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Operator: Thank you for standing by. At this time, we welcome everyone to the Amcor First Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Tracey Whitehead, Head of Investor Relations. You may begin. Tracey Whitehead: Thank you, operator, and thank you, everyone, for joining Amcor's Fiscal 2026 First Quarter Earnings Call. Joining today is Peter Konieczny, Chief Executive Officer; and Michael Casamento, Chief Financial Officer. Before I hand over, a few items to note. On our website, amcor.com, under the Investors section, you'll find today's press release and presentation, which we will discuss. Please be aware that we will also discuss non-GAAP financial measures and related reconciliations can be found in that press release and presentation. Remarks will also include forward-looking statements that are based on management's current views and assumptions. The second slide in today's presentation lists several factors that could cause future earnings to be different than current estimates. And reference can be made to Amcor's SEC filings, including our statements on Form 10-K and 10-Q for further details. [Operator Instructions] With that, over to you, PK. Peter Konieczny: Thank you, Tracey, and thank you to everyone joining us. I'm excited to welcome you today to discuss our first full quarter operating as a combined company. We're 180 days in, and I'm pleased with how well our teams have come together to integrate and execute against our priorities. We are also seeing strong and consistent validation by our customers, who are very receptive to our expanded offerings and innovation capabilities. We're now experiencing the quality of the combined business. As the global leader in consumer packaging and dispensing solutions for Nutrition, Health Care and Beauty and Wellness. We're gaining traction with synergy realization, including commercial synergies and have solid pipelines, which continue to grow. Margins increased in both operating segments, and we are addressing identified noncore assets to enhance focus on our core business. Adjusted EPS of $0.193 per share was above the midpoint of our guidance range, increasing 18% compared with last year. This includes the addition of the Berry business and was supported by disciplined cost-out performance, improved productivity and synergy delivery towards the upper end of our expected range. Our synergy run rate continues to build, and we have clear line of sight to opportunities that will drive at least $260 million in synergy benefits in fiscal '26. We're confident in delivering a year of strong earnings and free cash flow growth. This is an exciting time for Amcor, and I look forward to continuing to execute on our commitment to create an even stronger business that delivers significant long-term value for our shareholders and is the global packaging partner of choice for our customers. Now moving to Slide 3 and safety, which has always been a core value for legacy Amcor and Berry. As a combined company, our focus on safety remains absolute, and fiscal '26 has started well with strong performance. For Q1, our industry-leading safety metrics continue with Amcor's total recordable incident rate at 0.55. This is a slight increase compared with last year's performance, which is typically the case when we acquire a business. We have already identified opportunities for improvement across our now much broader footprint and global workforce, and we are proud that 89% of our combined sites remained injury-free in Q1. Slide 4 highlights our key messages for today, which align with our near-term priorities: delivering on the core business; integrating Berry; realizing synergies; and optimizing our portfolio. First, core business execution. As mentioned, we executed well in the first quarter with EPS above midpoint of guidance. This positions us well to achieve our full year financial objectives, including earnings per share growth of 12% to 17%, and doubling free cash flow over fiscal '25. Second, integration momentum remains strong. We delivered $38 million in synergies during the quarter, which was towards the upper end of our guidance range. In addition to strong cost and financial synergies, we have already secured revenue synergies totaling more than $70 million in annualized sales, and our strong pipeline continues to build. This performance, combined with our track record of executing synergy targets from prior large integrations, reinforces our confidence in delivering a total of $650 million in synergies through fiscal '28, including at least $260 million in fiscal '26. Third, we're addressing previously identified noncore assets and have entered into agreements to sell 2 businesses for combined proceeds of approximately $100 million. While these businesses are small, the swift progress underscores our commitment to disciplined portfolio management. We continue to review options to accelerate actions on noncore assets, and we anticipate additional actions this fiscal year. Fourth, we are reaffirming our fiscal '26 guidance. Importantly, Amcor is well positioned with significant earnings and cash flow growth expected through delivery of $260 million in synergies, largely under our control and not impacted by divestments of noncore assets. This means achieving our guidance for 12% to 17% EPS growth this year is not dependent on improvements in the macroeconomic environment or end customer or consumer demand. And fifth, the Board has approved an increase in Amcor's quarterly dividend to $0.13 per share. Turning now to Slide 5 and our first quarter financial results. As Michael will cover in more detail, ahead of our segment commentary, we've moved quickly to operate as a unified organization. As a result, our commentary is focused on the year-over-year performance of the combined business. Fiscal year '26 is off to a good start as our businesses benefited from disciplined cost performance, improved productivity, and delivery of cost and financial synergies, while also building a pipeline of revenue synergies. First quarter EPS of $0.193 per share was above the midpoint of our guidance range, growing 18% on a constant currency basis. Excluding noncore North America Beverage, overall volumes were broadly similar to Q4, down approximately 2% in the quarter and in line with our expectations. Emerging markets performed better than developed markets, led by solid growth in Asia. And EBIT of $687 million was up approximately 4% on a comparable basis as our teams continue to proactively manage and flex costs. These actions, along with the enhanced quality of the combined business, resulted in another quarter of strong margin expansion with reported EBIT margin of 12%, 110 basis points higher than Amcor's reported margin last year and 50 basis points higher than combined companies' comparable margin last year. Moving to Slide 6, which shows we are on track relative to our 1- and 3-year synergy commitments. Our teams delivered $38 million in synergies during the quarter, which was towards the high end of our guidance range. Approximately $33 million of those synergies benefited EBIT and came from G&A and procurement savings, with the remaining $5 million preliminary -- primarily, excuse me, related to interest. Headcount reductions now exceed 450, and discussions with our vendors and suppliers are progressing well. Our procurement savings and opportunity pipeline continue to build. We are also off to a fast start on revenue synergies, which I will return to shortly. Our teams are executing well against our proven integration playbook, positioning the business to deliver strong earnings growth in fiscal '26. We're confident in delivering at least $260 million in synergies this year and $650 million in total through fiscal '28. Today, we have reaffirmed both targets. Before turning the call over to Michael, I want to take a moment to acknowledge that this will be his final earnings call as Amcor's CFO, as he has decided to return to Australia to spend more time with his family. Michael has been an exceptional partner to me and to the business, and we thank him for his many contributions over the past decade. He will continue with Amcor in an advisory capacity through June, working closely with our teams to support smooth transition. We look forward to welcoming Steve Scherger, who will join Amcor as CFO next week. Steve brings deep industry expertise and a strong understanding of both the U.S. and global packaging markets. We're fortunate to have an executive of his caliber and reputation join our leadership team, and we're confident that his insights and experience will further strengthen our ability to deliver value for customers and shareholders. Michael, over to you. Michael Casamento: Hello, everyone, and thank you, PK for those kind words. It's been a privilege to work with our talented teams over the years, and I look forward to continuing to support Amcor's strategic objectives, over the next several months while helping Steve transition into the, role and ensure that he is well equipped to continue delivery of the significant opportunities ahead and value capture from the transformational Berry acquisition. Now, before we get into further detail, I note that comparative data throughout our earnings materials will continue to represent the legacy Amcor business only for most of the fiscal year. However, we also understand that insights on the performance of the business on a like-for-like basis is important to understand. And several of our comments today related to volumes and adjusted EBIT will be focused on first quarter performance compared with estimated prior period results for the combined legacy Amcor and Berry businesses. So starting with the Global Flexible Packaging Solutions segment on Slide 7. Net sales increased 25% on a constant currency basis, primarily driven by the Berry acquisition. On a comparable basis, net sales were down 2%, with favorable price/mix dynamics offset by a 2.8% decline in volumes. By region, demand across the developed markets of North America and Europe was down low single digits, with volumes across emerging markets in line with last year, reflecting growth in Asia offset by lower demand in Latin America. From an end market perspective, volumes in our focus categories reflected relative strength and were broadly in line with the prior year. We saw good growth in pet care and dairy categories and volumes comparable to last year in health care, offsetting softer demand in fresh meat and liquids. Broader Nutrition was weaker, including in categories such as snacks and confectionery coffee and condiments, partly offset by growth in other categories, including fresh produce and prepared meals. Adjusted EBIT rose 28% on a constant currency basis to $426 million, driven primarily by approximately $75 million in acquired earnings net of divestments, and on a comparable basis, EBIT was up approximately 2%, reflecting synergy benefits and improved cost performance and productivity, partly offset by the unfavorable impact of lower volumes. The quality of the business continues to improve, with EBIT margin of 13.1%, up 20 basis points over last year. Turning to Slide 8 and the Global Rigid Packaging Solutions segment. Net sales increased 205% on a constant currency basis, mainly driven by the Berry acquisition. On a comparable basis, net sales were lower than the prior year, reflecting a 1% volume decline excluding noncore North American beverage as well as unfavorable price/mix. By region, demand in North America was in line with the prior year, excluding North America Beverage. And outside of the U.S., volumes in Europe were marginally down, and Latin American volumes were down low single digits. From an end market perspective, our strategic focus categories were broadly in line with last year, with strong performance in pet care and continued growth in Europe in health care, helping offset softer demand in Foodservice and premium Beauty and Wellness. Adjusted EBIT of $295 million increased 365% on a constant currency basis, driven primarily by approximately $240 million in acquired earnings, net of divestments. On a comparable basis, and excluding noncore North America beverage, adjusted EBIT was up approximately 3%, reflecting synergy benefits and disciplined cost performance, partly offset by the unfavorable impact of lower volumes. The strength and value creation from the combination with Berry Global is clear in this segment, with EBIT margin increasing to 11.9%, which is 420 basis points higher than last year. Moving to Slide 9, covering cash flow and the balance sheet. Free cash outflow for the first quarter was $343 million and in line with expectations. It represented a year-over-year improvement of more than $160 million prior to funding acquisition-related costs. CapEx was $238 million, up from last year as anticipated, primarily due to the acquisition of Berry. And we continue to expect capital spending in the range of $850 million to $900 million for fiscal 2026, with depreciation expected to slightly exceed CapEx. Leverage exiting the quarter was 3.6x, in line with our expectations given seasonality of cash flows, and we expect solid cash flows in Q2 and remain on track to reach the 3.1x to 3.2x by fiscal year-end. This outlook includes $100 million of proceeds from the small asset sales announced today, but excludes proceeds from any additional asset sales through the balance of the year, which would support further deleveraging. Our commitment to maintaining investment-grade balance sheet and as a dividend aristocrat to growing our dividend annually, as we did again this quarter is unwavering. We are confident that our strong annual cash flow generation fully supports these priorities. Turning to Slide 10 and our financial outlook. Q1 EPS came in above the midpoint of our August guidance, reinforcing our confidence in delivering a year of strong EPS and cash flow growth. As PK noted, we are reaffirming our guidance for adjusted EPS of $0.80 to $0.83 per share on a reported basis, representing strong year-over-year growth of 12% to 17%. Our confidence in delivering at least 12% earnings growth is fully supported by continued execution against our identified synergy opportunities and does not rely on any improvement in the macro environment or increases in customer consumer demand. In terms of the December quarter, which historically has been a seasonally weaker quarter, particularly for the legacy Berry business. We expect EPS of $0.16 to $0.18 per share including approximately $50 million to $55 million of synergy benefits. At the midpoint, this represents around 12% comparable growth against prior year estimated combined EPS of approximately $0.15 per share. Interest expense and effective tax rate are both expected to be similar to the September quarter. This also means that earnings phasing is expected to be consistent with Amcor's historical performance with approximately 55% of EPS being delivered in H2. Growth is also expected to accelerate in the second half and particularly in the fourth quarter as synergies build throughout the year. We're also reaffirming our free cash flow guidance of $1.8 billion to $1.9 billion in FY '26, which is double fiscal 2025 cash flow and is after funding approximately $220 million of cash integration and transaction costs, of which $115 million was funded in the first quarter. Our full year net interest expense range of $570 million to $600 million remains unchanged, and we are currently tracking towards the lower end of our effective tax guidance range of 19% to 21%. So in summary, we had a solid start to the year, executing well against the outlook we provided in August. And with that, I'll hand back to you, PK. Peter Konieczny: Thank you, Michael. Before we move to Q&A, I'd like to take a few minutes to discuss the mid- to longer-term growth opportunities for Amcor. As we look ahead, we're well positioned with significant synergies from the Berry acquisition, which over the 3-year period ending fiscal '28, is expected to drive more than 30% EPS growth. At the same time, we are taking deliberate steps to position Amcor for sustained volume growth in our base business through 3 strategic initiatives shown on Slide 11. First, we have clearly defined our core portfolio, establishing Amcor as the global leader in consumer packaging and dispensing solutions for Nutrition, health care and Beauty and Wellness. These are large, stable end markets with attractive margin profiles, where we hold leadership positions and see meaningful opportunities to grow. As part of our portfolio optimization efforts, we are exploring strategic alternatives for several businesses that are less aligned with the core portfolio. As mentioned earlier, we've already entered into agreements to sell 2 smaller businesses. We continue to review strategic options to accelerate actions on noncore assets, and we anticipate additional actions this fiscal year. Second, we have meaningful opportunities to supply customers with solutions that neither legacy company would have provided -- could have provided on its own. Our now combined teams are largely -- are already actioning more than 10 growth synergy initiatives, which includes straightforward geographic expansion or cross-selling opportunities, such as taking Berry solutions into Amcor's Latin America or Asia Pacific footprint. They also include more complex combined solution offerings that meet customers' complete packaging needs, including combining legacy Berry containers plus Amcor Lids or seals or legacy Amcor bottles and containers with Berry closures. In just a few months, we have already been awarded new business wins, totaling more than $70 million in annualized sales revenue, and our pipeline is building rapidly. As an example, we expanded our business with a large food service customer. Amcor had a strong relationship with the customer and technical know-how and legacy Berry brought core manufacturing capabilities that were not then available to Amcor. Bringing our business together allows us to accelerate execution for the customer and deliver a disruptive and sustainable solution faster to the market. We also recently won business in Latin America with a large Beauty and Wellness customer across product categories. This is a great example of Amcor's ability to mitigate supply chain risk with production flexibility across a stronger multisite footprint within a single country. This also included the complete solution win combining Amcor's rigid container with a legacy Berry closure system. And finally, about 50% of our core portfolio, or $10 billion in annual sales comes from 6 key focus categories where volumes have historically grown at mid- to high single-digit rates with above-average margins, supported by demand for Complex Packaging Solutions. We're already winning in these attractive categories, and with enhanced scale and capabilities post Berry acquisition, we are even better positioned for continued success. We're making tangible progress across all 3 strategic initiatives, and we are confident our focus will result in more consistent volume growth in the low single-digit range, translating to meaningful long-term earnings growth and shareholder value creation. In closing, this is our first full quarter combined with Berry. The quality of our combined business is showing as we executed well against our financial commitments. Integration is progressing well, and we're building significant synergy momentum, including for revenue synergies. We moved swiftly on portfolio actions, reaching agreements to sell 2 smaller noncore businesses, and we increased our quarterly dividend, which now stands at $0.13 per share. We have also reaffirmed our fiscal '26 EPS and free cash flow guidance, which is not contingent on any improvement in the macroeconomic environment or increase in current customer or consumer demand. As we look ahead, we're uniquely positioned with $650 million in identified synergies. And over the 3-year period ending fiscal '28, synergies alone are expected to drive more than 30% EPS growth. At the same time, we're taking deliberate steps with strategic growth initiatives to create an even stronger business that delivers consistent organic growth and value for our shareholders and is the global packaging partner of choice for our customers. Operator, we're ready for questions. Tracey Whitehead: [Operator Instructions] And your first question comes from the line of Ghansham Panjabi with Baird. Ghansham Panjabi: Michael, first off, congratulations on the announcement and wish you the very best for the future. So PK, just going back to the Flexibles business, it looks like after an increase in the first 3 quarters of fiscal year '25, the volume cadence is basically reversing the growth from the year ago period, and I think you saw that last quarter as well. What do you think is driving this most recent decline? Is it the same issue with consumer affordability challenges? You called out confectionery and obviously, cocoa prices have gone up significantly. So are you seeing some sort of order pattern distortions because of that? Or do you see another sort of leg down in terms of volumes for -- at the consumer level? Peter Konieczny: Yes. Thanks, Ghansham. I think it's important for us to take a step back and just remind ourselves again, we expected the volumes to be very similar to Q4, and that's exactly where they were down about 2% if you exclude the noncore North American beverage. And now you're asking specifically about Flexibles, which was a little weaker, and particularly was weaker in Europe. So the Flexibles weakness really that we've seen is in Europe. And if you double-click on that one, you get to a subcategory that we call unconverted film. And the unconverted film category was weak essentially following really general market softness. This is a film that we make, we don't further process it. We don't print it, we don't cut it, we don't split it, we don't make any pouches. We just sell that film into different end markets and that's particular -- those particular segments that have been particularly weak, but that is really what's driven the Flexibles demand in the last quarter. Tracey Whitehead: Your next question comes from the line of Ramoun Lazar with Jefferies. Ramoun Lazar: And Michael, congratulations on your announcement from us as well. Just a quick one on just the North American beverage business, if you can give us any kind of update there? It looks like volumes for the quarter fell high single digits there. Just any progress you're making on turning that business around, given the issues that you identified last quarter? And any update on divestments of that business potentially? Peter Konieczny: I'll be happy to just take that, Raymond. Look, first off, I'll say we made really good progress on the operational side with that business. We were reporting a couple of challenges in the last quarter. I was not proud of those, but I have to say kudos to the team that sort of jumps on it. And as I was expecting, that was very quickly turned around, and we've exited the first quarter with those issues completely under control again. So that is important. You're right that volumes softened sequentially from the fourth quarter last year to the first quarter this year, but on the back of the operational activities and the strengthening of the business, we actually increased the profitability of the business sequentially, which puts us so much better spot. And finally, as this is a noncore business, you're absolutely right. We are pushing ahead ambitiously to find strategic alternatives for that business. We're exploring a broad range of options. We said about 90 days ago, and I'll just repeat that today, that we're very open to all kinds of solutions here, including joint ventures or also partnerships. That is progressing, and we'll see how that plays out, but it's really hard to be more definitive on timing. Tracey Whitehead: Your next question comes from the line of Anthony Pettinari with Citi. Anthony Pettinari: With the high-growth category, as you called out in Slide 11, I'm just -- if company volumes were down 2% for the quarter, is it possible to generalize kind of the volume performance of these focus categories? I know there are 6 of them. So -- but I'm just -- are these categories posting positive growth, and maybe the sort of more base business is seeing much sharper declines? Or are you seeing the same kind of challenges currently in health care, Beauty and Wellness that you're seeing maybe the more conventional CPG kind of Foodservice categories? Peter Konieczny: Yes, Anthony, I think it's a great question. Look, I think generally, what I would say is that the focus categories, and that's what we were referring to on that slide, they performed better -- they generally performed better than the overall business. They also did collectively in the first quarter of '26. If I give you a bit of a detail around that, and I'll start with Health, Beauty and Wellness. In that area, health care would have been in line with the prior year, Beauty and Wellness was down sort of low single digits, that was certainly reflecting the consumer being more value-oriented. And then moving to the nutrition space, the one that I would call out, pet care, really a strong category continues to grow strongly, very resilient, very happy with the performance there. Dairy as being a subcategory to protein. We've seen some low single-digit growth with really good performance in Europe on yogurt, in North America with cheese. And in Lat Am, we saw some good performance in margarine. So happy with Dairy overall. Meat, the other subcategory and protein on the other side was a little weaker. I think it's fair to say that we're having a bit of a tough time of the protein cycle in the meat cycle right now, and that also reflects the value-conscious behavior of the consumers. And then Foodservice and liquids, they were also down low single to mid-single digits. So it's a bit of a mixed bag. But when you pull it all together, the focus categories, overall, they did perform better than the rest of the business. Tracey Whitehead: Your next question comes from the line of John Purtell with Macquarie. John Purtell: Peter and Michael, thanks for all your help over the years, and all the best going forward. Just in terms of the comparable EBIT up 4% on a 2.8% volume decline. Obviously, there's some synergies in there, but can you just talk to the sort of, I suppose, the underlying sort of cost and productivity piece because it does imply that there's been some pretty good costs and productivity management there. Michael Casamento: John. I can take that one. Yes, you're right. We're really pleased where the quarter ended up. The team is really focused on the cost side of things, knowing that we were anticipating volumes to be similar to what we saw in Q4. So we knew there was going to be some softer demand. And we worked really hard to flex the cost base accordingly. So manage the shift patterns, manage the line performance, drive cost out, where we can and particularly on the discretionary spend as well. So we're really pleased with the performance on that front. And then, of course, you had the synergy delivery as well, which is really unique to us, and I think that's something we were really pleased with where the synergies ended up toward the upper end of the range that we guided to with $38 million in the quarter. A good mix of G&A and some procurement coming in there as well, some financial synergies, we feel really confident in the ability to deliver the full year of that $260 million. So we're really pleased with the way that came out and the pipelines that are coming through, which also include as PK touched in his remarks, revenue synergies as well in that pipeline. So we feel pretty good about the synergy delivery overall and where the business is performing from a cost standpoint because we are able to flex when we can see that the volume is a little softer than we would typically like. Tracey Whitehead: Your next question comes from the line of George Staphos with Bank of America. George Staphos: Michael, thanks for everything, and best of luck in the next chapter. I really appreciate your support of our research. My question is on synergy broadly. PK and Michael, can you talk a little bit more about how the sort of marriage, if you will, of Lat Am and specialty containers is going with legacy Berry? I think you touched on a couple of synergy benefits. Can you talk a bit more -- provide a bit more color, maybe what kind of growth you're getting there? And then somewhat relatedly, can you give us a bit more color on this Foodservice award you got, putting the 2 businesses together and getting a revenue synergy out of that? Peter Konieczny: Yes. Thanks, George. I'll start out here and try to take the 3 tiers of your question. Let me start off with the synergies. And before I get specifically into the benefits that we would be expecting from the combination of Rigid and Flexibles on Lat Am, let me just make some high-level comments here. Let's, first of all, calibrate ourselves against the fact that, we're really just 180 days into the combination of the 2 companies. It's really important to calibrate that because it feels like we've been together forever. The teams are really executing well. I'm very pleased with all of that. And in the first quarter, we've seen synergies coming through and really falling to the bottom line, which we are at the upper end of our guidance range, but what you're not seeing here because of how to translate it yet is really the momentum that we're building with the pipelines. Some of that you can take from the guidance in Q2, obviously, the synergies are stepping up. And that gets us -- when we think about the exit rates of Q2, gets us through a really clear line of sight of at least $260 million, and you will notice that we positioned that a little different to what we said beforehand, we said, now we're saying it's at least $260 million. So we've really strong confidence in the synergy delivery for this year. Now, you've been asking about Lat Am. Now Lat Am, and I think you're connecting that to the decision to combine the 2 businesses. We are doing this because we believe that we have an opportunity to more efficiently and effectively address the region of Lat Am by representing a larger product suite, which we know is very complementary between the 2 businesses, that's why we're doing it. And when I talk about the synergies that result from that, you referenced the -- I think the Beauty and Wellness customer that actually was in Latin America, was not the Foodservice customer. That one is North America, but in Latin America, it was a Beauty and Wellness customer. And we achieved an agreement for two products, across two products. And two things helped us actually land that win, one is we have a combined footprint between Berry and Amcor that actually provided a contingency solution in-house for the customer, which was really high in the customer's list, but more importantly, we're combining an Amcor Rigid container with a Berry closure. So it falls into the bucket of the systems solution sell. That's the Latin American piece. I hope I captured, sort of, your question. Operator: Your next question comes from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: In your raw material cost savings, were they largely in the United States or in Europe? And in your description of Global Rigid Packaging, you said your volumes were down 1% against combined prior year ex noncore North American beverage, were they down inclusive of the noncore North American beverage? Michael Casamento: So I can take you on the synergy side. Look, if I break down the synergies for the quarter, that's probably a better way to think about it. On the synergies in the quarter, we delivered $38 million, which was at the upper end of our guidance range. Of that, $33 million was in the EBIT space, and then we had $5 million financial synergies, which related to some interest benefits as we've got more flexibility now with fixed and floating and commercial paper, et cetera. On the EBIT side of things, of the $33 million, about 2/3 of that was G&A. And that comes from the fact we've already taken out 450 roles across the business. So we are starting to see the benefits there. And look, on the procurement side, again, it was 1/3. So it wasn't a significant amount, and it was pretty general across the board. So that's where we ended up for the quarter. And as we said, that will build through the second and third quarter into the full year, we feel really confident around that number. Peter Konieczny: And then, Jeff, I think you asked the question in terms of volume performance. We said Rigid overall, excluding North American Beverage, was a point down. If you rolled North American beverage in there, it's 2.5% that. Operator: Your next question comes from the line of Brook Campbell-Crawford with Barrenjoey. Brook Campbell-Crawford: I know you're talking about not expecting markets to improve in FY '26. And -- but does EPS range you've given for FY '26 cover a scenario where volumes continue to decline at that sort of 2.5% year-over-year trend that you saw in the first quarter? Peter Konieczny: Let me start this, and maybe Michael wants to build on that. So I think we've discussed the volume expectations for the first half, right? The first quarter is done, the second quarter we've discussed, and you're specifically asking about the back half of fiscal '26. And I'd say, if I take a step back, I believe that there is actually even an opportunity for the volumes to be positive in the back half of the fiscal year. And the reason for that is, one is technically, we're cycling softer comps in the back half, but we're also seeing wins coming through now that will translate. I told you that we are very much driving very discrete and select growth initiatives in the second half. We will have a little more time for them to actually gain traction. So you could even expect the volumes to be positive. Now what adds to that though, is the underlying market environment, and I don't know how that's going to look like. I think nobody really knows what the underlying consumer and demand environment is going to look like. And that creates a bit of the challenge here. So what we're going to do in the back half is we're going to do exactly the same thing that we did in the first quarter, which we did well and what we're set sales to do in the second quarter, we will manage our costs, and we will adjust our capacities to the actual volume situation, and we'll focus on the delivery of synergies. And that's what we've done very well. It was a good recipe in the first quarter, we want to do the same thing in the back half, and while our guidance range obviously includes a number of ranges on volumes outcomes and volume is not the only driver for our guidance range, as you know, but even if the overall macro environment, we're not -- would not improve, that would be covered within our guidance range. That's the way how we think about it. Operator: Your next question comes from the line of Matt Roberts with Raymond James. Matthew Roberts: Michael, I'll echo others, all the best for you Australia, and you should all be so lucky. Quickly on the divestitures you mentioned, could you give us sales and EBITDA contribution? Or I apologize if I missed that, there's still about $900 million to go there in the noncore, non-beverage assets. So based on those initial, albeit small -- smaller contribution of sales there, where the public markets are trading, how did multiples compare to your prior expectations on that? And how is line of sight to the remaining $900 million that you have remaining? Anything you could -- I don't know if you will frame it, but anything you've given potential impact to leverage or timing that would be appreciated. Michael Casamento: Yes, sure. Look, I think in terms of the 2 divestments that we announced today, one of those is just a small plant in Europe, sales less than $20 million, so not a significant impact on earnings or sales. The other one is actually a joint venture. So we were not consolidating that one. We were equity accounting that. And so that also contributes to the $100 million in earnings. So we were pretty pleased with the outcome of that. We'll use that cash to pay down debt, when it comes in, and we continue to focus on the other items, I think, PK already touched on the Rigid -- the North American beverage business, and we're working hard on the other businesses as well. So we'll keep you updated as that progresses. Operator: Your next question comes from the line of Cameron McDonald with E&P. Cameron McDonald: Just in terms of the volume performance. Do you -- and I appreciate that you've said that it's hard to see what underlying environment is going to be going forward. But do you -- when you think about either the core business or the North American business in beverages. Are you thinking that, that is all organic volume reductions? Or have you experienced some market share loss to other substrates, particularly in that North American beverage sector? Peter Konieczny: Cameron. Look, generally, I'd say, in the way that we look at our whole portfolio and there is always puts and takes, as you will appreciate. But this is not a story of share loss. So generally, I would say that. When you dive deeper into the beverage business per se, and you talk about shifts between substrates, we have referenced in the past, and I think that is still something, and that's the only trend that I would be able to point to that you have in multipack sales that go through big box stores. You have a more attractive price point for consumers when you choose an aluminum bottle versus other substrates. And that is the space where because of the -- where the consumer goes, as the consumer is seeking value. And that's where you can see -- in that specific case, you could see that there is some shift, but other than that, we don't see anything significant. Operator: Your next question comes from the line of Keith Chau with Macquarie. Keith Chau: Well, I think in me [indiscernible] and then ask this question is that if the [indiscernible]. Peter Konieczny: Keith, it's PK. You really broke up a lot here, and I had a really hard time to follow the question. It's not getting any better. It's not getting any better. I'm sorry. But I think, we probably need to move on, and maybe you can just dial in back in again, and we'll try to take your question when you come back in with a better line. Operator: Your next question comes from the line of Nathan Reilly with UBS. Nathan Reilly: Just a question on private label. Can you give us an update on your exposure to private-label products? And maybe just talk to some volume trends that you're seeing in that category at the moment? Peter Konieczny: Yes, Nathan. I think it's also a great question. I mean, in private label, you would assume that, generally, the consumer seeking value would turn to private label more, and that's something that we would expect that in certain cases, we do see and that we want to participate in. Obviously, we have some pretty good exposure to private label across the regions, both in North America and Europe, if I just focus on those 2 big markets where private label really plays a role. But I would also say that we are probably somewhat underrepresented in the market when you look at the share of private label and our share -- our sort of share of business with private label, you will see that we have an opportunity there. So that will be a focus area for us to drive additional growth going forward, and that will make us participate in the trend. Operator: Your next question comes from the line of Gabe Hajde with Wells Fargo. Gabe Hajde: I just had a question about health care. I think the expectation was that it was going to return to growth kind of in the back half of 2025. And I think you made some general comments around the business, but just if anything has changed with that trajectory. And then maybe I don't know if you want to talk about it in calendar year terms, but just prospects for that business in 2026. Peter Konieczny: Yes, Gabe, I'd say, first off, I'd say we believe that health care is a gem in our portfolio. I've said this many times and I continue to say that. The performance of health care has some differences between the regions, what we're seeing right now that we're having a really strong performance in North America. So very happy there in North America. We tend to be more focused on the medical side of the business. And our performance is improving, but on a comparable basis, a little weaker on the European side, where we have more of a pharma exposure. And that has averaged out to overall a flat health care business, which I would still say, if I compare it to the prior quarters, is a solid outcome given the fact that medical had improved faster than pharma and over time. So my expectations for health care is that we will see continued improvement in that business into calendar '26 and also into the back half of our fiscal year '26. Operator: Ladies and gentlemen, this concludes our question-and-answer session. I will now turn the call back to management for closing remarks. Peter Konieczny: Well, thank you, operator. This -- I'll keep this very short here. But we feel like we've executed a pretty solid quarter in line with our expectations, maybe even a little better than what we expected. We're very confident in the synergies with a delivery of at least $260 million and the revenue synergies, they're also coming through. We talked about those, and the pipeline is really building strongly. We talked about reaffirming our guidance where the low end of our guidance, the 12% EPS growth is really just driven by the synergies that we have good line of sight of. And then in the long term, and this is important for me also to make that point, we continue to really drive the growth strategy on the back of 3 pillars. One is the portfolio optimization, the other one is, again, capturing the revenue synergies, and the third one would be the focus categories and our drive towards those. So thank you again for joining us, and we look forward to the opportunity to sitting down with many of you over the course of the quarter. Thank you. Operator: That concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Consensus Q3 2025 Earnings Call. My name is Paul, and I will be the operator assisting you today. [Operator Instructions] On this call from Consensus will be Scott Turicchi, CEO; Jim Malone, CFO; Johnny Hecker, CRO and Executive Vice President of Operations; and Adam Varon, Senior Vice President of Finance. I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus. Thank you. You may begin. Adam Varon: Good afternoon, and welcome to the Consensus investor call to discuss our Q3 2025 financial results, other key information and our Q4 2025 quarterly guidance. Joining me today are Scott Turicchi, CEO; Johnny Hecker, CRO and EVP of Operations; and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an update on operational progress since our Q2 2025 investor call, then Jim will provide Q3 2025 financial results and our Q4 2025 guidance range. After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you on the procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to our forward-looking statements and risk factors on Slide 2 of our investor presentation. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would cause actual results to materially differ from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our regulatory filings, including our annual 10-K and quarterly 10-Q SEC filings. Now let me turn the call over to Scott for his opening remarks. R. Turicchi: Thank you, Adam. We had another solid quarter in Q3 with a slight increase in revenue over Q3 2024. Our corporate channel continued to lead the way with another 6% plus growth quarter despite there being a difficult comparable presented by Q3 2024. This was led once again by record usage from our customers and a record quarterly amount of net adds from our eFax Protect service. In addition, the VA also hit record revenue for the quarter. SoHo revenue was in line with our expectations and showed an improvement in its rate of decline from Q2 2025. Adjusted EBITDA was slightly ahead of our expectations and generated a 52.8% adjusted EBITDA margin. In the quarter, we added key personnel that we outlined in our original guidance in February, and we expect to continue to hire in Q4. As a result, due to these hires and seasonal cash costs associated with the year-end audit, we would expect a lower adjusted EBITDA margin in Q4 than we experienced in Q3. Free cash flow in the quarter was an exceptional amount of $44.4 million, up 32% from $33.6 million in Q3 of 2024. This was due in large part to the adjusted EBITDA conversion to free cash flow, coupled with an outstanding rate of collections, especially in our corporate channel, which has driven our total DSOs down to 25 days for the company as a whole. As a reminder, we pay our interest on the bond semiannually in Q4. And as a result, we do not expect the quarter to generate much, if any, free cash flow. However, based on our nine-month free cash flow, we would expect the free cash flow for the year to be in excess of $95 million, which is ahead of our original expectations. On October 15, we drew approximately $200 million of our credit facility and retired a like amount of the 6% notes. We have issued a call notice for the remaining $34 million, which will be funded with a further draw of $20 million from the credit facility and $14 million from our cash balances. This will reduce our total indebtedness from the original $805 million to $569 million and will put us very close to our target of 3x gross debt to adjusted EBITDA. In addition, the interest rate on the new debt will be 5.65% or 35 basis points below the cost of the notes that we are retiring. We will continue to look for opportunistic repurchases of both our debt and equity. I will now turn the call over to Johnny to provide more operational details. Johnny Hecker: Thank you, Scott, and hello, everyone. During my remarks, I will focus on our key performance indicators, such as revenue and customer metrics, and we'll discuss the go-to-market strategies for our corporate and SoHo business channels. I will also provide operational updates and share several key highlights from the quarter. Our corporate channel continues to demonstrate strong execution and sustained positive momentum. In Q3 2025, revenue reached a record $56.3 million, a 6.1% increase over $53.1 million in Q3 of 2024 and a sequential increase from the $55.3 million in revenue we reported in Q2 2025. As we noted last quarter, Q3 2024 was a particularly strong comparable, which makes this continued 6% plus year-over-year growth even more encouraging. This growth is driven by the sustained expansion and increased usage within our upper enterprise accounts and the continued momentum in our public sector business, complemented by stable growth in advanced products and strong performance in our corporate e-commerce channels. This reaffirms our corporate go-to-market strategy and lays the foundation for our future go-to-market, which I will address later in my remarks. I am pleased to announce that our trailing 12-month revenue retention rate stands at 101.9%. This is stable from 102% in the previous quarter, again, confidently meeting our greater than 100% target, up from 99.8% in Q3 2024. Our corporate customer base expanded to a new record of approximately 65,000 at the close of Q3. This represents an increase of over 12% from 58,000 in Q3 of last year and a sequential increase from approximately 63,000 at the close of Q2. The primary driver for this growth remains our eFax Protect offering, which expanded by approximately 6,700 new customers this quarter, contributing to our SMB cohort. Corporate ARPA was $293 for the quarter compared to $301 in the prior quarter and $310 in Q3 of last year. This expected trend is a direct result of two counterbalancing factors: the successful expansion of our smaller SMB cohort, which includes our eFax Protect product at an ARPA of around $50, balanced by strong high-value performance from our large enterprise clients. Importantly, we are proud to report strong sustained growth in our corporate ARPA net of eFax Protect for several quarters now, which demonstrates the underlying strength and growing value of our core enterprise customer base. Our corporate performance this quarter continued to trend from recent quarters, demonstrating sustained success at all levels of the market. We're effectively pairing robust revenue growth at high retention rates from our enterprise clients with steady customer base expansion in the SMB cohort. This balanced approach to growth proves our ability to execute across the entire customer continuum and provide significant stability to our business, which is evident by a continued expansion on two key metrics in our eFax network: the number of participants or endpoints and the volume of data we process across the network. Turning to the public sector, I want to make a clear distinction. Our main revenue driver in this vertical, the VA, saw its rollout and usage remain unphased by the government shutdown. The VA continues to set new all-time high records for usage, a clear proof of deepening adoption that has persisted even during the shutdown. Separately, since achieving our official FedRAMP High impact certification, we have built a solid pipeline among other government agencies and nongovernment organizations. We're successfully winning and onboarding new customers onto the ECFax product. While the temporary government shutdown has led to some delayed decision-making, we see this as a short-term timing impact on the conversion pace, and it does not affect our positive outlook for this new pipeline. Moving on to our SoHo business. We recorded Q3 revenue of $31.5 million, representing a strategic planned year-over-year decrease of 9.2% from $34.7 million in Q3 2024. This is a slight sequential decrease from $32.4 million in Q2 2025, reflecting our continued strategic focus on optimizing profitability and maximizing the efficiency of our advertising investments in this channel. The global SoHo account base declined from approximately 682,000 in the prior quarter to approximately 661,000 during Q3. SoHo ARPA for Q3 2025 was $15.56 compared to $15.62 in Q2 2025 and $15.38 in Q3 of last year. Our SoHo cancellation rate in Q3 2025 was 3.71%, down from 3.84% in the previous quarter. As I explained in our Q2 call, our SoHo customer acquisition strategy led to an unusual spike in ads last quarter, which temporarily influenced the cancel rate in both Q2 and Q3. Since then, our customer acquisition has reverted to a more normal pattern. Yet like all businesses that rely on digital marketing, we are actively navigating the recent changes in the search environment. This has created a near-term headwind contributing to a slight decline in organic sign-ups in Q3, which we believe will continue in Q4. We are already executing a multistep plan to recover from these impacts. While we continue to manage profitability with discipline, we are determined to return our paid ads numbers to the mid-50s, which we expect several months to fully realize. One key factor in this plan is to emphasize one of our greatest assets, our trademarked and redesigned eFax brand. This strategic focus on eFax follows a year-long intensive brand study. From day 1, more than 30 years ago, eFax was a pioneer and leader in digital transformation, and we have invested heavily in this brand over decades. With the brand refresh, we now better leverage that established market trust proven by millions of visitors to our web assets every month to unify our advanced solutions. It allows us to bring our entire go-to-market portfolio from cloud fax to interoperability and AI under one familiar name, clarifying our evolution from a simple fax service to a comprehensive platform for secure data exchange and digital transformation. Consensus Cloud Solutions, which has also received a brand refresh, will remain the company's NASDAQ-listed brand for investor continuity and as a universal home for employees. To summarize, we are very pleased with the quarter's performance and remain highly confident in our outlook. We will continue on our go-to-market path, which has proven to be very effective. Health care remains at the center of our strategy, complemented by strong execution on our automated e-commerce channel for the down market. We are expanding our efforts in the corporate SMB and upper enterprise market, which has extended into the public sector. We expect our SoHo business to continue on its trajectory with a clear focus on profitability. Before handing the call over, I want to express my sincere thanks to our employees for their hard work and dedication this past quarter. My gratitude also extends to our customers and partners for their ongoing trust and collaboration. We have delivered another excellent quarter, and we are focused on building on this momentum. With that, I'm handing over to our CFO, Jim Malone, who will now provide a detailed update on our financial performance and outlook. Jim? James Malone: Thank you, Johnny, and good afternoon, everyone. In our press release and on this call today, we are discussing Q3 2025 results and guidance for Q4 2025. We expect to file our 10-Q by close of business today. Moving to corporate. Beginning with our corporate business results, Q3 2025 was another strong quarter for corporate with record revenue of $56.3 million, an increase of $3.2 million or 6.1% versus the prior year quarter. As Johnny just mentioned, Q3 2024 was a particularly strong comparable quarter, which makes the continued 6% plus corporate growth even more meaningful. Our record of Q3 2025 corporate revenue delivered a trailing 12-month revenue retention rate of approximately 102%, up from 99.8% from the prior comparable period and stable sequentially. Our corporate customer base expanded to approximately 65,000 in Q3 2025 versus 63,000 in Q2 2025 and 58,000 in the prior comparable period. Corporate ARPA was $293 versus $301 in Q2 2025 and $310 in Q3 2024. This trend is in line with our expectations and an expanding customer base in the lower SMB cohort, primarily due to record eFax Protect paid ads, which generated an approximate $50 ARPA. As Johnny stated, corporate ARPA net of eFax Protect has experienced sustained growth for several quarters, demonstrating strong performance from our core enterprise customer base. Moving to SoHo. Q3 2025 revenue of $31.5 million compared to $34.7 million, representing a strategic plan decline of $3.2 million or 9.2% from the prior comparable period and a slowing decline from the Q2 2025 comparable year-over-year period of 9.4% Q3 2025 ARPA of $15.56 had an improvement from the prior year comparable period of $0.18 and was in line sequentially. The total cancel rate improved sequentially to 3.71% from 3.84% in Q2 2025. Moving to consolidated results. $87.8 million. Revenue was consistent with the prior year comparable period. Adjusted EBITDA of $46.4 million is a decrease of $0.6 million or 1.2% versus Q3 2024, primarily driven by planned headcount additions. We delivered a healthy 52.8% adjusted EBITDA margin or approximately 60 basis points favorable to the midpoint of our Q3 2025 guidance range. Q3 2025 adjusted net income of $26.6 million is a decrease of $0.2 million or 0.8% versus Q3 2024, primarily driven by lower interest expense and depreciation and amortization, offset in part by lower adjusted EBITDA and higher income tax. Adjusted EPS of $1.38 was unchanged from the prior year comparable period. Q3 2025 non-GAAP tax rate and share count was 22.3% and 19.3 million shares. Capital allocation, free cash flow. Q3 2025 free cash flow was $44.4 million, an increase of approximately $11 million or 32% versus the prior comparable period, driven primarily by operational performance. Q3 2025 CapEx of $7.2 million, a decrease of $0.8 million or approximately 10% versus the prior year. Cash and cash equivalents. We ended Q3 2025 with cash of approximately $98 million, which is sufficient to fund our operations and repurchases of equity and debt. 6% notes debt retirement. As noted in our 8-K filed on July 14, 2025, we executed a $225 million 3-bank club deal, including standard covenants to retire our 6% notes to October 2026. The loan consists of $150 million delayed draw term loan plus a $75 million revolving credit facility. The interest rate is SOFR plus an applicable margin based on total net leverage ratio. Subsequent to the quarter end, on October 15, 2025, we called $200 million of our 6% notes at par, leaving $34 million outstanding. We utilized our $150 million delayed draw term loan plus $50 million on the revolver. We didn't retire the entire $234 million as our secured lien capacity under our bond indentures was $200 million based upon our June 30, 2025 cash balance. The borrowing cost will be approximately 10 to 35 basis points lower than our current 6% rate. We have notified our trustee, and we will call the remaining balance of the 6% notes, $34 million on or about November 10, with a combination of $14 million balance sheet cash and $20 million of the remaining revolver. Equity repurchases. In February 2025, the Board approved an extension to the previously approved program for another 3 years and up to $67 million. In Q3 2025, we repurchased 121,000 shares for $2.7 million, bringing the total equity purchases to date of approximately 1.8 million shares for approximately $47 million. There were no bond repurchases in Q3 2025. Moving to guidance. We are providing Q4 2025 guidance as follows: revenues between $84.9 million and $88.9 million with $86.9 million at the midpoint. Adjusted EBITDA between $43.1 million and $46 million with $44.5 million at the midpoint. Adjusted EPS of $1.27 to $1.37 with $1.32 at the midpoint. Estimated Q4 2025 share count is approximately 19.4 million shares with a tax rate between 20.5% and 22.5% with 21.5% at the midpoint. Please remember that as previously mentioned, our 2025 guidance and actual results exclude foreign exchange gain or losses on revaluation of intercompany accounts. That concludes my formal remarks. I'd like to turn the call back to the operator for Q&A. Thank you. Operator: [Operator Instructions] And the first question today is coming from David Larsen from BTIG. David Larsen: Congratulations on the good quarter. Can you maybe talk a bit about the VA and corporate sales? And I think I heard you say that the VA had their highest usage rate yet. Just any sort of color there in terms of incremental growth going forward? And just any thoughts there would be helpful. James Malone: Great. Yes, I'll turn it over to Johnny because both the VA... Johnny Hecker: Yes. Thank you, David. Good question. Yes, the VA continues to expand. So, what we're seeing, we're seeing increased usage in the existing base, but we also continue to roll out to new facilities. We still haven't rolled out the solution to the entire base of facilities and sites within the VA. That is an ongoing process. We know it's going to continue throughout 2026 to do that. But we also think there is room for expansion and increased adoption within the existing base. And we see that happening. we see growth within the usage in existing sites, so basically same-store sales, but also with new sites coming on. And as I stated on the call, we do see record highs in usage on weekdays. And overall, the volume is growing as well. So that is very, very encouraging, and we expect that growth to continue into 2026. So, I don't think we've reached the limits with the VA just yet. Go ahead. David Larsen: How many VA sites are you in now? And what is the total potential or on a scale of 1 to 10, 10 being 100% penetrated across all potential VA sites, what number would you put yourself at now? James Malone: Well, I think there's 2 elements to that question. So, one is we're more than 50% in the absolute raw number of sites deployed, but not all sites are equal. So that's one element. But the other element is even in the sites where we are deployed, we do not yet have, in many instances, all of the traffic. And there are some reasons for that, such as incumbent contracts that have to burn off before we'll capture some of that traffic. In some instances, the site didn't fully appreciate all the different ways in which faxes could be either sent or received or outbound is easier to do. So, you've got to port the numbers before you the inbound traffic. So that's why I tag on to what Johnny said, which is we're on the $5 million-plus pace for this year in terms of actual revenue. and we'll meet that goal. We'll go somewhat north of $5 million. And then what we're setting is the exit run rate going into '26. That will give us a book of business based on the number of pages processed on average per business day, peak volumes, et cetera. And then the exercise we're going through now from a budgetary standpoint is what is the timing and what is the pace at which we pick up incremental traffic in the sites where we're already deployed, but don't yet have all of it. So, it's all of those pieces together. But if you don't bind it to a given year, and I understand kind of where you're headed because people are looking at trying to build '26 models. But if you look out over, say, a 2- to 3-year time frame, there leads us to believe there are multiples of revenue available to what we booked in 2025. How many multiples, that's what's still under discussion. David Larsen: So, could the $5 million turn into $10 million or $20 million? James Malone: Yes. But the question is where between $10 million and $20 million. I think $10 million is a highly confident number and it's a number we had talked about when this contract was originally won several years ago. But I think we have good reason to believe it's a higher number than that. The question is how much higher than $10 million. And in order to get confidence in that number, we need to, in conjunction with the VA, do some additional analytical work and then see what is a reasonable time frame over which that traffic can be captured, not all of which is in our control. Some of it has to do with the VA, some has to do with the way they roll things out. And as I said, existing contracts that carried over that need to expire. So, I think it is probably still at least 3 years before realistically we can capture all the traffic, but it could be even more than 3 years. David Larsen: Okay. Great. And then another quick one, if you don't mind. The SoHo year-over-year revenue growth was down 9%. What would you expect that like deceleration rate to be, let's say, in 2027 or 2028, when are we going to see that sort of level off? James Malone: Yes. I think that it's a good question, but it's very difficult to predict. I don't think we can give guidance in that direction 2 years out at this point. We've been talking about it for 1.5 years now and where is that at what point is it going to like reach that steady base and then the decline will go into the low single digits. But it's very difficult to model. There are so many moving parts to this business. I mean we've seen it slow down over time, but I don't think we can give you a clear number on '27 just yet. R. Turicchi: I mean I think look, it's clearly even at the accelerated pace, it's not going to happen in '26, probably depending on where your goal, it's not going to happen in '27. So, it's '28 or later. And the input factors that are relevant to us are as the base ages, how we see that cancel rate come down. You saw it come down sequentially from Q2 to Q3, about 13, 14 basis points. Some of that, as Johnny mentioned in his prepared remarks, is negatively influenced by certain excess customers that were acquired in Q2, which burn off very quickly, but they're very cheap acquisition costs. So, we're actually looking and studying the various cohorts to see where is that stabilized base of cancel as that base ages. So that's one element of the equation. And then the other element is not only how many gross adds you bring in, many new net customers in a given period, but what kind of customers do you bring in. Are they short-lived customers that you can get at a very attractive LTV to CAC, but they may only be around 2, 3, 4 months? Or are they longer customers because there's a whole range of use cases that will dictate the life of the customer. For us, it's really a matter of matching the right expense against their life, not so much whether the life is 4 months or 12 months or 18 months, but what are you paying to get that stream of revenue. So all those things are going in. We will keep crunching those models as we go through our budgeting process, which has commenced, but it's still early stage. David Larsen: Okay. And then just one more quick one. Can you talk a little bit about the advanced products upsells into corporate? Just any color there on the use of AI, RCM acceleration? Johnny Hecker: Yes. I can comment on that, David. It's a couple of things that we saw accelerate in Q3. One of them Clarity adoption and Clarity revenue, which is that AI product that abstracts data turns that unstructured data into structured data. So I've commented on it, I think, on the last call a little bit, but that is one of the key -- was one of the key drivers. And the other one was in combination with that, really our integration engine business, right, where we help customers connect their EHR systems to provide that interoperability. That has also been performing quite well. And the combination of those 2 with the connectivity to our eFax network is what's driving revenue there and what's helping us succeed. Operator: [Operator Instructions] The next question is coming from Gene Mannheimer from Freedom Capital. Gene Mannheimer: Congrats on the good numbers. Question on that SoHo paid adds. I know, Johnny, you talked about that at 50 was the lowest in a while. And just so for my edification, that was due to a spike last quarter around promotional pricing? Or is there also some level of conversion of the SoHo customers to enterprise that was a factor? Johnny Hecker: No, I think what we mentioned, Gene, thanks for the question. Yes, what we mentioned was last quarter, we had a little bit of a spike because of an acquisition channel for new customers that was commercially very interesting for us. But as Scott mentioned earlier, those customers come on at a low price, but they also fall off fairly quickly. So they burn off -- they have a shorter lifetime than regular customers. We did see a little bit of a decline in our paid adds this quarter. There was multiple factors to it. And the one that I mentioned was the change in search that we're seeing a little bit of headwind in the organic traffic, but we have put some measures in place, and we're already seeing some recovery of that. That we're getting additional sign-ups and reverting back to that mid-50 number. I don't think it's going to happen overnight. I don't think we will see -- we will probably not reach that by the end of this quarter. Q4 is usually a slow quarter for SoHo anyways. But we're expecting it in the course of the first few months of the next year to get back to that number. Gene Mannheimer: Okay. Yes, that helps out. And then just my follow-up is on the VA discussion, getting from, say, $10 million in revenue to $20 million or whatever the number happens to be, is that -- can that be accomplished based on the scope of the agreement you have in place today? Or would it involve selling additional products into the VA? Johnny Hecker: That's a good question. I think we are -- right now, we're just talking about the fax platform, right, about the ECFax platform that is FedRAMP High certified. There's obviously potential to upsell other solutions into the VA. They would have to go through a similar process as the Fax platform to be certified on that FedRAMP High platform or environment. I think we've learned a lot, so it wouldn't take us as long as it did for eFax, but what we're talking about right now is really only the Fax platform. We're not adding in any additional products into that growth. So there's additional potential... Within the... That would be under different contract. We have – R. Turicchi: Before we go to more live questions, we've got a question by e-mail. So one has to do with capital allocation and our thoughts really as we look forward to 2026 between retirement of debt and share repurchases. As I noted in my opening remarks, I think both are going to be opportunistic in nature. Right now, there's no mix that we've set between the two as it relates to either cash balances or free cash flow generated in 2026. One of the things that we're going to be looking at is as we get into '27 and we look at the 6.5s and their maturity in October of '28, what is sort of the right level of debt as we think about that refinancing. So that may influence some retirement of debt, which could be a combination of either the continuation of buying the 6.5% in the open market. But as I've noted before, the volume there has been limited because we've taken about $150 million out over the last couple of years. But we do have the ability as we generate cash to take our revolver down. And I think if we're going to prepay or repay any bank debt or credit facility, it would be in the revolver because that we can reborrow. The delayed draw term loan by its terms does have some mandatory prepayments per quarter of slightly under $2 million per quarter. So you will see about a little under $8 million come out next year just for the terms of the delayed draw term loan. But if we do have excess cash and we can't buy bonds and we don't like the stock price, we can't get enough stock, we could pay down the revolver. And then if we have needs in the future, we could reborrow the revolver. So that's kind of how we're thinking about it now. As I mentioned, we're still in the relatively early stage of the budgeting. So things like how much free cash flow and based on our current balances, what kind of capital is available is also going to be a question of the jurisdictional issue of where that cash sits, not only at 12/31/25, but as it's earned over '26. Clearly, there'll be an amount in the U.S., but there are also an amount in foreign jurisdictions. And so we'll have to look about how much of that cash we can bring back home to the U.S. because both stock repurchases and debt retirement, whether it is in the form of the bank debt or the 6.5 require U.S. cash as opposed to foreign cash. Paul, is there no live questions? -- if not, I've got another e-mail question. Operator: There were no other questions from the lines at this time. R. Turicchi: Okay. So the second e-mail question that came in had to do, I think I can interpret this in terms of -- it's stated the marketing-related disruption we mentioned in SoHo, which I think is really what Johnny commented both in his prepared remarks, but also in response to Gene's question, is that this likely disrupt the improvement year-over-year going into Q4 and '26. If you mean the rate of decline, which has been declining, it may very well impact Q4 somewhat. In other words, we've been seeing on a pretty much sequential basis, the rate of decline coming down. So it went from 9.4% to 9.2% from Q2 to Q3. That could trend modestly in Q4. We'll have to see because I think as Johnny mentioned, it's probably going to take up to a few months, which will take us into early '26, possibly through Q1 to get that normalized base back to around 55,000 net adds per quarter. So you could see a little bit of friction in Q4, might carry through to Q1. I haven't done, I say, enough budgeting and enough quarterization of that to know what kind of impact there might be. But I think, yes, you should expect there could be some noise in Q4, possibly in Q1 as well. Paul, we'll open up if there's any further live questions. Operator: There were no further questions from the line. Scott, I will hand it back to you for closing remarks. R. Turicchi: Great. Thank you. Appreciate everybody for joining us today for our Q3 call. We will be at a couple of conferences, I think more catering to the high-yield market than the equity market between now and our next earnings call. So stay tuned for those activities. We will also be putting out a release probably in late January, early February in terms of giving the timing for the Q4 release, at which time we will give full year 2026 guidance. At this point, we would intend, as we've done in the past, to give a range of revenues, adjusted EBITDA and adjusted net earnings per share. So obviously, it will be a call that will look back to '25, report the quarter, the full fiscal year and then what we're seeing as we look forward to 2026. And obviously, if there's any questions that you have between now and then, feel free to reach out and contact Laura or any one of us, and we can either arrange a call or if it's a fairly straightforward question answered by e-mail. Operator: Thank you. And this does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Hello, and welcome to the SES AI Third Quarter 2025 Earnings Release and Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to the Chief Legal Officer, Kyle Pilkington, to begin. Please go ahead when you're ready. Kyle Pilkington: Hello, everyone, and welcome to our conference call covering our third quarter 2025 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer; and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4:00 p.m. today, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter and today's conference call webcast in the Investor Relations section of our website at ses.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. The risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. This afternoon, we will review our business as well as results for the quarter. With that, I'll pass it over to Qichao. Qichao Hu: Thanks, Kyle. Thanks, everyone, for joining today. We had a record third quarter with more than $7 million in revenue. That's more than 100% growth over the second quarter. Our all-in on AI strategy is working remarkably. Today, I want to highlight some of the successes we've seen with this strategy and what it means for the future. We reached a major milestone this quarter that we expect to have far-reaching consequences across the revenue machine we described in detail during our last call. That milestone was the release of our latest version of Molecular Universe, MU-1.0. MU-1.0 is a powerful and complete end-to-end AI for science workflow that includes 5 features, ask an Agentic LLM with access to what we believe is the world's largest database of battery relevant literature, search and formulate what we believe are the world's largest databases of battery relevant molecule and formulation level properties enabled by GPU-accelerated quantum mechanics computation and machine learning accelerated property prediction, end design and predict chemistry-specific and chemistry-agnostic machine learning models, respectively, that can accurately predict battery state of health and end of life. Due to the popularity of the enterprise tier, we also launched 3 sub-tiers within enterprise to provide greater value to more enterprise users. In addition to cloud-based molecular universe, we expect to launch on-premise molecular universe, providing greater data security to more enterprise users. This new on-premise capability, which we will be describing in more detail in the coming months, addresses specific security and privacy needs of the world's largest battery makers that should unlock a greater share of our addressable market. We are incorporating MU1.0's Ask design and predict into our ESS products deployed by UZ around the world to collect data for on-site model training. This unprecedented ability for safety and health prediction, combined with reduced maintenance costs, truly helps differentiate our products and attract new customers. Since we completed the acquisition of UZ Energy in mid-September, our ESS revenue has been growing and is already responsible for approximately 45% of our third quarter revenue. We're very excited about the revenue potential of deploying Molecular Universe to enhance our ESS products. MU1.0' Ask, Search and Formulate are also helping our users identify several new electrolyte materials that we are commercializing. These include: one, improved low-temperature rate performance of lithium ion phosphate lithium-ion cells for ESS applications; two, improved cycle life for 12% silicon lithium-ion cells for EV application; and three, improved cycle life for lithium metal and 100% silicon lithium-ion for drones and UAM applications and many more. To supply these materials discovered by Molecular Universe to our customers, we entered into a joint venture agreement with Hisun New Energy Materials, a leading electrolyte manufacturer with 150,000 tons of annual capacity to contract manufacture these materials, so we stay CapEx-light, laying the groundwork for exciting revenue growth in the coming quarters. Another revenue opportunity we expect to grow in 2026 and beyond is in drones. A dependable supply chain of high energy density pouch cells is extremely rare and critical to the development of the American drones industry. To better address this burgeoning market, we are leveraging our Chungju, South Korea cell factory, incorporating the latest materials discovered from Molecular Universe to meet customer demands. In terms of potential revenues from EV, we completed B-sample line site acceptance test this summer with one auto OEM. As a result, in 2026, we expect to start commercial supply of electrolyte materials and partner with them for cell production. Overall, it's hard for us to comprehend a more consequential period than what we have experienced over the past 2 quarters, particularly as it relates to delivering on the goals we outlined coming into this year. For instance, we noted we wanted to break into the ESS market in a big way. Now we've done so with the acquisition of UZ Energy, and the acquisition has already delivered significant revenue in 2025. We launched 3 versions of Molecular Universe this year. The discoveries made by us and our customers so far have accelerated our push into materials to supply them through the Hisun JV. We'll have more to share on our fourth quarter call about how we expect 2026 to shape up for us, but we expect success for us will look like a hardware, software integrated platform with multipronged and multi-revenue streams. As Molecular Universe, a complete AI for science workflow SaaS platform accelerates innovation across all battery chemistries, we are working with our JV partners to provide a dependable hardware supply chain for the cells developed from Molecular Universe. Just as AI for science is completely changing other industries, Molecular Universe is now transforming all battery chemistries across all applications. We are excited about the revenue growth potential brought by Molecular Universe and we'll continue to assemble the best talent, data and compute resource needed to build AI for science for energy transition. Lastly, I want to express my gratitude for our teams who are working super hard to make all of this happen. And thanks to all of you for being on this journey with us. And now here's Jing for financial updates. Jing Nealis: Thank you. I will discuss our financial performance for the third quarter of 2025 and provide some context on how we are deploying our capital to support SES AI's long-term growth and then the all-in on AI strategy Qichao mentioned earlier. Revenue for the third quarter was $7.1 million, representing a $3.6 million or 102% increase from the previous quarter. Our Q3 revenue was approximately a 55-45 split between our service revenue from our automotive OEM customers to develop AI-enhanced lithium metal and lithium-ion battery materials for EV applications and product revenue, primarily from UZ Energy's energy storage system sales. For the full year 2025, we are updating our revenue guidance to $20 million to $25 million due to UZ's contribution going forward. Gross margin was 51% for the third quarter, which is a combination of 78% gross margin from the service revenue and 15% gross margin from the product revenue. As a reminder, with UZ Energy now part of SES, we expect gross margin variation from quarter-to-quarter as our service and product revenue mix will fluctuate. Our GAAP net loss for the third quarter was $20.9 million or negative $0.06 per share. In Q2 2025, our GAAP net loss was $22.7 million or negative $0.07 per share. As of September 30, we had 365 million Class A and Class B shares outstanding, which were down $1.3 million from the previous quarter, mainly due to the share repurchase we executed during the third quarter. In the third quarter, we repurchased and canceled 1.3 million Class A shares for a total investment of $1.6 million or roughly $1.20 per share. We utilized $14.3 million in cash for operations in the third quarter. We exited the third quarter with a strong liquidity position of $214 million. As mentioned, we closed the UZ acquisition in September and recognized some UZ revenue during the third quarter. We see a tremendous opportunity to grow the UZ Energy business from approximately $10 million to $15 million in projected full year 2025 revenue to a much larger growth in the coming years as we execute our go-to-market strategy that Qichao outlined to make market share gains in the $300 billion global ESS market. When we report Q4 earnings, we expect to provide a more definitive outlook on how we see the full year 2026 revenue growth shaping up from UZ's growth in ESS, SaaS subscription use, contributions from Hisun JV and potential for the start of commercial production of electrolyte and/or battery cells from automotive OEMs, drones and robotics. The potential growth of these revenue streams, which all have different margin profiles will be much larger than what we have experienced in 2025, but the growth isn't linear from quarter-to-quarter and the margin may vary quarter-to-quarter as well. Looking ahead, we remain focused on executing our strategy while continuing to grow our top line while remaining financially disciplined. With substantial liquidity, we are well positioned for sustainable growth and long-term success. We appreciate your continued support and confidence in SES AI. Thank you. Now I will turn the call back to the operator. Operator: [Operator Instructions] And our first question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: On the Hisun JV, can you talk about how that opportunity came about? Was the company paying for Molecular Universe access? Or was this sort of an internal project at SES? And then what type of battery will this electrolyte enable? Qichao Hu: Derek, so very good question. And actually, the Hisun JV came as a request by some of the Molecular Universe enterprise users. So Molecular Universe since we launched this -- earlier this year has been growing really fast. And we had almost every major battery company and battery materials company in the world trialing this. And so in addition to the SaaS platform, both on the cloud and also on-premise, several of the battery companies that are using the Molecular Universe enterprise tier also ask us, okay, we found these materials, these formulations, these molecules through Molecular Universe. Why don't you just make these and then sell these to us because they currently buy electrolytes from companies. So it's a quite mature business model. So we said, okay, yes. we're happy to sell these materials to you. These are new formulations that they cannot buy anywhere else. And so we formed this joint venture. It's a CapEx JV we control. We control 90% of the JV, and we contract manufacture with a company called Hisun to produce this formulation, and then we sell that formulation to the cell makers. And then some of the applications, so in the call, I listed 3 and then actually all 3 are being produced. So the most popular one is a new formulation to improve low temperature performance of LFP for ESS batteries. A lot of these LFP batteries for ESS, when they're deployed in like Northern Europe, these cold places, they don't work so well when it's a low temperature. Another one is for cell phone applications. So it's a high-voltage electrolyte for LCL cells. And then another is a 12% silicon lithium-ion cells for EV applications also to improve the cycle life. So these 3, we are requested by the user, the cell maker to actually supply these materials at commercial scale to them. And this was discovered through the Molecular Universe platform. Derek Soderberg: And I guess just to that point, I guess I wasn't imagining a JV coming out of this first in Molecular Universe. Can you just talk about how you expect the monetization of that business to sort of play out over the next year, beyond sort of JVs, do you expect Molecular Universe to grow sort of as a traditional Software-as-a-Service business where every quarter you sort of add additional seats? Or do you expect there to be sort of like a stair step up on revenue as you sign kind of larger agreements? How do you sort of see the monetization of MU playing out sort of over the next year? How should we think about it? Qichao Hu: Yes. So MU is a mix of SaaS platform and materials. And then for the SaaS platform, and then we laid out the different tier pricing on the website, molecular-universe.com. And so we have the individual tiers and then the number of individual tiers is growing. And then also, we have the enterprise tiers. These are the major battery companies and then the material companies and the chemical companies. And then -- and a lot of these companies prefer on-premise. So we also sell them this Molecular Universe in a box on-premise solution. So we charge them monthly subscription. And also we sell this computer that we actually deploy on site and also service on top of that. I think the SaaS platform, we do expect to see a growing number of seats per month and also per quarter and then the material supply because a lot of these companies eventually want us to supply the materials. But the revenue coming from the Molecular Universe discovery materials is actually going to be much higher than the SaaS revenue. Derek Soderberg: And then just one final one for me, just a broad update on Molecular Universe. I think in the past, you said you've got like 2 dozen or so companies in trial testing. Can you just give us an update on maybe where that is? And I think in the past, you have mentioned there are other potential large or medium-sized battery OEMs as part of that group. Where are you at with some of those players in negotiations? And when do you expect maybe a medium or large-sized OEM to sign on to MU through a joint development? Qichao Hu: Yes. So the number now is getting close to 40 enterprise and then -- and they have gone through MU-0.5 trial, MU-1.0 trial, which is the latest version and it's gone through the initial cloud-based trial. And now we are planning for on-premise deployment because a lot of these medium-sized, especially the larger-sized enterprises, they can do the cloud trial, but then eventually, they will need this on-premise to actually deploy this. This is why we're moving towards this Molecular Universe in the box on-premise solution. Operator: [Operator Instructions] The next question comes from Winnie Dong with Deutsche Bank. Yan Dong: I just wanted to follow up on that last question that was asked. You talked about launching 3 sub-tiers within the enterprise subscription. I was wondering if you can maybe just elaborate on that? What are they sort of looking for, what are your customers looking for? And then if you can just maybe just remind us of the other subscription options that's also bringing this recurring revenue opportunity. Qichao Hu: Yes, so the enterprise 1, 2, 3, basically, they differ in terms of size of market database, the depth of the models used and also the knowledge and the know-how the models are trained on. For example, enterprise 1, we see that as like a PhD student level and the enterprise 2 is like the postdoc level and the enterprise 3 is a senior scientist level. And then, for example, enterprise 1, when they answer a question, they'll answer question typically less than 3 minutes and the enterprise 2 postdoc level answer question in about 5 minutes. Enterprise 3 will answer question in more than 30 minutes. But the depth and the quality and the new discoveries are much deeper. So a lot of the enterprise 1 are medium-sized companies and also some start-ups and then the larger companies. And so for enterprise 1 and 2, we offer only cloud and for enterprise 3 and even higher tier joint development, we offer a combination of cloud and also on-premise, which most of the larger companies want. And then in addition to these tiers, we can also do the joint development tier with the larger customers. That's where -- so now the cloud version Molecular Universe is trained only on SES internal data. But then for the joint development, we will actually put our Molecular Universe in the box encrypted and then also organize the users' data, the cell makers data and then after that I train all Molecular Universe in a box. And then we're helping them do something that they've always wanted to do, but they've never had the resource and then never had the capability to do that. Yan Dong: And then so this quarter, you saw some very meaningful revenue contribution from UZ Energy. So I was just curious if you can just maybe take a step back and help us sort of get reengage with the background of this company, where the markets are, what you think the growth could be from this business? And then maybe more broadly speaking, as you look out to the different revenue streams, so UZ Energy, Molecular Universe, you have the relationships with OEM partners for electrolyte production. Just maybe give us a sense of which channels you're most optimistic about as you head out to growth in the next 2 to 3 years? Qichao Hu: Yes. So UZ Energy is an energy storage company and they serve mainly the behind-the-meter commercial and industrial applications. And before we acquired UZ, we actually used to supply this database machine learning model to UZ to help improve the accuracy of their BMS, battery management system in terms of predicting battery health and then end of life. And then since we acquired them, now we are adding more of these machine learning-based models, which is the predict feature in Molecular Universe, MU-1.0. We are adding that into their BMS. So when we sell these -- when UZ deploys these packs to customers around the world, a lot of the customers, for example, in Norway or Northern Europe, they complain that the packs, especially in winter are just not so accurate and the BMS just stop working. So by adding this predict, we can actually -- so each UZ pack is a box, is a Molecular Universe in the box. And then we can gather data and train the predict feature of Molecular Universe locally in the box and then make predictions about these issues before the customers can actually find out about the issues. And then -- so since we've added this predict, the amount of customer calls, their complaints actually dropped. And then we plan to continue to do that. So this application is actually really exciting. So think of each ESS pack as a Molecular Universe in a box. And then we collect the data, we do local training and we make prediction on the safety. And then I think that's a really exciting connection. So we get data and we get revenue. In terms of the overall growth of revenue of the different businesses opportunities that we mentioned, UZ this year, revenue, we expect to pull about $15 million to $20 million. And I think next year, ESS, we can at least double that. So this is one area. Another is drones. This year, we are getting our initial contracts and also a lot of the drones customers in the U.S. really want sales made outside of China. So we are making these cells in our Chungju, South Korea facility. Actually, the amount of capacity for pouch cells for drones outside of China is like super rare. It's hard to find pouch cells capacity outside of China. We have them. So we expect drones to also grow in a big way for us next year. And then EV and so for example, the joint development we had with Hyundai Motors and also Honda, we are using Molecular Universe to discover these new electrolytes. And then once we identify these electrolytes, then our plan is to use the Hisun JV to contract manufacture this and then supply. So I think next year, revenue-wise, total, we should be able to at least double, if not triple, what we did this year because of all these opportunities that are enabled by the Molecular Universe platform. Operator: [Operator Instructions] And as we have no further audio questions, I will hand back over to Kyle for the other questions. Kyle Pilkington: As in past quarters, we have received some written questions from investors and time permitting, we'll go through a selection of those questions, which have not yet been addressed on the call. So the first question that we have relates to liquidity and whether management has a view on where liquidity is expected to be at the end of 2025 and will kind of scaling up of Molecular universe or the UZ Energy integration impact the cash burn or CapEx plans? Jing Nealis: I can cover that. So -- yes, I'll take that. So our liquidity balance is very strong. And given that we closed the UZ acquisition, also, we did some stock repurchase based on our program, we still expect to exit the year with somewhere between $195 million to $200 million of liquidity. And then the other thing I wanted to probably emphasize is we are laser-focused on funding growth. So our liquidity balance is sufficient to kind of grow our revenue from different streams that Qichao just mentioned, whether it's ESS drones or materials or SaaS from MU. So the cash balance is no longer to fund runway. We have a CapEx-light business model. So the UZ acquisition is helping us to grow revenue with positive gross margin. All of our revenue sources come in on day 1 with positive gross margin. So it's not a CapEx-heavy business. So our liquidity balance will be sufficient to fund the growth going forward. Kyle Pilkington: Great. The next question relates to Molecular Universe and it goes, MU-1.0 is impressive. Can you share the road map for MU for 2026? And what other features have been requested? Qichao Hu: Yes. So for now, MU-1.0 has been mainly focused on electrolyte materials. And then we've been requested to expand that to cover electrode process optimization and also cell design and manufacturing optimization. And then another big request from some of the major battery companies, they want their own Molecular Universe, which is quite exciting because a lot of these battery companies, they want to expand. They want to build factories overseas in different continents, and they need a battery bible, so to speak, basically put all their know-how, train this model into a portable Molecular Universe. So that is going to be a really exciting project that we'll be working on with these battery companies. Kyle Pilkington: Excellent. And I think we have time for one more. So the last question is, if you could provide an update on the status on 2170 and LMA pouch cells for robotics, drones and UAM. Are you seeing good prospects for sales? Or do you see a need for scale up before promoting these more heavily? Qichao Hu: Yes. So the pouch cells, especially for drones, we're seeing a very interesting convergence and standardization of the format in the drones industry around the 10 amp-hour pouch cells. And so that's quite exciting. And then we are converting our Chungju line, which we built both the EV line as well as the UAM line. We're converting that capacity to make this pouch cell. And so, so far, the capacity that we have meets the needs, but we're also seeing fast-growing demand, especially since it's produced in Korea. So we do see a quite exciting growth in this market. Kyle Pilkington: Great. With that, I'll pass it back to the operator for closing remarks. Operator: Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect. Have a great rest of your day.