material Handling segment and certainly when compared to our other revenue streams. This volatility has certainly been evident in both 2024 and 2025 as macro factors such as interest rates, tax laws, election fears, tariff and trade policy uncertainty and customer backlog and local funding can all impact the CE customers -- CE segment customers' decisioning on when to purchase a piece of equipment. With that as a backdrop, we saw equipment sales in our CE segment drop $18.7 million versus last year Q3. That said, based on what we saw in October, we believe Q3 will be an anomaly as customers pushed ahead decisioning in Q4 given the expectations for interest rate reductions and year-end tax plan. Lastly, on equipment sales from a new and used equipment gross margin perspective, while we continue to run below historic level gross margins on new and used equipment, gross margins on new and used equipment were up slightly on a sequential basis, a hopeful sign that supply and demand dynamics in the marketplace are normalizing and that we may have found a bottom on this metric. On to Product Support, which grew roughly 3% year-over-year in the Construction segment and where we continue to outperform internal profitability metrics. Further to that point, as presented on Slide 14, while the segment stand-alone EBITDA is down $2.4 million year-to-date, the mix of the $75 million of EBITDA in 2025 is of a higher quality versus '24. Specifically, while 2024's EBITDA was more heavily weighted to opportunistic rental equipment sales and related gains, 2025's EBITDA is more -- been more heavily weighted to perpetual profitability gains in the form of increased gross margins and product support as well as a reduced SG&A load. This realignment from less consistent equipment sales to more reliable recurring product support profitability creates a more resilient and capital-efficient business going forward. Lastly, from a segment perspective, Master Distribution, which houses our Ecoverse business. The story for the quarter continues to be tariff related as nearly all of the segment's key metrics have been negatively impacted year-over-year. That said, a stabilizing trade environment between the U.S. and the EU and mitigating measures in the form of pricing actions and OEM risk sharing to best maneuver through this situation have been largely implemented, and we expect will take further hold and bear fruit in Q4. Overall, we are cautiously optimistic that the worst of the trade-related impacts on the segment in 2025 are now behind us. In summary, for the quarter, the company generated $41.7 million of adjusted EBITDA, a slight reduction versus last year on a pro forma basis and mainly driven by reduced episodic equipment sales in our CE segment. Lastly and notably, as we focus on driving ROIC, the company was able to realize nearly the same level of EBITDA year-over-year on a leaner balance sheet as the gross book value of our rental fleet is down nearly $30 million year-over-year. In terms of cash flows, and I'm referencing Slide 16, for the quarter, free cash flow before rent to sell decisioning was approximately $25 million for the quarter and stands at roughly $80 million year-to-date. To quickly check in on the balance sheet as of September 30 and as depicted on Slide 17, we ended the quarter with approximately $265 million of cash and availability on our revolving line of credit facility, plenty of capacity in term to navigate the business in this climate. Before closing my comments on the quarter, I'd like to quickly address the impact of Big Beautiful Bill had on the company's income statement in Q3. First, holistically, the company views the enactment of the Big Beautiful Bill as a net positive for both the company and for our customers. From the company's perspective, the effective removal of the interest rate -- the interest expense limitation in the Big Beautiful Bill will save the company cash taxes in the future and over time, will enhance our liquidity position. That said, given the reduction in the interest limitation, we had to take a notable onetime noncash income tax expense to establish a valuation allowance against our net operating loss assets. For clarity, this onetime expense has no impact on the company's operations, its cash liquidity position or its financing capacity. We welcome the benefits of the Big Beautiful Bill for both us and our customers going forward. Moving on to the second portion of my prepared remarks. The company's view on the potential bridge back to $200 million of EBITDA and the factors impacting that bridge. As presented on Slide 7 and as discussed earlier by Ryan, equipment values in our regions in each of our major segments have been depressed in recent years when compared to industry norms and in the case of our CE segment in the face of increased state and federal DOT spending in recent years. To illustrate the financial impact of Slide 7 and the reversion to the norm on equipment volumes and a few other elements, we present the EBITDA bridge on Slide 20. First, the starting point of the EBITDA bridge is our current midpoint of the FY 2025 adjusted EBITDA guidance. Next, the first step in the bridge is the incremental EBITDA created given Alta's current market share if equipment volumes simply revert back to historic norms. Note that this element represents $17 million in EBITDA in the bridge. Next, the second step of the bridge is related to a reversion of the norm on gross profit margins on equipment sales. As we've discussed on many calls recently, there has been an oversupply of equipment in the market -- in the equipment markets for nearly 2 year now -- 2 years now, which has led to an unprecedented competitive pricing environment that ultimately depressed equipment sales margins. The $10 million of EBITDA in this step represents a reversion to the norm on gross margins associated with the normalized level of equipment sales. Next, the third level of the bridge is related to Ecoverse, a business unit that in 2025 has experienced an outside level of impact from tariffs given its business model. The abrupt and blunt impact of the tariffs on this business can't be overstated. As a master distributor of environmental processing equipment that is sourced from Europe, Ecoverse relies on a constant flow of equipment and parts from that region and historically has not held a lot of stock inventory. Thus, the quick implementation of the tariffs was difficult to navigate and the time line on mitigation efforts had a longer tenor than keeping up with the marketplace. Thus, sales were impacted and margins quickly eroded. That said, since the outset of the tariffs, our team at Ecoverse has been effectively and actively working on mitigation efforts, which included supply chain resourcing, target pricing increases and supplier cost sharing. We believe these mitigation efforts are largely in place and the road back to Ecoverse contributing to the enterprise from an EBITDA perspective is ahead of us. Thus, the $7 million EBITDA step here. Next, we believe strongly that PeakLogix, our systems integration and warehouse automation business will revert to historic norms as interest rates come off their highs and CapEx projects get greenlighted for automation projects at customers within our material handling footprint. Thus, the $3 million reversion to the norm for PeakLogix in this column. Lastly, the $7 million negative EBITDA in the last step of the bridge is simply the incremental costs associated with the steps -- with steps 1 and 2 in the bridge. Overall, we believe the $30 million bridge on Slide 20 presents a simplistic -- presents simplistic hard evidence that a reversion to the norm in terms of industry equipment sales volumes and margins and a normal operating environment for both the Ecoverse and Peak provide for a logical path back to the company's target of $200 million of EBITDA. Moving on to the final portion of my prepared remarks, adjusted EBITDA and free cash flow before rent-to-sell decisioning for 2025. First, in terms of our adjusted EBITDA guidance for the year, we now expect to report between $168 million to $172 million of adjusted EBITDA for the fiscal year 2020 (sic) [ 2025 ] . Notably, the updated range implies a better sequential Q4 versus Q3. Lastly, despite the reduction in the guidance on adjusted EBITDA, we are effectively holding our guidance on free cash flow before rent-to-sell decisioning, which is again presented on Slide 21. As a reminder, free cash flow before rent to sell is a metric that we believe appropriately measures the true free cash flow generation capacity of the business in a steady state and removes the impact of the decisions we make with our rent-to-sell fleet. Overall, we expect free cash flow before rent-to-sell decisioning to be between $105 million and $110 million for the fiscal year 2025. In closing, I would say that we remain bullish about our partnerships, our employees and the long-term prospects at Alta and are confident in our enduring business model. Ryan and I would like to wish all of our 2,800 teammates and all of you listening tonight a healthy and happy holiday season. Thank you for your time and attention, and I will turn it back over to the operator for Q&A. Operator: [Operator Instructions] The first question today will be from the line of Liam Burke with B. Riley Securities. Liam Burke: Can we talk about Construction Equipment? It sounds like based on equipment sales for October that, that business, some of the roadblocks that have been slowing the business like funding of projects, availability of labor seems to have moved to the side and you'd anticipate at least an early upswing in that business, both from a sales and a margin perspective. Is that the right way to look at it? Anthony Colucci: I think, Liam, you said it well. From a sales perspective, I think we're -- as I mentioned, on the margin thing, we're cautiously optimistic. But from a sales perspective, certainly, we think exactly along the lines of how you described that October could be a harbinger of things to come. Liam Burke: Okay. But what would be the gating factor? I'm looking at your gross margins year-over-year were flat. I think Tony called out that they were up sequentially. What's to stop that movement to sort of move it back to their historic levels? Anthony Colucci: Liam, I think this is the first time we've been up sequentially. And so the messaging here is, hopefully, we've -- in several quarters, if not years. So hopefully, maybe we found a bottom. We continue to see some flattening in used equipment prices. But overall, we still think that the marketplace in construction equipment is still generally oversupplied. And until that oversupply or that overhang kind of fully mitigates itself, I think we'll continue to see gross margins at these levels. Now it has been dissipating in terms of the overhang. We have seen pricing kind of firm. And so it would follow that, we could see an upswing there in the coming year or so. Liam Burke: Okay. And then just quickly on Materials Handling. You highlighted some of the stronger pockets of the business, particularly food and beverage. And are you seeing any kind of movement on the manufacturing front? I know inshoring is going to be a long-term cycle, but are you seeing any lift on the traditional manufacturing side? Anthony Colucci: Go ahead, Ryan. Ryan Greenawalt: I'll take that one. This is Ryan. I think the lift we're seeing is more related to the replenishment cycle getting extended out than it is, the market demand being driven by -- the demand side of the equation is still -- has some pressure. And it's -- we think it's a near-term issue related to the tariff impact, in particular, on autos and the implications for the portfolio, the shift to EVs that was happening largely in the Michigan APR and in the northern part of our territory. There's some rationalization happening right now that's taking product out of the market in pockets. But what we're seeing is the fleet replenishments are back on track. Things that were delayed are back on track. We saw one of our biggest POs in that sector ever come through last quarter. So it's helping build the backlog and keep it what we're calling stable. But the longer-term trend, we think, is very bullish for our regions that -- we have a workforce that knows how to build things, and we have now policy that's going to encourage more to happen in our geographic footprint. Operator: [Operator Instructions] And the next question today will be from the line of Steven Ramsey with Thompson Research Group. Steven Ramsey: I wanted to continue that line of thought on Material Handling, the backlog being over $100 million. Maybe I heard you say you described it as stable. Maybe can you put that in context of the first half of the year, the backlog size where it was a year ago. But part of my thought process is sales have been increasing sequentially off of the Q1 levels. You talked about a great order in the prior quarter. Is this reducing the backlog? Or are there more orders filling it back up? Anthony Colucci: Yes. Steven, I'll take a shot at that. This is Tony. Just to clarify Ryan's comment there, the PO that he referenced is not going to be impactful for '25 here. It's more of a long-term kind of opportunity. Anyway, I believe we started in Material Handling, we started the year with $125 million of backlog. We're in the low $100s million here, as we mentioned. And so we have had some burn off of the backlog. As we mentioned last quarter, when we think of backlog, we're not just thinking of our Hyster-Yale new lift trucks, part-of-the-line lift trucks. We've got allied lines that we do very well with. And then used equipment, which given tariffs, there's an opportunity to really move used equipment from a pricing and competitive perspective. And so I think the burn off is, for us, less about maybe demand, which has been tepid and more about lead times from the factory coming down in terms of Hyster-Yale just being able to deliver more quickly given their production levels. So I would just say that the backlog is not down necessarily at Alta because of a massive decrease, although it's down, but more so just the lead times impacting it. Steven Ramsey: Okay. That's good. That's helpful context. And one more on material handling, parts and service gross margin very strong despite the flattish revenue. Can you talk about what drove that and how you think about the gross margin for the aftermarket and material handling going forward? Anthony Colucci: Yes. I think, Steven, in some of our regions, we have midyear increases from a pricing perspective. Certainly, some of the things we've talked about in terms of focusing on the right products and reducing non-billable labor can impact that as well. So those are some of the things that would impact service margins here in the third quarter. The way that we think about it over the long term in terms of modeling is taking a longer-term kind of view on margins. And if you look at it over the long term, the margins remain pretty stable. Steven Ramsey: Okay. Helpful. And then in Construction Equipment, I wanted to hear some of the nuance where parts sales were barely up while services grew mid-single digit. Can you talk about the delta between those lines and if that had -- or how that impacted the strong margin of that revenue line in the segment? Anthony Colucci: You know, Steve, that is probably just -- sometimes they don't move necessarily in conjunction with one another, depending on over-the-counter sales at the branches and how they move versus field service as an example. I don't know that I would draw any correlation or story that service was up relative to parts. Steven Ramsey: Okay. That's helpful. And then last one for me. On the divestiture of Docks and Doors unit, I guess, kind of why now at this point, given still keeping PeakLogix, maybe there wasn't synergy between the businesses necessarily. But why now? And then secondly, I may have missed it in the prepared comments, if that was an impact to the 2025 EBITDA guide? Anthony Colucci: Sure, Steve. I'll take the -- I'll go in reverse. Very minimal impact on the EBITDA guide. That business probably less than $1 million of EBITDA on an annual basis. I think on the Dock and Door strategically, and Ryan can weigh in, too. But overall -- recall, we did one acquisition several years ago of a Dock and Door business in Boston. The rest of that business or the majority of that business was inherited through an acquisition of the Hyster-Yale dealer in New York City. And so as we have kind of done a strategic review on all of the different business lines that we're in and trying to drive synergies between those, what our core business is with the Hyster-Yale products and what is the Dock and Door business, the more we looked at it, the more we thought that this would be better off in somebody else's hands, that was just focused on it. The other thing I would add is don't draw any parallels between what PeakLogix does and what Dock and Door does, very different kind of offerings, if you will, and go-to-market strategies, customers, et cetera. So anything else to add there? Ryan Greenawalt: I think that's well said. It's around -- the moat around the business, we prefer the exclusive rights, and there's more aftermarket yield on selling vehicles than selling [indiscernible] Operator: With no further questions on the line at this time, this will conclude the Alta Equipment Group Third Quarter Earnings Conference Call. Thank you to everyone who is able to join us today. You may now disconnect your lines.
Operator: Greetings. Welcome to Kingstone Companies' Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Joining us on today's call will be President and Chief Executive Officer, Meryl Golden; and Chief Financial Officer, Randy Patten. On behalf of the company, I would like to note that this conference call may include forward-looking statements, which involve known and unknown risks and uncertainties and other factors that may cause actual results to differ materially from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingstone undertakes no obligation to update the information discussed. For more information, please refer to section entitled Risk Factors in Part 1 Item 1A of the company's latest Form 10-K. Additionally, today's remarks may include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to GAAP figures, please see the tables in the latest earnings release available on the company's website at www.kingstonecompanies.com. With that, it is my pleasure to turn the call over to Meryl Golden. Meryl? Meryl Golden: Thank you. Good morning, everyone, and thanks for joining us. We delivered one of the strongest quarters in our history with net income of $10.9 million, diluted earnings per share of $0.74, a GAAP combined ratio of 72.7% and an annualized return on equity of 43%. Direct written premium grew 14% and net investment income increased 52%. This was our second most profitable quarter in history and our eighth consecutive quarter of profitability, underscoring the consistency and enduring competitive advantages we have created. I want to emphasize what sets Kingstone apart. First, our select product does a great job matching rate to risk and with risk selection, which reduces claim frequency over time. Second, our producer relationships support high retention and consistent new business flow. Third, our efficient operations and low expense structure enhance margin durability; and last, our great team, all of whom act with an ownership mentality. The hard market conditions in our downstate New York footprint have not changed materially. While we've seen some competitors broaden their underwriting appetite, our overall volume remains strong. New business this quarter has moderated compared to last year's surge when we benefited from the market exits of Adirondack and Mountain Valley. But we've seen a month-over-month increase in new business since June, and that has continued into the fourth quarter. We've also begun writing policies under our renewal rights agreement with GUARD, which will meaningfully add to new business policy counts going forward. Growth of 14% for the quarter was driven primarily by an average premium increase of 13% and improved retention. Looking ahead, we expect retention, which represents over 80% of our premium base to continue trending higher as rate changes transition to high single digits from the high teens pace of the past 3 years. Policies in force increased 4.2% year-over-year and 1.4% sequentially, underscoring the stability and loyalty of our agent and customer base. Net earned premium growth continues to be a powerful tailwind, exceeding 40% for the third consecutive quarter. The increase is primarily due to our reduced quota share, which allows us to retain a greater share of premiums and underwriting profits. Additionally, the surge in new business written in the second half of last year continues to earn in, further fueling the growth in earned premiums. On underwriting, our underlying loss ratio was 44.1%, an increase of 4.9 percentage points versus the prior year quarter, driven by higher claim severity. Claim frequency, especially for non-weather water and fire, our largest perils, declined versus last year, a trend we have shared previously. We believe this is driven by a mix shift to more preferred risk in our Select products. The Select homeowners program now represents 54% of policies in force. And on an inception-to-date basis, Select homeowners claim frequency is 31% lower than our legacy product. During the quarter, large losses were modestly higher than the prior year's unusually favorable experience, but remained consistent with the prior 3 years otherwise. Year-to-date, our underlying loss ratio is up only 0.1 percentage point from the prior year. The variability in large losses is random and does not indicate a change in trend. Catastrophe losses contributed 0.2 percentage points to the loss ratio compared with 1.7 percentage points in the prior year quarter. While catastrophe activity was light, our strong results aren't solely driven by favorable weather. With a normalized third quarter catastrophe load, our combined ratio would have been in the low 80s. Our state expansion initiative is progressing, and we intend to present Kingstone's multiyear road map to you in the first half of next year. With 3 quarters behind us, we've updated our 2025 guidance to reflect our outstanding performance. We are raising guidance for our net combined ratio, EPS and ROE, while reaffirming direct-written premium growth for all states to range between 12% and 17%. With anticipated net earned premiums of $187 million, we expect a GAAP net combined ratio between 78% and 82%, basic earnings per share between $2.30 and $2.70, diluted earnings per share between $2.20 and $2.60 and return on equity between 35% and 39%. Relative to our prior guidance and on the same net earned premium base, we have improved our GAAP combined ratio range by 100 basis points at the midpoint, raised both basic and diluted EPS ranges by 9% and 12%, respectively, and increased our ROE target range by roughly 300 basis points at the midpoint. This increased guidance reflects strong underwriting performance, sustained investment income growth and lower expenses, while maintaining our disciplined posture on pricing and exposure management. With regard to fiscal '26 guidance, our baseline assumes normal seasonality and catastrophe activity. In both 2024 and 2025, we have very mild winters and low cat losses overall. Weather is unpredictable, and we assumed more reversion to the mean for our '26 guidance. We will refine our outlook as the year unfolds and moving forward, we'll announce subsequent years guidance in March, along with fourth quarter results. Now I'll turn the call over to Randy Patten, our Chief Financial Officer, who joined Kingstone in late August. Randy brings 3 decades of insurance experience, most recently serving as Chief Accounting Officer and Treasurer at Next Insurance. Randy? Randy Patten: Thank you, Meryl, and good morning again, everyone. Q3 was our most profitable third quarter on record and our eighth consecutive quarter of profitability. We generated net income of $10.9 million, diluted earnings per share of $0.74, a 72.7% combined ratio and an annualized return on equity of 43%. Year-to-date, net income was $26 million, more than double the prior year. Performance was driven by strong net earned premium growth as our reduced quota share in the second half of 2024 new business surge continued to earn in, combined with very low catastrophe losses, favorable frequency trends and lower expenses aided by an adjustment to the sliding scale ceding commissions. Our net investment income for the quarter jumped 52% to $2.5 million, up from $1.7 million last year. Year-to-date, we've seen a 39% increase, reaching $6.8 million. The momentum is due to robust cash generation from operations, which has enabled us to grow our portfolio and benefit from higher fixed income yields. We capitalized on attractive new money yields of 5.2% in the third quarter. While we remain conservative in our investment strategy, we are actively seeking opportunities to enhance our portfolio's yield and duration. As of September 30, 2025, our fixed income yield is 4.03% with an effective duration of 4.4 years, up from 3.39% and 3.7 years at September 30, 2024, an increase of 64 basis points and 0.7 years, respectively. During the quarter, we recognized an increase of $1.4 million in sliding scale contingent ceding commissions under our quota share treaty, reflecting low catastrophe losses, which contribute to the 4.6 percentage point decrease in the quarter's expense ratio. 2025 marks the first period in some time in which a significant portion of the quota share ceding commission is on a sliding scale basis. While sliding scale ceding commission for the attritional loss ratios look quarterly, sliding scale ceding commission for the catastrophe loss ratio cannot be reasonably estimated until after the peak of the hurricane season, so it was recognized this quarter. As a result of this adjustment, our year-to-date expense ratio is down 1.1 percentage points to 30.8% versus the same period in 2024, and we anticipate ending the year with an expense ratio for the full year 2025 lower than the prior year. I will conclude my portion of the call today discussing our capital position. Our capital position remains strong. We have no debt at our holding company, KINS, and shareholders' equity exceeded $107 million, an increase of 80% year-over-year. Year-to-date return on equity is 39.8%, an increase of 3 percentage points from the same period last year. Given this foundation and our outlook, we reinstated our quarterly dividend during the quarter and have ample capital to fund disciplined growth. With that, I'll open it up for questions. Operator? Operator: [Operator Instructions] Our first question is from Bob Farnam with Janney Montgomery Scott. Robert Farnam: So on your New York admitted basis, the Select product now is 54% of the policies in force. Will all accounts eventually move to Select, or some just renew on the legacy product indefinitely? Meryl Golden: Yes. So we are maintaining our legacy book because it's profitable. So any policy written in legacy will stay there. But clearly, when it gets to be small enough, we'll probably convert it to Select, but we don't want our customers to experience that dislocation because it's profitable. So we don't have any plan to do that in the near term. Robert Farnam: Okay. But all new business, is that put on the Select platform? Meryl Golden: Yes, all new business has been written in Select since the beginning of 2022. Robert Farnam: Right. Okay. So when you're getting into the new states on an excess and surplus lines basis, I'm assuming this is going to be a new product. So -- because it's E&S rather than admitted. So how is this product going to differ from Select? And how are you developing it? Meryl Golden: Yes. So we are certainly going to benefit from the Select product and the experience we've had. But depending on the states we enter, there may be new perils or new rating variables that we'll need to account for. And we're currently deep in the development of that product as we speak. And we've been working with an outside actuarial consulting firm, the same firm that helped us develop the Select product for New York. So again, we're deep into it and feel really good about how we'll -- what the outcome will be. Robert Farnam: And has the new E&S carrier been finally been approved yet? Meryl Golden: So we are filing -- we have filed for a new company in Connecticut. It has not yet been approved. And we will be writing on an E&S basis as in Kingstone Insurance Company as well in certain states. Robert Farnam: Okay, okay. A little change in direction. So I know it's only been 2 months, but the AmGUARD book, you started writing at the beginning of September. So how has that performed thus far relative to expectations? Not performed in terms of profitability, but in terms of having policies move over to Kingstone? Meryl Golden: Yes. So it's early on. We started writing business effective September 1st. But so far, it's right within our expectations. So I had indicated that we write between $25 million and $35 million of business over a 3-year period. And we're right on track. We're writing about a little bit less than $1 million a month so far. And what I can tell you is we're very happy with the mix that we're seeing. It's very similar to what we've achieved in Select. However, we're writing a bit more business in the boroughs, and that is giving us some geographic diversification. So we're happy with that. So far, everything is right on track. Robert Farnam: Okay. And one of the bigger questions I always get is just the competition in downstate New York. Now you said that some companies are expanding their target areas. How -- can you give us any more color as to how competitors are going into that environment? Meryl Golden: Yes. So we compete with mostly MGAs in New York. And last year at this time when there was this surge of business from Adirondack Mountain Valley, a lot of companies stopped writing business. And throughout this year, they've just been opening up and writing more classes of business than they've written in the past, but it's not stopping us. Our growth is very healthy. And as I mentioned, every month since June, we've seen a sequential increase in our new business. So again, the way they're expanding is, it's not always obvious to us, but our conversion rate remains really high. So we feel good about where we're at competitively. Operator: Our next question is from Gabriel McClure with private investor. Gabriel McClure: Congrats on a great quarter. And also, please thank whoever puts a PDF in place for us, that's very helpful. Meryl Golden: Great. Gabriel McClure: Yes. I had one question for you. I think maybe a couple of months ago at the Sidoti conference or somewhere, you mentioned that these states you're looking at expanding into, you kind of described it as there being more demand for our policies that we'd offer on a homeowners policy that we'd offer on an E&S basis than there was supply. And so just my question is a couple of months ago, is the market still that way? Has it changed? Whatever you could offer up? Meryl Golden: Sure. So the homeowners market, particularly catastrophe-exposed homeowners nationally is in a bit of a crisis and because companies are not making money. And so we do have an opportunity to expand geographically and be opportunistic so that we can have -- earn the same return that we are in New York. So nothing is really -- in a quarter, markets don't change much. So we have not seen a material change in the market and believe the opportunity still exists for us to expand successfully. Operator: There are no further questions at this time. I would like to turn the conference back over to Meryl for closing remarks. Meryl Golden: Excellent. Thank you for joining today. As we wrap up, I'd like to reemphasize what continues to set Kingstone apart, our Select product, our producer relationships, our low expense structure and our great team. This quarter's results reinforce the durability of our earnings power. We will continue to execute with discipline, advance our measured expansion road map and allocate capital prudently to support profitable growth. We appreciate your continued support and remain focused on delivering long-term shareholder value. Have a great day. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Adriana Wagner: Good morning, and welcome to the ENGIE Brasil Energia's Third Quarter '25 Earnings Results Video Conference. I'm Adriana Wagner, Investor Relations Analyst at ENGIE Brasil, and I would like to make a few announcements. [Operator Instructions] It is worth remembering that this video conference is being recorded at our site, www.engie.com.br/investors, we have made available the results presentation and earnings release filed at the CVM, which analyzes financial statements, operational results, ESG indicators and progress in the implementation of new projects in detail. Before proceeding, I would like to clarify that all statements that may be made during this video conference regarding the company's business outlook should be treated as forecast depending on the country's macroeconomic conditions of the performance regulation of the electric sector besides other variables. They are, therefore, subject to change. We remind the journalists who wish to ask questions that they can do it through e-mail sending it to the company's press conference to present the results. We have with us today, Mr. Pierre Gratien Leblanc, the CFO and IRO; Guilherme Ferrari, Renewable Energy and Storage Officer; Marcos Keller, Director of Energy Trading; and Leonardo Depine, Manager for Investor Relationships. I would like to give the floor to Pierre to begin the presentation. Pierre Gratien Leblanc: So good morning, everyone. I will do it in English. So I hope it will be fine for everyone. So thanks for joining us in this -- during this hour. Always a very, very important moment for us to meet you and to explain you the financial results and the main highlights for the last quarter '25. So if we start with the highlights, it can be the main achievement we realized during this quarter are the following. First of all, regarding our project Assuruá and Assu Sol, we now almost complete the physical phases, and we are starting the operational commercial operations. So we are on time, and it's a very, very great achievement for us. Then we complete also the acquisition and the integration in our portfolio of the 2 hydro power plant, Santo Antonio do Jari and Cachoeira. So now there are -- the 2 assets are fully embedded in our portfolio management and since mid of August, and they are starting to contribute in our EBITDA. We won for the 15th time the trophy of transparency in accounting, Anefac, which recognize the transparency and the quality of our financial statements. And it's a very, very great job from teams and our accounting team. We also be certified as the Best Place to Work according to the GPTW, Great Place to Work Brazil. So good company and good achievement from our HR team. Then I have to mention that there is a subsequent event post from Q3. This is an increase of our social capital. So we decided because we need to comply with the law and our profit reserve was above our social capital in late '24. So we need to increase our capital through the profit reserve incorporation. So we will do it during November months, and we will do it through bonus shares. Then Q3 results in terms of finance is a very, very -- next slide, please. is a very, very good, robust and solid results. As you can see on the slide, our EBITDA grew by almost 12.54% compared to last quarter '24, which is good results. And if we look at year-end -- year-to-date EBITDA, of course, on a recurring basis, we increased our EBITDA in '25 by 6.4%. It's a little bit less true regarding the net recurring results because you can see that we decreased by -- in year-to-date by 8.4% our net income due to the -- mainly 3 factors. First of all, we see an increase of our depreciation of assets because we do have compared to last year, 3 big assets now in operation like Caldeirao Cachoeira. We also have an increase of our financial expenses linked to the high interest rate in Brazil in '25 much higher than in '24. And we do have an increase in our tax expenses also. But overall, very good results, robust. We deliver what we say. So ENGIE is a healthy company on that. Then regarding the ESG KPIs, well oriented to be fair, all of them, except maybe -- and unfortunately, we have to -- 4 accidents during the last quarter '25, 4 accidents with work stop days, some days. So we are still paying a lot of attention, a lot of focus on that. And we also support a lot the increase of the women in our leadership team. So we are on track. We are on the good way to achieve our results. We increased the percentage of women in our leadership team. And we continue to invest in innovation and in our responsibility, social responsibility even if we decrease a little bit our contribution on that. Now time to leave the floor to Guilherme in order for him to present the operation in renewables. Guilherme Ferrari: Very well, I'm going to explain what underlies these figures. Here, we have the availability of our wind, solar and electric assets. Our performance continues to improve, especially in wind and photovoltaic. We have a team that works closely with our suppliers so that we can have greater availability in our equipment. This is the effort of our team, of course, with the help of investment, always seeking good performance of our assets. Now the performance has been significant in these 2 technologies. In energy, we are subject to seasonality, but we're also following a very good availability standard. In transmission, also a very high availability. And of course, these are assets that are more predictable in terms of operations, except for unforeseen things, but we're doing well in transmission as well. Now regarding curtailment, the hot topic in the sector of renewable energy, it has been significantly impacting our generation. The impact is on wind, solar assets and very much aligned with what is happening in the system. We attempt, of course, to minimize this, optimize everything with maintenance, management of these curtailments. We hope that a solution for curtailment will come in the fourth quarter with operational adjustments that should come from ANEEL and the National Integration System. Now another important point that has already been mentioned by Pierre is the acquisition of Cachoeira Caldeirao and Santo Antonio do Jari. And I think you can go on to the next slide. No, perhaps not. If you could go back. Therefore, the organic growth in this quarter, where we added 680 megas additionally from [ Cerrado ] and additionally, the 2 hydroelectric plants mentioned by Cachoeira Caldeirao and Santo Antonio do Jari with 612 megawatts. Next slide, please. As has already been mentioned, we see a growth in generation. This comes from our organic growth and from the M&A operation we have just carried out. Once again, it's organic growth and an enhancement in performance. This year, the wind situation was above what we had expected, helping us to minimize the issue of curtailment. Operational enhancement, better natural resources, both solar and wind, all of these are helping us have an increase in power generation. Next slide. Keller, you have the floor. Marcos Amboni: Good morning to everybody. And I think this slide summarizes our trading activity for the quarter. It was an excellent quarter. And in the graph to the right, you can observe that we had very good sales during the quarter. Now this is a comment we made in the call of last quarter that some operations that were under negotiation are still not reflected in our balance. And this is the case of this quarter, where they are reflected, the variation is due to the accounting of new productions with high production levels, and we're showing the availability, new contracts for all the years until 2029. So we have good volumes, as you can see. And besides these good production volumes, you can see the number of our consumers. We have a good evolution in that figure of consumers when compared with the same quarter last year. 17.6% increase of consumers. We have 2,056 at the close of the quarter and a growth of 24% in consumer units served in the third quarter of '25 until the end. Once again, very positive figures in energy sold, volumes sold as well as in our consumer portfolio with a lower ticket perhaps, but with higher margin. We can see the position of our resources available until 2030 going forward. This means that we continue with that strategy of contracting through time, fine-tuning tactical adjustments, gradual growth, guaranteeing revenues and the predictability of our results. I think this is what I wanted to say regarding that slide, and I am at your disposal during Q&A. Well, to go back to the projects that are under implementation, the Assuruá Wind Complex, as Pierre mentioned, the physical progress has been concluded. It is 100% operational. We're waiting for ANEEL dispatch to enter commercial operations of 100% of this complex. And we're waiting for the decision of ONS that has created new procedures to obtain, well, the license and to test these assets. It's worth highlighting that the Assuruá Wind Complex, as you already know, has quite a bit of supply and the performance has been much above what is expected. It surprises us in terms of its performance. It's the largest wind complex in Brazil and also the part with the best performance throughout Brazil. This project was delivered within the forcing budget within the right time line with health and security fully complied with. And we're in the final stage of execution, the environmental part, the recovery of degraded areas and investment in social areas surrounding the assets location. Next slide, please. Assu Sol, we have concluded it. We are progressing in installation activities. And because of this new procedure of the ONS, we're waiting to signal all of the procedures to be able to enter commercial activity. This is an asset with very good performance, top line performance. Now in terms of CapEx, it's all according to what has been scheduled. It was -- it is in accordance to our scheduling. And the same holds true for health and security. We have a recovery plan for the degraded areas. These are activities that tend to take longer, but within what is foreseen and as part of the social work that we carry out. Next slide, please. Our first transmission project in this presentation is Asa Branca. The first stretch is between [ Shaffield 2 and Corso 3]. It's about to be concluded. This should happen in the fourth quarter. Now at the end of this year, we will have 33% of the project RAP, a relevant amount compared to what we expected in the auction. Now the second stretch is awaiting the license for the continuation. This should take a few weeks, and this should begin the coming year. The final stretch of the project will only come into operation at the end of 2027. Well, in Grauna, this comes from a recent auction at the end of 2024. It's still in the environmental phase, but going according to plan. Now that red line that you see, the brownfield on the map. At the beginning of July, we began to operate that line. We have 5% of the total RAP, not that much, but an important framework for us. It's the first brownfield that we take on with our own operation, not with third parties. And of course, this is important for ENGIE. Regarding Grauna, now if anybody would like to add something, please do. No great updates compared to the last quarter. We -- Well, we are fully mapping everything out in the graph that you see. And regarding the transfer, which is a frequent question that we receive, we're still awaiting the stance of the controller, and there's nothing new this quarter regarding that topic. And the last one, Guilherme, who will speak about expansion where there is nothing that novel. Guilherme Ferrari: Nothing new here. We continue to maintain our project pipeline. And we are awaiting and the market is reacting, of course. There are real demands. We hope this will not be impacted by curtailment. We continue to keep these in our portfolio, especially the wind assets so that we can follow on with their development. Expansions are always marginal, but highly welcome. And as part of this context, we have the possibility of the auction for capacity in the coming year. We have 2 of our assets, Santiago and others that will participate, but well, we will be able to take part in this auction. And another important point refers to the batteries. We're beginning to look at these with greater attention, the development of batteries to also take part in the auction that will take place in the coming year. Marcos Amboni: Well, thank you, Guilherme. We'll go to see our financial performance, return on equity and return on invested capital at satisfactory levels, showing how resilient we are. We invested more than BRL 38 million in the last years, which means that our asset base has increased. And of course, it is updated. The prices in the past were old. It seemed to be greater with this new updated base, the prices have dropped a bit. And some of these projects are not delivering 100% of their EBITDA. This will become more clear in 2026, Assuruá and others delivering their full performance. And so the levels will be more recurrent. Now for the 9 months of '25, we have a slightly higher share of transmission vis-a-vis 2024 as part of our strategy of diversification. 1/4 comes from transmission, gas transportation, 75% from generation. Here, we see our revenue changes at 31.8%. Most of this due to IFRS, BRL 22 million in transmission, but we do have an important organic effect in growth of revenue and volumes, inflation and new assets coming into operation vis-a-vis the same period last year. And if we look at EBITDA, this will become more clear. Now to go to the results of TAG that continues to deliver a very consistent performance, BRL 2.3 billion, and BRL 1 billion -- almost BRL 1 billion of profit this quarter of net income, very similar to the first quarter, somewhat below the second quarter where we had a nonrecurrent effect and doing very well. Here, we have a more complex graph for this presentation referring to EBITDA at one end, the accounting EBITDA that is published. Then we have the intermediate bar that is adjusted EBITDA. This quarter, there were very few adjustments, as you can see and in the middle, adjusted EBITDA and the effect of IFRS, all have a similar growth between 10% and 13%. Transmission, very stable, equity income of tax somewhat lower. So we're left with generation with an increase of BRL 287 million that we have called performance is price, volume and expansion and reduction due to costs associated to expansion, connection cables, material service and sundry costs. This is a positive result coming from generation. Now in the middle, we have a growth of 10.5%. Net income change, a very similar panorama in the center, an increase of 10% from BRL 666 million to BRL 738 million, most comes from adjusted EBITDA, income taxes, negative variations due to depreciation, new assets and partly due to financial results. Our indebtedness has increased a bit. And we have, of course, the interest rates that are higher than the third quarter last year, leading to a 10% increase. We'll speak about our indebtedness, balance debt. It's increasing, which is expected BRL 3 million for the acquisition of Jari and Cachoeira. We have BRL 600 million in debt, BRL 3 million impact on our debt. Only this acquisition changed the EBITDA. It was 2.7x last year. It has now reached 3.2x. This is still a satisfactory level that guarantees a AAA, which we would like to maintain in gross debt, 3.8x, a well-balanced debt, as you can see. Of course, as of now, we need to be more cautious in our coming steps, but a healthy indebtedness. Now in this slide, we show you the debt profile and maturity, a very smooth schedule after 2030. Therefore, this profile is BRL 2 billion a year in terms of debt payment, fully under control. We continue to be AAA, 1/3 in CDI and the rest in IPCA. The cost of the debt evidently has increased a bit, 6.4% on average compared to 5.6% in the same period last year. Of course, there is pressure from the financial conditions throughout the country. Regarding our CapEx, no significant changes, a detachment year-on-year, almost BRL 10 billion year-on-year. This year, BRL 6 billion, which means the BRL 3 billion from Jari and Cachoeira and the rest for the conclusion of Jari, the transmission companies, that is where our CapEx is going to. And in '26, '27, everything at lower levels. We will be left with maintenance and the 2 transmission companies. Grauna that extends to 2028 and Asa Branca until 2027. And finally, well, this slide, I believe, is the same as that of last quarter to show you our payment of dividend 2021, 100%. And since '23, we maintain this at 55% without significant changes. And that is it. Adri will now lead the Q&A session for us. Adriana Wagner: [Operator Instructions] Our first question is from Daniel Travitzky from Safra. He has 2 questions. I will pose the first question and put it together with another question from [ Huang ], an individual investor about the share of bonuses. Could you explain the rationale to do that now? And we have the question from Ruan on the bonus and other models for the payout of dividends and shareholder capital. Pierre Gratien Leblanc: I can take it, this one. You complement if you want. So why we are doing that? It's just because ahead of '24, our profit reserve was above the capital. And to be compliant with the law, we need to increase our capital -- social capital. This is the first point. The second point is we do have -- we had space until -- to increase our social capital until the authorized capital we do have. And this authorized capital was -- is today at BRL 7 billion. So we take the opportunity to go up to the limit or close to the limit. And we proposed to the Board yesterday, and it was approved to increase the social capital up to BRL 6.9 billion, and it will be done through a bonus action. Why? Just because we wanted to -- also to have a better liquidity of our shares in the stocks. And through these mechanisms, we will increase the liquidity of our shares without any financial impact at short term for our minority interest shareholders. Guilherme, if you want to complement or not, up to you. Guilherme Ferrari: No, that was perfect, Pierre, simply to complement the remuneration model besides the shareholder equity payment. In the future, we can alter the company's stock. I don't think this will be done in the short term. This is a model that will be analyzed to see if there's any advantage in doing that. Adriana Wagner: The second part of the question refers to your vision on the solution proposed for the curtailment in provisional measure 384. This is also part of Juan's question, who asks about curtailment and how to deal with it in the medium term? Pierre Gratien Leblanc: I would like to begin the answer, then I will give the floor to Guilherme or Keller. This provisional measure 304 was approved, but not sanctioned. We have to wait for it to be sanctioned. And we need to understand the regulation better. Perhaps Guilherme would like to comment on what is included in this provisional measure. Guilherme Ferrari: Well, this is simply to add information. We're faced with several uncertainties in terms of the real impact, which will be the reimbursement. We still have doubts if there will be reimbursement regarding power or if there will not be reimbursement. And there is an issue that we already mentioned, regulatory issues that could make investments in generation have a different technical condition to the ones we have presently, creating another obstacle to the incredible growth of generation companies. Now all of this strongly impacts our curtailment projections going forward. Marcos Amboni: Well, I don't have very much to add. Everything has been said. We would have to see the final version of provisional measure 304. There are 2 articles that we need to analyze before we can estimate what will be subject to reimbursement and those articles that refer to us and the impact, the effect that this causes on physical distribution and distributed distribution. These are points that need to be further assessed at the end of this legislation. Now there is a positive point in the midterm, and it is interesting for the long term better conditions to insert batteries into the system. This will help us overcome several difficulties that we face at present and physical curtailment can be mitigated if we make good use of these batteries. Now in the coming months and years, we will see how this plays out. To complete that topic and others, we're going to approach this in great detail in ENGIE Day that will be held in Sao Paulo at the end of November. If you can't be with us, we will record the session. Adriana Wagner: Our next question is from Joaquin. The question is will the company think of similar acquisitions compared to the assets recently acquired? Will this go in detriment of new assets in the renewable sector? Guilherme Ferrari: I will begin and then Depine and Keller, please feel at ease to add your comments. Now evidently, the market with this oversupply ended up thinking greenfield made no sense. And with curtailment massively impacting the results, greenfield has been put aside. Now this is a factor that will make us postpone our decision to invest in greenfields. And when we look at M&A for wind and solar operations, the curtailment factor is a fundamental assumption. Of course, the seller will try to insist on curtailment. The buyer will insist on a more realistic curtailment, and this leads to a great difference in values. Potential M&As for renewable wind and solar energy will have to wait until we have a clear vision of the impact of provisional measure 304 and the regulation that will come about to work with distributed generation. Now M&As in hydro plants, well, this is not only our desire, but that of other players, but it is scarce in the market. There are a few opportunities. Whenever an opportunity arises, we will look at it, of course, following the line that we followed for Cachoeira and Jari. We will see the quality of the assets, labor -- I think, labor qualification is fundamental, and that was a positive point in these 2 assets. We were able to maintain all of the employees that were already working there, bringing in the knowledge since the phase of conception until the beginning of operation. And we're adding ENGIE's knowledge to enhance the quality of these assets. We have to carry out an in-house analysis. And as I said, these assets are scarce in the market. There are not very many opportunities. Adriana Wagner: Thank you, Guilherme. The next question comes from Bruno Oliveira, sell-side analyst. Two questions. Any planning on TAG, a possible partial sale in the horizon? And as part of your investment projects, any outlook for a dividend payout of 100%? Or is it too early for this discussion? Pierre Gratien Leblanc: The answer is quite easy is no. Nothing planned in the very, very short term or short term or medium term for TAG. Depine, maybe you can take the second one. Leonardo Depine: Well, regarding the dividends, for the time being, no, our indebtedness continues to grow somewhat above 3 at present and will further increase because of the 2 projects under construction until mid-2026. I think Bruno asked about this. It doesn't make sense for the time being to go back to 100% of payout with indebtedness above 3%. I think we had already referred to this in the second quarter as well. Adriana Wagner: Very good. Thank you. To continue with the next question from Victor Brug, a sell-side analyst for JPMorgan. Any update in the revision of tariffs in the Northeast, TAG? Leonardo Depine: Well, from TAG and the regulator itself, we have heard that this tariff revision should happen in the first half of the coming year. The last information is that this review will be carried out in 2 stages. They're going to work on work and the asset base. So this process will be displaced through June, perhaps will be concluded in June. This is the last statement we heard from the regulator. We shouldn't expect anything very concrete in the short term. Adriana Wagner: Our next question comes from Bruno Vidal, sell-side analyst from XP Investments. Does the company have an outlook on participation in BP and which would be the modality, capital stock increase or increase of indebtedness? Pierre Gratien Leblanc: So we are still studying this opportunity to prepay our UBP topic. We are waiting for the ANEEL calculation. And then we will have until beginning of December to discuss with ANEEL. And then ANEEL will give us if we are interested to prepay the deadline to do the cash out. How we will do it? So it will be probably now in '26, not in '25, is still under discussion inside EBE. We do have a lot of different options. Increase of capital may be one, but it's not the only one. So we will take and choose the best option for EBE to finance the prepayment if we decide to do it. I hope that as Depine said earlier, I hope that end of December during our Investor Day in Sao Paulo, we could give you more and more detail on that. Leonardo Depine: Thank you very much. Our calculation in the time line, the payment should be until the end of March or the beginning of April. So we have the first quarter of 2026 to discuss these options. Adriana Wagner: Our next question is from Lorena, sell-side analyst from Itaú BBA. Our trading strategy, which is the outlook of maintaining part of the portfolio uncontracted considering the price of energy in the coming years. Leonardo Depine: I can answer that. If you could tell me the first part. Adriana Wagner: Our trading strategy, which is the outlook of maintaining part of the portfolio uncontracted, considering our viewpoint on energy in coming years. Leonardo Depine: We continue with that vision, with that strategy of having gradual uncontracting and we make tactical adjustments in terms of sales. This is the best for a company that is capital intensive and works with generation. We give ourselves the opportunity to make the most of higher prices in that long arm. Now we're thinking of year plus 1, year plus 2. We have future prices that are higher than years further ahead. So there is space for that long arm, while the market prices react in the upward position. It's important to make the most of contracting and not move away from this now. There's also a limit in liquidity in the market. So we can't contract everything on the spot with this very volatile price model, we know there are scenarios where the price will be much too low and spot prices will be low and we have to counterbalance our vision that there is room for future prices to improve vis-a-vis the risk in the short term, not allowing huge volume for the short term because we'll end up in the spot market. This is a bet, of course. Our profile is to have an appropriate management between results, our revenues and the risks that we take on. To summarize, we're going to continue following our broader strategy of gradually contracting future energy. Adriana Wagner: Thank you very much. At this point, we would like to end the question-and-answer session. I will return the floor to our officers and Mr. Depine for their closing remarks. Leonardo Depine: I would like to thank all of you for your attendance, and we hope to see you at our next events. We will meet at our event at the end of November, and we hope to have a better vision of the impacts of PM304. Thank you all very much. Have a good day, and we hope to see you in our next event. Pierre Gratien Leblanc: Thank you all. See you in late November in Sao Paulo. Adriana Wagner: We thank all of you for your attendance, the energy video conference and have a very good afternoon.
Operator: Welcome to Franklin Resources Earnings Conference Call for the Quarter and Fiscal Year ended September 30, 2025. Hello. My name is Sachi, and I will be your call operator today. As a reminder, this conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your host, Selene Oh, Head of Investor Relations for Franklin Resources. You may begin. Selene Oh: Good morning and thank you for joining us today to discuss our quarterly and fiscal year results. Please note that the financial results to be presented in this commentary are preliminary. Statements made on this conference call regarding Franklin Resources, Inc., which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and the MD&A sections of Franklin's most recent Form 10-K and 10-Q filings. With that, I'll turn the call over to Jenny Johnson, Chief Executive Officer. Jennifer Johnson: Thank you, Selene. Welcome, everyone, and thank you for joining us to discuss Franklin Templeton's Fourth Quarter and Fiscal Year 2025 results. I'm here with Matt Nicholls, our Co-President and CFO. Joining us is Adam Spector. This is Adam's final quarterly call as he has transitioned to a new role as CEO of Fiduciary Trust International. Adam has played a vital role in our success with clients over the past 5 years, and his expertise and leadership will be invaluable to Fiduciary. I'd like to also welcome Daniel Gamba to our earnings call for the first time. Daniel joined Franklin Templeton in mid-October as Chief Commercial Officer and also assumes the role of Co-President alongside Matt and Terrence Murphy, Head of Public Market Investments. A respected industry leader, Daniel brings extensive experience across public and private markets globally. On today's call, as outlined in our investor presentation, I'll share the progress we made in year 1 of our 5-year plan, which was marked by strong momentum and tangible results. I'll also touch on highlights from our fourth quarter and fiscal 2025. After that, Matt will review our financial results and quarterly guidance, then we'll be happy to answer your questions. In recent years, Franklin Templeton has continued to build on our strong foundation, advancing our mission to help clients achieve the most important milestones of their lives. As one of the world's most comprehensive asset managers, we combine deep expertise across public and private markets with a client reach spanning over 150 countries. Today, clients look to Franklin Templeton as their trusted partner for what's ahead, one firm offering the reach and resilience of a global platform together with the distinct expertise of our specialist investment teams. As more asset owners seek multifaceted partnerships with fewer firms that can deliver across asset classes, styles and regions, we believe our business is poised to meet that demand. In recognition, just last week, Money Management in Barron's named Franklin Templeton as its 2025 Asset Manager of the Year in the $500 billion plus AUM category. The award recognizes firms leading through innovation and excellence in investment advisory solutions. Our position today reflects years of deliberate strategic planning and the strength of a global brand that's earned the trust of investors around the world. This year was another important step forward as we continue to deepen client partnerships, broaden our investment capabilities and strengthen our diversified model. Fiscal 2025 marked the first year of our 5-year plan, and we've made great strides across a number of key focus areas for the company. We are ahead of our plan for alternatives, ETFs and Canvas and on track in the other areas. Let's now turn to the investor presentation beginning on Slide 8 to review our progress report. Starting with Investment Management, we continue to offer a broad spectrum of investment capabilities across public and private assets, helping clients achieve a wide range of financial goals. In public markets, focus remained on strengthening investment performance while optimizing our product lineup. Performance continues to improve with over 50% of our mutual funds, ETFs and composites outperforming peers and benchmarks across all standard time periods. This underscores our disciplined investment process and commitment to delivering consistent results for clients. This year, we also simplified our investment management structure to strengthen talent development and enhance the way we manage investments across public markets. These changes are fostering greater collaboration and alignment across teams, positioning us to operate with greater agility and scale. At the same time, we refined our investment offerings to focus on scalable, high-demand strategies where we can deliver the greatest value for clients. That involved thoughtfully retiring certain brands and integrating investment capabilities where it makes sense, steps that make our platform more efficient, scalable and strategically positioned for future growth. Turning to private markets. Franklin Templeton is a leading manager of alternative assets with $270 billion in alternative AUM with the closing of Apera. We have a broad range of strategies, including alternative credit, secondary private equity, real estate, hedge funds and venture capital. On October 1, we further strengthened our private debt platform through the acquisition of Apera Asset Management, bringing our private credit AUM to $95 billion and enhancing our reach across European markets. The acquisition complements Benefit Street Partners and Alcentra and expands our direct lending capabilities across Europe's growing lower middle market. This year, we fundraised $22.9 billion in private markets, keeping us ahead of pace toward our 5-year $100 billion fundraising goal. The strong momentum reflects both the depth of our alternative's platform and the growing demand for diversified outcome-oriented solutions. In fiscal 2026, we anticipate an increase to private market fundraising to between $25 billion and $30 billion. We remain committed to the democratization of private assets, bringing institutional quality opportunities to a broader range of investors. Franklin Templeton Private Markets, our wealth management offering, continues to gain traction, contributing more than 20% of our private market fundraising this year, underscoring the strength of our global distribution partnerships and client reach. We expect this to grow to between 25% to 30% in the next few years. Our perpetual secondary private equity funds, the Franklin Lexington Private Markets Funds have raised $2.7 billion since their launch in January. In addition, our 2 other primary alternative managers, Benefit Street Partners and Clarion Partners, each have perpetual funds with scale. These are semi-liquid perpetual vehicles open to ongoing subscriptions, giving investors efficient access to long-term private market exposure. This year, we announced an infrastructure partnership with 3 leading firms, Actis, DigitalBridge and Copenhagen Infrastructure Partners, expanding our expertise in one of the most dynamic areas of private investing. Infrastructure is a significant opportunity with an estimated $94 trillion in global funding need by 2040. We're excited to develop a diversified perpetual infrastructure solution for the wealth channel, investing across all subsectors and positioning Franklin Templeton to capture opportunities in this fast-growing market. In addition, we are in the process of launching new products to bring to market. Industry tailwinds for private markets remain strong. According to Boston Consulting Group, alternatives are projected to represent roughly half of industry revenues by 2029, driven largely by the democratization of alternatives. Goldman Sachs projects the retail alternatives market alone will expand from $1 trillion to $5 trillion over that same period. Franklin Templeton is well positioned to capture our share of this growth leveraging our scale, partnerships and innovation to lead in the next era of alternative investing. Alternatives and retirement represent one of the most exciting opportunities ahead. This year, we announced a partnership with Empower, one of the largest U.S. retirement service providers with over $1.8 trillion in assets under administration. Together, we're paving the way for private market investments to be included in defined contribution plans, an important step toward broadening access for millions of retirement savers. While still early days, the long-term opportunity is significant. In U.S. defined contribution plans alone, allocations to alternatives are projected to create a $3 trillion addressable market over the next decade. With $125 billion in defined contribution assets and $440 billion in total retirement assets and a compelling range of alternative strategies, Franklin Templeton is well positioned as demand continues to accelerate. Turning now to distribution. As one of the most comprehensive global investment managers with clients in over 150 countries, we offer our clients a full range of investment strategies in vehicles of their choice. We saw growth across vehicles, driven by record positive net flows in retail SMAs, ETFs and Canvas, contributing to AUM growth from the prior year of 13%, 56% and 71%, respectively. We are a leader in retail SMAs with AUM of $165 billion across more than 200 high-quality strategies. Our SMA business has grown at a 21% compound annual rate since 2023, reflecting the growing demand for personalized investment solutions. As the market continues to evolve, retail SMAs now about $4 trillion are expected to double by 2030 according to Cerulli. Against that backdrop, we're positioned to capture this growth supported by powerful trends driving investor behavior, greater customization, direct ownership and tax efficiency. Within the retail SMA segment, custom and direct indexing continue to be the fastest-growing areas. According to Cerulli, direct indexing assets have reached $1 trillion, growing more than 35% from the prior year. We're seeing that strong momentum in our own business. AUM on our Canvas platform has more than tripled since 2023, an 82% compound annual growth rate. Our partnership network is expanding quickly, growing from 67 partner firms in 2023 to more than 150 today. And over that time, our financial adviser base has increased fivefold from just over 200 to more than 1,100 advisers now using Canvas to deliver customized portfolios at scale. We're exceeding our growth goals driven by continued adoption of personalized investing and the expanding reach of our Canvas platform. Our ETF business also continues to scale rapidly and ahead of plan, driven by strong global demand across fundamental active, systematic active and thematic country strategies. Active ETFs are now mainstream, representing about 10% of industry AUM, yet capturing 37% of flows and probably nearing 25% of revenues in the first half of 2025 according to McKinsey. At Franklin Templeton, our ETF AUM has grown at a 75% compound annual rate since 2023, with 16 consecutive quarters of net inflows and 14 ETFs now exceeding $1 billion in AUM. Importantly, active ETFs account for 42% of our ETF assets, but more than 50% of flows in fiscal 2025, underscoring the strength of our active ETF positioning, and we're just getting started. In our first year with approximately $50 billion in ETF AUM, we're already halfway to achieving our 5-year goal, a clear sign of the strength, momentum and scalability of our platform. Franklin Templeton Investment Solutions is another key driver of our growth strategy, leveraging our capabilities across public and private asset classes to deliver customized solutions for clients. Investment Solutions AUM grew 11% to $98 billion, in line with industry growth, supported by a strong pipeline. In July, we welcomed Rich Nuzum, former Executive Director of Investments at Mercer, to lead the expansion of our OCIO business, a major priority for us as asset owners increasingly seek strategic advice on objectives, governance and strategic asset allocation. With Rich's leadership and the strength of our investment platform, we are optimistic about this growing opportunity. This year, our focus on strategic partnerships delivered strong results, including $15.7 billion in multiple insurance sub-advisory fundings, a reflection of our growing position as a trusted partner to leading insurance companies. Beyond insurance, we also expanded multibillion-dollar relationships with clients in each of our regions. For example, the company was appointed trustee and manager of the $1.68 billion National Investment Fund of the Republic of Uzbekistan, further extending our strong track record in managing strategic investment mandates across emerging markets. These achievements reflect the strength of our partnerships and the trust we've built globally. In this context, we were delighted that the Central Banking named Franklin Templeton its 2025 Asset Manager of the Year, highlighting our expertise and enduring relationships with central banks around the world. Turning to Slide 9. Two additional important growth areas are private wealth management and digital and technology. Fiduciary Trust International, our Private Wealth Management business is positioned to benefit from major demographic trends, including the $84 trillion intergenerational wealth transfer expected through 2045. As a fully integrated wealth platform offering investment advisory, trust and state, tax and custody services, fiduciary continues to stand out with a client retention rate of about 98%. Global financial wealth is projected to grow at a 6% CAGR through 2029 according to the Boston Consulting Group. Non-depository trust companies like Fiduciary Trust International have historically grown at a faster rate. In fiscal year 2025, Fiduciary's AUM stood at $43 billion, supported by a strong pipeline of new business. As mentioned earlier, we also strengthened Fiduciary's leadership team with the appointment of Adam Spector as CEO of Fiduciary. Adam has been instrumental in the success of Franklin Templeton's global advisory services and his leadership will help accelerate Fiduciary's next phase of growth. Fiduciary is a leading independent wealth management business, and we will continue to invest both organically and through targeted acquisitions to position the business for sustained long-term growth. Our goal is to double Fiduciary's AUM by 2029. Turning to innovation. The pace of change in our industry continues to accelerate and Franklin Templeton is leading the way. According to Boston Consulting Group, the market for tokenized real-world assets is projected to grow from about $600 billion today to nearly $19 trillion by 2033, a transformative opportunity that we were early to recognize in the development of our digital assets group. Fiscal year 2025 was a defining year for our digital asset business. We expanded our product lineup, and our tokenized and digital AUM now stands at $1.7 billion, up 75% from the beginning of the year. As the only global asset manager offering digitally native on-chain mutual fund tokenization, we introduced first-of-the-kind features for registered money market funds using our proprietary blockchain-based tokenization and transfer agent platform, including intraday yield calculation and daily yield payouts, 365 days a year. During the year, we also completed launching new tokenized funds in UCITS, VCC and private fund wrapper to supplement our 40 Act offering, supporting a broader range of tokenized fund types across multiple jurisdictions and building a strong foundation for the next wave of innovation. And we deepened our global partnerships, embedded our tokenized money market funds into the crypto collateral process and partnering with Binance, the world's largest crypto exchange to develop new products for its global wallet platform. Today, Franklin Templeton stands as the only global asset manager delivering native on-chain mutual fund tokenization. We remain focused on investing in innovation and technology to harness blockchain's potential, redefining how investors access opportunities and shaping the future of asset management. Over the past year, we've taken a major step forward in our AI journey. What began as hundreds of isolated use cases has evolved into a large-scale end-to-end transformation across 4 core areas: investment management, operations, sales and marketing. This shift is accelerating our scale in agentic AI. Through strategic partnerships, including our collaboration with Microsoft announced last summer, we're building integrated scalable AI platforms that are already driving measurable results tied to clear business outcomes and commercial impact. As these initiatives deliver results, greater value will be unlocked across the firm. And importantly, I'm pleased to see that AI adoption continues to grow across our workforce. Today, the majority of employees are using approved AI tools to drive productivity, efficiency and better outcomes for our clients. We continue to advance our efforts in capital management, operational integration and expense discipline, strengthening the foundation for future growth. Matt will cover our progress and next steps in these areas in just a moment. Fiscal 2025 was a pivotal first year of our 5-year plan, one that set a strong foundation for growth, innovation and scale. We executed on our long-term priorities, delivering growth across both public and private markets as clients increasingly look to Franklin Templeton as a trusted partner for comprehensive investment solutions. With that strong foundation in place, we're entering fiscal 2026 with clear momentum and excitement about the opportunities ahead. Now turning to market performance. Fiscal 2025 brought strong public equity gains despite a complex geopolitical and macro backdrop. After a long period of narrow mega cap leadership, market breadth returned, a welcome shift for active managers. Equities rose across regions, supported by easing monetary policy, steady growth and improved earnings. While markets briefly wavered early in the year amid China's DeepSeek AI debut and U.S. tariff proposals, they rebounded quickly with the S&P 500 and MSCI Emerging Markets both up over 30% from April lows. AI remains a key driver of market direction, fueling innovation and differentiation across industries. In fixed income, returns were positive even amid policy uncertainty, a government shutdown and shifting rate expectations. The Fed's 50 basis point rate cuts in September and October helped support growth, while inflation has held near 3%, yields remain attractive, though volatility is likely to persist. Our overall view of private markets remains constructive. Activity has been more selective, but we continue to see opportunities. Secondaries offer compelling risk-adjusted profiles and in private credit, areas such as asset-based finance and commercial real estate debt are benefiting from reduced bank lending. Real estate capital markets remain muted overall, but industrial, multifamily and self-storage sectors are leading performance due to strong and sustainable long-term fundamentals. This is an environment that rewards selectivity, discipline and active management. Market breadth, dispersion and dislocation are creating opportunities across public and private markets where active managers can add meaningful value for clients. These market dynamics set the stage for another strong year at Franklin Templeton. Let's now move to fourth quarter and fiscal 2025 results, beginning on Slide 15. In terms of investment performance, as mentioned earlier, over half of our mutual fund ETF AUM outperformed peers and over half of composite AUM outperformed their benchmarks in all periods. Turning to flows on Page 17. Long-term flows increased 7.8% to $343.9 billion from the prior year. Excluding Western Asset Management, we had $44.5 billion in long-term net inflows, marking our eighth consecutive quarter of positive flows, excluding Western and reflecting client demand in key strategic areas. Our institutional pipeline of won but unfunded mandates remain healthy at $20.4 billion following record fundings in the quarter. The pipeline remains diversified by asset class and across our specialist investment managers. Internationally, Franklin Templeton manages nearly $500 billion in assets. And excluding Western Asset Management, we achieved $10.7 billion in positive long-term net flows in markets outside the U.S. That momentum highlights the strength of our global platform and the diversity of our growth across vehicles, regions and client segments. From an asset class perspective, turning to Slide 18. Equity net outflows improved to approximately $400 million for fiscal year 2025. We saw positive net flows into large-cap value, smart beta, infrastructure, equity income, custom solutions and mid-cap growth strategies. Fixed income net outflows were $122.7 billion. Franklin Templeton Fixed Income more than doubled net inflows from the prior year. With approximately $240 billion in AUM, Franklin Templeton Fixed Income has expertise in every sector and is active in all corners of the global bond market. Excluding Western, fixed income net inflows were $17.3 billion for the year. We experienced positive net flows into Munis and Stable Value strategies. Excluding Western, fixed income generated positive net flows for 7 consecutive quarters. Let's move to Slide 19. Finally, as I mentioned before, broad-based client demand drove sustained organic growth in alternatives and multi-asset, which together generated $25.7 billion in net flows for the year. This week, we reported preliminary October AUM and flows. Western's long-term net outflows were $4 billion for the month of October and had ending AUM of $231 billion. Excluding Western, long-term net inflows continue to be positive and were $2 billion. We continue to see positive net flows in alternatives, ETFs, Canvas and digital assets. The past year has presented significant challenges for Western Asset, and we remain committed to supporting them. As part of that commitment, we integrated select corporate functions to drive efficiency and give access to broader resources. Western's client service team joined Franklin Templeton in order to better serve the needs of our clients. These enhancements have been seamless for clients. Western's leading investment team continues its investment autonomy and performance has rebounded strongly with 92%, 98%, 88% and 99% of Western's composite AUM outperforming the benchmark for the 1-, 3-, 5- and 10-year periods. To wrap up, we take great pride in the efforts we've made over the past year to further grow and diversify our business. As we enter fiscal year 2026, Franklin Templeton stands stronger than ever, anchored by broad investment expertise, global scale and reach and commitment to innovation. We have strengthened our competitive position across public and private markets, expanded our partnerships globally and continued to innovate in technology, AI and digital assets. These achievements reflect not only our ability to navigate dynamic markets, but also our long-term focus on creating sustainable value for our clients and shareholders. Before I close, I want to thank our employees around the world for all their efforts this past year. Their dedication, expertise and unwavering focus on our clients are the foundation of everything we accomplish. Now I'd like to turn the call over to our Co-President, CFO and COO, Matt Nicholls, who will review our financial results and quarterly guidance. Matt? Matthew Nicholls: Thank you, Jenny. I will briefly cover our fiscal fourth quarter and full year 2025 results, followed by fiscal first quarter 2026 guidance. So for the fiscal fourth quarter, ending AUM reached $1.66 trillion, reflecting an increase of 3.1% from the prior quarter, and average AUM was $1.63 trillion, a 4.4% increase from the prior quarter. Adjusted operating revenues increased by 13.9% to $1.82 billion from the prior quarter due to elevated performance fees and higher average AUM. Adjusted performance fees were $177.9 million compared to $58.5 million in the prior quarter. This quarter's adjusted effective fee rate, which excludes performance fees, stayed flat at 37.5 basis points compared to the same rate in the prior quarter. Our adjusted operating expenses were $1.34 billion, an increase of 10.5% from the prior quarter, primarily due to higher incentive compensation on higher revenues, higher performance fee incentive compensation and performance fee-related third-party expenses, higher professional fees, partially offset by higher realization of cost savings. As a result, adjusted operating income increased 25% from the prior quarter to $472.4 million, and adjusted operating margin increased to 26% from 23.7%. Fourth quarter adjusted net income and adjusted diluted earnings per share increased by 35.7% and 36.7% from the prior quarter to $357.5 million and $0.67, respectively, primarily due to higher adjusted operating income and adjusted other income and a lower tax rate. As of September 30, we impaired an indefinite-lived tangible (sic) [ intangible ] asset related to certain mutual fund contracts managed by Western Asset and recognized a $200 million noncash charge in our GAAP results. Turning to fiscal year 2025, ending AUM was $1.66 trillion, reflecting a decrease of 1% from the prior year, while average AUM increased 2.6% to $1.61 trillion. Adjusted operating revenues of $6.7 billion increased by 2.1% from the prior year, primarily due to an additional quarter of Putnam, higher average AUM and elevated performance fees, partially offset by the impact of Western outflows. Adjusted performance fees of $364.6 million increased from $293.4 million in the prior year. The adjusted effective fee rate, which excludes performance fees, was 37.5 basis points compared to 38.3 basis points in the prior year. The decline is primarily driven by strong growth into lower fee categories such as ETFs, Canvas and multi-asset solutions, mitigated by lower fee Western outflows and increasing flows into higher fee alternative asset strategies. Our adjusted operating expenses were $5.06 billion, an increase of 4.3% from the prior year, primarily due to an additional quarter of Putnam, higher incentive compensation on higher revenues and sales and higher spend on strategic initiatives, partially offset by the realization of cost-saving initiatives. Importantly, as previously guided, adjusted for an additional quarter of Putnam and excluding incentive fee compensation, our fiscal year expenses were substantially similar to fiscal year 2024, less than 1% difference. This led to fiscal year adjusted operating income of $1.64 billion, a decrease of 4.3% from the prior year. Adjusted operating margin was 24.5% compared to 26.1% in the prior year, reflecting our support of Western. Compared to prior year, fiscal year adjusted net income declined by 6.3% to $1.2 billion, and adjusted diluted earnings per share was $2.22, a decline of 7.5%. The decreases were primarily due to lower adjusted operating income and lower adjusted other income. On other topics, we continue to focus on capital management and operational integration to drive efficiency and long-term value. As stated on Slide 9 in the investor presentation, from a capital management perspective, we returned $930 million to shareholders through dividends and share repurchases, funded the majority of the remaining acquisition-related payments and repaid $400 million senior notes due March 2025 in the current year. Our dividend, which has increased every year since 1981, has grown at a compound annual growth rate of approximately 4%. Our balance sheet provides flexibility to invest in the business organically and inorganically. We have co-investments and seed capital of $2.8 billion, an increase from $2.4 billion from prior year to develop and scale new investment strategies. In addition, while continuing to invest in long-term growth initiatives, we also continue to strengthen the foundation of our business through disciplined expense management and operational efficiencies, especially given the ongoing evolution of our industry. Our plan to further simplify our firm-wide operations, including the unification of our investment management technology on a single platform across our public market specialist investment managers remains on track, both from a cost and implementation perspective. We have also integrated functions of certain specialist investment managers to simplify investment operations and increase collaboration across the firm. Before presenting our fiscal first quarter 2026 guidance, I just wanted to reiterate an important point on our fiscal year 2025 expenses. As mentioned earlier, when adjusting for an additional quarter of Putnam and excluding incentive fee compensation, our fiscal year expenses were substantially similar to fiscal year 2024, less than 1% difference. This is notwithstanding markets being significantly higher in the year and the relatively modest difference is fully attributed to higher sales commissions and higher valuation of mutual fund units linked to deferred compensation. All other investments across the company, including additional resources tied to alternative assets, ETFs, Canvas, multi-asset solutions, investment management technology and operations have been directly funded through savings initiatives. Turning to fiscal year 2026 first quarter guidance. As a reminder, guidance assumes flat markets and is based on our best estimates as of today. We expect our EFR to remain at mid-37 basis points for the quarter. We anticipate the EFR to be stable as higher growth in lower fee categories are partially offset by higher fee alternative asset flows. In future periods, episodic catch-up fees may move the EFR temporarily higher. We expect compensation and benefits to be approximately $880 million. This assumes $50 million of performance fees at a 55% payout and also includes approximately $45 million to $50 million of annual accelerated deferred compensation for retirement-eligible employees, flat from the first quarter of 2025. For IS&T, we're guiding to $155 million, consistent with the prior quarter. We also expect occupancy to be flat at approximately $70 million. G&A expense is expected to return to previous guide levels in the $190 million to $195 million range and includes elevated professional fees. In terms of our tax rate, we expect fiscal 2026 to be in the range of 26% to 28% due to a high proportion of U.S. income and the effect of increased tax rates globally. We're 1 month into the 2026 fiscal year, and it's obviously early, but consistent with our plans discussed earlier in fiscal 2025, we begin the year knowing that we have approximately $200 million of gross expense efficiencies for fiscal 2026, but the net amount of those efficiencies will ultimately depend on market and our performance during the year, both of which are up to start with as we go into the new fiscal year. Similar to fiscal 2025, these savings will also fund ongoing investments across the business, absorb increased fundraising expenses and $30 million of expenses added from the Apera acquisition. However, all else remaining equal from this point, we expect to end fiscal 2026 at or below adjusted expenses versus fiscal 2025 and at a higher operating margin. And now we would like to open the call for questions. Operator? Operator: [Operator Instructions] The first question is from Alex Blostein from Goldman Sachs. Alexander Blostein: Thanks for all the detail and some of the updated targets as you think about some of the growth areas for the firm. Super helpful. I wanted to start with a question around alts. When you talk about the fundraising target for 20 -- fiscal 2026, I think you said 25 to 30. Can you just unpack how much you assume for Lexington's flagship fund? And then within that, how you're expanding their retail alts lineup as well? Jennifer Johnson: So as you said, we think the 2026 target is between $25 billion and $30 billion. And just, Alex, you remember, last year, we said $13 billion to $20 billion, and we thought the $20 billion would be contingent on the first close of Lexington. That didn't actually happen, and we still blew away that number at, I think, $22.7 billion. So this year, the $25 billion to $30 billion will be a mix of Lexington. There will be contributions from Clarion on the real estate, BSP and Alcentra as well as Venture. Lexington could be half of that, but the others are intended to contribute significantly. And we think 2026 is going to be a real well-routed year as far as all of the alts managers contributing. Alexander Blostein: Got you. And then, Matt, one for you on expenses. So I heard you kind of try to bridge exiting fiscal 2026 all-in expenses, same or better or lower, I should say, expense run rate. Can you just help us think maybe through the cadence of that over the course of the year or maybe asked another way, your just total expense guide for 2026 in totality? Matthew Nicholls: Yes. As I said in the prepared remarks, we guided earlier on in the year when markets were a lot lower that we'd be targeting $200 million of cost savings for 2026, which will be spread out through the year, and we're confident that we've achieved that. It's now a matter of determining the net amount that we can achieve. And there's a lot going on, as mentioned by Jenny on this call and as I referenced. We're confident that we can self-fund many of these things from the $200 million. We can absorb the increased fundraising that I mentioned when I talked about the $200 million earlier in the year, I caveated that with the increased fundraising that we expect this year and the addition of Apera. And also, we've mentioned in the past, the absorption of the Aladdin project expenses. So all those things, taking all those into account and beginning the year with the market up 15%, 20%, depending on what market you're talking about, we're still confident that we end the year at least -- I want to say, at least in line with where we were in 2025 with the full expenses, excluding performance fees from both years. And what I mean by at least is there's a very good shot that we are below that amount. It's very early on, Alex, obviously, for the year. So that's all I can give right now. The second thing I'll say, though, is that we do expect the results as we move into the year, except the first quarter where the margin would be a little bit lower because the accelerated deferred comp probably represents about 2% of margin. But if you take that out every quarter as we model our way through the year, all else remaining equal, we'd expect the margin to tick up. Second, third, fourth quarter, we expect the margin to get increasingly higher towards our target of 30%, as we've also referenced in the past. Operator: [Operator Instructions] The next question is from Ben Budish from Barclays. Benjamin Budish: Jenny, you talked about your ambitions on the infrastructure side in your prepared remarks. Curious if you can unpack that a little bit more. You mentioned some wealth products coming to market, a number of partnerships. What's sort of in the pipeline for the near term in terms of new funds? And maybe talk a little bit about what your current exposure is today? Jennifer Johnson: So -- sorry, let me just get a clarification. Are you talking infrastructure, meaning like the stuff we're doing on tokenization and blockchain or infrastructure, meaning the alternative products infrastructure? Benjamin Budish: The latter. Jennifer Johnson: Okay. So we announced like we think that the infrastructure category is just massive. There's -- as we all know, you guys have heard the statistics as far as the number of projects that are needed to be funded out there. And so the relationship that we created, the partnerships with DigitalBridge, which DigitalBridge is known for their sort of data centers, cell towers, fiber networks kind of thing. Copenhagen Infrastructure Partners are really greenfield energy manager and then Actis is sustainable kind of infrastructure. Infrastructure requires massive scale. And so none of these players play particularly -- have really any penetration in the wealth channel. And so we're able to -- what we're going to do is be able to build a fund around participating in their deals that will then distribute in the wealth channel. Now that doesn't prohibit us from being able to do some M&A if the appropriate opportunity comes. But infrastructure is an asset class that is particularly desired by people who are looking for income because these tend to be long-term PPA products and others that kick off a lot of income. So we felt that we needed that category to fill out our alternative's capability. We didn't find something that was of scale that we wanted to acquire at the time and this -- and they needed to get into the wealth channel, or they had a desire. So it's a good match. Operator: The next question is from Bill Katz from TD Cowen. William Katz: I appreciate all the guidance and commentary. Jenny, I'm very interested in what you guys are doing on the AI and the tokenization side. You do seem to be way ahead of most of your peers as our conversations are going. Can you talk a little bit about how you sort of see maybe the opportunity in particular for tokenization, how that might impact the ability to drive performance, what it might mean for operating costs and ultimately, how it might redefine distribution opportunities? Jennifer Johnson: Sure. So again, it's really important to just think about digital assets and tokenization is blockchain, it's just a programming language. It's a programming language that does certain things really efficiently and then it's going to open up new opportunities. So we are the only ones who have -- and we built a transfer agency system and a wallet-based system because they didn't exist in the market. Starting in 2018, we had approved -- I think it was in 2021, the SEC approved our tokenized money market fund. And to give you an idea of the opportunities, because it's significantly cheaper to run and there's -- we're able to offer our money market fund with an initial investment of $20. Our traditional money market fund is you have to have $500. And the second thing that technology enables us to do is we can -- with this money market fund, we actually calculate the yield every second, and we pay it in your account every day, 365 days a year. So this is important for people who are, say, a hedge fund who are wanting to leverage -- use the money market fund for collateral and they only own it for partial part of the day, they can get 4 hours, 32 minutes and 22 seconds worth of yield that is paid in their account even for a partial day ownership. So it's just going to create new capabilities, less expensive new capabilities. And then on distribution, you saw that we had an announcement with Binance. So Binance is a crypto exchange, 270 million wallets. They're interested in bringing traditional, we're actually talking to a lot of different exchanges. They're interested in bringing additional products to traditional products that are tokenized because we built this capability, and we're the only asset manager that has this capability that I'm aware of, we can take like ETF and other products and tokenize them and list them on some of these exchanges. So it opens up a new distribution capability. But I think the future, all mutual funds, all ETFs, all will be tokenized merely because the technology is tremendously efficient. And so we're excited to be leaders in this space. Operator: The next question is from Brennan Hawken from BMO Capital Markets. Brennan Hawken: Can we get an update on your expectations for the latest Lexington flagship? Maybe what caused the timing for the first close to slip? What are your updated expectations for size? And do you have any updated expectations for timing for any of the -- either the first or the final close? Jennifer Johnson: The -- so first of all, just to be clear, it was always a stretch if there was a first close. We just felt like it was important to list it as a possibility. I do think that everybody would say that the fundraising environment is more difficult than it's been historically. But again, if you're in the secondary space, there's so much opportunity in the secondary space because the real issue is the clogging of so many of the LPs with private equity that is not moving. Private equity is distributing at about half the cash flow that they've done historically. And so as these guys are needing liquidity, whether it's because they just need it in their funds or because they want to participate in a new round of private equity, they're turning to firms like Lexington. And size really matters. Scale matters in the secondary space. And so there's only a few firms like Lexington that have that kind of scale that gives them a real advantage to play in the bigger deals. I think their target is -- I'm trying to find my notes; I think it's about $25 billion for this fund. And I think the first close, they expect in the first half of 2026, calendar 2026. Operator: The next question is from Patrick Davitt from Autonomous Research. Patrick Davitt: Madam, you mentioned elevated distribution fees, and there's reporting this week that Schwab is planning to add a 15% platform fee on all of its third-party ETFs. ETFs obviously a big growth story for you this year. So curious if you can give us an idea of how much of your ETF growth has come from Schwab, if at all? And then more broadly, any thoughts on to what extent you're seeing a more pervasive push from all of your distribution partners to increase revenue shares like this? Jennifer Johnson: Well, that is not a dynamic that has changed. It's probably just changed as ETFs have taken off. They're trying to -- more of them are trying to push for that. But as you know, that is something that we always deal with in this business, who's actually responsible for the distribution? Is it the platform? Is it the individual? And so there's probably capability in the active ETFs to be able to do some amount of that. There are already players that have it. We have not been particularly big on the ETF portion with Schwab. So it probably impacts us less immediately. But obviously, as we desire to grow there, it will be something that we will have to work with. I think that it's going to be difficult on these platform fees on passive ETFs because they're obviously cheaply priced. But as the world is moving to more active ETFs, 43% of our ETFs are in the active space above the industry. We'll have to deal with those kind of revenue share type programs. Matthew Nicholls: And Patrick, just to tie your question back to that, I think you were tying it also to the G&A remark that I made on increased placement fees. That's really to do with alternative asset placement fees, not the ETFs and mutual fund type fees that you're referring to. So when I talked about G&A-related expense item around distribution, I meant placement fees related to alternative assets. Operator: Next question is from Craig Siegenthaler from Bank of America. Craig Siegenthaler: My question is on your tax efficient suite. You have a pretty big offering here, and you're seeing good flows across munis, especially the SMA wrapper and also in Canvas with direct indexing. Do you think flows here could get even better given rising adoption and allocations among high net worth investors? And I don't think you have anything in the hedge fund space where you can generate even more tax alpha and flows there just started taking off this year. Is that a gap that you can fill in at some point? Jennifer Johnson: We have a product called MOST. It's an options overlay product. So actually, we do have capabilities in that space. It's just now really starting to get traction. Look, we think that the direct indexing and the overlay space is going to just continue to grow. a lot of reason is the dynamics of fee-based advisory where they prefer that, and they can show the client that they've had tax efficiency. So we do have that capability with an acquisition we did, and we're really just growing it on the -- we continue to add more and more platforms. I think we have 175 sponsors now that we're now selling our SMAs to. Canvas continues to add more and more platforms every month. And once you get on a platform, the flows just continue to come on. And -- I don't know, Adam, you want to add anything else to that? Adam Spector: Yes. I would only say that a real power comes from being able to combine these different capabilities. So we're growing well in munis. We're growing well in ETFs, Canvas as well as 1/30/30 and option-based strategy. So to be able to do them all through a Canvas platform, which we're building towards is where the real power is. And I think we're one of the few firms that can offer all of those things in the combined suite. Operator: The next question is from Brian Bedell from Deutsche Bank. Brian Bedell: Thanks for all the great today on the outlook. Maybe my question is on the credit alternative business and the direct lending strategy, 2-part question. One is just on your views on credit quality in direct lending. If you can comment on whether you have any exposure to any of the problem, credits that have been out there and maybe just a view on whether you think that's -- do you think these are idiosyncratic? And then on the growth side of that, it sounds like you're increasing your traction in Europe with the most recent Apera acquisition, bolted on with Alcentra. So maybe your view on expanding direct lending and growth of this business in Europe over time? Is that an additional growth lever for you? Jennifer Johnson: Yes. So first on kind of the opportunity in private, we're not seeing a deterioration in credit. And we tend to -- our view on the economy is that its still very strong, consumer is strong and you're just not -- while you'll hear about the banks talking about a slight uptick in subprime, it's really coming back to kind of more normal levels. As you could see, the fixed income market is really priced for perfection. Nobody is expecting great deterioration. We had very, very teeny exposure at ESP to one of those 2. And the truth is that was really looking like fraud. So it's not something that's systemic from a credit standpoint. So we still remain very optimistic in the credit market, again, especially because of the strength of the economy, which we still think is very strong. And then, yes, we're excited about direct lending. We think you -- if you're in the private credit space, the ability to move between different types of credit is important because sometimes something gets squeezed and it's trading very tightly, and you want to be able to pivot. But the Apera acquisition brought direct lending capabilities, particularly in the lower middle market, which is -- it's not a particularly crowded space there. So we're very optimistic about it, and we think it rounds out the private credit capabilities that we have. Operator: The next question is from Dan Fannon from Jefferies. Daniel Fannon: Matt, I wanted to follow up on your comments around the fee rate and the outlook for next quarter as well as the year, given continued growth within alternatives, obviously, beta has been quite strong, and you've had declining fixed income. So trying to understand the mix a little bit better. And I believe there is a fund that's going to start kicking in from Lexington for fees starting, I believe, October 1. So curious as to why you're not seeing a bit more of a step-up in that fee rate sequentially. Matthew Nicholls: Yes. I think when you factor in a Lexington fundraise over the year, as I mentioned in my prepared remarks, we will see an increase or we are very likely to see an increase in the EFR to -- into the higher 37s, 38s, even something like this. But I'm trying to make sure we communicate that, we expect that to be a temporary increase and then for it to come back down to reflect the very strong growth we have in ETFs, Canvas, multi-asset solutions. And remembering as well, Putnam has been very, very strong in terms of flows and Putnam's effective fee rate is 34 basis points in average across the franchise. That's getting offset. Those lower fees are getting offset by a steady and becoming more predictable alternative asset set of strategies and flows at much higher EFRs. So that positions the company to have a very stable EFR with upside as and when we raise larger flagship funds, so that's the way I would sort of describe it. Stable EFR with upside during different periods based on flagship fundraisings. And the reason why we're stable is because you've got the offset of the higher fee, more predictable alternative asset raises away from the flagship funds combined with strong, larger flows on average into the lower fee categories of ETFs, campus and multi-asset solutions. Operator: The next question is from Ken Worthington from JPMorgan Chase & Company. Kenneth Worthington: A little one for me. Shareholder servicing fees really jumped sequentially, about a $20 million pop. So anything unusual here? Or is it just sort of some mix changes, maybe some seasonality? It just seems like the jump is much bigger than we typically see in the fiscal fourth quarter. Jennifer Johnson: Matt, do you want to take that? Matthew Nicholls: Yes, that's to do with our -- it's a little bit seasonal, but also to do with the arrangements we have with our outsourcing providers around the TA. So you'll see that normalize. Jennifer Johnson: Yes, higher transaction fees. There's also a little bit of trust and estate planning fees in there, but it's seasonal. Operator: The next question is from Michael Cyprys from Morgan Stanley. Michael Cyprys: I wanted to ask about agentic AI and the Wand AI partnership. I was hoping you could elaborate a bit on the partnership, your goals, ambitions there, why partner with Wand versus other vendors. It sounds like you've been running a pilot program with them for the past year. I was hoping you could speak to some of the learnings from that, how it's informed your approach? And how might you quantify the sort of savings or reduced expense growth over time? Jennifer Johnson: Yes. So we've announced a couple of different partnerships in the AI space, Microsoft, AWS, Writer AI. In each of these cases, I think we've done a good job that has excited the AI providers that we're not just going in and fixing one little thing. We're going in it from a platform approach. And so for example, Microsoft has helped us on distribution, which uses multiple agents and then integrates them. And so what Wand has been working on, for example, is an ESG agent with the Franklin Equity team and our solutions team where it goes out and gets internal data and external data, brings it back and runs it through their kind of a scoring on ESG. What's interesting with Wand is they really enable us to -- and by the way, these partnerships mean they're co-developing. They're going to provide resources because they want the learnings of what's happening in your environment so they can take the domain knowledge and be able to go, extend it to other people and build their business that way. So they provide us free resources. What's interesting with Wand is we're able to connect these multiple agents in our investment groups. And then we can actually take those agents and go across other investment teams and be able to customize them to say, just take the ESG example to specifically however that team uses their ESG screen. And just a little bit on Wand. I mean, they are backed by leading AI venture firms. So Thiel Capital, Peter Thiel's Fund, Fusion Fund, [indiscernible]. These are all big AI firms or AI venture capital firms, and they're terrific, and they've been a great partner with us. And like I said, we have multiple partnerships with different AI development companies. Operator: This concludes today's Q&A session. I would now like to hand the call back over to Jenny Johnson, Franklin's Chief Executive Officer, for final comments. Jennifer Johnson: I'd just like to thank everybody for joining us on today's call. And once again, I want to thank our employees for their continued hard work and dedication, and we look forward to speaking with you again next quarter. Thanks, everybody. Operator: Thank you. This concludes today's conference call. You may disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Westrock Coffee Company Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Robert Mounger, Vice President of Investor Relations. Please go ahead. Robert Mounger: Thank you, and welcome to Westrock Coffee Company's Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. With us are Mr. Scott Ford, Co-Founder and Chief Executive Officer; and Mr. Chris Pledger, Chief Financial Officer. By now, you should have access to the company's third quarter earnings release issued earlier today. This information is available on the Investor Relations section of Westrock Coffee Company's website at investors.westrockcoffee.com. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other SEC filings for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements made today. All discussions during the call will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release provide reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures. And with that, it's my pleasure to turn the call over to Scott Ford, our Co-Founder and Chief Executive Officer. Scott Ford: Thank you, Robert. Good afternoon, everyone. Thanks for joining us. We're pleased to announce today that for the second quarter in a row, we produced record-breaking quarterly results, driven by continued new customer volume additions and cost management execution. We believe these results reflect the strength of our customer-centered model and the value to our customers of the strategic investments we have made in both the physical expansion of our facility and the systems that allow us to manage them more effectively. We remain on track toward our goal of becoming the premier integrated, strategic supplier to the pre-eminent coffee, tea and energy beverage brands globally. And now due to great customer interest, we're excited to be adding a new body of work focused on ultra-filtered milk-based, high-protein products as well. We ended the third quarter with the combination of our Beverage Solutions and SS&T Adjusted EBITDA of $26.2 million, up 14% over the second quarter and up 84% over the same quarter last year. These results bring the combined Segment Adjusted EBITDA of our first 3 quarters of '25 to $60.7 million, up 55% over the same period in the prior year, leaving us on target within our original full year guidance range for the year 2025. The growing volumes at both our new single-serve cup and extract to RTD plants in Conway, Arkansas, combined with cost controls across our core business units derived from process, data intelligence and risk mitigation insights via our ongoing relationship with Palantir continued once again this quarter to be the key drivers of this quarter's earnings beat. Importantly, on key packaging lines in Conway, we have already reached production levels nearing 80% of our original planned capacity, and we have added significant water and tank farm capacity to the plant to enable future lines to be quickly added. We also completed the installation of our second can line, which should start commercial production in Q1 of next year. You may recall that last quarter, we gave you some initial data on our second single-serve cup manufacturing facility located in the Conway complex, the start-up of which went seamlessly. The cup volume produced through these new lines was a key contributor to our profitability this quarter. Chris will have an important word on this topic in just a few moments. We remain convinced that by becoming the lead innovation and development partner, dependable and sustainable sourcing resource and low-cost processing and packaging outsourcer for the world's leading beverage brand, we enable them to capitalize on their brand equity position in step with the movements of their consumers. Our record quarterly results demonstrate growth brought about from our delivery as this leading integrated platform in the category, delivery that enhances the value of our services to our customers, contributes to the growth of the careers of our teammates, manifests as pricing fairness on the ground for smallholder farmers in the developing world and rewards our shareholders. These continue to be important things worthy of our greatest efforts. I believe that our customers and our competitors are keenly aware of the market share shifts that we are beginning to cause as these new plants scale operationally. We have been successful at winning our customers' trust because we have spent 3 years over $350 million in capital and the time of 1,400 highly skilled development and manufacturing professionals to provide them a set of products and services that they can count on for quality, convenience, innovation and price. That said, I also believe that historically high coffee prices and major tariffs on coffee imports, coupled with the 2 extra quarters it took us to reach scale production levels in our Conway plant has given some investors pause. Therefore, I am thrilled to share with you today the news of a new $30 million infusion of capital into our business from our traditional core shareholder group, which coupled with the realignment of our debt covenants with our growth in Conway clears the way for us to completely focus all of our resources on operational delivery and driving results for our customers and stockholders. My thanks to the entire Westrock team who steadfastly go the extra mile to ensure our customers are positioned to win in their markets daily. Our Board and core shareholders who are simply relentless in their support of our mission and to our bank syndicate members led by Wells Fargo, Bank of America, Rabobank, Truist and others who have been the consummate engaged and encouraging professionals throughout the entire build-out and start-up phases of what is now the largest and I believe, best facility of its type anywhere in the world. I'm now going to turn the call over to Chris Pledger, our CFO, who will explain all of these developments and more in greater detail. Chris? Thomas Pledger: Thank you, Scott, and good afternoon, everyone. Before I go into the details of the capital markets activity we announced today, I'll first cover the results of our third quarter. As Scott mentioned, we delivered an exceptional quarter, highlighted by year-over-year volume growth in our roast and ground, single-serve and flavors, extracts and ingredients platforms and continued supply chain optimization and disciplined expense management. Our Sustainable Sourcing & Traceability segment also posted another strong quarter. On a consolidated basis, net sales increased 61% compared to the third quarter of 2024. Our reported net loss of $19.1 million reflects our continued investment in the Conway extract and RTD facility through its scale-up phase. Our Consolidated Adjusted EBITDA was $23.2 million, representing 125% growth over the third quarter of 2024. In our Beverage Solutions segment, net sales increased 60% year-over-year and Segment Adjusted EBITDA grew 74% to $20.4 million in the third quarter. This growth was driven by a 4% increase in core roast and ground coffee volumes, an 85% volume increase in single-serve cup and continued supply chain optimization and disciplined expense management. Year-over-year increases in commodity coffee prices and tariffs, which we passed through to our customers, also contributed to top line growth. Our SS&T segment continues to outperform our expectations with net sales growth of 62% over the third quarter of 2024, driven by volume growth, margin capture and higher coffee prices. Segment Adjusted EBITDA was $5.8 million, up from $2.5 million in the prior year quarter. As I mentioned last quarter, our SS&T results reflect the scalability and resilience of this business segment. Capital expenditures totaled approximately $18 million in the quarter, primarily related to the Conway extract and RTD facility. We have $15 million of CapEx remaining on our original build-out of the Conway extract and RTD facility, and we expect to spend that over the next 2 quarters. As of quarter end, we had approximately $52 million in unrestricted cash and available liquidity under our $200 million revolving credit facility. This is before taking into account the $30 million capital raise we announced today. Our leverage metrics remain within expectations and in full compliance with the covenants under our credit agreement. We have talked a lot on our last few calls about the working capital impact of historically high coffee prices and tariffs on coffee imports and their potential impact on consumer demand. Both topics continue to be front and center for Westrock Coffee and other U.S.-based coffee roasters. To help mitigate the working capital impact of higher coffee prices and tariffs, we raised approximately $12 million in the third quarter via sales of common stock under our ATM program. In addition, today, we announced the issuance of $30 million of convertible notes and a credit agreement amendment. The capital raise strengthens our balance sheet and provides additional liquidity to support the working capital needs resulting from elevated coffee prices and tariffs, while the credit agreement amendment realigns our financial covenants with the ongoing scale-up of our Conway facility. While it's impossible to predict how macroeconomic influences might impact our business, we believe we now have the working capital and credit capacity needed to navigate the continued elevated coffee prices and tariffs, and we do not anticipate any additional capital markets activity in response to these headwinds. Turning to our outlook. For 2025, we're updating our guidance to reflect our current expectation for the fiscal year. We now estimate that Consolidated Adjusted EBITDA will be between $60 million and $65 million, which is consistent with the guidance we provided at the beginning of the year. Beverage Solutions Segment Adjusted EBITDA for fiscal 2025 is expected to be between $63 million and $68 million and SS&T Segment Adjusted EBITDA is expected to be between $14 million and $16 million. Finally, our Beverage Solutions credit agreement secured net leverage ratio is expected to be 4.5x, a 40 basis point beat to our prior guidance. Turning to 2026 guidance. Earlier this year, we shared our expectations for 2026 Consolidated Adjusted EBITDA, our expected annualized run rate for Consolidated Adjusted EBITDA as we exit 2026 and our expected year-end Beverage Solutions credit agreement secured net leverage ratio. While we believe it would be premature to update our 2026 guidance, we also believe it's important to call out that one of our key customers is involved in a large M&A transaction within the coffee category. This is creating uncertainty for us related to their single-serve cup volume commitment for 2026. In addition, continued elevated coffee prices and tariff costs are creating uncertainty regarding how consumers will respond to higher coffee prices across restaurants, convenience stores and on retail shelves. We expect to have greater clarity, particularly regarding the M&A transaction ahead of our fourth quarter call, and we'll update our 2026 outlook, if necessary, when we report fiscal 2025 results. It's important to note that for purposes of resetting our credit covenants as part of our amendment, we have conservatively assumed that all single-serve cup volume related to the impacted customer will be off our platform by the end of this year, thereby assuring we don't need to seek additional relief if this scenario plays out. And even if it does, we're confident that over time, we'll be able to replace any lost volume on our single-serve cup platform with expanded volume from existing customers and new customer wins. With that, we'd be happy to open the line for questions. Operator: [Operator Instructions] Our first question comes from Eric Des Lauriers of Craig-Hallum Capital Group. Eric Des Lauriers: First question is just kind of checking in on the progress of some of the production lines after the delays reported last quarter. So on the Q2 call, you expected main production line to be up fourfold in Q3 and that you expect to be fully caught up to the delays by the end of the year. It sounds like you're about 80% there as of Q3. So just looking for an update on both of those and seeing how those trended in Q3? Scott Ford: Eric, this is Scott. We are -- at this juncture, we've run 80% to 125% kind of the standard volumes we would have expected off the line on the main can line. We've got all of our customers caught up at this juncture and the glass line is at this juncture, making commercial product for sale starting in the month of December. Eric Des Lauriers: Congrats on that progress. I suppose I'd like to focus my next question on this newly announced -- I don't know if it's a product line or just a product type, but including this ultra-filtered high-protein milk. Can you just expand on any timing and I suppose, size or scale commentary on this product? I mean, it certainly seems like this is an area where a lot of consumers are focused, looking to get more protein. So it seems like this could be quite a successful product for you and your partners. So just looking to get a little bit more info on there, whatever you're able to share. Scott Ford: Sure. It's early days, but it has been -- there is a tremendous amount of interest from a number of people, a number of different businesses. The core issue is as ultra-filtered milk products, high protein, if you will, start to move into cans and not just aseptic plastic bottles. There's a demand for aluminum cans over those bottles. The only plants that can run those are big major retort plants. We own and operate the largest retort lines in the country. And we have just installed a second line that is coming on for commercial production in January. So the whole product development cycle is probably a 12-month process. But as you're probably aware, the demand from these ultra-filtered milk products that are moving into cans are competing with the traditional coffee, ready-to-drink bottle -- I mean, can lines that we've been serving. And so a lot of the same customers are saying we want to do product extensions out into that platform and so we love doing product development work. We have small-scale lines that they can set up and run on. And I don't know that it will turn into anything, but the demand and the forecasted numbers that people are talking about, I wouldn't be surprised that it's not as big as our ready-to-drink coffee business over the next 2 to 4 years. Operator: Our next question comes from Sarang Vora of TAG. Sarang Vora: So I'll just follow up on the protein -- ultra-processed protein line. So do you have to make incremental investment to build this line? It seems like it's a great opportunity for the future, but do you have to -- or will you be able to leverage the existing production line to cater to this segment? Scott Ford: Yes. So we could, if someone delivered the product to us, we could run it through our production facilities today. We have probably $5 million or $6 million of capital that we or our distribution milk partner would have to put up to fully enable that, but that's the kind of thing that as we moved into production contract levels, we could easily put in place. That's really all we have to do, the can lines themselves, the product development, the labs through which we do all the testing, that's all completely interchangeable with the products that we make for people today. Sarang Vora: My second question is about the coffee sourcing and stuff. Coffee prices are high. There's tariffs on top of the coffee prices. How are you managing that? Like are you changing the sourcing between like markets? I know you were able to pass, but there is a pressure on gross margin right now. So how are you managing the whole dynamics on the coffee price increase? And how -- and what is your outlook when you look out for next year on coffee? Thomas Pledger: Sarang, this is Chris. I think the short answer is that with 60% of our coffee coming from Brazil and Brazil having the highest tariff, it's hard to produce product in the coffee space without using Brazil coffee. But we look at ways in order to be able to optimize the coffee that we use and the blend that we make. We'll continue to do that. And my guess is the longer the coffee prices stay high, the more innovation people will have around that, including us. The capital raise that we completed and announced today was really in order to ensure that coffee prices can stay as high as they are, tariffs can stay exactly where they are, and we've got the balance sheet in order to be able to make it through it. And so from our perspective, we feel like we're good as we move forward in whatever the market environment entails. Operator: Our next question comes from Todd Brooks of Benchmark, StoneX. Todd Brooks: First question, Scott, just thinking through the single-serve customer who we may be losing some M&A transaction friction. Were they existing customers on the platform? Or were these prospective customers that were contemplated when you gave the original 2026 EBITDA guidance? Scott Ford: They were coming on in the '25 year, and we're going to be at full ramp by early '26. And so they were incorporated in our original '26 guidance. Todd Brooks: And then the one I wanted to explore more in depth, you talked about really having the financing in a place that from a go-forward standpoint, you could start to play a little bit more offense again. You talked about, obviously, the high protein ultra-filtered. But other areas where maybe you haven't been able to play offense that the balance sheet might let you to go attack here in '26? Scott Ford: Yes. It's a good question, Todd. I think for me, when I look at the last multiple months as we worked through with our bank syndicate and with our core shareholders the right and best path forward, I kind of take really 2 or 3 things away from it. The first one is that immediately this year, our performance and the capital raise is going to allow us to be at 4.5x debt to EBITDA by the end of this year. Well, I don't think anybody thought Westrock Coffee was ever going to get back to 4.5x debt-to-EBITDA. But the team has delivered a great set of EBITDA numbers and the core shareholder groups coming in. Frankly, we've managed our cash extremely closely as the Conway plant has neared completion and out of kind of the helter-skelter fast mode. The second thing, and this is probably more important, as Conway turns on the new lines that are being commissioned and are coming up right now, and we get into the first half of next year, both Conway will be EBITDA profitable with no add-backs or any of that, just straight up old school, old-fashioned EBITDA profit and free cash flow positive and the entire business should move into free cash flow positive after debt service. So I've talked to people that have us going free cash flow positive in 5 years. We're going to go free cash flow positive after debt service in the next, I think, 4 or 5 months. So what that allows is simply what we're going to do is very conservatively, just chip away at each incremental opportunity. But to just show you how wild it is out there, I just came out of a meeting while we're talking about losing a single-serve customer. I just came out of a meeting where we need CapEx to meet the demand that is trying to line up and come into that plant over the next 12 to 18 months. Now I would have never guessed that. And while we were in the middle of building Conway, we wouldn't have had any capacity to deal with that other than to say we have to go to the market at this juncture. If that's what happens, we could do that ourselves. So it's a level of freedom we haven't had since we decided to go build the world's largest RTD factory, but I've missed it, and I'm glad to have it back. Operator: Our next question comes from Bill Chappell of Truist Securities. Unknown Analyst: It's Davis on for Bill. Can you hear me okay? So just on the expanded single-serve capacity that you all brought on recently and the consolidating customer leaving the platform. You mentioned being pretty confident that you're going to be able to fill the capacity. So I guess I was just wondering is there currently a backlog of customer demand that's ready to go ahead and step in? Or is that just kind of based on the way things have worked for the facility up until now, that just gives you the confidence. Scott Ford: Yes. Davis, this is Scott. So we don't really know. And I think the words that pleasure you is to talk about the fact that it is an uncertain period of time for us. We haven't changed our guidance from what -- for '25 or '26 from what we said in the beginning of '25. We haven't changed the thing. The one thing that's different is one of our large single-serve customers is in the middle of an M&A acquisition transaction, and we don't know how that will play out. And the last thing we're going to do is start to guess at how that plays out. So we will know more by the end of the year, and we will update you with whatever we know at that point. And we're trying to be very careful about staying on the line of what we know and what we don't. But nothing has happened in the business other than that transaction to make us change a single number we laid out for '25, '26. That said, the specific transaction that is causing us to have to put you on notice that we have a large customer in the single-serve space that is potentially involved in an M&A transaction, the same transaction that is possibly going to pull that customer away has called a multiple of other customers with multiples of their volume to get interested in coming to our facility and moving off of whatever platform they're on and into this one. How that will play out is completely unknown to me. But if it plays out the way we think it will play out over the next 2 to 3 years, which is, I know for eternity for your average 90-day hold stockholder. But if that plays out the way I think -- it plays out over the next -- we're trading at 4x EBITDA on what we think we can turn this business into over the next couple of years. So I've had high stock prices in a bad business forecast, and I'll take the low stock price and a great forecast. And we'll just play the cards from here. And that's about all we really know. Unknown Analyst: And I guess like you've mentioned a lot of -- kind of uncertainty around how the consumer is going to be actually engaging with coffee across channel next year. So I mean, I guess, kind of to connect just some past themes, are there any -- I guess, are your contracts still holding with customers? Have there been any shakeups in that area? I mean, obviously, you've mentioned having a long line of customers just wanting to get into the facility, but has there been any sort of customers falling out, new ones coming in that you haven't been expecting or haven't mentioned in the past? Scott Ford: Sure. We are every day battling in a very competitive like the RTD market and the roast and ground market is ultra-competitive. And we battle and we win some every quarter and we lose some every quarter. And we win SKUs and lose them. And we will win a brand customer, and we will lose one every now and then. So that battle day-to-day has been going on. In the single-serve space, I don't think we've ever lost a customer until maybe the one that's currently going through the transaction and then how that plays out is, like I said, we're going to stay out of the guessing game until we see exactly how that [indiscernible]. Operator: This concludes the question-and-answer session. I would now like to turn it back over to the Chief Executive Officer, Scott Ford, for closing remarks. Scott Ford: Well, thank you all for hopping on. I appreciate it. We were, as you can probably imagine, looking at being up 85% from last year. We were thrilled with the quarter. We're very optimistic about what lies in front of us, as you can tell. We're not going to try to get ahead of ourselves in terms of how it all lands. But we have recapitalized the business from mostly the same set of shareholders that have been backing us for years now. We have much more information about where we stand in Conway. Those lines are all now up, running, producing and making sellable product. We have new lines on that are just starting out on the incline for their production volumes and profits. And I really like where we've landed with our balance sheet. We have handled the cash crunch, if you will, that was caused by 50% tariffs on Brazil. It was a painful solve, but we have been able to solve it and I think, in good order. And we're very actually optimistic about our current business, about new business that we're working on, about new cost ideas that we're working on. And the only caveat, and it's fair to call it out, the caveat is we don't know exactly where one customer is going to land that is currently being purchased or at least set to be purchased by one of our competitors. And so I think that's all we know. That's full disclosures, and we will see you in another 90 days, and we'll give you an update as we know more. Thank you very much for your support, and we will see you soon. Operator: Thank you…
Operator: Good afternoon, and welcome to Banco de Chile's Third Quarter 202 Results Conference Call. If you need a copy of the financial management review, it is available on the company's website. Today with us, we have Mr. Rodrigo Aravena, Chief Economist and Institutional Relations Officer; Mr. Pablo Mejia, Head of Investor Relations; and Daniel Galarce, Head of Financial Control and Capital. Before we begin, I'd like to remind you that this call is being recorded, and the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed notes in the company's press release regarding forward-looking statements. I will now turn the call over to Mr. Rodrigo Aravena. Please go ahead. Rodrigo Aravena: Good afternoon, everyone. Thank you for joining this conference call, where we will present the key results and developments achieved by our bank during the third quarter of this year. We are pleased to report that Banco de Chile has once again delivered strong results, reaffirming our solid market position. Our performance this quarter reflects not only robust financial outcomes, but also meaningful progress in a strategic initiative that strengthens our long-term competitiveness. Key highlights for the quarter include net income as of September 2025 reached CLP 927 million, representing a year-on-year growth of 1.9% that resulted in an ROAC of 22.3%. These results were driven by strong customer income, fund asset quality and ongoing efficiency improvements. These achievements are particularly significant given the challenging macroeconomic and political environment marked by subdued loan growth, especially among corporations. In times of uncertainty, solid fundamentals and proven risk management become critical differentiators. Banco de Chile continues to stand out among peers in asset quality, additional provisions and capital strength, providing resilience and a solid basis for the future. Let's now turn to the macroeconomic context. Please refer to Slide #3. Consistent with the trend observed in previous quarters, the Chilean economy continues to show signs of recovery, particularly in consumption and investments. As illustrated in the graph on the left, GDP growth has maintained an upward trajectory since the second half of 2024, supported by a notable rebound in domestic demand. In the second quarter of this year, GDP expanded by 3.1% year-on-year, remaining above the estimated long-term potential growth rate of around 2%, which resulted in a 2.8% year-on-year expansion in the first half of this year. It is worth noting that this acceleration occurred despite a moderation in external demand. Export growth slowed to 5.4% year-on-year in the second quarter, down from 10.5% in the previous quarter. This reflects the trends of domestic demand, which improved significantly from 1.6% year-on-year in the first quarter to 5.8% year-on-year in the second quarter. A key driver behind this performance was the sharp increase in investment, particularly in machinery and equipment, which surged by 11.4% year-on-year during the period. These indicators confirm that the positive trend in domestic demand has persisted into the second half of this year. As shown in the chart on the upper right, imports have accelerated in recent months, driven by stronger domestic expenditure, particularly investments, evident in the sharp increase in capital goods imports. Furthermore, weighted investments for the next 5 years according to the corporation of capital goods rose by 19% in the second quarter, reflecting a substantial expansion in the pipeline of new projects across the mining and energy sectors as illustrated in the chart on the bottom right. All these figures would result in improved economic performance over the next period while positively impacting loan growth and banking activity. Please go to Slide #4 to analyze inflation and interest rate evolution. Inflation remains above the Central Bank target at the chart on the left displays. In September, headline inflation increased to 4.4% from 4.1% in June. The measure that excludes volatile items was relatively stable, rising just 10 basis points to 3.9% in the same period. This suggests inflation is still driven by volatile items such as energy, which increased 11.4% year-on-year in September. In response, the Central Bank maintained the interest rate at 4.75% in the monetary policy meeting held in October. According to the statement released after the meeting, the persistence of some inflationary risk and the slight improvement of macro conditions require more information before continuing to reduce the interest rate towards neutral levels. Despite this decision, it's important to mention that the Central Bank of Chile has already reduced the interest rate by 650 basis points from the peak of 11.25% reached in 2023, positioning it among the most proactive central banks in terms of monetary easing. The Chilean peso has remained volatile, hovering around CLP 150 per dollar in recent months. However, as shown in the bottom right chart, the U.S. dollar measured by the DXY index has globally weakened this year, a trend not yet reflected in the local exchange rate, partly due to faster pace of interest rate cuts. Now I'd like to present our base scenario for this year. Please go to Slide #5. We have revised our GDP forecast up for 2025 from 2.3% in the previous call to 2.5% now. This adjustment is due to stronger-than-expected growth in domestic demand and improvement in some leading indicators, as mentioned earlier. As a result, the economy will likely achieve a similar expansion as compared to 2024 despite weaker global activity, which is expected to reduce the export pace of growth. However, the better outlook for domestic demand has offset this external drag. This scenario is consistent with a gradual decline in hyperinflation to 3.9% by December 2025, assuming no relevant shocks or significant depreciation of the Chilean peso in the coming months. Under this condition, we expect the Central Bank will likely cut the monetary policy interest rate once more in the fourth quarter to end the year in 4.5%. Finally, it's important to reiterate the unusually high level of uncertainty we face, particularly from global factors. Domestically, attention will also be focused on the upcoming presidential and parliamentary election scheduled for November and the presidential runoff expected in December 2025. Before reviewing the bank's results in detail, let's take a brief look at industry trends. As shown in the chart on the top left, the banking industry delivered another solid quarter. Net income reached CLP 1.3 trillion and the return on average equity stood at 14.7%. While below the previous quarter, this figure confirmed the central ability to sustain healthy profitability despite lower inflation. This performance reflects the resilience of core banking activity, particularly concentrated in commercial banking after a long period that was dominated by the extraordinary revenues coming from treasury activities on the ground of extremely high levels of inflation and higher-than-normal interest rate, among others. Turning to asset quality. The chart on the top right shows that nonperforming loans remain relatively stable for the industry at 2.5% with a coverage ratio of 143%, consistent with recent quarters. Despite a challenging macroeconomic backdrop marked by elevated borrowing costs and labor market pressures, banks have managed to keep delinquency under control while maintaining prudent provisioning and strong buffers to absorb potential increases in credit risk. On the credit side, the bottom left chart highlights that the loan-to-GDP ratio stood at 76% as of September 2025, continuing a below-trend behavior from pre-pandemic highs. This reflects the subdued pace of credit expansion relative to economic activity in recent years. Finally, the bottom right chart further illustrated the persistent weakness in real loan growth across all segments. Since December 2019, total loans have contracted 2.3% with consumer lending showing the sharpest decline of 18%, followed by commercial loans at 9.5%. This slow demand for credit has been driven by, firstly, by liquidity surplus caused by pension fund withdrawal in 2021, 2022, which was after followed by high interest rates, increased inflation and cautious corporate borrowing amid economic and political uncertainty and persistent labor market challenges more recently. In summary, while profitability and asset quality remains strong, lending activity continues to lag. Looking ahead, a gradual recovery in loan growth could materialize as uncertainty eases, particularly regarding external risk and in the local front, the outcome of upcoming presidential and parliamentary election, together with revised approval procedures for large-scale investment projects, allowing the industry to return closer to historical GDP multiples. Next, Pablo will share information regarding Banco de Chile developments and financial results. Pablo Ricci: Thank you, Rodrigo. Let's turn to Slide 8, which brings our strategy and ambitions into focus. It's our road map for growth and leadership. The core of our strategy is guided by a well-defined purpose, which is to contribute to the progress of Chile, its people and its companies. Supporting this are our guiding principles that shape how we operate in the medium term, efficiency, collaboration and a customer-first mindset and a focus on creating value in the areas we compete. These elements ensure our agility, innovation and long-term sustainability. On the right, our midterm targets show where we're heading. industry-leading profitability, market leadership in lending and local currency deposits, superior service quality as reflected by a top Net Promoter Score and a strong corporate reputation among the top 3 companies in Chile. We're also committed to efficiency, which translates into a cost-to-income ratio that must remain below 42%, driven by digital transformation and continuous improvements in technology and operational processes. In short, this strategy enables us to deliver sustainable growth and create lasting value for all of our stakeholders. Please move to Slide 9, where we will go over our key business achievements. In the third quarter of 2025, we continued advancing initiatives that strengthen our position as a more efficient digital and sustainable institution. A major milestone this quarter was the successful integration of our former collection services subsidiary, SOCOFIN, into the bank's operations. This merger was completed without affecting productivity metrics for the collection of overdue loans and has generated important cost and operational synergies that have translated into increased efficiency and enhanced customer experience. Productivity also continued to rise in the third quarter of 2025, driven by technological innovation and digital solutions. In consumer loan originations, executives increased productivity by 13% in the number of operations and 11% in the amounts sold compared to the same period last year. These results highlight the positive impact of our digital transformation on overall performance. We also worked to optimize our physical branch network and strengthen customer service. Through branch efficiencies, we aim to keep our service line aligned with clients' evolving needs while improving efficiency and delivering a better experience. On the digital front, we expanded the use of AI virtual assistants for both customers and employees. FANi, our chatbot now supports all FAN accounts, including SMEs through the FAN and Print the Plan. Additionally, we introduced AI tools to assist staff with internal processes, boosting productivity and service quality. To deepen partnerships with businesses, we launched the API store, a platform that enables secure technological integration with corporate clients. This initiative allows companies to automate operations directly with our financial services, adding value to our offerings. In line with this is our sustainability commitment. We introduced a training plan to promote responsible supplier management. As part of this effort, we are developing educational capsules to inform suppliers about our revised purchasing procedures and encourage best practices within their organizations. Another highlight of this quarter was the 4270 project, an unprecedented audiovisual initiative that captured Chile's 4,270 kilometers from north to south through a 90-day drone journey. By documenting the country's diverse landscapes, traditions and cultural richness, this project aims to strengthen national identity and reconnect Chileans with their shared heritage. Beyond its artistic value, this initiative reinforces our brand positioning by associating Banco de Chile with pride, unity and long-term commitment to the country. The project was conceived as a gift to Chile, offering more than 500 royalty-free high-quality images for education and cultural use and has earned international recognition, including a Gold Lion at the Cannes Festival and the showcase at Expo Osaka 2025. Finally, our customer-focused strategy continues to deliver solid results. For the third year in a row, we ranked first in customer satisfaction at the Procalidad Awards, and we were honored as the best of the best among large financial institutions, the only bank to achieve this distinction. These recognitions confirm the success of our strategy and their commitment to serving clients with excellence. Please turn to Slide 11 to begin our discussion on our results. We continue to deliver strong results in the third quarter of 2025, posting a net income of CLP 293 billion, equivalent to a return on average capital of 22.4%, as shown on the chart and table to the left. This represents a net income increase of 1.7% compared to the same period last year despite a sequential decline from the previous quarter, reflecting the impact of lower inflation on margins. It's important to highlight that we outperformed our peers in both net income market share and return on average assets, as illustrated on the charts to the right. Specifically, as of September 2025, our market share in net income reached 22%, well above the closest -- our closest competitors and our return on average assets stood at 2.3%, maintaining a wide gap over peers. These results underscore our consistent focus on customer engagement, prudent risk management, disciplined cost control and above all, the resilience of our core business and recurrent income-generating capacity, particularly centered on customer income, which has continued to grow steadily and enabled us to deal with the expected normalization of key market factors. Our strategy remains firmly oriented towards building a sustainable and profitable bank, and we continue to aspire to be the industry benchmark in profitability. Let's take a closer look at the operating income performance on the next Slide 12. We continue to demonstrate the strongest operating revenue-generating capacity in the local industry, reaffirming the resilience of our superior business model through different market cycles. As shown on the chart to the left, operating revenues totaled CLP 736 billion in the third quarter of 2025, representing a 2.1% increase year-on-year despite a backdrop of subdued business activity and the effect of lower inflation on treasury revenues. This performance was supported by solid customer income of CLP 630 billion, which grew 5.4% year-on-year, while noncustomer income amounted to CLP 105 billion, reflecting a 14.1% decline compared to the same quarter last year. The contraction in noncustomer income was mainly explained by lower inflation-related revenues from the management of our structural UF net asset exposure that hedges our equity from changes in inflation as UF variation dropped to 0.6% this quarter from 0.9% recorded in the same quarter last year. To a lesser extent, revenues coming from the management of our trading and debt securities portfolios also recorded a slight decrease year-on-year due to both lower market mark-to-market revenues due to unfavorable changes in interest rates and a decrease in revenues coming from the management of our intraday FX position. In turn, customer income has continued to grow, supported by a robust performance in income from loans and net fees, which helped offset the pressure from lower inflation-related revenues. Within loans, better lending spreads and growth in average balances drove income generation, particularly concentrated in consumer and commercial loans as our loan book has continued to return to more normalized margins to the extent FOGAPE loans keep on amortizing. Furthermore, net fee income expanded by 10% compared to the third quarter of 2024, led by mutual fund management fees, which increased 19% and transactional services up 6%, together with increased contributions from insurance and stock brokerage fees due to improved cross-selling and credit-related insurance and the participation of our stock brokerage subsidiary in a couple of important transactions carried out in the local capital market this quarter. This performance highlights the strength of our diversified revenue base beyond traditional lending activities. As a result, our net interest margin stood at 4.65% for the 9-month period ended September 30, 2025, maintaining a clear market-leading position in the industry despite margin compression caused by inflation and the financial environment marked by lower interest rates. Furthermore, our fee margin as a percentage of interest-earning assets reached 1.3%, which enabled us to further drive our operating margin to the level of 6.4%, well above the industry average and our main peers, demonstrating the effectiveness of our strategy and our ability to consistently deliver value to our customers and shareholders regardless of prevailing economic conditions. Please turn to Slide 13, where we will review the evolution of our loan portfolio. As shown on the left, total loans reached CLP 39.6 trillion as of September 2025, representing a 3.7% year-on-year increase and a 0.6% sequential growth. This expansion remains contained and continues to reflect subdued credit dynamics across the industry, consistent with the Central Bank's latest credit survey, which indicates that overall demand and supply conditions remain stable, although noticing some signs of recovery in certain segments. Breaking this down by product, mortgage loans grew 7.3% year-on-year, well above inflation, supported by stronger demand through selective origination in middle- and upper-income segments and demand for housing that continues to be driven by demographic issues rather than economic cycle. Consumer loans increased 3.7% year-on-year amid cautious borrowing behavior and interest rates that remain above neutral levels as well as the profile of our customers characterized by liquidity levels above our peers would partly explain our performance in consumer loans. While loan growth in this lending family has been slower than the industry, it's important to note that our strategic focus continues to be centered into the higher income segments, avoiding aggressive expansion into lower income markets targeted by some market players, which explains an overall loss in market share that, however, is consistent with our long-term strategic view. Regarding commercial loans, we posted a 1.3% year-on-year increase in September 2025, constrained by weak investment and uncertainty. However, we'd like to emphasize that we are seeing some early signs of recovery, particularly in the SMEs and certain wholesale banking units, such as the large companies area, which is consistent with higher-than-expected capital expenditures in some industries earlier this year as reported by the Central Bank and national accounts. On the right side of this slide, you can see that retail banking continues to be the main commercial focus by accounting for 66% of total loans with personal banking representing 52% of the whole book. Accordingly, wholesale loans represent 34% of our book and is split between corporate clients, representing 20% and large companies, representing 14%. When looking at the loan growth by segment, we can see some interesting trends. Personal banking expanded 5.8%, driven by mortgage loans, while SMEs and large company segment have also posted positive year-on-year growth levels of 4.8% and 7.1%, both above 12-month inflation. SME loan expansion was supported by demand from non-FOGAPE loans that continues to grow steadily by expanding 8% year-on-year, while the large companies banking unit has managed to grow positively for the third quarter in a row on the grounds of commercial leasing and trade finance loans. Corporate loans, however, contracted 4.3% year-on-year, reflecting lagged investment activity and selective credit demand among corporations, which is highly aligned with findings released by the Central Bank in the last quarterly credit survey. It's important to note that our loan growth remains slightly below the 12-month inflation, and we have experienced a minor decline in overall market share over the last year, mainly due to competitors expanding into segments outside our strategic scope and the countercyclical role played by the state-owned bank BancoEstado. Positively, we gained share in mortgage loans, thanks to our competitive funding and strong customer relationships. Overall, our portfolio remains well diversified and positioned to capture opportunities as business sentiment improves, interest rates continue to converge to neutral levels and the domestic demand strengthens. Slide 14 highlights our strong balance sheet mix supported by long-term financial stability. As shown on the chart to the left, loans represented 71.4% of total assets as of September 2025, while our securities portfolio reached 12.5% of total assets, up 54% from a year earlier. The increase in our securities portfolio was primarily driven by the funding strategy carried out by our treasury in the third quarter, which resulted in long-term bond placements aimed at replacing upcoming amortizations, reducing term spread and currency mismatches in the banking book and supporting future loan growth. In the short run, part of this funding has been invested in high-quality fixed income securities, which has translated into improved liquidity metrics over the last couple of months. In this regard, our securities portfolio is mainly composed of securities issued by the Chilean Central Bank and government, which accounted for 65% of the total amount, followed by local bank instruments, mostly certificates of deposits, representing 28%. As a percentage of total assets, available-for-sale securities represented 5.9%, trading securities amounted to 5.8%, while held-to-maturity represented only 0.8% of total assets, all as of September 30, 2025. On the funding side, deposits remain our main source of financing, representing 53.1% of the total assets with demand deposits accounting for 25.8% and time deposits representing 27%. Given these figures, our noninterest-bearing demand deposits fund 36% of our loan book, which is a key competitive advantage that supports our leading net interest margin, as shown on the chart on the top right. More importantly, our deposit base is highly concentrated in retail banking counterparties, which provide us with more stable sources of funding over time. Regarding debt issued, it increased significantly during the third quarter of 2025, rising from 19% of our total liabilities in the third quarter of 2024 to 20% in the third quarter of 2025 as a result of recent placements. This growth was mainly driven by senior bond issuances in the local market, particularly this quarter, which added CLP 1.6 trillion to our former balances, representing a year-on-year increase of 16%. Prior to this quarter, long-term bond placements had primarily been focused on replacing scheduled maturities of previously issued bonds. However, beginning this quarter of 2025, we reassessed our funding strategy in light of the gradual rebound expected for lending activity, particularly in longer-term loans. Similarly, the gradual convergence of key market factors such as the monetary policy rate and inflation towards neutral levels significantly reduces the opportunity to benefit from temporary balance sheet mismatches. With this outlook in mind, during this quarter, we carried out several placements of bonds in the local market for an amount of CLP 1.1 trillion with an average interest rate of approximately 3% and an average maturity of 11.1 years and a 5-year bond denominated in Mexican pesos equivalent to CLP 50 billion, bearing an interest rate of 9.75% in Mexican currency. Together with raising long-term funding for future loan growth, these bond issuances also allowed us to reduce our structural UF gap from the peak of CLP 9.7 trillion in March 2025 to CLP 8.3 trillion in September 2025, implying a sensitivity of roughly CLP 83 billion in net interest income for every 1% change in inflation. This is aligned with our revised view on inflation that does not significantly differ from the market ones. The placement of long-term bonds also had a positive effect on interest rate mismatches in the banking book as bonds issued were mostly denominated in U.S. with tenures above 10 years, which closed the gap generated by steady growth in residential mortgage loans. As a result, regulatory and internal rate risk in the banking book metrics for short- and long-term rate risk posted a significant sequential decrease of around 20% Furthermore, our liquidity ratios remained well above the regulatory requirements with an LCR of 207% and NSFR of 120%, both well above the prevailing regulatory thresholds of 100% and 90%, respectively, reflecting prudent liquidity management and the positive impact of recent bond placements on this matter. Please turn to Slide 15 for our capital position. As illustrated, Banco de Chile continues to demonstrate a strong capital foundation, comfortably above regulatory thresholds and peer averages. Our CET1 ratio reached 14.2%, reflecting our leadership in the industry. When including Tier 2 instruments, our total Basel III capital ratio stood at 18%, providing wide room to support organic and inorganic growth initiatives and absorb potential market volatility. The solid capital position reflects a disciplined approach to profitability and sustained earnings retention over recent years. Additionally, the modest loan growth has also contributed to maintaining positive capital gaps. Our capital strategy was designed to navigate the final stages of Basel III implementation while preserving flexibility for both organic expansion and potential strategic opportunities. It's worth highlighting that Chile operates under one of the most demanding regulatory environments globally, characterized by higher risk-weighted asset density as compared to jurisdictions where internal models play a significant role. In fact, risk-weighted asset calculations under Basel III in Chile resemble those under the formal Basel I framework. Furthermore, local regulations impose capital requirements similar to those in markets with lower risk-weighted asset densities, including systemic surcharges, Pillar 2 charges and the conservation and countercyclical buffers, all working together and on a fully loaded basis. Despite these stringent conditions, Banco de Chile consistently exceeds all capital requirements, underscoring once again the resilience and the strength of our business and balance sheet by delivering a unique combination of lower risk and higher capital and outpacing in profitability. Please turn to Slide 16 to review our asset quality. We continue to set the benchmark in asset quality, supported by disciplined risk management and a conservative provisioning framework. In the third quarter, expected credit losses only reached CLP 80 billion, marking a sequential decline and reinforcing the positive trend we saw during the year. Despite the year-on-year figure remained almost unchanged, there were notable shifts in the composition of expected credit losses. Specifically, the Wholesale Banking segment recorded a net provision release of CLP 18 billion, mainly driven by a comparison base effect following the deterioration of asset quality of certain customers belonging to the real estate construction and financial services industries during the third quarter of 2024 as well as an improvement in the credit profile of a manufacturing client this quarter. Conversely, the Retail Banking segment posted a year-on-year increase of CLP 4 billion in risk expenses, primarily due to higher level of overdue loans above 30 days when compared to the same quarter last year. These movements were largely offset by a rise of CLP 5 billion of impairment of financial assets explained by a comparison base effect related to lower probabilities of default for fixed income securities issued by local financial institutions in the third quarter last year, a loan growth effect of CLP 5 billion, driven by a 4.2% year-on-year increase in average loan balances, mainly fostered by residential mortgages and a year-on-year increase of CLP 2 billion in provisions for cross-border loans. Mostly driven by a comparison base effect associated with the lower exposures to offshore banking counterparties and Chilean peso appreciation of 4.7% in the third quarter of 2024. As a result, this performance translated into a cost of risk of 0.8% in the third quarter of 2025, which remains below our historical average and highlights the resilience of our diversified loan portfolio amid a still-adjusting credit cycle. Nonperforming loans across the industry remained above pre-pandemic levels, as shown in the top right chart. Our delinquency ratio stood at 1.6%, significantly below peers. This gap underscores the strength of our underwriting standards and the proactive risk management. From a forward-looking perspective, despite fluctuations observed in 2025, we believe that the delinquency indicators will continue to converge to historical levels in both retail and wholesale banking segments. Now in terms of coverage, we maintain the highest ratio in the industry. As of September, total provisions amounted to CLP 1.5 trillion, including CLP 821 billion in specific credit risk allowances and CLP 631 billion in additional provisions. As a result, our total coverage ratio stands at 234%, positioning us with the highest coverage among peers. In summary, our strong asset quality metrics, exceptional coverage levels and prudent risk practices continue to differentiate Banco de Chile and position us to navigate evolving credit conditions with confidence. Please turn to Slide 17. Operating expenses totaled CLP 276 billion this quarter, representing a modest increase of 1.2% when compared to the third quarter of 2024. This growth remains well below the UF variation rate of 4.2% over the last 12 months, highlighting our disciplined approach to cost management. The contained increase reflects our continued efforts to optimize resources and drive efficiency through strategic initiatives and diverse digital transformation projects across the organization. The top chart provides a detailed breakdown of the annual variation expenses. Personnel expenses decreased by 1%, supported by headcount optimization of 5.7% over the last 12 months, which helped offset inflationary pressures on salaries. On the other hand, administration expenses rose by 5.3%, mainly due to higher marketing expenses linked to sponsorship activities aligned with our commercial strategy, increased IT-related costs and to a lesser extent, higher ATM rental costs due to relocations of part of our network. As shown on the chart on the bottom right, our efficiency ratio reached 36.8% for the 9-month period ended September 30, 2025, which significantly outperforms historical levels and competes closely with the market leader in this indicator. This achievement underscores the effectiveness of our ongoing productivity initiatives, which should provide further efficiency gains in the future. Looking ahead, we remain confident that our strong cost discipline, branch optimization efforts and continued investment in technology will allow us to sustain this positive trend. Please turn to Slide 18. Before we conclude, I want to highlight a few ideas presented in this call. First, we have adjusted our GDP forecast for 2025 to 2.5%, up from 2.3%, reflecting a more positive outlook for the Chilean economy. Chile continues to stand out for its strong macro fundamentals, a resilient financial system and a credible policy framework, making it a reliable destination for long-term investment even amid global uncertainty. Second, Banco de Chile remains the clear leader in profitability and capital strength. As shown on the left, we delivered CLP 927 billion in net income with a CET1 ratio of 14.2% and a return on average assets of 2.3%, significantly ahead of our peers. These achievements reinforce our ability to combine strong earnings with robust capital levels. Third, we have revised our guidance for the full year 2025. We expect our return on average capital to be around 22.5%, efficiency near 37% and cost of risk close to 0.9%. These metrics reflect our disciplined approach to both risk management and operational efficiency. Finally, we're confident in our capacity to remain the most profitable bank in Chile over the long term, supported by a strong customer base, solid asset quality and sound capital levels. Thank you. And if you have any questions, we'd be happy to answer them. Operator: [Operator Instructions] So our first question is from Daniel Vaz from Banco Safra. Daniel Vaz: I just want to touch base on your midterm targets. I think the only thing a little bit more distance that we see is the top 1 market share for commercial loans and consumer loans, and we see some stable market shares like in the past few months when we look at the big tables. Just wondering, you're a bank that focused a lot on profitability and focus on maintaining the discipline of the underwriting process. Trying to understand how are you going to tackle this top 1 commercial loans and consumer loans going forward, especially considering that the Chilean market is probably going to a better outlook for commercial loans. We see a little bit more appetite for consumer as well. So how exactly you're going to tackle this first position on both market shares? Like is going to the same clients or going to a more attractive position versus your competitors to still clients or any other things that you would highlight? Pablo Ricci: Daniel, thanks for the question. Maybe Rodrigo will start on the first part there. Rodrigo Aravena: Perfect. Well, thank you very much for the question. Today, we have a more positive view of the Chilean economy in the future. Even though the economic growth expected for this year, which is around 2.3%, 2.5% and probably in the next year, the economic growth will be similar. It's very important to pay attention to the composition of the growth because, for example, in the last year, when the economy grew by 2.6%, we have to remember that the key driver were exports, which are not very relevant as a driver for loan growth, for example, right? More recently, we have seen some positive signs for investment including the acceleration for capital good imports and also the pipeline of expected projects for the next 5 years is also improving a lot, especially in the last quarter. In terms of consumption, we see that the lower trend for inflation is also a positive news for the perspective for consumption as well. So at the end of the day, in our baseline scenario, we're going to have a more dynamic domestic demand, especially on the investment side which will be a positive driver for loan growth in the future. Even though we are not expecting an important acceleration in part of investment because we have to remember that in Chile, between 50% and 55% of investment is related with construction. That part of investment will likely recover not in the short term, but the 45% remaining of investment, which is related with machinery and equipment today is getting better. So that's why even though we are not expecting important changes in the GDP forecast for the next year, we are expecting a more -- a different composition of growth with a more dynamism in domestic demand, which is a good news for loan growth in the future. Also, we have to pay attention to the evolution and the final results of elections in Chile. We're going to have election from the President for the Senate for the lower house as well. So at the end of the day, there are important factors that could accelerate or not the economic growth in the future. But I think that so far, the most important aspect to keep in mind is the potential recovery in domestic demand. Pablo Ricci: So yes, in terms of our midterm targets, these are midterm targets that go beyond not only 2026, but it's a midterm aspiration. And those aspirations, as shown on the slide, we want to be #1 in terms of total commercial loans and consumer loans. So our growth strategy is focused on 3 key ideas. So the first, and we'll go into each one of these a little bit, is digital transformation as a growth engine for the bank. Also as a second area of focus is focus on the high potential segments, notwithstanding all the entire commercial loan book is interesting for us, but it's been more challenging in this environment. And third is operational productivity. So in the digital transformation area, what we've been focusing is leveraging technology to scale the efficiency, enhance customer experience and really drive new growth opportunities across the bank in all the segments. So in that regard, what we're seeing is an increase on digital onboarding. Most of transactions are being done online, and we're expanding our digital capabilities in order to capture this new growth through different channels of the bank in order to grow consumer loans in the middle- and upper-income segments. And we're also implementing the use of AI across the bank in order to improve the service, improve the understanding of our customers and risk management as well. So all of this is improving the customer experience and operational efficiencies and the ability to grow. And in the high potential customer segments or high potential segments, what we're looking to do is to grow and create a larger value creation. And in that area where we're focused on in commercial loans, especially as SMEs, where we see potential to continue growing in the medium term. We've seen good levels of growth recently, especially if we exclude certain government-guaranteed loans. Consumer loans as well, there's a large area to grow. If we look at what's happened today versus prior to the pandemic, this segment has decreased its importance in the overall proportion of loans in Chile. So the loans to GDP penetration has come from levels above 90% to around the 75%. And one of the strongest hit not the most important in the total loan book of the industry is consumer loans. So the strongest hit with a lower percentage in the mix is consumer loans that dropped somewhere almost 20%, 18%. So this area, we think will continue to grow once the economy improves, once unemployment reduces, there's better growth in labor across the board. So here is a very interesting area to grow. SME is very interesting because it's also very cyclical in terms of the economy. So as long as the economy continues to improve, better unemployment, we should see a better activity in these segments and with a better overall view -- business view of Chile, there should be more demand for loans in these 2 segments. And finally, in the large corporate segment, we've seen very little growth, very little demand. But as Rodrigo said, there's a lot of projects in the pipeline with a positive evolution in the future. This should also help drive loan growth for the industry. Saying that, we're in a very good position to capture this growth in organically or inorganically because we have a huge level of capital that allows us to do this. We don't have any impediments that make us more reluctant to grow and take on growth because we have a very good level of capital in order to do this, and that's the idea of the capital that we have. And finally, operational productivity, which is what we mentioned in the presentation, this helps all the areas improve overall and maintain our profitability high. Operator: Our next question is from Tito Labarta from Goldman Sachs. Daer Labarta: Just with the upcoming presidential elections, just kind of curious sort of where you think things stand from here? And depending on which candidates when -- how do you see that potentially impacting the macro-outlook for next year and then also trickling down to the bank's profitability? Rodrigo Aravena: Thank you for the question. I'm Rodrigo Aravena. I think that it's very important to be aware that in Chile, we have a political system, which is based on important counterweight between the central government, the Congress, the system, et cetera. So that's why it's not only a matter of who's going to be the next in Chile. We have also take into consideration the future composition of the Congress as well. According to the surveys, there's going to be a runoff in December, but we're going to have the final results of the Congress in November in the next week. Even though there is uncertainty about the final composition of the Congress and also in terms of who's going to win the election. I think that it's worth mentioning that today, which is an important difference compared to the election that we had 4 years ago, that there are some consensus in Chile between different candidates and different political factors as well. In terms of put on the table, I would say, 3 important aspects in the policy agenda. First of all, there is a consensus in Chile in terms of the need to improve the long-term sources of economic growth. When we analyze all the different proposals, they are aware about the importance to promote more economic growth mainly investment, especially considering that the external environment will be a bit more challenging in the future. So we don't have important differences in terms of the diagnosis of the importance of economic growth. Also, today, there are not important proposals with higher tax rates. In fact, there are some proposals that are based on lower corporate tax rate, for example, which is a good news as well for the future. And also, we also have an important consensus in terms of the importance to improve, for example, the licenses and permit system that we have in Chile, which is an important factor to promote investment in the future. So all in all, today, I, which is the main difference compared to the elections that we had 4 years ago, there are not important differences in terms of proposals for economic growth for taxes, et cetera. So when we consider this scenario and also the recent improvement in some leading indicators, I think that we have good reason to expect a more dynamism in domestic demand in the future, especially in investment and consumption, even though we have uncertainty for the final result of the presidential elections. Pablo Ricci: And in terms of the bank, the most important result of this is more demand and activity in Chile, which should drive loan growth in all the segments. So in commercial loans, large corporates and multinationals concessions and SMEs, consumer loans, et cetera. So what we've seen is a period of low growth, high interest rates. And now we're moving into a more attractive period with better business confidence, hopefully, better consumer confidence, and that should lead to stronger loan growth, and we have the capital in order to grow. So we don't need more capital. So that means additional points in terms of the bottom line for ROE. Operator: Our next question is from Neha Agarwala from HSBC. Neha Agarwala: Congratulations on the results. Just a quick one on the outlook for 2026. What kind of pickup should we -- can we expect in the coming quarters in terms of loan growth? And what would be the drivers for earnings for 2026, given that there should be some pressure on the NIMs with easing inflation? Pablo Ricci: Neha, I think in 2026, well, today, we don't have guidance yet because it's -- we're working on the budget, and it's something that's being discussed internally in the bank. But what we can say is similar to what we've said in the other questions is what we're foreseeing is a better overall aspect of Chile in the next years. And this should allow us to have in the banking industry to have better results in terms of loan growth, the main area, the main driver for growth for us in the following year. The inflation level, what we expect is to return to levels closer to 3%, somewhere similar in terms of the overnight rate, not too much lower. We're already close to the long-term levels there. So in order to really generate a stronger bottom line over the next years, we should see loan growth is the main driver. So what we have and what's very positive for Banco de Chile is that we have an attractive level of CET1 total base ratio, and this is allowing us to grow when the opportunities arise. And hopefully, that's sooner than later. Rodrigo Aravena: And also Neha, this is Rodrigo Gara. Important to mention as well that we are not expecting important changes in interest rate for the next year. Today, it's likely that the Central Bank will reduce interest rate by 25 basis points the next meeting or probably in the first quarter of the next year. Today, the annual inflation is at 3.4%. So for the next year, it's reasonable to expect a convergence towards the target, which is 3%. So I mean we are not expecting important adjustment in the key factors behind the ROE and NIM as well since we are not seeing important room for adjustment in both interest rate and inflation as well. Operator: [Operator Instructions] Our next question is from Andres Soto from Santander. Andres Soto: My first question is for your loan growth next year, which I will assume you are expecting an acceleration versus 2025. Which segments are you expecting to see faster growth? Is going to be commercial lending in your comments about the third quarter results. You mentioned some market share losses in consumer as other players are focusing in the lower segments of the population. So I would like to understand what is missing for you guys to take a more optimistic view on consumer lending. You have mentioned in this call, this is a segment that is still depressed compared to the pre-pandemic levels. So what is missing for you to see faster growth in the consumer? And overall, what is going to be the driver in 2026 for the total loan growth? Pablo Ricci: Well, in terms of loan growth, what we're seeing the main driver, as you know, commercial loans is the largest mix of the portfolio. So -- and what's been most impacted over the last 5, 6 years has been commercial loans as importance in terms of volumes. So in terms of volumes, we should see a recovery in terms of commercial loans. Within that, we're expecting with better business confidence with more -- less uncertainty, we should see a return of larger corporate demand in Chile. SMEs as well should have a very good activity in this environment with a better global activity in GDP, unemployment, they're much more cyclical, as I mentioned. And in consumer loans, we should see slowly as we should continue to see slowly that the consumer loans will continue to improve in line with unemployment rates. For what's happened in the consumer loan segment is that some players in Chile have implemented or have focused on the lower income segments where we're not active today, penetrating that market more than us. Probably we have a customer base that's a higher net worth customer base. as well that it's not demanding as much loans. But we continue to grow well. So in a new environment next year with better business and consumer confidence, we should see more attractive loan growth in this segment, and we're implementing different digital initiatives to understand the customers in order to offer them products to the channels that they desire with business intelligence, much more focused on each customer rather than global plans that are focused over the entire segment. So we're trying to personalize much more of the information that's going to these customers. Next year should be a more positive year overall. Andres Soto: My next question is regarding capital. Your core equity Tier 1 is 400 basis points above all your peers, basically. What level do you guys feel necessary for the growth that you see ahead? And how you imagine the capital normalization of Banco de Chile taking place? How long is going to take place for you to get to a level you see as the adequate level for capital? Daniel Ignacio Galarce Toro: Andres, this is Daniel Galarce. From the capital point of view, as we have said, of course, we have today important buffers and favorable gaps over the regulatory limits. Basically, everything depends on how the portfolio will normalize in terms of loan growth in the future. And basically, in which products we will increase and we will expand our portfolio in the future as well. As Pablo said, we are expecting to grow more in commercial and consumer loans. We want to be leaders in those lending products and those products are more intensive in terms of use of capital, of course. So everything depends on the evolution of loan growth in the future. So probably we will have a normalization in terms of capital buffers probably over the midterm, 3 years or something like that, depending on the economic activity in the country. Andres Soto: And which level will be that? Daniel Ignacio Galarce Toro: Well, we don't have any specific target, but in the long run, we will -- we need and our aim is to be always at least 1.5%, 2%, something like that in the range of 1% to 2% above regulatory limits. Operator: We would like to thank everyone for the questions and the participation. I will now hand it back to the Banco de Chile team for the closing remarks. Pablo Ricci: Thanks for listening, and we look forward to speaking with you for our full-year results next year. Operator: That concludes the call for today. Thank you and have a nice day.
Operator: Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Third Quarter 2025 Conference Call and Webcast. As a reminder, this conference call will one. I am Jennifer Suess, senior vice president general counsel, ESG and corporate secretary of RioCan. Before we begin, Jennifer Suess: I am required to read the following cautionary statement. In talking about our financial and operating performance, and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objective its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plan estimates, intentions, and similar statements concerning anticipated future events results, circumstances, performance, definition prescribed by IFRS and are therefore unlikely to be comparable similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profit RioCan's management uses these measures to aid in assessing In making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements filed yesterday and management's discussion and analysis related thereto as applicable, together with RioCan's most recent annual information form, that are all available on our website and at www.sedarplus.com. I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin. Jonathan Gitlin: Thank you, Jennifer, and good morning to everyone joining us today. We are pleased to share our Q3 2025 results. RioCan's operating momentum accelerated this reflect con Q3 retention ratio of 92.7% highlights the value tenants place on space in RioCan assets. This demand translated into strong performance with commercial same property NOI up 4.6%. RioCan is operating from a position of strength. Our performance is driven by a number of factors but relies heavily on our focus on tenant quality and disciplined asset manage from top-tier necessity-based retailers. These retailers are not just getting by. They are focusing on growth. They are proving out their strength and ability to thrive in any economic backdrop. These tenants exemplify the caliber of retailers that can comprise RioCan's portfolio. This supply-demand imbalance is most acute where RioCan's assets are concentrated. Our properties are in Canada's major markets with an average 277,000 people and a $155,000 household income within five kilometers. Our strategy is straightforward. We optimize our portfolio by selling For the current environment, and we are pleased though not at all surprised, to see our portfolio and tenants performing exceptionally well. This is the benefit of a tenant mix that features necessity-based retailers with strong balance sheets, that provide everyday needs. Canada remains an attractive market for our tenants, and our centers are ideally located to support their growth. RioCan's leasing spreads remain at record highs. We There are 10.7 million square feet of leases coming up for renewal at a relatively consistent pace over the next three Combined with our at the same time, we are retaining strong established tenants to reduce downtime and capital requirements. high-quality tenants for our properties. When opportunities emerge, we Alternatively, we also like to help our reliable established tenants expand their existing footprints within our assets. We put our platform to work and we help those tenants by seeking out opportunities in adjacent and surrounding space and help them execute on the enhancement and expansion of existing space. We are excited to share a number of examples to demonstrate this strategy at work later this month at our Investor Day. Our strong quarterly performance beyond the numbers. It reflects the quality of our portfolio, and the discipline behind our strategy. We previously indicated our plan to repatriate Interest in six Based on the quality and desirability of our RioCan Living assets, we are highly confident in our ability to continue to monetize these assets and to put the capital to work accretively in the numerous capital allocation opportunities we have at our disposal. Our business is rooted in a well into the future. I will wrap up in a moment. But before I do, I would be remiss if I did not mention that our commitment to excellence was further validated by our impressive performance in the 2025 GRESB assessment. Among other recognitions, we maintain regional sector leader status in The Americas under the retail sector and the first rank among North American retail peers in the standing investment assessment. So as we look at our outlook remains aligned with the guidance we provided in the first quarter. FFO per unit of $1.85 to point eight Quality. Necessity-based retail space, and Canada's major markets. Our leasing strategies are fueling organic growth, and our disciplined capital management is amplifying my growth now and for the future. We are excited to share more at our Investor Day on November 18. Our team is energized. Our strategy is clear and our portfolio is positioned continued success. Thank you for your time today. I look forward to your questions. And This increase was driven by 4.6% growth in same property income in our core commercial portfolio the benefit of unit buyback. Partially offset by high interest expense. Total FFO was also impacted by the following items that are not compared with Q3 2024. Lower fee and interest income due to residential inventory completions had an impact of 1%. Reduced NOI and fee income related to the former HPC locations had a combined FFO impact of 2¢ per unit compared with Q3 2024. It is a $148 million of net fair value losses We have a significant amount of long-term debt potential in our portfolio. However, given the stagnant land and development market, it is important to ensure that we are maximizing income from the existing retail on our properties. As such, freeze. Removes any ambiguity related to these sites. Freeing up our leasing team to maximize retail rents by offering longer lease term to our tenants. The second category attributable to a significant totaling $25 million relates to assets that are high quality but with lower growth potential proportion of fixed renewals so relates to three large Toronto-based residential rental buildings. We have seen weakness in rent growth and occupancy in submarkets where there is high competition from condo delivery. We have reduced the stable was $24.19. Which is approximately 29% above the current unit price. Going forward, we will focus on compounding NAV by and for the four HBC locations. With asset plans for 12 of the 13 location. As previously we will only participate in stated, assets where we would expect strong return on capital. And Actual provisions record recorded. This chapter is substantially With a 186 thousand square feet delivered, With approximately $70 million remaining to be spent for the balance of the year, and our committed capital for development construction in 2026 of only $15 million we will have significant flexibility going forward to invest capital where it is most accretive. In addition, we have delivered 61,000 square feet of retail infill development. This is an area where we invest in our core portfolio to drive attractive returns through growth in NOI and NAV growth. And will be a continued area of focus. We expect approximately $1.3 billion to $1.4 billion of capital We are repatriating a significant amount of capital to our balance sheet. from the sales of residential rental buildings and pre-sold condos over the course of 2025 and 2026. So far this year, we have brought in nearly $500 million of capital. $314 million in total asset sales, of which $250 million has been from the sale of five residential assets sold so far this year. Bringing the total sold to six buildings. With the sale of a number of others in process. A hundred and sixty-three million is from condo closings, resulting in the repayment of a $128 million of construction loans point three million of guarantees. and the removal of three hundred and We expect the remaining condo units at the end of the year to be valued at approximately a 100 continue to improve. Our adjusted spot debt to adjusted EBITDA improved to 8.8 times solidly within our target range of eight to nine times. Our unencumbered asset pool grew to $9.3 billion. Our ratio of unsecured debt to total was 64%. Our liquidity was $1.1 billion. Our balance sheet provides us with financial flexibility take advantage of opportunities as they arise. As I conclude my remarks, is important to mention that our result are driven by our best in class platform. This includes our team of very talented and hardworking people. ERP system migrating our systems to the cloud, and employing analytical reporting and tools. This ensures that our teams have the best information analysis available as they execute our strategy. Whether it be negotiating a lease, investing in a retail infill project, or buying and selling assets, we ensure that the relevant data is available and the collective knowledge of our organization is brought to bear. We apply a continuous improvement mindset to ensure that we the tools available to our people driving efficient processes and effective decision making. With that, I will turn the call over to the moderator for questions. Operator: Of course. We will now begin the question and answer session. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset Our first question comes from the line of Sam Damiani with TD Securities. Sam, your line is now open. Sam Damiani: Thank you, and good morning, everyone. next couple of years. Lots going on here at RioCan, and it is exciting to see you in next I just wanted to start off. I think, Jonathan or Dennis, one of you mentioned in numerous capital allocation opportunities in front of you right now. I wonder if rate quite a bit more on that at our investor day. So I do not want to, put too much emphasis on it today, just leaving something to talk about when we see you next in two weeks from now. But I will give you the most obvious ones. Right now, the opportunity that are highly accretive and also beneficial scope. So really looking at properties that we own are infill development, in our retail where there is existing retail, and we can make it better through the creation of additional retail pads and strips. And we are now at a position where the rents justify the, the expense of building out those those, additional square footage. And then the other is obviously NCIB, which we have participated in the past given where our stock or where our units are trading. Relative to NAV and, you know, what we we feel is an immediate FFO Return on for that? Dennis Blasutti: No. I think that is right. And I think what is also important is to just note what what Jonathan did not mention, which is you know, we are we are winding up our mixed-use development program. That is just not a priority for us. Right now in terms of any large construction at scale. So yeah, I would agree. Putting money back into our own portfolio, retail portfolio is a is a great use of capital right now, and it is hard to ignore the stock price. Sam Damiani: Okay. Great. And I look forward to, November 18. Next my second question is on, I guess, the fair valuing or the fair value changes you detailed on the quarter. Just Want to be clear. The the 90 odd million dollars take taken on the on the density asset Footage? Dennis Blasutti: I am just gonna go into it here. Math quick here. It is just call a little over $500 million of total density value still on the balance sheet. When you kinda put that against you know, almost 20 million square feet of of zone density It is a pretty low value on a per square foot basis. Sam Damiani: That is great. Thank you, and I will turn it back. Jonathan Gitlin: Thanks, Sam. Thanks. Operator: Thank you for your question, Sam. Our next question comes from the line of Brad Sturges with Raymond James. Your line is now Brad Sturges: Renewal rent spreads. Continue to improve even with a higher proportion of fixed rate auctions. Do you think you you kind of hit a peak at that point? Or how do you expect your rent spreads to trend over the next few quarters? Jonathan Gitlin: You know, we preached in the in the prepared remarks about the sustainability of the conditions. I cannot predict precisely where our renewals spreads will be, but we do think it is gonna be a strong market for landlords like RioCan given the strength of our portfolio going forward. I do not see a catalyst to change these conditions in the near or medium term simply because there no new supply, and we recognize that the tenants that we are dealing with are typically very much in, in in growth mode. So we really do see the ability to continue achieving solid rent spreads. We are not providing specific guidance at this point, but we have said in the past mid-teens, and that is, again, a a pretty comfortable spot. And so I think it is, it is you know, the if you look at also the opportunity said, as I mentioned in my prepared remarks, we have got over ten million square feet that will be up for renewal over the next three years on a pretty consistent basis. And there is a significant mark to market. I mean, if you look at the rents that we wrote Q3, they were over $29, and that compares favorably to the average rents we have across our portfolio, which is in the $22.50 range. So that is about a 30% range that we feel very capable of bringing in through a a strong renewal process. Brad Sturges: Sounds good. And just a follow-up to that. Just with respect to next year's expires, is there anything that stands out in terms of anomalous or would be unique or would be pretty similar to what you experienced in 2025? And and know, kinda see that consistent results going forward. For next year. Jonathan Gitlin: Yeah. I mean, beauty of scale, Brad, is that we really, we have so many properties with so many tenancies. And even if there is one or two larger renewals coming up that might be like a Walmart renewal with flat, with a flat provision, It is offset by so many other renewals that do not have flat provisions or they go to market. So there might be one or two larger or three or four larger tenants that will come the scheme of things, they will not change our guidance or outlook. for renewal that might be a little bit flat. But, again, I will look to John Ballantyne just to see if I have missed anything there. John A. Ballantyne: No. You have not, Jonathan. And, I would also add, you know, again, we are gonna sound like a broken record, but we are going to unpack this a little more in our Investor Day in two weeks. is in our existing leases. Namely, you know, where we think the mark what the actual mark to market And how that is gonna unfold in the same property revenue over the next, three years. Brad Sturges: Okay. That is great. I will turn it back. Appreciate it. Jonathan Gitlin: Thanks, Brad. Operator: You for your questions. Our next question comes from the line of Mario Saric with Scotiabank. Your line is now open. Mario Saric: Hi. Good morning. Just a really quick one on each HPC and specifically the Ottawa location. Seems like it is the one asset where plans are still forthcoming. Do you have a sense of, the timing of clarity on that asset? Jonathan Gitlin: Thanks, Mario. Good morning. There there is no defined timeline at this point. We have got a few different options that we are exploring, and we endeavor to keep everyone apprised of how those unfold. But, you know, again, as we have always unless there is committed, we are not gonna put any significant capital into these assets a logical return that competes with our other capital allocation opportunities. Mario Saric: Okay. And then, shifting gears you know, some institutional interest coming into the multifamily space. So as it pertains to RioCan Living or something, any incremental demand how does that change the timeline in terms of so so I do not know if the acid. Jonathan Gitlin: Timeline is still intact. I would say that the demand for our new builds, rent control, limited CapEx Residential portfolio has been consistent throughout. I do not think there has been significant ebbs and flows. Flows in the in the demand for them. In terms of the profile of buyers, we have not really seen much of a change. We have had a pretty wide spectrum of buyers or interested parties thus far, and that has not changed So the the timeline both institutional and private. We remain confident in our goal. Mario Saric: Right. Oh, and so just last question. As it pertains to the Investor Day, I am asking what you may disclose. But is the retail environment today your confidence level in the portfolio today such that you feel comfortable disclosing one year, three year targets on some of the key metrics? Such as FFO, same store NOI, etcetera. Jonathan Gitlin: Yeah. We are we are gonna give some pretty thorough outlooks. I think it would be a letdown at Investor Day if we did not. So we we will certainly leave you with a good outlook on the next, few years. Okay. Promise not to this point. Alright. Thanks, Mario. Operator: Thank you for your questions. Our next question comes from the line of Michael Markidis with BMO. Your line is now open. Michael Markidis: Thanks, operator. Good morning, guys. Congrats on the strong core portfolio results. Thanks, Just wondering if you could help us think about property management and other service fees and interest income have been a fairly significant contributor to your your business on the earnings side over the last couple of years, and it is starting to moderate. How should we think about the trajectory those two line items going forward? Jonathan Gitlin: I will start an In terms of property management fees, co-owned, and we are always the manager for we have a, a a set of of properties that are those. Whether the number of co-properties increases or decreases, I think would be a marginal marginal component of those fees going up or down. So I do not think they will be much much to add there. But we are an entrepreneurial organization. We are always looking at ways to continue to use the strengths that we have. And one of those strengths is a very strong platform here at RioCan. And so we will look to at opportunities to utilize that to create fee income. But it is it is hard to predict at this point what exactly those will be and how much they will be for. So I I think I think, you would be a to speed. Be pretty level. On that one. Michael Markidis: Okay. And one of the other fee a little bit as well. Because it was there there was a layer somewhat to development. We do occasionally do mortgages on behalf of properties that are co-owned. Which will add a bit of fees here and there. But not I do not see that as a meaningful contributor going forward. Michael Markidis: Okay. That is helpful. Thanks so much, guys. Jonathan Gitlin: Thanks, Mike. Operator: You for your question. Our next question comes from the line of Matt Kornack with National Bank of Canada. Your line is now open. Hey, good morning. Matt Kornack: Good morning, guys. I was wondering if you could just help a little bit on bridging kind of the current quarter more in line with to future quarters in terms of HPC kind of any incremental capital deployment related to the, I guess, three assets that you own? And the NOI generation, what would maybe be in this quarter versus what will be in future quarters considering your more of those income-producing assets. Jonathan Gitlin: Dennis? Dennis Blasutti: Yeah. Sure. So on the three assets that we are backfilling, we had given a a guidance range of about a 100 to a $120 per square foot. Equates to approximately $25 million. In total for capital outlay on those. So that is that is the the number there. You know, we had messaged that we would see you know, we had about 8¢ of FFO coming in you know, from from HBC. For you know, in total, that that was gonna go away. We will claw back some of that with the acquisition of George and and Oakville and and the backfills. Probably about a penny in in 2026. And then about 2 pennies in 2027 as the tendencies ramp up. Matt Kornack: Okay. That is helpful. And then just on the nonrecoverable operating costs, they have been a little elevated this year starting in, I guess, Q4 2024. Is that onetime in nature? Or is that a change in kind of the portfolio Just trying to understand where those should head over. The next year. Jonathan Gitlin: John, do have a thought on that? John A. Ballantyne: Yeah. I actually do not, Matt. We will, we will take a better look at that and get back to you with an answer. Matt Kornack: Okay. Fair enough. That is it for me. Thanks, guys. Jonathan Gitlin: Thanks, Matt. Operator: Thank you for your questions. There are no questions registered at this time. So as a reminder, it star one to ask a question. Alright. I am showing no further questions at this time. I would now like to pass the conference back to President and CEO Jonathan Gitlin. Jonathan Gitlin: Thank you, everyone, for dialing in. We will look forward seeing you at our Investor Day. Coming up in two weeks. Operator: Thank you for your participation. You may now disconnect your line.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to HEI Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mateo Garcia, Director of Investor Relations. Sir, please go ahead. Mateo Garcia: Welcome, everyone, to HEI's Third Quarter 2025 Earnings Call. Joining me today are Scott Seu, HEI President and CEO; Scott DeGhetto, HEI Executive Vice President and CFO; Shelee Kimura, Hawaiian Electric President and CEO; and other members of senior management. Our earnings release and our presentation for this call are available in the Investor Relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings and in the Investor Relations section of our website. Today's presentation also includes references to non-GAAP financial measures, including those referred to as core items. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. We will take questions from institutional investors at the end of this call. Individual investors and others can reach out to Investor Relations. Now Scott Seu will begin with his remarks. Scott W. Seu: Aloha kakou! Welcome, everyone. For today's call, I'll start with an update on our continued progress on initiatives to improve our company's financial strength and resilience. I'll also touch on the ongoing implementation of our wildfire safety strategy and update you on the tort litigation settlement. Scott DeGhetto will walk through our financial results, and then we'll open it up for questions. In the third quarter, we continued to take actions to ensure that we're best positioned to serve the communities in which we operate for the long term. We had a successful quarter progressing the initiatives we've talked about for much of the last 2 years, implementing wildfire safety improvements, advancing the Maui wildfire tort litigation toward final court approval and laying the groundwork for a successful second multiyear rate period under our performance-based regulation, or PBR framework. We also improved our liquidity and financial flexibility through a successful debt issuance and the upsize and extension of our revolving credit facilities, which Scott DeGhetto will discuss. In February, and as we had requested, the PUC issued an order establishing that Hawaiian Electric's target revenues should be rebased ahead of the second PBR multiyear rate period set to begin on January 1, 2027, and that a general rate case type proceeding is the most efficient means for doing so. In August, we requested PUC approval to pursue an alternative non-rate case process to rebase rates. The innovative process would involve collaboration with the existing PBR working group parties to develop a rebasing proposal for the PUC's review and approval, and it would avoid the time, cost and resource burden typically required for a formal rate case proceeding. If successful, the process could result in rebased rates before the next multiyear rate period begins. We also made this proposal in recognition of the multiple resource-intensive processes that the PUC and other interested parties are and will be undertaking related to the newly enacted Act 25. These include a wildfire recovery fund study due by the end of 2025, securitization financing and a rule-making process to determine utility liability limits for catastrophic wildfire claims. In l ate September, the PUC granted our request directing us to collaborate with the PBR working group parties to develop a rebasing proposal by January 7, 2026. If this process does not result in an approved rebasing proposal, Hawaiian Electric will file a 2027 test year rate case sometime in the second half of 2026. In that scenario, the PUC will determine whether the start of the next multiyear rate period will be pushed out beyond January 2027. Turning to Slide 4. We continue to see progress toward implementation of the Maui wildfire tort litigation settlement agreement. The process to obtain final court approval is advancing with the parties working through remaining administrative steps required for the settlement to take effect. These include final approval of the class settlement agreement and a formal dismissal of the subrogation insurer claims. We expect the court to hold a hearing on January 8, 2026, to consider final approval of the class settlement agreement. And last week, we filed a summary judgment request to dismiss the subrogation insurer claims. In sum, the settlement is on track and progressing as expected, and we still anticipate that our first payment will be due no sooner than early 2026. Turning to Slide 5. We continue strengthening our utility operational risk profile, which we believe has greatly improved since the 2023 Maui wildfires. In the third quarter, we advanced implementation of the enhanced wildfire safety measures outlined in our wildfire safety strategy. We fully deployed all weather stations and AI-assisted high-definition video cameras outlined in our strategy ahead of schedule. For the first time, the utility now has its own in-house meteorologist, part of the utility's newly created watch office that will help us better predict and prepare for potential dangers from severe weather events. These are just a few examples of the many advancements we've made to help ensure the safety of our communities. We'll continue to make these kinds of critical investments as laid out in our wildfire safety strategy which is currently under review by the PUC. As we discussed last quarter, recently enacted legislation allows for securitization to finance these investments, ensuring these safety improvements can be implemented at a lower cost to customers. In summary, we continue making significant progress toward resolving the wildfire tort litigation, improving our operational risk profile and laying the foundation for a strong long-term outlook. I'll now turn the call over to Scott DeGhetto. Scott Deghetto: Thank you, Scott. I'll start with our financial results for the quarter on Slide 6. In the third quarter, we generated net income of $30.7 million or $0.18 per share. Quarter's results include $4.5 million of pretax Maui wildfire-related expenses net of insurance recoveries and deferrals. Approximately $3.6 million of these expenses was recorded at the utility. Excluding these items, which we refer to as non-core, consolidated core net income was $32.8 million for the quarter or $0.19 per share. This compares to core income from continuing operations of $32.7 million or $0.29 per share in the third quarter of 2024. Utility core net income for the quarter was $39.6 million compared to $43.7 million in the third quarter of 2024. The decrease was driven by lower tax benefits from R&D tax credits, higher legal and consulting costs, which were deferred in 2024 and higher wildfire mitigation program expenses. Holding company core net loss was $6.8 million compared to $10.9 million in the third quarter of 2024. The lower core net loss was driven by lower interest expense due to the lower debt balance following the April debt retirement and higher interest income from holding company cash being held on the balance sheet primarily to make the first settlement payment. Turning to the next slide, I'll provide a few key updates on our liquidity and settlement financing plans. As of the end of the third quarter, the holding company and the utility had approximately $40 million and $504 million of unrestricted cash on hand, respectively. In addition, the holding company has approximately $519 million in combined liquidity available under its ATM program and credit facility capacity. The utility also has approximately $544 million of liquidity available under its accounts receivable facility and credit facility capacity. In September, we completed a successful $500 million unsecured debt offering at Hawaiian Electric, while also increasing our credit facility capacity at HEI and Hawaiian Electric by a combined $225 million. Proceeds from the Hawaiian Electric debt issuance will be used to finance CapEx and pay down debt. Both September transactions not only enhance enterprise-wide liquidity, but also show our readily available access to capital markets. Consistent with last quarter, the Hawaiian Electric's Board of Directors approved a $10 million quarterly dividend to HEI for the third quarter of 2025. Turning to our funding expectations for the tort litigation settlement. $479 million continues to be held in a subsidiary created for addressing the first payment. This is included in restricted cash on the balance sheet until we make the first payment, still expected not sooner than early 2026. We expect to fund the second settlement payment with debt and/or convertible debt and expect that payments thereafter will be funded with a mix of debt and equity depending on market conditions. Turning to the next slide. CapEx is projected to increase significantly in the coming years compared to historical levels. The higher CapEx will support key strategic objectives of reducing wildfire risk, increasing reliability and resilience and repowering firm generation. We expect to fund the higher spend primarily with retained earnings and proceeds from our recent debt issuance. As Scott Seu mentioned, we are working through the rate rebasing process with the PUC and PBR working group parties. We are also awaiting PUC approval of our utility wildfire safety strategy. In October, we filed an application to increase the total cost for the Waiau repowering project and the application remains subject to PUC approval. The results of these regulatory proceedings will impact our capital expenditure forecast. With those caveats, we are expecting 2025 CapEx to be approximately $400 million. We expect 2026 CapEx of $550 million to $700 million. Of this total, CapEx recovered under the annual revenue adjustment mechanism, or ARA, is expected to be $350 million to $400 million. EPRM recovered CapEx is expected to add roughly $150 million to $200 million. Wildfire and resilience CapEx, which we are planning to finance via securitization is expected to be approximately $50 million to $100 million. We expect 2027 and 2028 CapEx to increase further, driven by the Waiau repowering, the wildfire safety strategy and the Army privatization project. Roughly $1.8 billion to $2.4 billion in total CapEx is expected over the next 3 years from 2026 to 2028. This level of spend is subject to additional PUC approvals and further resource adequacy initiatives and analysis. With that, let's open up the call to questions. Operator: [Operator Instructions] Your first question comes from the line of Julien Dumoulin-Smith with Jefferies. Jamieson Ward: It's James Ward on actually for Julien. How should we think about the revenue requirement and timing under the alternative rebasing filing, the Gen 7 filing? What are the key elements that you're looking to align with the PBR Phase 6 modifications and so on? So just that revenue requirement and timing. Scott W. Seu: Well, let me address the timing first, and then I'll perhaps ask either Scott or one of our utility team to comment on some of our goals for the rebasing process. So as I mentioned, we are now -- we requested the PUC approval to enter into this alternate rebasing process. So the discussions with the PBR parties are underway. The proposal for rebasing is due to the PUC on January 7, 2026. And should that be successful, then we would go from there. If the proposal is not successful, then at that point, later on in the year, we would consider filing for a 2027 test year rate case. So that's just a high level in terms of what the timing is. And maybe I can defer to perhaps Joe Viola, who is our Senior Vice President at Hawaiian Electric Company, Head of Overseeing Regulatory Affairs. Joe Viola: James, again, yes, Joe Viola here. In terms of what we're shooting for, for the rebasing process, really the way I think to think about that is we're setting a new starting point for the second multiyear rate plan. So we want to put ourselves in a position that we have new target revenues that would allow us with efficient performance to begin to earn our authorized ROE. At the same time, we'll be developing potential changes to the next multiyear rate plan, we call that MRP2, scheduled currently to begin in 2027. So working on setting a new starting point and then at the same time, have changes to the PBR framework that can make it successful during MRP2. Jamieson Ward: Very much appreciated. Given that utility dividends have resumed, albeit in a small amount, but what's the sustainable cadence of utility to holdco dividends through the settlement years? And what are the gating criteria? Scott Deghetto: So it's Scott DeGhetto. So what we have been doing, and I think you're aware of this, is the utility dividend to the holding company, at least over the past year or 2 has been set based on what the needs are up at the holding company. I don't see that changing for the foreseeable future. Jamieson Ward: Got you. Okay. Just checking. That's very helpful. And the last one for me. really appreciate the CapEx guidance, which you obviously mentioned was a goal for you guys on the Q2 call. So well done, and thank you for that. As we look forward, how do you think about earnings guidance and ultimately, of course, EPS, which will have to include the financing element there. Could we see EPS guidance in the Q4 call? Or is that not something we should put expectations on? Scott Deghetto: So too soon to say. Again, we really have been looking at reinstituting earnings guidance, but we really don't want to do that until we get through the final settlement approval process and put that behind us. And so there's a possibility that it could be at that particular point, but I wouldn't count on it. It just all depends on when the final settlement will be approved, and then we'll take a look at how the business is performing on a steady-state basis and get back to you. Now keep in mind, going into the rate rebasing process, right, it's going to be hard for us to give guidance. We might be able to do it for a few quarters. But again, going into that process, we won't know the outcome of that process. And so what we don't want to do is give you guys guidance and then have to go back on that guidance or change it dramatically. Operator: Your next question comes from the line of Nicholas Campanella with Barclays. Michael Brown: This is Michael Brown on for Nicholas Campanella. Can you provide an update on the sale of the remaining portion of the bank? Scott W. Seu: You're talking about the remaining or 9.9% ownership on American Savings? Michael Brown: Yes. Scott Deghetto: Yes. So we're always looking at what's going on in the market. And as we've said on previous calls, we do intend to monetize that stake. We haven't really given a time frame on it. I would say certainly -- I wouldn't say certainly, but probably in the next 6 months or so, we probably look again pretty hard at that and see what it looks like. But we're not committing to a specific time line at this point. Michael Brown: Next question for me. What are the expectations of the commission's report on the wildfire fund going into the new legislative window? Scott W. Seu: Yes. So the Public Utilities Commission, they have been working on the study that is due to be submitted to the Hawaii State Legislature 20 days before the next legislative session starts. So that is on track. They have been working on information gathering, collecting stakeholder input. And they are -- as far as we know, they are on track to submit that report. Michael Brown: With the report, do you anticipate movement in 2026 on any key legislation? Scott W. Seu: It's -- I don't want to get ahead of the PUC. I'm not quite sure what will be in that report and whether they will recommend that legislation is needed next year. So too soon to say. Operator: That concludes our question-and-answer session. I will now turn the call back over to Scott Seu for closing remarks. Scott W. Seu: I just want to thank all of our shareholders, and a lot of our shareholders are our neighbors here in Hawaii. So again, thank you, Mahalo, for your continued investment in HEI. We're also very thankful to those of you who supported our successful debt issuance in September. Again, we just really greatly appreciate your support as we continue to help our communities move forward to a sustainable future. So thank you. Mahalo, everybody. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, and welcome to AbCellera's Third Quarter 2025 Business Update Conference Call. My name is Cameron, and I'll facilitate the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would like to turn the call over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. You may proceed. Tryn Stimart: Thank you. Hello, everyone. Thank you for joining us for AbCellera's Third Quarter 2025 Earnings Call. I'm Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Dr. Carl Hansen, AbCellera's President and CEO; and Andrew Booth, AbCellera's Chief Financial Officer, are also on today's call. During this call, we anticipate making projections and forward-looking statements based on our current expectations and in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially due to several factors outlined in our latest Form 10-K and subsequent Forms 10-Q and 8-Q (sic) [ 8-K ] filed with the Securities and Exchange Commission. AbCellera is not obligated to update any forward-looking statements, whether due to new information, future events or otherwise. Our presentation today, our earnings press release and our SEC filings are available on our Investor Relations website. The information we provide about our pipeline is intended for the investment community and is not promotional. As we transition to our prepared remarks, please note that all dollars referred to during the call are U.S. dollars. After our prepared remarks, we will open the lines for questions and answers. Now I'll turn the call over to Carl. Carl L. Hansen: Thanks, Tryn, and thank you, everyone, for joining us today. Last quarter, we completed our transition from a platform company to a clinical-stage biotech with the initiation of our Phase I clinical trials for ABCL635 and ABCL575. Both trials are progressing to plan and remain on track for readouts next year. I'm pleased to report that this quarter, we have also started activities at our new clinical manufacturing facility, and we have substantially completed our platform investments. We ended the quarter with approximately $680 million in available liquidity to execute on our strategy. And as we close out the year, we are confident in achieving all our corporate priorities, including advancing at least one more development candidate into IND-enabling studies. A highlight of this quarter was the appointment of Dr. Sarah Noonberg as Chief Medical Officer. Sarah is a physician-scientist with over 20 years of clinical drug development experience. She is a broad -- she has worked across a broad range of modalities and indications and has led programs through all stages of development from discovery through to approval. You can expect Sarah to join future earnings calls to provide updates on our clinical pipeline. With Sarah taking the helm, Dr. Geoff Nichol will be stepping down as our SVP of Development. I'd like to thank Geoff for his leadership in building development as we transitioned from a platform company to a clinical-stage biotech. And with that, I will hand it over to Andrew to discuss our financials. Andrew? Andrew Booth: Thanks, Carl. As Carl pointed out, AbCellera continues to be in a strong liquidity position with approximately $520 million in cash and cash equivalents and with roughly $160 million in available committed government funding to execute on our strategy. We are continuing to execute on our plans with a focus on internal programs and leveraging our CMC and GMP investments. Looking at our business metrics. In the third quarter, we started work on one additional partner-initiated program, which takes us to a cumulative total of 103 programs with downstream participation. With Phase I trials for ABCL635 and ABCL575 underway, we maintained the cumulative total of molecules to have reached the clinic at 18, including both our own pipeline and those led by partners. As we have stated previously, we view the overall progress of molecules in the clinic as a potential source of near and midterm revenue from milestone -- from downstream milestone fees and royalty payments in the longer term. Turning to revenue and expenses. Revenue for the quarter was $9 million, predominantly from research fees relating to work on partnered programs. This compares to revenue of approximately $7 million in the same quarter of last year. With respect to research fee revenue, as we have mentioned in the past, we expect these to continue to trend lower as we increasingly focus on our internal pipeline. Our research and development expenses for the quarter were $55 million, approximately $14 million more than last year. This expense reflects the focus on investment in our internal and co-development programs. The increase over the recent run rate expense levels in Q3 is largely due to specific investments of $15 million on 2 internal programs. In sales and marketing, expenses for Q3 were just under $3 million, a small reduction relative to the same quarter of last year. And in general and administration, expenses were approximately $22 million compared to roughly $19 million in Q3 of 2024. Included in these expenses are the ongoing expenses related to the defense of our intellectual property. Looking at earnings. We're reporting a net loss of roughly $57 million for the quarter compared to a loss of about $51 million in the same quarter of last year. In terms of earnings per share, this result works out to a loss of $0.19 per share on a basic and diluted basis. Looking at cash flows. Operating activities for the first 9 months of 2025 used approximately $97 million in cash and equivalents. Excluding investments in marketable securities, investment activities amounted to $49 million year-to-date. This is predominantly in property, plant and equipment, driven by investments in establishing clinical manufacturing, which are now substantially complete as we had expected. The investments in PP&E were partially offset by government contributions. And as a part of our treasury strategy, we have $413 million invested in short-term marketable securities. Our investment activities for the quarter included a $62 million net divestment of these holdings. Altogether, we finished the quarter with $523 million of total cash, cash equivalents and marketable securities. And as a reminder, we have received commitments for funding for the advancement of our internal pipeline from the Government of Canada's Strategic Innovation Fund and the Government of British Columbia. This available capital does not show up on our balance sheet. And with over $520 million in cash and equivalents and the unused portion of our secured government funding, we have approximately $680 million in available liquidity to execute on our strategy. In addition, we have available liquidity in our ownership of both Vancouver-based lab and office buildings as well as our GMP manufacturing facility, both of which have been financed off of our balance sheet. The operating cash usage for the remainder of 2025 will continue to prioritize advancing our 2 lead programs through their Phase I clinical studies and building a strong preclinical pipeline. With respect to our overall company expenditures, our capital needs are very manageable, and we continue to believe that we have sufficient liquidity to fund well beyond the next 3 years of increasing pipeline investments. And with that, we'll be happy to take your questions. Operator? Operator: [Operator Instructions] The first question comes from the line of Malcolm Hoffman with BMO. Malcolm Hoffman: Malcolm on for Evan. I want to ask how to think about partner-initiated programs in the clinic. These look somewhat stagnant since 2024. And to be clear, we appreciate the conversion to more AbCellera-led development. But just wanted to understand why these partner-initiated programs may not be progressing clinically. Is it just a timing issue? And then a second one about Dr. Noonberg and her new role as CMO. Can you comment on why you felt like now was the appropriate time to bring Dr. Noonberg in? And what do you think she uniquely brings to AbCellera that the company may have lacked before? Carl L. Hansen: Sure. So I'm happy to take that one, Carl Hansen here. So first, on the partner-initiated programs. So as you know, in the early stages of the company and through until 2023, our business was primarily focused on a partnership mode where we were doing discovery on behalf of partners and keeping a position in the resulting molecules, both in royalties and in milestones. We have handed off a large number of those. And as Andrew mentioned, I believe we have initiated about 103 programs to date. We do expect that some fraction of those are going to move forward into clinical development, and we continue to report on that. I would say that our experience has been that it takes longer than we had initially anticipated. So we have examples where programs that were handed off ultimately go into clinical development as much as 6 years later. So it's difficult to make an assessment as to what will be the number of those that ultimately make it into clinical development. But we do think that there is value there that's going to accrue over time, as mentioned by Andrew on his prepared remarks. Moving to the question of bringing Sarah on. Obviously, in 2023, we made the definitive decision to back away from that partnership business and to move into doing drug development on our own behalf. Over the past few months, we've succeeded in bringing the first 2 programs into clinical development. We have a robust pipeline coming behind that. And as the portfolio matures, we definitely thought it was time to bring in a senior executive with experience in clinical development and also that the company was at a position where we would be able to attract someone that was absolutely top-notch. So we're thrilled to have Sarah on board, and we look forward to working with her and with you over the coming years as the pipeline matures. Operator: The next question comes from the line of Andrea Newkirk with Goldman Sachs. Andrea Tan: Carl, I was just wondering if you might be willing to speak a little bit on the data disclosure strategy that you plan on taking for the Phase I 635 study, particularly given you do have the various cohorts, SAD/MAD dosing as well as the proof-of-concept section where you're evaluating efficacy. Just curious if this will all come within one disclosure. And then if you could help frame expectations for the profile you would deem supportive to continue advancing this further into a Phase II study? And then I have one follow-up following that. Carl L. Hansen: Thanks, Andrea. So to your first question, our expectation is to make a single disclosure after we have completed the proof-of-concept part where we have a double-blind, placebo-controlled evaluation of ABCL635 in the patient population that it's intended for. We do expect that will come sometime in the new year. I think we had said before around mid-new year, but give that a couple of months on either side for error bars. What we're looking for is that we have a safety signal, and we have efficacy that shows that we're in the game to have a competitive product against the other products that are now in the market. And the study is powered to do that. So somewhere around midpoint next year, we should know a lot about this program. So far, we're encouraged by what we're seeing. Everything is on track. And if that continues on track, then we're getting ready to be in a position to aggressively move it into later-stage trials. Andrea Tan: Got it. Okay. And if you do achieve your desired target product profile when you see the data emerge next year, how validating would that be for your platform and technology? And do you think there is read-through to the rest of your pipeline? Carl L. Hansen: It's a great question. So we have highlighted before that one of the areas where we've been investing for a long time and where I believe we have world-class capabilities is in making antibodies against ion channel and GPCR target. Obviously, NK3R is a GPCR target. So it's the first from that platform to move forward. I think that's strong evidence that the platform is working and that we can make highly differentiated molecules. Of course, evidence of a platform doesn't happen with a single asset, and our intent is to follow that up again and again with other molecules from that pipeline that we're equally excited about. Operator: The next question comes from the line of Stephen Willey with Stifel. Joshua Nickerson: This is Josh on for Steve. Is there anything you can tell us about how enrollment is going in the Phase I trial for 575 and maybe potentially some color on some of the doses you've reached in this cohort? Carl L. Hansen: Sure. So in terms of enrollment, as I mentioned, the program is going as expected. So everything is on track and at the pace that we anticipated. We are not disclosing preliminary results in terms of how far we got in dosing. But as I said, we're encouraged by what we're seeing. And so far, everything is as expected. Joshua Nickerson: Okay. Great. And then just another quick one. I know you said on the 2Q call, you were in line to declare a potential fourth AbCellera-led candidate by the end of this year. Are you guys still on track to do so? Carl L. Hansen: Yes, that's correct. I think I said that in my prepared remarks that we are on track before the end of the year to bring an additional development candidate forward, and that would be the fourth in the pipeline. Operator: The next question comes from the line of Faisal Khurshid with Leerink Partners. Faisal Khurshid: On 635, could you speak to us about whether there's a specific benchmark or bar that you would want to see on testosterone reduction in healthy male volunteers? Carl L. Hansen: Sure. So I wouldn't point out a specific level, but there is good literature out there disclosing testosterone levels from small molecules that were in development, particularly fezolinetant. And so we would, within the power of the study, look for something that shows that we're getting engagement that is at least as good as that to move forward. Faisal Khurshid: Got it. Okay. And then could you also discuss the risk of engaging this target with a mAb given it's a CNS target? Carl L. Hansen: Sure. That's a great question. I think it's one that I touched on an earlier call. So we believe that the pathway, the NK3R pathway is very well validated. And so that if we can engage NK3R in the relevant neurons, that it's highly likely to be an efficacious drug. The NK3R is expressed in KNDy neurons in the arcuate nucleus. And those neurons connect both to the endocrine system and also go through the blood-brain barrier into the thermoregulatory center of the brain. So we expect that we should be able to engage NK3R in the arcuate nucleus. And given our understanding of the biology, we believe that, that should be sufficient to be efficacious in treating VMS. But of course, we have not yet proven that. And so we need to wait for the proof-of-concept study and that readout to have conviction to move the program forward. Operator: Next question comes from the line of Steve Dechert with Key Corp. Steven Dechert: It's Steve on for Scott. I was hoping you could talk about what the benefits are of 635 versus existing hormonal treatment for hot flashes. And then as a follow-up, are there any molecules currently being developed that would compete directly with 635? Carl L. Hansen: Sure. So 635 is not being developed as a substitute for hormonal therapies. It's being developed as an alternative to menopausal hormone therapy. I think as I mentioned on a previous call, there are roughly 12% of women that have a strong contraindication against using menopausal hormone therapy. In addition to that, about 8% that end up discontinuing because of adverse events or tolerability. So there's a significant portion of women that have fewer options or cannot avail themselves of MHT, which is the first-line therapy for treating VMS. In terms of alternative therapies, of course, there are now 2 molecules that have approval. One is VEOZAH by Astellas and one is Lynkuet by Bayer. Those are both now on the market. We believe that we have -- we're in a great position to have these 2 products out there, providing good options for people that need these treatments and build the market for us so that we can come in with a molecule that we believe can be differentiated in dosing, in safety and potentially also in efficacy, depending on how we do a target engagement. Operator: The next question comes from the line of Brendan Smith with TD Securities. Jacqueline Kisa: This is Jackie on for Brendan. Just a quick one and maybe just to remind us, with earlier in competitors like DUPIXENT [ and Sanofi's assets ], what do you expect we need to see from the Phase I data for 575 to really solidify the drug's positioning within the pretty competitive landscape? Carl L. Hansen: Sure. So 575 is obviously coming behind amlitelimab and also rocatinlimab from Amgen. And our differentiation thesis when we began this program was really about less frequent dosing. What has happened recently, particularly with the readout in the COAST trial with amlitelimab is that they have shown that the class is efficacious, although not as efficacious as was expected -- as DUPIXENT had been on previous trials. So it looks like it's going to be approved as a second-line therapy. But they also showed that the 1-month dosing and 3-month dosing were relatively equivalent. So at this point, we have a drug that the data would suggest would allow for even less frequent dosing, perhaps 6 months. It's unclear how important that's going to be in a clinical setting. So our position in 575 right now is that we have a terrific molecule. The early readouts are going to show safety, obviously, but also PK and half-life that would support that dosing hypothesis. And probably the most important catalysts are going to come from outside of AbCellera, and they will be readouts on amlitelimab or the OX40/OX40 ligand class in other indications that are being evaluated by Sanofi and by others. Operator: There are currently no questions registered. [Operator Instructions] There are no additional questions waiting at this time. I would now like to pass the conference back for any closing remarks. Carl L. Hansen: Thank you, everyone, for joining us today. This is an exciting time for AbCellera, and we're moving into 2026 with some exciting progress in the pipeline, both in programs that are coming and what's in the clinic. And we look forward to updating you on future calls. Thanks so much. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Hello, and welcome to Groupon's Third Quarter 2025 Financial Results Conference Call. On the call today are Chief Executive Officer, Dusan Senkypl; and Chief Financial Officer, Rana Kashyap. [Operator Instructions] The company has posted earnings materials, including earnings commentary on the company's Investor Relations website at investor.groupon.com. Today's conference call is being recorded. Before we begin, Groupon would like to remind listeners that the following discussion and responses to questions reflect management's views as of today, November 7, 2025, only, and will include forward-looking statements. Actual results may differ materially from those expressed or implied in the company's forward-looking statements. Groupon undertakes no obligation to update these forward-looking statements as a result of new information or future events. Additional information about risks and other factors that could potentially impact the company's financial results are included in its earnings press release and its filings with the SEC, including its quarterly report on Form 10-Q. We encourage investors to use Groupon's Investor Relations website at investor.groupon.com as a way of easily finding information about the company. Groupon promptly makes available on this website the reports that the company files and furnishes with the SEC, corporate governance information and select press releases and social media postings. In the call today, the company will also discuss the following non-GAAP financial measures: Adjusted EBITDA and free cash flow. In Groupon's press release and their filings with the SEC, each of which is posted on its Investor Relations website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable measures under U.S. GAAP. And with that, I'd like to turn it over to Dusan, to make a few opening remarks before we jump into Q&A. Dusan? Dusan Senkypl: Hello, and thanks for joining us for our first quarter 2025 earnings call. It's great to be with all of you today. Yesterday, after the market closed, we released our earnings and posted our earnings commentary on our Investor Relations website. Today, I will make brief opening remarks and then open up the call for your questions. For more details on our quarterly performance, I encourage you to read our full earnings commentary, press release and 10-Q. I'm pleased to report another strong quarter that demonstrates continued momentum in our transformation journey. Global billings grew 11% year-over-year, making our second straight quarter of double-digit growth. Our core local category continues to be the engine driving this growth with North America local up 18% and international local, excluding Giftcloud, up 15% year-over-year. Combined, our core local category now represents 89% of billings and grew 18%, reinforcing the scalability of our hyperlocal marketplace playbook. We delivered adjusted EBITDA of $18 million, ahead of our expectations, and our trailing 12 months free cash flow reached $60 million. This demonstrates our ability to generate strong profitability and cash flow while continuing to invest strategically to accelerate our top line. On the demand side, Q3 reflects the compounding benefits of systematic improvements across our marketing engine. We drove healthy growth in our paid market performance channels, supported by a modest increase in marketing spend and improving ROI. We added nearly 300,000 net new active customers quarter-over-quarter and 1 million plus over the last 4 quarters, excluding Italy, a strong signal for the overall health of our marketplace. On the supply side, our hyperlocal focus is working. All 4 major international markets delivered a second consecutive quarter of double-digit growth. In North America, our focused hyperlocal city strategy is paying off. Chicago is now our biggest city and growing at nearly double the rate of North America local overall. Things to do had an exceptional summer season with its seventh consecutive quarters of strong double-digit growth. On the technology front, our platform velocity is accelerating meaningfully. Deal page conversion rates improved 13% year-over-year in North America, and we are seeing faster development cycles and higher quality releases as our modernization efforts translate into tangible business capabilities. Looking ahead, our strategic priorities remain clear, accelerate top line growth towards our goal of over 20% billings growth while generating strong adjusted EBITDA and free cash flow. The momentum we are seeing across customer growth, category performance and platform capability gives me confidence that we are building the foundation to become the trusted destination for quality local experiences at unbeatable value. We are still in the early innings of a large opportunity to build a hyperlocal experience marketplace that combines trust, curation, quality and unbeatable value with the network effects and unit economics of modern marketplaces. I would like to thank our team. This is not an easy journey and their continued commitment to our mission and to our transformation has been really great. With that, let's open the call for questions. Operator: Our first question comes from Bobby Brooks from Northland Capital. Robert Brooks: Something that really caught my attention was the commentary that after allocating the focused sales resources to Chicago at the start of the year, it's now growing double the rate of North American local. So just a few questions on that. But first, is it right for me to then think that Chicago local billings was growing in the high 30s? And a follow-up, could you just discuss a bit more in detail what those focused sales resources look like and the notable actions they took? Dusan Senkypl: Yes. Thanks a little bit for the question. I can take it. So our Chicago efforts started already last year, where we reallocated disproportionately a higher share of our sales resources and sales team to Chicago. And at the same time, as we are developing our -- let's how we call it, marketplace understanding and deal books and curation for sales, which means that we are more prescriptive in the terms of what we are asking ourselves to come with. Chicago is always the first in the pipeline. So we are really focusing on it so that we understand the inventory. We understand what's missing. We understand how our customers are behaving in Chicago. We understand what they are searching on Groupon. And then we are asking ourselves to come specifically and close the gap. And obviously, it takes several quarters before the results are visible in the numbers. But with the compounding effect, we need a very strong -- we see very strong impact on Chicago results. And obviously, this is a big learning for us. It's not really a surprise result. We were expecting that this will come. So we are expanding our focus on more cities, which we already did 2 quarters ago, and we are also expanding our marketplace understanding across the board so that this becomes the new golden standard across the board for all sales processes within Groupon. Robert Brooks: Got it. That's super helpful color. And then -- so it seems like this is a playbook that you're already in the process of expanding to other metros. I guess just for like context, you mentioned how you initially put those sales -- increased sales resources in Chicago last year. So is it like maybe -- was that like 4 quarters ago, 5 quarters ago? I'm just trying to get a sense of then maybe when we see the impact of those other metros and now you're using that playbook with -- start to kind of flow through results because I get that it's a lag effect. Dusan Senkypl: Yes. We were iterating the process, but you can think about it that we started approximately 4 quarters ago. With all new metros, we would like to see results faster because we have learnings, and it was also a process where we were improving pretty much every quarter and changing and fine-tuning the approach. So it should be faster with other metros. Robert Brooks: Got it. That makes sense. And then one more for me is just clearly got the sense of you guys' focus of making a customer journey kind of match a customer in the prepared remarks last night, I think you guys used the example of someone wanting to take their kids to a water park is going to be different than someone looking for an oil change. And so I'm just curious like how do you plan on having Groupon kind of provide a different customer journey? And I'm just curious kind of what that different customer journey would look like? Dusan Senkypl: So we have -- I would split it into 2 parts. One is a mindset shift, which was happening in Groupon in the last 6 to 12 months because in the past, we were looking on the marketplace as one product, running plenty of tests across the board and then quite often being surprised that we don't see a result. Now especially in the product department with new leadership, we changed the approach, and we are looking really on the results and test per category. So for example, we have our new map feature, but simply the map is relevant on some categories and completely irrelevant in some other categories. In the past, if we would release new app, we would say it's not bringing the results as expected. So let's forget it and let's jump to something else because the overall impact would be probably 0 or around 0. Now we can see that, for example, when you are looking for oil exchange, then the map is very relevant and we can show it and there are some other categories where actually we should not be showing the map. So we have this very category-specific approach in product development, which is changing the customer journeys across the board. And then there is a second very important technological enablement project for us. This is CDP or let's say, CRM for customers. We are building, and we already have a live pilot in the U.K., a new technology, which will be able to customize the messaging because the old Groupon tech stack is very limiting in terms of how we can target customers, how we can do personalization? So this is something which we are changing, and we want to be pretty much optimizing based on the behavior of every single customer on the website. And every user journey will be pretty much fitting the profile of that user. When we were doing some internal demos and showing it, it should end up with Groupon looking completely different for each customer simply based on the profile. Operator: Our next question comes from Eric Sheridan from Goldman Sachs. Eric Sheridan: Maybe 2, if I could. Building on parts of the last answer, when you think about purchase frequency, which you call out the difference in behavior between newer cohorts versus older cohorts, can you go a little bit deeper in some of the initiatives aimed at improving frequency among the newer cohorts against the type of user growth you've seen over the last 12 months? That would be number one. And then number two, when you think about the next 12 to 18 months and the intensity around marketing, how do you think about striking a balance between more direct response marketing aimed at either user acquisition or behavior against scaling from the brand advertising you talked about in the shareholder materials, just so we better understand the combined effort on marketing intensity over the next 12 to 18 months? Dusan Senkypl: Thank you very much for both questions, Eric. We are kind of interconnected. And I will start with purchase frequency and will be building on the last answer. We were talking about purchase frequency as a focus for the company probably the last 3 or 4 quarters. Yet we are reporting that we don't see material improvements. Internally, we see improvements in the repurchase rate of the cohort of new customers when we compare customers which we were acquiring last year versus customers which we acquire right now and look and, which -- what percentage of them is doing the second purchase typically within 30 days from the first one, we see improvement. So we know that the activities and plans which we have are directionally right. What's holding us back is really the tech limitation of our platform. And that's why I was talking about the CDP project implementation, which we have up and running in the U.K., and we will be expanding it very soon to the -- mainly to North America, pretty much rest of the Groupon, which would really allow us to design the specific journeys based on what customer did because we see that we are simply category-specific rules, our customers are buying the stuff which can be predicted, meaning that if you buy all exchange now, we know that most likely you will need it in like next 9 months and similar. Right now, we don't have the targeting capabilities. So this technology enabler is, I would say last major big missing piece in the marketing stack, which we have, so that we can accelerate on a purchase frequency. And the second part on the brand advertising in general, it's very hard to predict how exactly we will be running it, but we simply have based on our experience, we know that the brand is part of the marketing mix and especially, nowadays when the world is moving towards like social media influencers, this is a channel which can drive business significantly. We were piloting and we have some great influencers promoting Groupon, I would say, last 4, 5 quarters, and we are successfully growing it. But now we are adding into it like the video advertising, YouTube and other channels where we will be pushing brand. It's very hard to say how it will be impacting ROIs. Overall, we don't plan to change our strategy that we want to grow contribution of profit in the company. At the same time, if we see that the brand is delivering more than we were expecting, we would be adjusting the budgets between performance and brand advertising. But we will come back with more data in the next earnings call because our brand campaign starts in 2 weeks. Operator: Our next question comes from Bobby Brooks from Northland Capital Partners. Robert Brooks: I just wanted to circle back on -- it was great to hear the shift in tone on how you're kind of looking at the buyback from the prepared remarks last night, comparatively from the second quarter call. So I was just curious if you could maybe give us a look or a bit more color on the factors you guys will be considering when -- of making the decision of when to be stepping in the buyback? Or just any more general color on how to be thinking about it or modeling it going forward? Rana Kashyap: Yes, Bobby, this is Rana. I can take this. So I think you rightly noticed our commentary in the script, which I think you commented on was a little -- was different than what we said in the past. What we said in the past was fairly noncommittal. And I think this -- what we've said here is we expect to be opportunistic. And so we are evaluating the factors to consider here you asked about. We are looking at our cash generation, our investment priorities, what the market conditions are like and of course, the trading prices of our shares. So we will be opportunistic on the buyback, and those are the factors that we'll be considering in evaluating how to allocate our capital with respect to this channel. Robert Brooks: Got it. That's helpful. And then I just wanted to follow up, Dusan. I think with the customer frequency of the new cohort, I just want to make sure I understood it right. You mentioned that the new cohorts added in 2024 -- or I should say, the new cohorts added in 2025, their purchase frequency is higher than the cohorts added in 2024, albeit that 2025 new customers is still below the legacy customers. And am I understanding that correctly? Dusan Senkypl: On the operational level, so that we can drive these projects in a very agile way, we are pretty much following the, let's say, repurchase rate in the next 30 days, meaning when a new customer makes an order, we are looking what percentage of these customers is doing the second order within the 30-day interval because it's a leading indicator for the purchase frequency. And we can see based on the changes in projects which we started already in Q4 last year that there is improvement in this group. So this makes me strongly convinced that like the projects which we have in place are the right ones that they will be working. It's by adding right inventory. We were talking about the WOW Deals, but it's also about the communication at the right moment, right time, which is typically when the customer is redeeming and using the service which typically means a very good experience with Groupon. They are more open to next purchase. So this is confirmed to ramp it up. And so it's converted in the overall user base. We simply need to also step up with better technology so that we can target and personalize in a more advanced way. Operator: Our next question comes from Sean McGowan from ROTH Capital Partners. Sean McGowan: Kind of following up on some of the things you've talked about there. You've been now doing for quite a while, the reminding consumers of expiring Groupons and encouraging them to redeem them. Can you talk a little bit about what impact you've noticed on their purchase patterns, how likely they are to purchase an additional Groupon? Dusan Senkypl: Thank you, Sean, for the question. I am not able to share the exact numbers, but our analysis are showing that when the customer redeems, we simply have a much higher rate of the second purchase. And this is a project which we were talking about since last year. It takes a little bit more time versus what we were expecting because of the way how some Groupons are redeemed because with some merchants, we don't even have a redemption signal. So we have to do plenty of background work to improve the system and collect more inputs and signals from our merchant partners. But this is one of the -- like the priority projects. We will be also improving and expanding our review section, which is very highly related to the overall topic, and we will expect that it will translate into repurchase rate overall for all Groupon customers. Sean McGowan: Okay. And Rana, a quick kind of housekeeping question. I think you mentioned in the prepared remarks that the ex-Giftcloud International billings were up 15%. Can you translate that into what the revenue growth would have been at ex-Giftcloud? Rana Kashyap: So ex-Giftcloud, our revenue growth in Italy -- ex-Giftcloud and actively our revenue growth in Q2 was up 7.6%, so I think about 8%. Sean McGowan: Okay. Then back to you, Dusan. Quite a bit in the prepared remarks about AI. Can you give a little bit more color on what some of the benefits you're expecting to see from greater use of AI. Dusan Senkypl: So there will be and there are benefits both on the -- like how we are running the company, but at the same time, we see opportunities with customers. So I can start with like, let's call it, SG&A opportunities. AI is and will be increasingly more one of the factors which will be improving conversion of our sales team. We are doubling down and expanding our lead generation capabilities. We have the system now which is connected with our -- I talk about it as marketplace understanding so that we are feeding our legion engine with information, which businesses, which deals we need in what areas. So we will be sending to our sales team better quality leads, which when will be converted, will generate higher revenue versus just some poor leads in general which we had in the past. We have AI included in the, I call it, warmup communication with merchants to present the Groupon. And overall, we are adding AI tools to the whole sales process. For example, we were talking about the AI deal creation where we see that when we can present merchants during the sales call, how the deal will be looking on Groupon, it not only speeds up the whole process, but it's also increasing conversion. We already have AI used in supply monitoring where AI is giving deal insights and like guiding salespeople what should be changed on the deal to improve it and generate more for the merchant and more sales for Groupon and for customers. Obviously, engineering, it's pretty much everywhere, higher efficiency, higher quality of outputs, finance, also higher efficiency and marketing is scale and conversions like going forward, I expect that we will be able to drive growth of performance marketing and social and influencer marketing with same or smaller team. And recently, also we introduced the chatbot for our customer service where we expect that until now, the chatbot was -- or the customer service of Groupon was more really like a service. But going forward, we want to look at customer service as an advertising marketing channel because it's a touch point with customers, and we already have AI-driven chatbot, which is handling the initial part of the communication and then advanced system where our agents are pretty much guiding AI, how we should treat the conversation with customer and taking over just part of the communication with heavy help of AI. So this is on SG&A side. And then on the customer side, I expect that -- and it will be slower than everyone probably predicts now like always with new technologies that there will be a change in behavior, how customers are looking for services. So we are closely monitoring and working with partners and with our teams how to be ready for AI apps, how to have the website easy to read and communicate with AI engines so that we can find it. We are analyzing what are the really keywords, which are driving the AI traffic so that we can provide better results. Like going forward, and again, it will be slower than everyone expect. We believe that people will change the way how we are looking for stuff, and it will be more conversational and Groupon will be part of it. Ultimately, I see Groupon also as a kind of gateway for small businesses because it's very hard to expect that all small businesses who have quite often tough time just to run the business will be ready to have the solution ready working with all the key players. We will be ultimately connect with the platform which will be bringing all local merchants and small businesses to AI world. Operator: We'll now pose written questions to management that came in through our Investor Relations press line. Investors who are live on the line, if you have follow-ups, please raise your hand and we'll head back to you. Our first written question is in regards to marketing efficiency. Marketing spend rose 14% year-over-year to 37% of gross profit as you leaned into acquisition. How are you measuring marketing ROI across channels? And what early learnings are emerging from your new brand campaign in key markets like New York and Chicago? Dusan Senkypl: I can take that question. So first, brand campaign is starting in the next 2 weeks. So we don't have a lot of learnings from our own. Obviously, we were doing the homework and we were looking on how other companies were running brand campaigns to take the learnings. So we have positive expectations of the outcome. And in terms of performance of our marketing channels, based on the numbers which we were reporting, you can see that our marketing channels and paid marketing channels are performing very well. We have very good ROI. We are not changing our ROI goal of like 100% return within the 7-day window for all our performance marketing budget. And with this setup, although based on the results which Google and Meta are posting, you see that we are able to monetize better their traffic. We are still able to grow and improve the marketing with the exactly same ROI, which I consider as a great result. And based on the additional AI opportunities, I believe we still have a way to go. We still can grow the video part, the social part of the marketing. So I believe that part of our future growth will be coming from this area. And maybe one additional comment on this. At the same time, we see a shift of behavior of customers. We see that the AI PCs mainly by Google are simply decreasing the traffic coming from SEO. At the same time, we see higher conversion. So SEO overall for everyone, it's not just a Groupon specific topic, is definitely kind of a headwind. But at the same time, we see that there are opportunities with conversion and opportunities with AI, which will balance it. Operator: Our next written question is in regards to platform modernization. Your new app remains at roughly 3% of traffic with plans for a full North American cutover by early Q1 2026. What KPIs are you watching to gauge readiness for the full migration? And what incremental uplift in conversion or engagement have you seen from early adopters? Dusan Senkypl: So I'm happy to report that in recent weeks, we see quite major improvements, and that's why we are more optimistic with the rollout of the platform. The biggest learning and takeaway which we have from the app is that new mobile next app users have 10% to 20% higher engagement, which means that because app is easy to use, we are simply coming back to the application, relaunching it, looking what's available on Groupon more than customers using the legacy application. At the same time, it's not converted yet into conversion. The monetization is pretty much on par. That's why we are just decided that we will be ramping up the distribution for new users already now in Q4, and then we will really accelerate it in early Q1 because we feel much more confident about the outperformance right now. And the second part to this question is related again to the CDP or CRM platform, which would allow us to deliver personalized messaging because this is a tool how to improve experience for customers, deliver them the push notifications and in-app messages, which will be more relevant, and we see this as an opportunity for us for next year. Operator: We have a follow-up question from Sean from ROTH Capital. Sean McGowan: Yes, I noticed that last quarter and this quarter as well, travel seems to be doing better. So can you talk about some of the things that you're doing in travel that seem to be working? Dusan Senkypl: Rana, do you want to take that question or should I? Rana Kashyap: Yes, I can take it. So Sean, you correctly noted, our travel business has been doing well. Our travel business is still relatively small relative to the market opportunity and our business. We have had success this summer working with several large enterprise brands in travel that really fit with our proposition. And so what we've been doing there, these are actually existing customers that we're growing faster with, and what -- we've been working closely with them to understand their needs and designing and want to understand what our customer needs are and introducing more room nights, better deals. And that's been really successful. These properties also overlaid with many of the outdoor activities for the summer. And so that also, let's say, lines up well with our platform offering things to do experiences. And so that's really what drove travel this summer. Operator: And another follow-up from Bobby from Northland. Robert Brooks: One more for me. So obviously, a lot of discussion on the AI initiatives and kind of where you see the opportunity there. But I guess I was just curious like from the customer-facing perspective, is there anything as folks are checking out the website and looking for deals in the coming months, are any of these kind of AI initiatives going to be -- able to be directly seen when browsing inventory on the website or maybe through the app, whether it's the legacy or the new rollout one? Just curious to hear that color. Dusan Senkypl: So one internal project which we are running in this area is also really updated version of search and relevance platform for whole Groupon, which would allow us to unlock better opportunities, more personalization in general, in line with what I was talking about in the CRM project also. And the plan is that when we will have this platform released, we will be adding the AI search also on the Groupon platform. Until then, we released the functionality, which is not like pure AI, but which is like helping customers when they are typing the search query that we are adding the better suggestions, we are adding the related stuff based on the previous results. This is what we are already piloting on that new technology, but we expect much more when we will have it. And at the same time, we have a very heavy stream when we are making sure that our website is able to talk with all AI platforms because like our observation right now is that not many customers are really using the apps in OpenAI and other platforms. It's more still the organic language, help me find the Groupon deals in New York, for example, the query, which is quite often used in OpenAI or find me the deals for, I don't know, for the bowling during the weekend. And we want to make sure that our website is providing the feeds for AI agents so that it's very easy to incorporate our results in that natural language flow there. But obviously, we are and will be ready also for the upward when we will see some better numbers coming. We have projects which are covering it so that we are ready. But from like impact perspective, I believe that the bigger value right now is about the compatibility of the website to talk with AI engines so that it's easy for them to show our results. Operator: We have one final written question. Can you give an update on the Italian tax settlement? Rana Kashyap: Yes, I can take that one. And there are more details on this in our queue. But the headline is we continue to see progress there. Our Italian entity received an update that the proposed settlement we had -- has received several approvals. So that's good progress. And now it's waiting to get a revised assessment that reflects the terms of the agreement. We also have an upcoming court date in December, and we are expecting to jointly seek judicial approval. So this is progress. We're hoping to resolve this ongoing matter and put it behind us. At the same time, it's been a fluid situation. And so we will continue to update you as we get more information. And maybe as a reminder, the remaining amount that would be owed under the terms of this agreement is approximately $15 million. So that's the latest update we have in Italy. Thank you. Operator: Thank you, Rana. Thank you, Dusan. There are no further live or written questions. So this concludes our call for today. Thank you, everyone, for joining. For additional information, please go to investor.groupon.com.
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