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Operator: Good morning. Welcome to the Tronox Holdings plc Q3 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Jennifer Guenther, Chief Sustainability Officer, Head of Investor Relations and External Affairs. Jennifer, please go ahead. Jennifer Guenther: Thank you. Good morning, and welcome to our third quarter 2025 earnings call today. A friendly reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward-looking and subject to various risks and uncertainties, including, but not limited to, the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today. However, actual results may vary based on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance. Reconciliations to their nearest U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. On the call today are John Romano, Chief Executive Officer; and John Srivisal, Senior Vice President and Chief Financial Officer. You can find the slides we will be using on our website. It is now my pleasure to turn the call over to John Romano. John? John Romano: Thanks, Jennifer, and good morning, everyone. We'll begin this morning on Slide 4 with some key messages from the quarter. Our third quarter results were shaped by ongoing challenges associated with the weaker demand than forecasted, downstream destocking above what we expected and heightened competitive dynamics in both TiO2 and zircon markets. While our competitors' insolvency proceedings are expected to benefit Tronox's future sales volumes, we saw a temporary headwind in the third quarter with more aggressive liquidation of inventory at below market pricing. We have made headway in securing tariffs against Chinese dumping though late in the quarter, we encountered an unexpected hurdle in India when a state court temporarily stayed antidumping duties. The zircon market also experienced headwinds beyond our expectations, particularly in China, where both pricing and volumes continue to face pressure. In addition, we had a sizable shipment of zircon that rolled from Q3 to Q4 at the end of September. We recognize the importance of safeguarding our cash flow and our cost improvement program is ahead of schedule. We are now on track to deliver in excess of $60 million in annualized savings by the end of 2025 and expect to reach our $125 million to $175 million annualized savings goal by the end of 2026. Separately, we have targeted operational actions to manage near-term cash flow. These include the temporary idling of our Fuzhou pigment plant and adjustments at our Stallingborough pigment plant, where we lowered operating rates and are accelerating planned maintenance to align inventory with current market conditions. At our Namakwa smelter operation, we temporarily idled 1 furnace and will soon initiate a temporary shutdown of our West mine. These actions are intended to reduce inventory and enhance cash flow, supported by our new East OFS mine, which will begin commissioning November 17, supplying higher-grade heavy mineral concentrate into our network. We will continue to assess further measures across mining and pigment sites to ensure production remains closely aligned with prevailing market conditions. Combined, these initiatives are anticipated to generate an estimated cash benefit of approximately $25 million to $30 million in the fourth quarter, positioning us for free cash flow in the fourth quarter and 2026. And on the commercial front, we're driving targeted initiatives to monetize inventory throughout our value chain. Additionally, we strengthened our balance sheet by raising $400 million in senior secured notes, boosting our available liquidity. We are continuing to actively evaluate all available levers to generate cash, reinforce our operational foundation and continue supporting our customers strategic -- as a strategic global supplier. Despite the unforeseen obstacles in the third quarter, there are reasons for optimism. Antidumping measures continue to gradually improve our penetration and growth -- and growth in protected markets. We're pleased that the Brazil finally finalized their duties 2 weeks ago, increasing them significantly for major importers compared to provisional duties. Likewise, Saudi Arabia has now implemented definitive antidumping duties at rates comparable to the European Union, and we expect India's duties to be reinstated in the near future. Additionally, increased focus by the West on diversifying away from China and rare earths presents a unique opportunity for Tronox. Our mining operations in Australia and South Africa contain substantial amounts of monazite, a rare earth mineral containing heavy and light rare earths, which can be processed for downstream use in permanent magnets. We are continuing to action on what we can control and influence, reinforcing the business through our cost reduction and cash improvement actions and creating long-term shareholder value. I'll speak to these actions in more detail a little bit later in the call. But for now, I'll turn the call over to John for a review of our financials in the quarter in more detail. John? John Srivisal: Thank you, John. Turning to Slide 5. We generated revenue of $699 million, a decrease of 13% versus the prior year third quarter, driven by lower sales volumes and unfavorable pricing for both TiO2 and zircon. We also had lower sales of other products as compared to the prior year. Loss from operations was $43 million in the quarter, and we reported a net loss attributable to Tronox of $99 million, including $27 million of restructuring and other charges primarily related to the closure of Botlek. While our loss before tax was $92 million, our tax expense was $8 million in the quarter as we do not realize tax benefits in jurisdictions where we are incurring losses. Adjusted diluted earnings per share was a loss of $0.46. Adjusted EBITDA in the quarter was $74 million, and our adjusted EBITDA margin was 10.6%. Free cash flow was a use of $137 million, including $80 million of capital expenditures. Now let's move to the next slide for a review of our commercial performance. As John covered earlier, in the third quarter, we saw further demand weakness and heightened competition, putting pressure on TiO2 and zircon sales. TiO2 revenues decreased 11% versus the year ago quarter, driven by an 8% decrease in volumes and a 5% decline in average selling prices, partially offset by a 2% favorable exchange rate impact. Sequentially, TiO2 sales declined 6%, driven by a 4% decrease in volumes and a 3% decrease in price, partially offset by a favorable 1% exchange rate impact from the Euro. Europe, Middle East and North America saw sharper seasonal declines amid market weakness, destocking and competitive pressures. Latin America experienced typical seasonal uplift, although weaker than expected, while Asia Pacific growth was muted by competition and a temporary stay on India antidumping duties. Zircon revenues decreased 20% compared to the prior year due to a 16% decrease in price, including mix and a 4% decline in volumes driven by continued demand weakness, primarily in China. Sequentially, zircon revenues decreased 13%, driven by a 7% decrease in volumes and a 6% decrease in price, including mix. Revenue from other products decreased 21% compared to the prior year due to higher sales volumes in the prior year. Sequentially, other revenue increased 18%, reflecting higher sales of pig iron and heavy mineral concentrate tailings in the third quarter. Turning to the next slide, I will now review our operating performance for the quarter. Our adjusted EBITDA of $74 million represented a 48% decline year-on-year as a result of unfavorable commercial impacts, higher freight costs and higher production costs, partially offset by exchange rate tailwinds and SG&A savings. Sequentially, adjusted EBITDA declined 20%. Unfavorable average selling prices, including mix, lower sales volume of TiO2 and zircon, higher production costs and unfavorable exchange rate impacts were partially offset by the sale of heavy mineral concentrate tailings and SG&A savings. Production costs were unfavorable by $4 million compared to the prior year and $7 million unfavorable compared to Q2. Both were a result of unfavorable LCM and [ idle ] facility adjustments due to lower pricing and higher costs from reduced operating rates. These were partially offset by lower cost tons sold in the quarter as a result of the self-help actions that we initiated with our sustainable cost improvement program. Without these proactive actions, the headwinds would have been more significant. Turning to the next slide. As John mentioned earlier, we raised $400 million of secured notes in the third quarter to enhance available liquidity and repay borrowings under our revolving credit facilities. With that, we ended the quarter with total debt of $3.2 billion and net debt of $3.0 billion. Our net leverage ratio at the end of September was 7.5x on a trailing 12-month basis. Our weighted average interest rate was -- in Q3 was approximately 6%, and we maintained interest rate swaps [ such that ] approximately 77% of our interest rates are fixed through 2028. Importantly, our next significant debt maturity is not until 2029. We also do not have any financial covenants on our term loans or bonds. We do have one springing financial covenant on our U.S. revolver that we do not expect to trigger. Liquidity as of September 30 was $664 million, including $185 million in cash and cash equivalents that are well distributed across the globe that we are able to move around with little to no frictional cost. Working capital was a use of approximately $55 million, excluding $30 million of restructuring payments related to the closure of our Botlek site. This was due to the decrease in accounts payable driven by lower purchases and cash improvement actions and increase in accounts receivable. Changes in inventories was a much lower source of cash than expected as a result of lower sales volumes. Our capital expenditures totaled $80 million in the quarter with approximately 59% allocated to maintenance and safety and 41% almost exclusively dedicated to the mining extensions in South Africa to sustain our integrated cost advantage. We returned $20 million to shareholders in the form of dividends paid in the third quarter. The Q4 dividend reflects the updated $0.05 per share level. I want to reaffirm our commitment to improving cash flow and optimizing working capital. We are implementing targeted actions to reduce inventory through lowering production rates across all areas of our operation. And we continue to remain disciplined across -- around capital expenditures as illustrated around our actions with the West Mine. I remain confident in our ability to weather this prolonged downturn. With that, I'll hand it back to John to review these actions in more detail. John? John Romano: Thanks, John. So turning to Slide 9. As outlined at the starting of the call, we have seen positive developments on antidumping this year. This slide summarized the monthly Chinese exports to the 4 key regions that finalized duties in 2025. While India's duties are currently stayed, we have a high level of confidence that they will be reinstated in the near future. As the data shows, the implementation of antidumping duties has had a measurable and meaningful impact on Chinese imports in the EU, Brazil and India, and we would expect to see this trend carry into Saudi Arabia as the governments reinforce their commitment to local investment and sustainability. At the peak, these markets imported a total of approximately 800,000 tons of TiO2 from China. While we do not anticipate this figure to go to 0, we have and expect to continue to see a meaningful reduction in exports to these markets and share growth for Tronox. As a reference, the U.S. has had tariffs in place on TiO2 since 2018 when the Section 301 tariffs were put in place under President Trump's first administration. Chinese exports to the region have remained consistently below 20,000 metric tons per year in a market that consumes approximately 900,000 metric tons. These developments are extremely positive for Tronox, especially as the sole domestic producer in Brazil and Saudi Arabia and a significant participant in the EU and Indian markets as well as the U.S. market. Combining this with the industry's idled mining capacity and over 1.1 million tons of global TiO2 supply that has been taken offline since 2023, the majority of which we believe is permanent, the industry is undergoing a structural shift that supports a supply-demand rebalance. As the most vertically integrated TiO2 producer, Tronox is well positioned to capitalize on this opportunity created by the rebalancing of the market. Turning to Slide 10. We remain actively engaged in advancing our rare earth strategy. With high concentrations of rare earth in our mineral deposits and decades of expertise in mining and mineral processing, we're uniquely positioned to play a significant role across the value chain from mining to upgrading. We are already mining monazite in Australia and South Africa, but our capabilities extend beyond mining. We operate both hydro and pyrometallurgical processes and employ over 400 engineers, geologists and metallurgists among our 6,500 employees. Combined with our global footprint, we are -- we have the flexibility to optimize where we participate along the rare earths value chain. As a part of this strategy, in October, we took a 5% equity interest in Lion Rock Minerals, a mineral exploration company whose Minta and Minta East deposits have the potential to be a major source of high-quality monazite and rutile. This investment represents an attractive opportunity with minimal overburden and has substantial potential for resource development in support of our rare earth strategy. Now turning to Slide 11, I'll review our updated outlook. We are now expecting Q4 2025 revenue and adjusted EBITDA to be relatively flat to Q3 of '25. This is primarily driven by weaker-than-anticipated pricing on TiO2 and zircon as a result of more aggressive competitive activity in the market, partially offset by improving volumes across both TiO2 and zircon. Although our outlook has been revised lower from our previous guidance, we expect fourth quarter TiO2 volumes to increase 3% to 5%, net of a 2% volume headwind from idling our Fuzhou facility and zircon volumes to increase 15% to 20% sequentially in part due to the rolled bulk order from Q3 to Q4. These are strong leading indicators for the fourth quarter, which is normally lower due to seasonality and directionally in line with what we would historically see on the front end of a recovery. On the cost side, we continue to execute on our cost reducing measures as previously outlined. Our sustainable cost improvement program is expected to exceed over $60 million -- $60 million of run rate savings by the end of the year. And as I mentioned earlier, we have temporarily idled our Fuzhou pigment plant and one of our furnaces at our Namakwa site, lowered operating rates at Stallingborough pigment plant and will soon initiate a temporary shutdown of our West mine. We will continue to assess further measures across mining and pigment sites to ensure production remains closely aligned with prevailing market conditions. These actions position us for positive free cash flow in the fourth quarter and 2026. With regards to our cash use items for the year, we expect the following: net cash interest of approximately $150 million, net taxes of less than $5 million and capital expenditures of approximately $330 million. And we expect working capital to be a slight source of cash for the fourth quarter. Turning to the next slide, I'll review our capital allocation strategy before we move the call to Q&A. Our capital allocation priorities remain unchanged and focused on cash generation. We continue investing to maintain our assets, our vertical integration and projects critical to furthering our strategy, including rare earths. We have taken decisive action to reduce our capital expenditures over the course of the year. For 2026, while we have some catch-up capital from delayed projects in 2025, we expect capital to be less than $275 million in the year. We continue to focus on bolstering liquidity. With the actions taken in the third quarter, we have ample liquidity to manage the business and endure market fluctuations. Last quarter, we lowered the dividend by 60% to align with the current macro environment. And as the market recovers, we will resume debt paydown, targeting mid- to long-term net leverage range of less than 3x. We will continue to focus on what we can control and influence and reinforce the business through cost reduction and cash improvement actions. As the most vertically integrated TiO2 producer, Tronox is well positioned to capitalize on the opportunity created by the rebalancing of the market, evidenced by the effect of antidumping duties and supply rationalization in the industry. I remain confident that our -- in our ability to navigate this environment and deliver meaningful value for shareholders. And with that, we'll turn the question back over to the operator for the Q&A session. Operator? Operator: [Operator Instructions] Our first question comes from James Cannon at UBS. James Cannon: I think the first thing I wanted to poke on was just around some of the antidumping measures you're seeing. Just given the movement with India kind of pausing their tariffs for a while, it seems like if I square that against the new measures in Brazil and Saudi Arabia, that would be a net negative in terms of like market size. Can you talk about how those dynamics are playing into your volume guidance? John Romano: Yes. So you're right, the Brazil market and the Saudi Arabia market collectively are, in fact, lower than the demand in India. But I will say that we have a high level of confidence that those duties are going to be reinstated. And we're hoping that's going to happen before the end of the year. We are not obviously not having a facility there actively engaged in those negotiations, but we're very informed in what's going on, and we do believe the DGTR will make a decision prior to year-end. So the duties in India are currently still being collected. And if for whatever reason, those duties get reinstated, nothing is really changing. So when we look at the exports, we are -- there is a bit of a headwind where we were expecting more volume in the fourth quarter. When we think about our prior guidance, we were guiding to a higher number. We're still guiding to 3% to 5% more than what we were in the third quarter, and we're seeing some pickup there, but not as much as we had originally anticipated. With Brazil and Saudi Arabia, we think that, that is a unique opportunity. When you think about the duties that were implemented in Brazil, they were significantly higher than the provisional duties in many instances with the larger importers doubled. So you should think about a number of around $1,200 per ton across all importers. So that's a significant play. We're the sole producer there. Saudi Arabia, what I can tell you is that was a -- we were expecting that to happen, but not as soon as it did. And we are the only producer there, and we also think we're going to have a unique opportunity there. So when we start to think about those volumes and that shift that I referenced on the call in the prepared comments about Q3 numbers versus Q4 numbers, it's not just a projection. We're looking at our -- October is already complete. And when we look at across every month that we've sold so far, if you recall, our first quarter sales were actually pretty strong. March was our strongest month, and then we saw our volumes decline because we had a lot of other destocking going on, all the things that we referenced earlier. But our October sales, which are now complete, were the second largest month this year and equivalent to the March sales. And when we look into November and December, November is trending in the same way. We have very good vision on November and December orders. So I know there's probably some trepidation around what we're saying with regards to confidence level in the numbers, but that 3% to 5% that we're looking at with regards to growth Q3 to Q4 is very much in our line of sight. James Cannon: Got it. And then I just had one follow-up on the rare earths opportunity. You talked about having some capabilities with chemical conversion. But if you could give a little more detail and just unpack for us what you can do in the rare earth space in kind of the refining type downstream piece of that market and whether or not you can do that with your current footprint or that would need additional capital or a partner? John Romano: Okay. Yes. So look, on the rare earth side of the business, obviously, we've been mining forever, and I made reference that mining is not the only capability that we have. So we're already in the concentration business. So that's just producing rare earth mineral concentrate and have historically been selling that. The next step in that value chain would be cracking and leaching. We've already completed a pre-feasibility study and have started a definitive feasibility study on that production. We've located a site where that would be in Australia. Look, moving down into refining and separation, that is work that's going to require for us to do some work with a partner. We're engaged with a lot of different participants across multiple jurisdictions. We have nondisclosure agreements in place, so we aren't at liberty to elaborate on who that is. But we're well positioned with our current capacity as well as some of the things that we referenced. So we made a small investment in a company called Lion Rock. That company has a very interesting deposit. We've looked at it. We've actually sent our people there. We made the investment so that we could now validate the work that they've done. There's still a lot of work to do there, but it's not only our current mining, we're looking longer term at how we can continue to support that growth. There will be capital involved. And as we have more information, we'll articulate that. But at this particular stage, that's about where we'll have to close off the discussion with regards to development there. Operator: Our next question comes from Peter Osterland at Truist Securities. Jennifer Guenther: Sorry, Peter, we're getting a little bit of a tough connection from you. Can you start at the beginning of your question again, please? Peter Osterland: Sure. Can you hear me now? Jennifer Guenther: Better. Peter Osterland: I just wanted to ask [Technical Issue] operating rates [Technical Issue]. Do you have a specific time frame in mind at this point for how long [Technical Issue] to continue industry [Technical Issue] could these actions come from. John Romano: Peter, I'll try to answer your question. It was a bit broken up. It was regarding, I think, the idling of the Fuzhou plant and our actions that we took in Stallingborough. So the Fuzhou plant, we idled that plant to preserve cash. The market, as we've talked about, all of these issues with antidumping are creating a lot of competitive activity inside of China. That is one of our lowest cost plants, but it's obviously operating in one of the lowest priced markets. So we've idled that facility. Our plan would be to probably have that offline. We'll make decisions on what we're going to do with that asset as the market unfolds. With regards to Stallingborough, we brought forward some maintenance and have slowed the facility down just to be in line with what the market is doing. So I would expect in the fourth quarter, we'll probably bring that plant back up to full rate. When you start thinking about all the things that we referenced around these structural changes, we want to make sure that we're positioned to be able to support that inside of Europe. We have a significant position in Europe. The market in Europe has been a bit weaker in the third quarter. When we start thinking about all of the activity that's going on around the supply-demand dynamics right now with the pickup in Q4, I do believe, and I've said this before, but I do believe we're on the front end of a recovery. And front end of the recovery, you start to see demand patterns that are a bit different than what you would historically see. Q4 volumes being up 3% to 4% when they're seasonally normally down is a good sign for us. And the next step beyond that, if we see this continuing to transition in a positive direction, we'll start looking at pricing initiatives. So I'm very encouraged by what we're seeing in the market. Stallingborough, to be specific, is a short-term action where we brought forward some maintenance, slowed the plant down to manage inventory, but we'll be ready to action that plant at full rates to meet the demand as it returns. Peter Osterland: Very helpful color. And just as a follow-up, thinking about 2026 earnings potential, targeting the $125 million to $175 million of cost savings by the end of 2026. Do you have an estimate of what the year-over-year EBITDA impact will be in '26 versus '25? And what are the swing factors that would drive the low versus the high end of cost savings within that range? John Srivisal: Yes. So as we've mentioned previously, we have taken action this year, but on the sustainable cost improvement program, but it will take some time for us to flow through our balance sheet and to see it in our results. So in 2025, there's been tons of activity across all of our sites, all of our functions, all of operations. But in 2025, it's primarily been the lower-hanging fruit that we see in our numbers. So about $10 million we've seen primarily in SG&A, although as we move into 2026, as John mentioned, we're already on a run rate to end the year at over $60 million. So we should see at least that amount in 2026. It will be more operational focused at that level, and we see it coming through in fixed costs. John Romano: So maybe just adding on to that a little bit because we've had a lot of questions about this sustainable cost improvement program. And this is a bottoms-up process across our entire organization. And at this point, we've identified and acted on almost 2,000 ideas across our network. And out of those, we've got more than 1,100 that have been planned, executed and fully realized, and we currently have 413 of those ideas that are already delivering value. And when you think about how those savings kind of break out, a significant portion of those savings are coming from fixed cost reductions, and we're making good progress on the variable side as well. And we've made some great progress on ore yield improvements at our pigment plants, thanks to some of the investments in our digital infrastructure like TOIS, which is Tronox's operational information system, APC and other actionable metrics, all working together now, and we're lifting and shifting those progress -- those projects across our network. Now I just add a few more bullets because I think it's important. In addition, some of our other capital investments are now starting to pay off. For example, some of the work that we did in Bunbury to upgrade our cooling and waste infrastructure are now translating into our capability to use lower head grade more efficiently. And we're also realizing benefits from our energy efficiencies and investments in KZN and Namakwa with larger electrodes at our furnaces, making differences in our costs and EMV optimization across all of our mining -- all of the mining side of our business. Our contractor usage has been optimized, and we've significantly reduced our outside services, helping us become more efficient. And we've improved our logistics and optimizations of our MSPs to produce higher-value product mixes that match current market demand and have found new opportunities to improve yield in several areas. And one of the things that we're utilizing now is an app called Power BI. So every one of our people that are engaged in this process across the organization, including myself, have the ability to track these projects on a daily basis. So this isn't something that we're just talking about. It's something that's become ingrained in what we do every day, and we're making great progress on that front. Operator: Our next question comes from Vincent Andrews at Morgan Stanley. Justin Pellegrino: This is Justin Pellegrino on for Vincent. I just wanted to see if you could help us bridge to the positive free cash flow that you stated for 2026 and what assumptions are included within that, specifically if there's any expectation for earnings growth and changes in working capital amongst the other cash items that have been discussed on today's call. John Romano: Yes. Thanks, Justin, and I'll try to handle that. And obviously, we aren't giving a guide on 2026 as of yet other than being free cash flow positive. But some of the biggest drivers of improvement 2025 to 2026 include, as we've mentioned, the sustainable cost improvement program, growing from $10 million to well over $60 million year-over-year. We are also moving from a building of inventory in 2025 to reducing inventory. Some of that relates to the targeted operational actions that we have mentioned before, which is a $25 million to $30 million savings in Q4. And that should grow to almost $50 million to $80 million, just depending on how long we keep our facilities down for. Additionally, we did mention that CapEx will be reduced, $330 million guided this year to under $275 million for next year. And then finally, as you know, we did shut down our bottling facility and the cash restructuring charges we do hit through free cash flow, which was -- should be well behind us -- mostly behind us in 2026. We have roughly $80 million of cash charges in 2025 and a much lower low teens or so expected in 2026. But obviously, it will depend a lot on the commercial market. Justin Pellegrino: Great. And then just one more. I was hoping you could kind of talk about the higher-than-expected destocking that you saw downstream. Can you frame that just relative to historical averages? And then what are you hearing throughout the supply chain regarding expectations for rebuilding any sort of inventory in the channel? John Romano: Yes. So look, that -- I think the destocking, in my opinion, took a little bit -- it happened a little bit sooner than we would normally in the year. So we weren't anticipating a lot of that destocking to happen in the third quarter. Quite frankly, a significant amount of it happened in September, so right at the end of the quarter. So it was a bit unexpected. That being said, we think that a lot of that destocking has already taken place. And so when we start to look at our order pattern in the fourth quarter, A lot of it is just, I think, our customers going back to normal buying patterns. Again, when we start to think about a recovery, it's going to be different this time. And it's large -- at the front end of it, it's going to be based on a lot of this restructuring that's happened that's been fueled by all these antidumping initiatives. And then when you think about the duty affected areas, including the U.S., which I noted on the call, was actually started under the First Trump administration with the Section 301 tariffs, you've got markets that consume 2.7 million tons of TiO2 that now have duty impacts. And that's starting to play favorably because a lot of those markets are markets that we participate in. And I know we've been talking about it for a long time, but it's starting to actually show up in the numbers. That paired with some of the competitive activity that was generated by one of our competitors that went through an insolvency, it's our opinion that, that inventory will be liquidated soon. And we're starting to see buying patterns in the European market, which would reflect that. India, still a big market for us. The duties have been stayed. We have high level of confidence that they're going to come back, hopefully, before the end of the year. And at this particular stage, although muted from our prior expectations, we're still seeing growth in that region. So again, I think there's a lot of reasons to be optimistic about where we are in the cycle. We're 3.5 years into a downturn, and I can say with 100% certainty that it will turn. And it's my assumption that we're on the front end of that at this stage. Operator: [Operator Instructions] Our next question comes from John McNulty at BMO Capital Markets. Unknown Analyst: This is John Roberts. I heard you call John McNulty, but I'm just checking whether you can hear me. Will LB be able to use their new position in the U.K. to bring Chinese ore in and serve the rest of the European market without a tariff? John Romano: John, look there's a lot left to be done with the announcement that LB is going to be acquiring that asset in the U.K. There's a lot of regulatory work to go through. So I would say by no means is that a slam dunk. I can't speak to what they may do. That asset is down. The longer that asset is down, the harder it's going to be to be brought back up. And having done a lot of work trying to buy assets in Europe historically, I would just say there's a lot of wood to chop there. Unknown Analyst: Okay. And do you have any rare earth activity going on in South Africa as well? John Romano: We mine in South Africa and Australia and monazite is present in both deposits. What we're doing right now is actioning the majority of what we have in Australia. But yes, we have monazite in South Africa and some of the things that we've done historically, although this last sale of mineral concentrate didn't have much rare earth in it. Historically, we have and continued to mine. And as long as we're mining in both those regions, we're getting monazite, which has both light and heavy rare earths in it. And we're developing a process forward to monetize that in a way which we can move down the value chain. Furthest we're going to move down that chain would probably be the refining side. The [ metalization ] and magnet production is not something that we feel we're uniquely positioned to do. But being a mining company that's regularly involved in mineral upgrading, it's a natural fit for us to look at concentration, acid leaching and cracking and refining and separation. Operator: Our next question comes from Roger Spitz at Bank of America Securities. Roger Spitz: I just want to understand the updated guidance for either 2025 working capital outflow and 2025 free cash flow or discuss the Q4 numbers because you've got -- you said working capital is only a slight inflow even though you're idling all these assets. So can you update us on either Q4 or full year 2025, both working capital as well as free cash flow? John Romano: So I'll start and then I'll let John add on to it. But to be clear with the idling of the assets. So obviously, it will be a working capital gain for us on the Fuzhou facility, slowing down Stallingborough and bringing forward maintenance will be a benefit. But -- and also on the furnace because that furnace actually was idled on September 15. We're just reporting that now. But the West mine, which is a significant process. Again, we made reference that, that's going to happen as we bring on East OFS. East OFS is starting commissioning on November 17. And as we finish that commissioning, we'll then bring that West mine down. The West mine, if you think about that particular asset, we had an East and a West mine. East OFS is replacing the East mine. And the West mine will continue to run and operate, but to preserve cash, we're idling that as soon as we bring on East OFS and East OFS is going to have that higher grade mineral -- heavy mineral concentrate that will become into the network as we referenced on the call. So John, do you want to add more? John Srivisal: Yes. I think just to answer your question, I'll give you a little more details. But through year-to-date Q3, obviously, it was a significant use on working capital and free cash flow, roughly $190 million use on working capital and about over $300 million use in free cash flow. And we mentioned that we were going to be positive both on free cash flow and working capital for Q4. So obviously, maintaining that and slight improvement over both. I do think you need to look at what happened in Q3 and to understand what the drivers are in Q4. So as John mentioned, we did have a lot of commercial impacts negatively with the antidumping delays in India, with the Europe competitors insolvency and then competitive dynamic in China and rolling of shipment on zircon from Q3 to Q4. And obviously, that zircon shipment will help us in Q4. And then we did have a tailings sale in Q3. But obviously, that went to -- as that happened late in the quarter, we will collect on cash on that in the -- in Q4. So it should be an improvement quarter-over-quarter. But all of that drove the fact that inventory was less of a reduction than we had expected. And so not a significant source of cash. We will see that recovery. Obviously, the volumes are much higher in Q4 on both TiO2 and zircon, much more muted than what we expected, as John mentioned, but still an increase. So we will see some benefit from reduction in inventory. And then just from an AP perspective, it was a pretty decent use in AP as well as we did have restructuring charges of about $30 million in Q3 that will be lower in Q4. So while driving lower purchases and lower CapEx drove higher AP, we will see that revert in Q4. So all that being said is we do expect Q4 free cash flow and working capital to be more significant than Q3, but roughly flat. Roger Spitz: And my follow-up is you said you don't expect to breach your revolver maintenance covenant in Q4. Would you be able to provide either the EBITDA and/or debt headroom at the end of Q3 under that covenant? John Srivisal: Yes. So obviously, we -- as we mentioned, we do not expect a spring covenant on the U.S. revolver. We are sitting with ample liquidity of $667 million. And so obviously, the test is you have to draw up 35% of our revolver, which is $350 million. So right now, we are undrawn on that revolver. And so we have significant cushion to get to that point, several hundred millions of dollars. John Romano: And when we think about all the actions that we're taking to preserve cash and you couple that with some of the positive things we're talking about on the market, again, I made reference that the market will recover. We think we're on the front end of that, but we're taking actions that we feel are prudent at this particular stage to make sure that we have cash and that all those things that John just referenced around a covenant is not triggered ever. So this is a process that we're in place. It's been a tough downturn, but we're taking actions that we need to take to manage the business through the long term. Operator: Our next question comes from Frank Mitsch at Fermium Research. Frank Mitsch: All right. Great. I was close to saying something I shouldn't. Okay. So I want to come back to the unanticipated headwinds on price for the fourth quarter on both TiO2 and zircon. So for TiO2, it sounds like the competitive actions that you're seeing from liquidation Venator's inventory is a large part of that. And I was just curious as to -- and then also you would anticipate at some point in the future getting these duties put back on. I'm just curious from your perspective, assuming a normal coating season, when might we see instead of unanticipated headwinds on price, unanticipated tailwinds on price on TiO2. And then you also referenced on zircon, more aggressive competitive dynamics. Can you please flush that out a little bit for us? John Srivisal: Yes. Thanks, Frank. So on the TiO2 side of it, I'll be specific to the competitor that was liquidating inventory. We weren't responding to all of those liquidation events, right? By definition, they were selling at prices that weren't super attractive. All that being said, it created a lot of competitive environment, right? Others in the market were being -- competitive activity was going on in second quarter and the third quarter. We made reference in the third quarter that we were going to regain some of our share, and we were working towards that. But the liquidation of the inventory is just a catalyst for more competitive activity. I do believe that a lot of that inventory is going to work its way through the system before the end of the year. We're already starting to have discussions with customers about what '26 looks like because they want to be aligned with customers or with suppliers that are going to live beyond '26. So with the demand patterns that we're seeing right now, and again, in '24 and in '25 in Q1 we saw these bump-ups and then kind of fizzled out in Q2 and Q3. Q4 is a bit different. We haven't seen a swing up like this with all the things that are going on that I referenced around kind of the restructuring of the industry and the duties. We do think this is going to be a bit of a different recovery. And with demand patterns like this, if they continue, as I mentioned, our October sales are the largest sales month in the year equivalent to where we were in March, and we have a very good visibility into November and December, which would also indicate that a lot of the destocking has already happened, and we're getting back to normal demand patterns from our customers. So the next natural thing would be pricing going in the other direction. And we're looking at that. It wouldn't be before the first quarter, but that's something that we're looking at. As far as zircon goes, there was a lot of competitive activity. There's been a fair amount of heavy mineral concentrate being mined from China and other parts of Africa. Indonesia has now started to back off. So prices have gotten to the point where the Indonesian market, which is not huge, it's 60,000 to 70,000 tonnes of zircon per year, but we're starting to see them back off on that. There's other mining projects that have been backed off on, as I referenced earlier. So the zircon swing in Q3 to Q4, part of that had to do with the world shipment, but we're also seeing demand start to pick up. The last call, I made some reference around the rest of the world had kind of picked up, but China had not done much. We're starting to see, I would say, the front end of a pickup in China as well. So maybe a little bit too early to call what we might be seeing on pricing, but the demand pattern in fourth quarter is encouraging on zircon. Operator: Our next question comes from Edward Brucker at Barclays. Edward Brucker: I think you sort of mentioned it as you're going through the cash flow implications of the idling of the facilities. But are you able to provide the actual cash cost of the idling of the facilities and furnaces and then the closure of the mine that you expect? John Romano: Well, first off, we're not closing a mine. We're idling the West mine. So we're just bringing it down as we brought one furnace down at Namakwa, that furnace supplies a lot of the slag that we consume. So as we're not producing as much TiO2, we've idled the furnace. We're idling the mine. We'll bring that mine back up when the market recovers. And our cash generation, our benefit from that idling in 2026 will largely depend on how long we bring that down, but there will be a cash positive input to that. In 2025 fourth quarter, the collective impact from an EBITDA perspective on bringing those assets down is $11 million. I think that's really important. So when you think about take Fuzhou off the table right now, we're running just north of 80% capacity utilization. And if you recall, when we were in the last downturn running our assets at low rates, these fixed cost absorption numbers were costing us $25 million to $30 million a quarter, and that did not include idling a mine. So this -- I want to kind of translate that back to -- we talk about this cost improvement program all the time. It's hard to see in the numbers. But when you think about that LCM or that fixed cost absorption hit we're taking in the quarter at only being $11 million has a lot to do with what we're seeing in the cost improvement program because we're running at similar rates. We brought a mine down, but our costs have not gone down or have not been impacted as much. So John, do you want to? John Srivisal: Yes. No, I think just to be clear, though, it's $11 million impact, as John mentioned, in Q4, but that will be offset from a cash perspective by a positive $25 million to $30 million, as we mentioned. So net Q4 will be a positive from a free cash flow basis. And it was important to note that, obviously, we do spend a lot of time. We've said before, we have a 30-year mine plan, but equally as important is really the handoff we have between mines. And so the reason why we ran the West mine for longer -- a little bit longer and didn't execute on that earlier in the year, it's really facilitated by the fact that our new East OFS mine is coming online. And so that's why you kind of see that bridge be much more cost effective than you would have had you just had a sharp cutoff of that mine. Edward Brucker: Got it. And just my next question, can you dive a little further into why you feel so confident that India will reinstate those duties? And then if they don't, are there any contingency plans for the region? John Romano: Well, I'll start off with the last question. India is the second largest country that we sell into. We have currently a 10% duty advantage because we're supplying India out of Australia and there's a free trade agreement between Australia and India. So it's still upside for us. Even with India supplying -- or the Chinese -- at the peak they were buying, that's a 450,000 ton per year market. 300,000 tons per year were being supplied by China. We were still growing in that market. It's still our second largest market. So the contingency would be it's going to be slower growth, but we will continue to grow. We have -- again, we're not a producer in that region, but we've been actively engaged in discussions with the government. So we have a good window into what's going on at the DGTR. We do believe those -- we believe there'll be an answer sometime towards the end of the year, and it's our belief at this particular stage that that's going to be a positive one. I can't provide any more color other than that, but we're pretty confident in it. And in the absence of it, we still have a growth model. Operator: Our final question comes from Hassan Ahmed at Alembic Global. Hassan Ahmed: A question around -- in the press release, you guys mentioned 1.1 million tons of TiO2 capacity being shuttered since 2023. So a specific question around anti-involution and China in particular. I mean, if my understanding is correct, China has probably around 50 TiO2 facilities. My understanding is 20 of those are quite subscale, 50,000 tonnes or less and quite uneconomic. So if I were to sort of bundle all of those 20 subscale facilities up, I'd say that's roughly around 700,000 tonnes of capacity. So how are you thinking about that capacity? Is that vulnerable? Are you guys hearing something about closures around that? And sort of generally, what are you guys hearing about anti-involution? John Romano: Yes. Thanks, Hassan. It's a great question. And just to be clear, that 11 -- 1.1 million tons of capacity is from 2023 to the current date. And again, our belief that the majority of that is off-line. There were some Chinese plants included in that. We're not including our -- idling of our plant. But we have heard that there are other plants that are looking at being idled. And the real question is, do they go off permanently or do they bring them down for short periods of time. But I would expect that there's going to be some kind of consolidation in that capacity. Look, we're going to have to continue to compete with the likes of [indiscernible] on the long term. That's why these duties, albeit not -- maybe they're not permanent. Duties typically last 5 years with a 5-year sunset that typically follows that. So that's why all of our focus has to be on how we become more cost efficient and the traction that we're getting around costs so that we have a long-term sustainable plan to be competitive no matter where we're selling the product. But I do believe -- look, our China plant is -- it's our lowest cost plant in our entire system. But the market in China is the lowest price market, and it's more competitive today because that 800,000 tons that historically was exported outside into other regions of the market, you've got fewer markets for that material to move into. All the other areas that are nonduty affected are largely saturated with Chinese material anyway. So I would agree with you. It will be a matter of time, and it's one of those things where you would have thought it would have happened earlier. I think a lot of those are state-owned or SOEs where they're getting subsidies. We don't get subsidies in our Chinese facility. So again, we've idled that for the right reasons, and we'll determine how long that's down based on the current market condition. But I would agree with you that, that's not -- what you just described is not fully baked into the 1,100 tons that's already been brought offline. And in a down cycle that's lasted now 3.5 years, you've never seen -- I've never seen in my almost 40 years, anything like that amount of capacity reduction. Maybe 25% of that historically is what you'd see in a downturn. And normally, what happens as the market goes down and right before people start closing plants, there's a recovery. And this one has been longer than any other one, and every competitor has idled or closed a plant. Hassan Ahmed: Very helpful, John. And as a follow-up, I wanted to revisit the India antidumping side of things. I know things are still sort of transient and the like. But my understanding is that the sort of overturning by the courts of the antidumping duties actually didn't have much to do with the cause agents of why those antidumping duties were sort of levied in the first place, but it was far more procedural. I mean, again, my understanding is that the Indian Paints Association came out and said, "Hey, look, certain details were not shared with us, and they were shared with other parties. So those need to be -- so it was far more procedural than really why they were imposed in the first place. Is that what actually gives you confidence that they may be levied again? John Romano: That's exactly right. I couldn't restate it any more clearly than you just did. It was a procedural error. We believe that the data that they didn't get has been submitted. The procedural correction will be done and the duties will go back into place. So I can't state what you stated any more clearly, the right answer. Operator: Thank you. So there are no further questions today. So I'll now hand the call back over to John Romano for closing remarks. Thank you, John. John Romano: Thank you very much, and we appreciate you joining the call. Look, I do believe that we are -- clearly, it's been a challenging 3.5 years, but we're pretty optimistic on the things that we're doing around self-help -- the duties -- a lot of that work was hard work that we initiated. A lot of the work that we're doing on the cost improvement program. I gave you a lot of details on that. It's not just things we're talking about. It's things that our operational teams are weaving into the work that we do every single day, just like safety is a priority, cost improvement and maintaining those cost improvements and being competitive long term is something that we will continue to do for the long term. And our team has done an outstanding job of implementing those programs and lifting and shifting them from one site to the other. So I'm feeling really good, and that's largely on the back of all the work that our team has done to get us to where we are today. So we look forward to updating you again throughout the quarter and next quarter. So thank you very much. Operator: This concludes today's call. Thank you for joining, and have a great day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's third quarter 2025 results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at 5:00 p.m. Eastern Time and run through November 13 on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. [Operator Instructions] This call will be limited to an hour. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer; and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees or assurances of any outcomes, financial results, levels of activity, performance or achievements, and listeners are cautioned not to place undue reliance upon them. Forward-looking statements are subject to estimates and assumptions and known and unknown risks uncertainties and other factors. Listeners should review the description of the company's risks and uncertainties that could affect the forward-looking statements in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. Statements made on this conference call speak only as of the date of this call, and except as required by law, the company does not undertake any obligation to publicly update or revise any forward-looking statements. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please proceed. Robert Sprowls: Thank you, Bailey. Welcome, everyone, and thank you for joining us today. I'll begin with brief highlights to our quarter, Eva will discuss some financial details, and then I'll wrap it up with updates on regulatory activity, ASUS, dividends and then we'll take your questions. I'm pleased to report that recorded earnings per share for the third quarter were $0.11 per share higher compared to the third quarter of last year, an increase of 11.6%. Favorable variance is attributable to the receipt of final decisions from the California Public Utilities Commission or CPUC in January 2025 for our regulated water and electric utilities general rate cases which authorized new water rates for 2025 to 2027 and authorized new electric rates for 2023 to 2026 and higher earnings for our contracted services business, American States Utility Services, or ASUS, of $0.08 per share, due mostly to increases in construction activities during the quarter. For the year-to-date September 30, earnings were $2.63 per share, $0.21 per share higher than last year or 8.7%. We continue to invest in our water and electric utility systems for the long-term benefit of our customers. Our regulated utilities are on pace to invest a combined $180 million to $210 million in infrastructure investments this year. In addition, our water utility recently received CPUC approval to provide water services at another new planned community that will be built out over time with the first development expected to serve up to 3,800 customer connections during the next 5 years. And over the longer term, 20-plus years, allows for the construction of 17,500 total dwelling units at full build-out. ASUS continues to enter into U.S. government awarded contract modifications for new construction projects and was awarded $28.7 million in new capital upgrade construction projects during the 9 months ended September 30 of this year. These newly awarded projects are expected to be completed through 2028. I'd also like to mention that we are pleased to be recognized on Times America's Best Midsize Companies 2025 list and are 1 of only 2 investor-owned water utilities on the list. Companies are ranked by revenue growth, employee satisfaction and sustainability transparency. In addition, American States Water Company is the only water utility included in Barron's 100 Most Sustainable Companies for 2025. Companies were scored across 230 environmental, social and governance performance indicators from workplace diversity to greenhouse gas emissions. We believe these recognitions reflect our strategic growth plans, commitment to our workforce and focus on our initiatives and disclosures in the sustainability areas and these will remain priorities for the company. With that, I will turn the call over to Eva to discuss earnings and liquidity. Eva Tang: Thank you, Bob. Hello, everyone. Let me start with our third quarter results. Recorded consolidated earnings were $1.06 per share for the quarter as compared to $0.95 per share for the third quarter of 2024. For our water utility Golden State Water reported earnings were $0.86 per share as compared to $0.84 per share last year. The $0.02 per share increase in 2025 was largely due to new 2025 water rates as a result of receiving a final decision in Golden State Water's general rate case proceeding. Higher gain generated on investments held to fund a retirement plan and lower interest expense, partially offset by higher operating expenses and a higher effective income tax rate. Lastly, there was a decrease in earnings of $0.02 per share due to the dilutive effect from the insurance of equities under AWR ad market offering program. Our Electric segment earnings were $0.04 per share for the quarter as compared to $0.02 per share for the same quarter last year, a $0.02 per share increase primarily due to receiving the final CPUC decision on the electric general rate case with the new 2025 electric rates as compared to 2022 rate used to record revenues during the third quarter of last year. Earnings from ASUS were $0.19 per share for the quarter compared to $0.11 per share for the same quarter last year. That is an increase of $0.08 per share, which Bob will discuss further later. Lastly, losses from our parent company were $0.03 per share for the quarter when compared to losses of $0.02 per share for the same quarter last year, due largely to an increase in interest expense resulting from higher borrowing levels from AWR's credit facility. Consolidated revenue for the third quarter increased by $21 million when compared to the same quarter of 2024. Revenues for the water segment increased by $8.3 million, largely as a result of receiving the final decision in Golden State Water's general rate case with new rates effective January 1, 2025. Revenues for Electric segment increased by $4.3 million, mainly due to new 2025 electric rates as compared to 2022 rates used to record revenue during the same quarter of 2024. Revenues from ASUS increased $8.4 million, primarily due to higher construction activity during the quarter due to timing. Turning to Slide 9. Supply costs increased by $4 million, mostly due to higher overall per-unit purchased water cost included in customer rates in 2025. Looking at total operating expenses other than supply costs. Consolidated expenses increased by $10.3 million compared to 2024. This increase includes the impact of the Electric general rate case decision issued in January which authorized higher operating expenses, primarily for vegetation management and other wildfire mitigation efforts. These costs were previously excluded from customer rates and are not expensed -- were not expensed in the third quarter of last year, as they were being tracked in memorandum accounts. They are now included in adopted Electric revenue. In addition, the increase was due to higher ASUS construction expenses and higher overall operating expenses. These higher expenses were partially offset by lower interest expense, net of interest income, primarily due to decreases in interest rates and overall borrowing levels partially offset by reduced interest income from a decrease in regulatory asset balances. Lastly, there was an increase in other income net of other expense due largely to higher gains generated on investments held to fund a retirement plan during the quarter as compared to the same period in 2024 due to financial market conditions. Slide 10 shows the EPS bridge comparing reported EPS for the third quarter of 2025 against the same period for 2024. Moving on to Slide 11. Consolidated earnings for the 9 months ended September were $2.63 per share compared to $2.42 per share for the same period in 2024, an increase of $0.21 per share. The increase is largely generated from higher earnings at our regulated utilities. Turning to liquidity on Slide 12. Net cash provided by operating activities was $202 million for the year-to-date September compared to $134.2 million for the same period last year, with the increase largely related to the implementation of new rates at our regulated utility funds approved to generate proceedings as well as various approved surcharges or additional base rate from advice letter filings. In addition, the increase also resulted from differences in timing of income tax payments, billing and cash receipts for construction work at military basis at ASUS and the timing of its vendor payments. For investing activities, our regulated utility invested $151.8 million on company-funded capital projects in the first 9 months of this year and we project to be on target to reach $180 million to $210 million for this year. For financing activities, American States Water under its ad market offering program raised the proceeds of $40.2 million during the 9 months ended September 30, net of issuing cost and legal costs, leaving a remaining balance of $68 million available for issuance under the program. In July, Standard & Poor's Global Ratings affirmed a credit rating of A stable for American States Water and A+ stable rating for Golden State Water. These are some of the highest credit rating in the U.S. investor-owned water utility industry. With that, I'll turn the call back to Bob. Robert Sprowls: Thank you, Eva. On the regulatory front, as previously mentioned, in January of this year, the CPUC issued a final decision in connection with the recent water general rate case that covers rates for 2025 through 2027. We have discussed the details of this rate case decision in our prior earnings releases and calls. We have begun preparation for our next water rate case expected to be filed by July 1, 2026. As a reminder, the final decision ordered Golden State Water to transition from a full decoupling mechanism and a full supply cost balancing account, which were requested again in the general rate case application to a modified rate adjustment mechanism known as the Monterey-Style Water Revenue Adjustment Mechanism, or MRAM and an incremental cost balancing account for supply cost effective January 1, 2025. Without the continuation of a full revenue decoupling mechanism and a full cost balancing account for water supply, the company may be subject to future volatility in revenues and earnings as a result of fluctuations in water consumption by its customers and changes in water supply source mix. Final decision adopted the company's MRAM rate design proposal, which authorizes Golden State Water to increase the revenue requirement in the fixed services charges to between 45% and 48% of the revenue requirement depending on the rate making area, representing approximately 65% and of the water utilities fixed cost in aggregate. It also approved Golden State Water's sales forecast and its request for the continuation of a sales reconciliation mechanism, which would allow the company to adjust its sales forecast throughout the general rate cycle to address significant fluctuations in consumption. In August 2023, Golden State Water entered into an agreement which was subject to CPUC approval to purchase from a developer, the water and wastewater system assets in a development located in California's Central Coast region. This is a new planned community, which will serve up to approximately 1,300 customer connections at full build-out, which is anticipated to occur by 2034 under the current construction schedule, barring any future delays. On December 5, 2024, the CPUC approved a final decision granting Golden State Water's certificate of public convenience and necessity that establish rates for water and sewer services, including the company's recovery of the purchase price through future customer rates in this new San Juan Oaks and service area. After receiving CPUC approval and finalizing other closing procedures, in May of this year, the parties completed the closing of the transaction, which included the initial installation and conveyance of water and wastewater system assets of $10.7 million by the developer a noncash transaction to Golden State Water recorded during the second quarter of 2025. That resulted in an increase in the company's utility plant with corresponding increases in advances and contributions in aid of construction. In the future, Golden State Water will take ownership of the incremental water and wastewater system assets in phases as they are completed and ready to accommodate new connections. In addition, Golden State Water and the Public Advocates Office of the CPUC filed a joint motion with the CPUC in March to adopt a settlement agreement to authorize initial rates for water service in the new Sutter Pointe service area. Last week, the CPUC approved the settlement agreement in its entirety. The approval establishes initial water service rates for 2026 through 2028 and authorizes various balancing and memorandum accounts for this area. This new planned community in Northern California will be built out over time with the first development expected to serve up to 3,800 customer connections during the next 5 years. And over the longer term, 20-plus years allows for the construction of 17,500 total dwelling units at full build-out, as part of the overall plan approved by the respective counting. Turning our attention to Slide 15. We present the growth in Golden State Water's adopted average water rate base from 2021 through 2025 which increased from $980.4 million in 2021 to $1,455.8 million in 2025. That represents a compound annual growth rate of 10.4% over the 4-year period using 2021 as the base share for the calculation. Golden State Water anticipates a robust and sustained growth in its rate base over the next few years as a result of receiving its recent general rate case decision that not only authorizes it to invest $573.1 million in capital infrastructure. But in addition to that, capital investments of certain projects through advice their filings upon completion that will contribute to a further growth in rate base in the second and third year of this cycle. Turning our attention to Bear Valley Electric. As previously noted, in January of this year, the CPUC issued a final decision on the electric general rate case that set rates for 2023 through 2026. Like the water utility rate case, we have discussed the details of the electric rate case in our prior earnings releases and calls. We are working to file our next electric rate case in the first quarter of 2026. This past April, Bear Valley Electric also implemented new base rates to recover the revenue requirement associated with $11.6 million of capital projects approved for recovery through advice layers. In July, Bear Valley Electric and the Public Advocates Office of the CPUC filed a joint motion with the CPUC to adopt the settlement agreement resolving all issues in Bear Valley electric application to construct solar energy generation and battery storage facilities. The solar energy generation project will help Bear Valley Electric meet approximately 18% of its renewables portfolio standard requirement. These facilities will also help enable Bear Valley Electric to better control its energy and energy-related costs through self-supply from a local generation resource and also provide energy shifting capabilities and additional capacity during emergencies and peak load conditions. Among other things, the settlement agreement authorizes the construction of the facilities for a total combined cost of $28 million plus allowance for funds used during construction. Settlement agreement is pending approval by the CPUC to the proposed decision expected by the first quarter of 2026. If approved, the costs associated with the projects would be recoverable in customer rates at the time the projects are completed and in service. Let's continue to ASUS, which contributed earnings of $0.19 per share in the third quarter of 2025 as compared to $0.11 per share for 2024. The increase was a result of higher construction activity due to the timing of when the work was performed. Management fee revenues resulting from the resolution of various economic price adjustments and lower interest expense from lower borrowing levels partially offset by higher overall operating expenses. During the quarter, ASUS made substantial progress on its construction activities with year-to-date earnings of $0.45 per share as compared to $0.44 per share for the same period of 2024. We continue to project ASUS to contribute $0.59 to $0.63 per share this year, representing an increase of 7.3% to 14.5% year-over-year. ASUS was awarded $28.7 million in new capital upgrade construction projects through the year-to-date September of this year to be completed through 2028. As we look ahead to 2026, we project that ASUS will contribute $0.63 to $0.67 per share. In addition, we remain confident that we can effectively compete for new military-based contract awards. I would like to turn our attention to dividends. In the third quarter, we raised our dividend by 8.3% and our quarterly dividend rate has grown at a compound annual growth rate or CAGR of 8.5% over the last 5 years. These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term. Our unrivaled dividend history since 1931 is something that the company is proud of and will continue to be an asset to our shareholders. I'd like to conclude our prepared remarks by thanking you for your interest in American States Water. And we'll now turn the call over to the operator for questions. Operator: [Operator Instructions] Our first question comes from Ian Rapp with Bank of America. Ian Rapp: Congrats on the good quarter. I'm just curious on ASUS, obviously, a good quarter and a good contract announcement there. If I look at the incremental contract, I'm just curious if you could provide a little color on the timing and when we might see that further into EPS over the -- I think you said '25 to '28 period. I'm just looking at the ASUS guidance for '26, and it looks like year-over-year a little bit down relative to the last 3 years. So just curious if that's just contracts rolling off or what the earnings power looks like going forward there? Robert Sprowls: Yes. I mean it's a pretty good step up, I think, in the earnings from $0.59 to $0.63 to the $0.63 to $0.67. It's -- but would just talk a little bit about the new capital upgrades. Those have been an important part of our overall performance and getting almost $29 million of new capital upgrades a pretty good year for us. Additionally, last year, we had a fairly significant amount of new capital upgrades relative to our history in the neighborhood of $55 million. So between those 2, we've got a pretty good backlog to do new capital upgrade work in '26 and beyond. We also have the renewal and replacement work that we're doing. So it's, I would say, a pretty good year, recognizing we don't -- we're not adding any new bases in that number. It's -- I think, as you know, Ian, there's a transition period we typically have to go through once we were awarded a contract. And so the expectation is we likely won't have a new contract to deal with in 2026 just because of that transition period and where we think the government might be on privatizations. Ian Rapp: Okay. Got it. Yes, that makes a lot of sense. And then just on the new announcements or, I guess, the new approvals on the new customer connection growth, it looks like some robust activity around the new development projects. I'm just curious like if you look at these numbers, should we think about translating that -- those new customer connections to rate base based on looking at your Golden State rate base relative to your customer base or as a rule of thumb? Or should we think about it more just on the capital that you've applied for? Just any color as to how we should think about the rate base translation would be helpful. Robert Sprowls: Yes. I guess the one difficult thing with those new customers is it is a function of people wanting to buy homes and a developer signing them up to buy homes. And so looking at the potential there. It is under this incremental acquisition approach. So as phases are done, the company will buy the infrastructure. I think the way to think about it maybe is the distribution infrastructure for these houses. And that's a pretty favorable activity for both the company and the developer because typically, the developer would have had to advance those facilities to the company to be then paid back over 4 years. So we will be acquiring new systems there. And I'm not exactly sure what to tell you about how you bake that into your rate base forecast because I do think the figuring out when those customers are going to be added is a challenge. Ian Rapp: Right. Okay. That's helpful color. And with that growth, maybe just one more if I could squeeze it in. Obviously, the big thematic these days is corporate M&A. As you look out at your growth profile, do you feel like gaining scale in California or other places would be beneficial? Or I'm really just curious to hear your thoughts on how you're thinking about M&A as investor attention kind of shifts toward it. Robert Sprowls: Yes. I mean we were a bit surprised by the announcement of the merger between American Water and Essential Utilities, which I think that's what you're sort of asking about. However, we don't really think that merger will impact our company's strategic direction going forward. We are optimistic about the future of our company. The rate bases at both of our regulated utilities continue to grow at strong rates of growth, and our ASUS business also continues to grow at a good pace. We noted in our presentation materials, the 10.4% 4-yea CAGR on our rate base for 2025 -- sorry, 2022 to 2025 at Golden State Water in our presentation and Bear Valley Electric's rate base has been growing at a faster rate than that. And then, of course, we will see additional customer growth, we believe, through the 2 new developments that we've mentioned, San Juan Oaks and Sutter Pointe over time. So I think generally, we're happy with our growth plan. That's not to say if a good deal came along. We wouldn't try to buy some systems that are in places where we believe the regulatory framework is neutral to positive. Does that answer your question? Ian Rapp: Yes, that's super helpful. And that all makes a lot of sense. I appreciate you guys walking me through and congrats again on the quarter and I'll echo your confidence on the growth rate. It looks promising. Operator: Our next question comes from Angie Storozynski with Seaport Agnieszka Storozynski: Okay. So you added your rate base projection for 2025 on Slide 15. It is actually a little bit lower than I would have implied it from just the pace of CapEx less depreciation. I mean, Eva is there any reason why again, just assuming that you're spending about, I don't know, $190 million, right, and around $30 million something of the depreciation that would have implied a slightly higher rate base for '25 versus '24, no? Eva Tang: So Angie, we talk about -- we have tons of advice letter yet to be filed toward end of this year in the rate case decision, we will authorize about $76 million of advice letter that we can file by end of this year to get new rates effective 1/1 next year. So we are preparing the documentation and close the job and to get the final number in Q4. So we anticipate that should be approved for rate effect is 1/1 of next year. So after 2025, those actual advice letter project amount will be added to the rate base. So that's maybe something... Agnieszka Storozynski: And that $573 million, that number, does that include the advise letters? No... Eva Tang: Does not including the advice letter that was started to do prior to the rate case cycle. So there are $58 million I would think advice letter coming from the prior rate case that were allowed to added to rate starting next year. So in total, $573 million, I believe, including $17 million of new advice letter project, but we have another $58 million project that come in from the prior rate case. So both of which can be added to our rate base starting next year. Agnieszka Storozynski: Yes. I mean -- and again, I don't want to nickel and dime you here, but it's just that, that would imply this $573 million number, right, that I'm spending about, again, assuming that it's ratable, $190 million a year, right, if I divide it just by 3 simple math and then subtract $30 million or say $35 million, that would still suggest that, that rate base should have grown by about $150-something million versus the $100 million that is shown of a growth between '24 and '25. So is it deferred taxes, again, just like simplistically. Eva Tang: Our actual spending is about that amount. I was just talking about the adopted rate base. Robert Sprowls: We are spending a little ahead of the rate cycle because we do have an earnings test in California that we have to meet. And you are predisposed to try to spend early because it's a 13-month average. So that may be contributing a little bit. I don't know, Eva, what do you... Eva Tang: Yes, I think that will definitely contribute. And we want to make sure we can finish advice letter project so we can file this year. So we've been spending the $76 million that authorized us to file . Agnieszka Storozynski: And that wouldn't count towards the right base? Because my point is that the rate base is lower than it would have been implied from the approved CapEx minus depreciation. Eva Tang: Yes, it will count as the actual rate base. It's just not -- currently not in the revenue requirement based on the adopted rate base. We'll have a new rate next year to cover what we spent so far. Does that makes sense? Agnieszka Storozynski: Yes. Okay. And even though you have gone through the GRC for the water business, you will not show the projected rate base for '26 and '27? Eva Tang: We will show that next time for sure, because we want to make sure we have the exact number of what we can file by end of this year for those advice letter even though we are also right $76 million, not sure that's exactly the number will be in the adopted rate base. So we're very conservative. We like to have a pretty certain number before announce [indiscernible]. So definitely, we'll announce that next quarter earnings. Agnieszka Storozynski: Okay. Okay. I've been asking. So I'm just repeating the question. Okay. I have... Eva Tang: Yes, I can probably share with you the [indiscernible] number for next year, but I don't have the information right now. But it's public information, so I can shoot you an e-mail, Angie. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Bob Sprowls for any closing remarks. Robert Sprowls: Thank you, Bailey. Just want to wrap up by thanking you all for your participation today, letting you know that we look forward to speaking with you next quarter and then wishing all of you a happy holiday season. Thank you very much. Operator: The conference has now concluded. You may disconnect.
Operator: Greetings, and welcome to the Advantage Solutions Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce [ Vic Mohan ]. Thank you. And Vic, you may begin. Unknown Analyst: Thank you, operator. Welcome to Advantage Solutions Third Quarter 2025 Earnings Conference Call. Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide their prepared remarks, after which we will open the call for a question-and-answer session. During this call, management may make forward-looking statements within the meaning of the federal securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors. Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations and revenues will exclude pass-through costs. And now I would like to turn the call over to Dave Peacock. David Peacock: Thanks, Vic. Good morning, everyone, and thank you for joining us. Before we begin, I want to acknowledge the continued focus and dedication of our teammates. You are advantage and your commitment to delivering for our clients and customers, especially as they navigate a complex consumer environment remains central to our success. Starting with our third quarter results. Revenues of $781 million were down 2.6% versus prior year. Adjusted EBITDA was $99.6 million, a decline of 1.4% versus prior year, a sequential improvement from the second quarter. This was the result of a strong performance in our Experiential segment, where demand remains robust. This partially offset softer trends in branded services and anticipated declines in retailer services due in part to timing shifts. We generated strong cash flow driven by our marked improvement in working capital, resulting in adjusted unlevered free cash flow of $98 million or nearly 100% of EBITDA. As a result of the strong cash flow generation, we ended the quarter with over $200 million in cash, including the proceeds from the sale of our 7.5% equity stake in Acxion Foodservice. During the quarter, we leveraged the benefits of our structurally diversified platforms, pulling levers in real time across our high-volume labor business and retailer and experiential. We meaningfully increased hiring activity to meet growing customer demand, enabling the business to execute more events in in-store retail work, which drove strong incremental margins. Our ability to respond to rapidly changing dynamics with the right data, systems and talent provides resilience in the near term, while longer term, we remain well positioned for an improving environment across our network businesses, primarily in branded services. As we move into the acceleration phase of our IT transformation and modernization effort, having implemented our new ERP and enterprise data infrastructure with Phase 1 of our SAP and our Oracle EPM environment in place, we are beginning to leverage these systems to drive efficiency gains, improve workforce optimization, increase cash flow, accelerate data integration and sharpen visibility into performance. These actions enable us to operate as a truly insights-driven organization even as we continue the remaining phases of our SAP and Workday implementations over the next 15 months. We remain committed to establishing a leading data architecture and system foundation to yield operational savings and better data-driven services for our clients and customers. We're advancing the development of our new Pulse system, an AI-enabled end-to-end decision engine designed to elevate the speed, precision and impact of our commercial decision-making across sales and merchandising. This next-generation platform will seamlessly integrate Advantage's data intelligence, including unique retail data with dynamic real-time capabilities, augmenting our team's ability to anticipate demand, prioritize actions and drive efficiency and effectiveness across client workflows. At the same time, we are deepening key strategic partnerships that enhance our technology capabilities and operational reach, most recently through our expanded collaboration with Instacart. By combining their live in-store audit capabilities with Advantage's retail execution network, we are building an alert-based retail model that allows CPG brands to quickly identify and correct on-shelf availability, pricing and display issues in real time. This approach leverages Instacart's network of more than 600,000 shoppers alongside our execution expertise to reduce out of stocks, improve compliance and drive stronger ROI for our customers. We closed over 6 million distribution voids and out-of-stocks each year, and this new partnership will enable us to do more of this and do it faster than anyone in the industry. The early results of our 200-store pilot have been encouraging and the partnership will scale into additional markets in 2026. The partnership reinforces our commitment to data-driven execution and technology-enabled growth. We also continue to roll out our centralized labor model, which we believe will significantly strengthen our high-volume labor businesses in our retailer and Experiential segments over time through increased utilization, which will drive higher retention and ultimately stronger execution for clients and customers. We see this as providing some benefit in the fourth quarter with acceleration in 2026. Our teams remain laser-focused on the fundamentals, deepening customer relationships, elevating our technology platform and driving better labor utilization in our highest volume service lines. These actions are helping us to operate with more consistency and improved execution in the market, which leads to a better experience for our customers. Turning to a review of our segments. We are adapting as we continue to operate in a dynamic macro environment. Inflationary pressures and a cautious consumer continue to curb demand. Last quarter, we noted that higher income shoppers remain more resilient while value-oriented consumers were becoming more selective, and we saw the trend persist in the third quarter. Accordingly, CPG companies and retailers alike are remaining increasingly cautious and sharply focused on stronger ROI on every dollar deployed. Our platform with its ability to drive efficient execution, informed decisions with data and improved commercial outcomes positions us well to help our customers compete and win. In Branded Services, we faced uncertain market conditions as tariffs, channel shifts and a softening growth environment continue to influence spending. While the decline in revenues and EBITDA eased sequentially, the business continued to face headwinds. The result was a reduction in commission-based revenues through scope and customer retention that was not fully offset by new customer wins and growth in incremental services within our existing client base. While the environment remains challenging, we continue to focus on investing back into this business, strengthening our value proposition and pursuing customers that can benefit from our core offerings, both near and long term. We expect branded services revenues and EBITDA to remain under pressure. However, we are encouraged with a larger pipeline of new business opportunities as we close out the year. Turning to Experiential Services. We had a very strong quarter with solid growth in revenues and EBITDA. Demand for events continued to rise, and we responded with increased staffing levels, resulting in higher revenues and incremental margin. Demo event volume grew strongly in the quarter, up 7% on an underlying basis and execution reached 91%. We continue to see strong demand signals in this business, and we expect improving execution in the fourth quarter as we enhance our talent acquisition processes even more. Retailer Services was down year-over-year in revenues and EBITDA. As we indicated in our last earnings call, this reflected a difficult year-over-year comparison and a shift in the timing of some project activity out of the third quarter. We also experienced a negative impact from ongoing channel shift toward club and mass stores as well as some pressure from more cautious retailer spending. We remain focused on the controllables as staffing levels and execution rates continued to improve through the quarter, enabling stronger coverage and an ability to satisfy demand for projects. We view these staffing improvements, along with a healthy project pipeline as leading indicators of stabilization and recovery and are well positioned for improving revenues and EBITDA in the fourth quarter and beyond. While consumer behavior remains challenging, effective execution, transformation-enabled technology, a solid project pipeline and accelerating customer demand gives us confidence in the long-term trajectory of the business. Our diversified business model, which includes high-volume labor businesses, creates operating leverage and the disciplined execution, we can redeploy teams and flex staffing to meet customer demand, creating outsized incremental margin growth in the business. We also continue to improve our productivity through AI initiatives, which are accelerating efficiencies in our back office as well as sales tools and data analysis while engaging with vendors to build platforms and applications at scale. Taking into account our expectations for the fourth quarter, we are reiterating our revenue growth guidance of flat to down low single digits for the year. We are updating our EBITDA guidance for the year to include the Acxion Foodservice divestiture as well as the challenging macro environment, especially affecting our Branded Services segment and now expect mid-single-digit decline. We continue to expect unlevered free cash flow to be greater than 50% of EBITDA. We are encouraged by the strong cash flow performance despite the negative impact from a timing shift of our payroll period weighing on the working capital in the fourth quarter. We expect cash flow generation to remain strong, driven by continued working capital improvements, lower CapEx and benefits from our labor and efficiency initiatives. Our business is built to generate consistent cash flow. And as the transformation investments taper and our modernization work takes hold, we continue to expect strong cash conversion going forward. We are confident in the trajectory of the business and are taking the right long-term actions to strengthen our position and restore growth. We continue to focus on disciplined execution while improving our systems, technology and labor capabilities. I'll now pass it over to Chris for more details on our performance and guidance. Christopher Growe: Thank you, Dave, and welcome to all of you joining the call today. I will review our third quarter 2025 performance by segment, discuss our cash flow and capital structure and expand on Dave's guidance commentary. In Branded Services, we generated $258 million of revenues and $42 million of adjusted EBITDA, down 9% and 15% on a year-over-year basis, respectively. This segment continues to experience challenges, mainly within the sales brokerage business, which we are working expeditiously to address as well as our omni-commerce marketing business. The softer growth environment for consumer packaged goods companies has weighed on our organic growth performance, and we continue to see some pressure around in-sourcing, which has been a headwind to growth. However, we took cost actions earlier in the year to improve our efficiency. We maintain a robust pipeline of new business opportunities, offering confidence in our ability to move towards stabilization in 2026. In Experiential Services, we generated $274 million of revenues and $35 million of adjusted EBITDA, up 8% and 52% on a year-over-year basis, respectively. Solid execution and the continued improvement in staffing levels enabled our teams to execute more events in the quarter. We were able to pull operational levers during the quarter to accommodate growing demand that was again ahead of our expectations. Events per day increased by 7% versus the prior year on an underlying basis, and we see momentum accelerating into the fourth quarter. Execution rates were approximately 91%. And given strong fixed cost leverage, we saw EBITDA margin improvement of 370 basis points year-over-year and up strongly on a sequential basis. We are beginning the rollout of our centralized labor model for part of our experiential business with the goal of further improving our efficiency, which will also support a better teammate experience as our teammates access an opportunity to garner more hours in the store. In Retailer Services, we generated $249 million of revenues and $23 million of adjusted EBITDA, down 6% and 22% on a year-over-year basis, respectively. As expected, we faced a challenging comparison to the prior year period and results were impacted by project activity timing. Additionally, advisory and agency work were impacted by channel mix. We are developing more bespoke services to increase our value add to retailers and focusing on expanding our services beyond the grocery store to other retail outlets. We maintain a strong and growing pipeline of new business opportunities in this segment. Across the businesses, shared service costs were down year-over-year in the quarter, which benefited profitability in all segments and reflects the stabilization of costs we expect to continue. Moving to the balance sheet and cash flow. We ended the quarter with $201 million in cash on hand, a notable increase from $103 million in the second quarter, driven by the improvement in working capital, mainly DSOs and the benefit of the $19 million in proceeds from the sale of our stake in Acxion Foodservice as well as the $22.5 million in proceeds in July related to the first of 2 deferred purchase price installments for June Group. We did not repurchase debt or shares in the quarter. Our net leverage ratio was 4.4x adjusted EBITDA, which is down from the second quarter, and we expect it to hold at this level in the fourth quarter. With cash on hand, expectations for stronger cash generation going forward and approximately $450 million available on our undrawn revolving credit facility, we have ample liquidity to operate the business in the current macroeconomic climate while investing for growth and opportunistically paying down debt. Turning to cash generation. We ended the quarter at approximately 62 days of sales outstanding, an 8-day improvement from the second quarter as cash collections continue to recover after the transition to our new ERP system. Optimizing DSOs has been a big focus for the organization, and we continue to make progress in reducing DSOs as we move forward into 2026, which will contribute to additional cash flow. CapEx was $11 million in the quarter. We now expect full year CapEx in the range of $45 million to $55 million, moderately below our previous guidance due to the timing of projects occurring this year and continued efficiency in our spending. Adjusted unlevered free cash flow was $98 million in the quarter, and the conversion rate was nearly 100%, driven by the stronger working capital performance as well as lower-than-expected CapEx. In addition, we made progress on transforming and optimizing our portfolio. During the quarter, we monetized our 7.5% stake in Acxion Foodservice for $19 million in cash proceeds. This divestiture helped streamline our portfolio and boost our liquidity position. We will continue to capitalize on similar opportunities that make strategic sense going forward. As Dave highlighted, our revenue guidance is unchanged, but we are adjusting our full year EBITDA guidance due to the divestiture of our stake in Acxion Foodservice as well as the more challenging macro environment. We remain encouraged by the sequential progress in 2025. After a challenging first quarter to start the year, we have seen a steady improvement in our operating performance, which has supported a strong revenue and EBITDA trend for the business. As indicated by our full year guidance, we expect a stable growth trend in revenue and EBITDA in the second half of the year, supported by strong execution across our labor-related businesses. The diversity and resilience of our business model supports this improved business performance and provides confidence in our path forward. As Dave mentioned, we continue to expect 2025 adjusted unlevered free cash flow to be above 50% of adjusted EBITDA. We lowered our CapEx spending outlook slightly again this quarter to a range of $45 million to $55 million, which will aid unlevered free cash flow growth for the year. Our expectation for interest expense remains in the range of $140 million to $150 million, assuming no additional debt repurchases. Robust cash generation is expected to continue in the fourth quarter. Excluding a $45 million year-end payroll shift into 2025 due to timing, we anticipate adjusted unlevered free cash flow conversion close to 100% and net free cash flow conversion of approximately 30% in the second half. We continue to expect our restructuring and reorganization expenses to be about half the level of the prior year, which is contributing to our stronger net free cash flow performance in the second half and the year. Our business is designed for efficient and consistent cash generation, and we expect to return to our typical net free cash flow conversion rate of at least 25% of adjusted EBITDA next year and beyond as our transformation improves our services and modernizes our processes for more consistent and efficient results. Thank you for your time. I will now turn it back over to Dave. David Peacock: Thanks, Chris. We believe our expertise and range of services position us well to navigate the current macroeconomic environment with resilience and agility. We continue to execute with discipline and advance the foundational work of the company. We are making measurable progress in improving our systems and workforce efficiency, strengthening the backbone of our operations and competitive positioning. At the same time, we continue to make progress toward completing the strategic initiatives that will enable Advantage to reach its full potential as a technology-driven industry-leading service provider and generate meaningful cash flow for our shareholders. Operator, we are now ready for a Q&A session. Operator: [Operator Instructions] Our first question comes from Lucas Morison from Canaccord. Lucas Morison: So maybe just to start here, discussing the EBITDA outlook and the minor trend there. Can you just frame like how much of that change was related to the divestiture versus core operations? Christopher Growe: Yes, I can go. Luke, good to speak to you. Welcome to Advantage. In the fourth quarter, so we had an EBITDA contribution from that stake, like we do with other joint ventures that we have. It's a relatively small piece of the fourth quarter. And outside of that, obviously, you have this overall challenging macro backdrop that I'd say. But I'd just say we're bringing down a little bit, and there's one element of like business mix, never seen stronger growth from experiential versus branded as an example. So there's a little bit from the divestiture and a little bit from that just general macro environment that we're incorporating into the guidance here. Lucas Morison: Got it. Makes sense. And then maybe just like thinking bigger picture longer term, it sounds like experiential continues to outperform. Branded services and retailer are kind of softer and lagging. Can you just talk about like how you see the overall portfolio mix evolving as we enter 2026? Do you expect experiential to remain the primary growth driver? And do you see stabilization in branded and retailer returning the model to a more balanced footing? David Peacock: Yes, Lucas, this is Dave. Yes, we do see experiential continuing to perform well, and we see continued demand in that segment. And then as it relates to branded and retailer, and we talked about it in the second quarter and just here again, retailer is really facing a little bit of an anomaly in the third quarter. We feel very good about the retailer segment and its outlook as we move into 2026, especially the merchandising services, which is the largest component of that business. And then on the branded side, we expect sequential improvement as we move through 2026. Obviously, the macro backdrop affects that segment more than the others. But we recognize that the efforts we're undergoing to kind of get the business back where it needs to go are starting to pay off. And our pipeline for the fourth quarter as we end the year of new business is very strong. So we have optimism of a more stabilized branded services as we move into 2026. Operator: Our next question comes from Greg Parrish from Morgan Stanley. Gregory Parrish: Maybe to start, I just thought it would be good to hear maybe an update on the market and the consumer. Obviously, hearing a lot of softness out there, especially on the lower income side this week even from some restaurants. So maybe kind of just update us on what you're hearing from your clients in store. David Peacock: Yes. Thanks, Greg. And I'm glad you asked that question. We make the rounds with leadership across most of our clients and customers on a quarterly basis. And obviously, everyone has been tracking the consumer and the retail names pretty closely over the last couple of weeks and a little bit mixed. You see some positive results for some. But for the most part, you're seeing guidance down or a little more of a negative tone relative to the consumer. I do think we've got 2 realities. You've got, call it, kind of higher income consumers still remaining resilient, still shopping, still realizing trip and what have you. But when you think of all the things that have hit consumers more broadly and especially those on the lower end, you've got pricing that largely rolled out at least in the businesses that we work with. Not all of them, but a lot of them in the kind of late second quarter, early third quarter. And there was a byproduct of tariffs or tariff concerns. There was a byproduct of commodities in some large categories. You've got the continued GLP-1, which on the food side does have some effect on demand. And then you just -- if you look kind of longer term, you've got a little bit more constrained population growth. And it's not just immigration reform, but it's also birth rate is actually -- if you look kind of back a few years and look forward, it's lower. So I think that's created some of the environment we have. Now I think there's a belief that there's some cyclicality to those -- some of those dynamics. If you think of being GLP-1, there'll be a lapping of that eventually and the growth of the adoption of that will slow. Number one. Number two, I think you see a lot of CPGs and even the private label side leaning into innovation and innovation can spark growth within these categories. And then you have different realities across different categories. So categories that are protein-centric, categories that are expandable consumption, categories that lean a little bit more on the health orientation continue to show pretty strong growth. And then you've got obviously other categories maybe they're struggling a little bit. So I think that it's -- as we move to '26, a little bit of cautious optimism that '25 was a pretty tough year for the consumer and some hope that some of the factors on the margins that have affected the consumer, especially on the low end, are mitigated a bit and taper a bit as we move into '26. Operator: Our next question comes from Faiza Alwy from Deutsche Bank. Faiza Alwy: I wanted to -- you mentioned timing as it relates to retailer services, and it sounded like you're a little bit more optimistic on that business as we look ahead. So just talk a bit -- just put a finer point on the timing issues and talk more about the visibility and pipeline that you're seeing into next year. David Peacock: Sure. Thanks. To be clear, so third quarter was a combination of a difficult comp due to the timing of project work last year, not all of which is going to be repeated this year. And then also the timing of some project work, as you saw in the second quarter, retailer had a pretty strong quarter, and we do anticipate improvement in the fourth quarter. When we zoom out and look at the year, because I know we all look quarter-to-quarter, but I like to look at the year, the retailer segment will be for us, I think, largely in line with expectations, but for some of this kind of macro consumer impact that's obviously affected retailers that hit probably a little bit of our advisory business, a little bit on the merchandising services side, only in the retailers will pull back investment a bit on the project work. The continuity work continues, but it is important to understand that the continuity work is also funded by a flow-through of revenue for the retailer. And then when we talk about the pipeline as we go into 2026, our business development team, and we've really redoubled efforts there, has really done a nice job building a pipeline really across, if you will, all our segments, but especially the branded segment. And we're seeing just better success as it relates to closing on opportunities. So we're optimistic as we look out into '26 and the ability as we lean into this business development effort. And it's a byproduct of all the work that's been done by our teams around talent upgrades, which is a combination of some new people, but a lot of training, investment in technology and our data lake is now paying off with more robust and faster data at the fingertips of our sales teams because as you can imagine, that's the most critical factor in helping drive client performance is having deep and what I'd say, fast insights relative to what's happening with brands and SKUs so that they can make decisions around promotion schedules, merchandising plans, what have you. Faiza Alwy: Understood. And then I guess just a similar question on branded because I think you're saying that you're expecting declines to moderate into 2026. Like is that because of, again, some of these business development efforts that you're talking about? Or do you think like market conditions or the macro environment is likely to improve into 2026? David Peacock: I mean, look, it's a lot of the work that I was describing before, which is the business development and just improving what I call the machine, the sales machine about underpins that Branded Services segment because so much of it is in how we represent our clients with retailers on the sales side and the headquarter selling support. And then also on the retail merchandising side, with our Instacart partnership, especially being able to demonstrate ROI in the services we provide and addressing out of stocks. We mentioned in the prepared remarks, we're close to 6 million out of stocks a year. If we can leverage the relationship with Instacart to identify those more quickly and close those faster, that's just more sell-through, which both benefits us and our clients. And then -- I mean, look, I believe opinion of one, that the industry, like I mentioned earlier, it has some cyclical aspects this year that likely won't repeat or the industry, as I say, learns to adjust to a new environment and some of the uncertainty that you heard a lot in the first half that I don't think you're hearing quite as much in the second half is probably an example of the industry, if you will, and companies kind of learning how to manage in this new reality. And I personally remain optimistic that the macro market should be a little bit better for the consumer as we move into 2026. Operator: Our next question comes from Greg Parrish from Morgan Stanley. Gregory Parrish: Okay. Yes. So I don't know what happened, perhaps user error -- thanks for coming back. Chris, I just want to clarify on the EBITDA guide. So I think you said like stable second half. And then -- I mean, obviously, the mid-single digits, you can kind of plug in a lot of numbers the fourth quarter and get to that. So you've had improvement every quarter in the year-over-year EBITDA. Third quarter, you're down 1. So like sort of similar level, maybe a little bit better to flattish. How do we think about the year-over-year 4Q EBITDA relative to third quarter? Christopher Growe: Yes. And I think relative to the third quarter, Greg, obviously, there's some nuances year-over-year. We do expect experiential to have a very good quarter. We mentioned retailer gets better in the quarter. There's a tougher comp on the branded services side, just given some of the activities of a year ago in the fourth quarter. That mid-single-digit growth is meant to have a range, and it would get you to a relatively flat second half overall, certainly for revenue and then like a flat to down level of EBITDA overall. And I think that's just where we keep it right now is right at that level and gives us a little bit of flex for the fourth quarter here. David Peacock: Yes, Greg, I'll jump on Chris' response, too. I mean if you really look at our year without digging in detailed fourth quarter, let's talk about second and third, we all know we had a rough first quarter, and there was a couple of things. We knew when we implemented SAP that given our business and the fact that working capital is really driven for us by DSO and the impact that, that implementing SAP can have on cash collection and what have you that from a DSO standpoint, it would be a rough period. We also knew we were transitioning to more centralized talent acquisition and workforce planning. And with any transition, you're going to have bumps. So we have that hiring shortfall. What I'm excited about is the team is hiring for us a record pace and doing a great job in bringing in more and more talent to address the increasing demand we have in the labor parts of our business. I'm also excited, and I think we don't always acknowledge we have had a very good SAP implementation. And we've had a team that's really pulled together even amidst a challenging kind of broader environment and done a great job and to see our DSOs kind of back to close to where we were at the end of last year. Basically realizing about a 6-month challenge just given the implementation. We've all seen some of the other stories of more difficult or challenged SAP implementations. And I just want to note that our team has done a phenomenal job in implementing that amidst everything else going on in the industry. And I think it's an example of the ability to execute both projects but also on a day-to-day basis in driving the business. Gregory Parrish: Yes. Okay. And maybe one more each on the segments here. Maybe just experiential, you've been recovering from labor shortages. Like how much of this -- you talked about demand a lot this quarter. So really trying to unpack like how much of this is staffing up versus like real demand increases? And then how do I think about that heading into '26? And like how sustainable is the growth here, especially given the backdrop of you're recovering from COVID and staffing up post-COVID. And then as we reach normal here, what's going to sustain growth going forward? How do we think about that? David Peacock: So events per day grew 7% and execution, frankly, was only 91%. What that implies is while we were able to satisfy an extra about 850-plus events per day during the quarter, we could have done more. And for us, it's why I'm even optimistic about the fourth quarter as we move into '26 because our -- the fidelity of our hiring and onboarding machine, if you will, is improving every day. And so -- and then demand is there. I mean there was -- I would argue, unmet demand in the third quarter that we could have capitalized on and even with a great talent acquisition and onboarding process. So there's more to be had. I think the other thing you see is COVID is in this space kind of long in the rearview mirror. There are some retailers that have opportunity to kind of get back to that COVID level. There are a number of retailers that are at that level or beyond. So we're not doing that comparison back to COVID as we used to do because this is now just underlying growth and demand for this business. And part of it is, as I mentioned earlier, the innovation that's going on within the industry, number one, especially on the consumables side. And then you are seeing some sampling efforts around general merchandise, and it's crazy that sounds. But we've got a program this year with one retailer around toys and having kids kind of be able to see in parents. So as they start planning for holidays, maybe driving those categories for these retailers a little bit more. So this is a segment that's going to continue to exhibit growth. And I'm just really proud of the team for meeting the demand and yet at the same time, challenging them every day to continue to find ways to both make the experience for our teammates as the best they can be and continue to bring more teammates in to meet this demand. Christopher Growe: Greg, to add a couple of points here. I think from a high level, what I wanted to add was that these activities and this investment that retailers and/or CPGs make drives a return. So I think with the fact that you've got a return on this investment and you've got enough activity going on, there's a desire to want to lean into it. It also helps drive traffic. So there's a lot of good features of this business that can help differentiate a retailer. The other thing I want to say was that we've had pretty solid pricing here, which gives us an ability to offset some of the incremental inflation in labor. So -- and then when I wrap it all together with the incremental demand and the pricing coming through to help offset some of the incremental investments we're making in wages and with our teammates, we've got a really strong incremental margin. So that really shined through in this quarter. And I think that's something where we can -- we should continue to see some of that incremental margin benefit as this business continues to grow. Gregory Parrish: Yes. Okay. That's all very helpful. And maybe just to wrap here, touch on branded and some of the comments you made. With the backdrop, I know it's been a very challenging market there. You called out some new customer losses. And then I think you mentioned in-sourcing on the call here as well. If you could unpack those 2. And are the losses to competitors? Or is that losses to in-sourcing? Or is both happening? And then is there an uptick of in-sourcing that you're seeing? I just wanted to maybe clarify that. David Peacock: Yes. I think when the comments were made, it's a little bit more of a longer-term trend that we've seen relative to in-sourcing. And like most trends that we envision that ultimately tapering because you get to a point where you kind of in-source the accounts, if you will, that you want to call on. We've obviously seen some of that this year. We have had some losses to competitors as well. And then we've had wins and wins from those very same competitors. In fact, this year was a very good year from a win standpoint. So -- and then we have to look at kind of net losses and wins. And we're constantly assessing the drivers and what I'll call the sales action plan that we started in earnest in the summer -- in the early part of the summer was to address the kind of root causes of that. And I think this notion of being the fastest in the industry, identifying, again, the root cause of any sales issue or opportunity our brand or SKU and be able to proactively action that on behalf of our clients has been the focus of our efforts. So that combination of work and the upskilling of both the technology and talent against that with, again, as you heard, a little bit, at least in my view, of some optimism on maybe a little bit better macro environment next year and the fact that our business development efforts are really bearing some fruit as it relates to pipeline gives us some optimism to see that business start stabilizing and obviously improving as we get into '26. Christopher Growe: And I might just add a quick comment on there, Greg, around the -- just 2 dynamics. We talked about the in-sourcing. I think that would be the predominant area of loss, if you will. But then beyond that, just there's been organic growth softness. We've talked enough about a challenging macro environment, but that definitely was a weight on the quarter and has been for the year, frankly. So we can't dismiss that because it's a pretty meaningful contributor to this. Dave mentioned the large pipeline. That's actually just even accelerated in the third quarter. How we can go execute that pipeline. Let's be clear, but that's something I'd just say it gives you a lot of optimism in terms of the business going forward. And I just want to add one other element around the omni-commerce. There's a marketing business within this as well. It's been -- you can look at the industry trends there it's been a little more challenged. That's been also another, call it, factor in our softer revenue growth performance in this business. Operator: There are no further questions at this time. I want to turn the call back over to David Peacock for closing comments. David Peacock: Yes. We want to thank everybody for joining, and we look forward to connecting with this group on next quarter, and we will talk then. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for participating.
Operator: Greetings, and welcome to the Fortuna Mining Corp. Q3 2025 Financial and Operational Results Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Carlos Baca, VP of Investor Relations at Fortuna Mining Corp. You may begin. Carlos Baca: Thank you, Paul. Good morning, ladies and gentlemen, and welcome to Fortuna Mining's conference call to discuss our financial and operational results for the third quarter of 2025. Hosting today's call on behalf of Fortuna are Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder; Luis Dario Ganoza, Chief Financial Officer; Cesar Velasco, Chief Operating Officer, Latin America; and David Whittle, Chief Operating Officer, West Africa. Today's earnings call presentation is available on our website at fortunamining.com. Statements made during this call are subject to the reader advisories included in yesterday's news release, the webcast presentation or management discussion and analysis and the risk factors outlined in our annual information form. All financial figures discussed today are in U.S. dollars unless otherwise stated. Technical information presented has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services and a qualified person as defined by National Instrument 43-101. I will now turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder of Fortuna Mining. Jorge Durant: Good morning, and thank you for joining us today. The third quarter was a strong one for Fortuna, not only in terms of operational delivery, financial results and continued buildup of Fortuna's balance sheet, but also in the meaningful progress we have made in positioning the company for the next stage of growth. But let's start with safety. By the end of October, we achieved 318 days or 9.7 million work hours without a lost time injury, our longest streak yet. Our total recordable injury frequency rate improved to 0.86, down from 1.6 a year ago. These results demonstrate our collective commitment to ensuring everyone returns home safe and sound. Turning to the numbers. We realized an average gold price of $3,467 per ounce, up 5% from the second quarter and up 20% from the first quarter of the year. Attributable net income reached $123.6 million or $0.40 per share, driven by a $69 million impairment reversal at our Lindero mine. Adjusted net income was $0.17 per share, impacted by higher share-based compensation due to a rising share price and a $7.4 million foreign exchange loss in Argentina, which both together account to approximately $0.04 per share. Our strong free cash flow from operations was $73 million with net cash from operating activities before working capital changes at $114 million or $0.37 per share, surpassing analyst consensus of $0.36. During the quarter, we recorded $13.5 million in withholding taxes related to the repatriation of $118 million from Argentina and Côte d’Ivoire. We expect regular repatriations moving forward. Overall, our business benefits from higher realized gold prices, improving margins and strong cash generation. As a result, our liquidity position at the end of the quarter stands at a solid $588 million with a growing net cash position of $266 million. This enables us to accelerate our pursuit of multiple high-value opportunities in the asset portfolio across different stages of the project life cycle. In Côte d’Ivoire, at Séguéla, our flagship mine, we are expanding the life of mine and boosting annual gold output through exploration success at Sunbird and Kingfisher deposits. In Senegal, our predevelopment stage Diamba Sud project boasts strong economics, advancing towards a construction decision in the first half of next year. In Salta, Argentina, we're excited to drill for gold at one of the largest untested high-level epithermal anomalies in the north of the country. The Cerro Lindo project, held privately for years, now offers us an exciting exploration opportunity. Our strategic investments announced this year in Awalé Resources and JV with DeSoto Resources position us with exciting gold prospects on both the Ivorian and Guinean sites of the prolific Siguiri Basin, which straddles these 2 countries. And we continue advancing a pipeline of early-stage projects in Mexico, Peru and Côte d’Ivoire. Our consolidated cash costs remained below $1,000 per ounce. And all-in sustaining cost at our mines is tracking within guidance. Lindero's all-in sustaining cost has been trending lower every quarter to the current $1,500 per ounce range, where we expect it will stabilize. At Séguéla, the story is inverse. We expect to complete the year on the upper end of guidance but we're coming from a low all-in sustaining cost of $1,290 in first quarter of the year to the current $1,738 in the third quarter. This is driven mainly by timing of capital investments and the impact of higher gold price on royalty payments. As key investments at Séguéla are completed in Q3 and into Q4 to support our 2026 expanded production of 160,000 to 180,000 ounces of gold, we expect to see all-in sustaining cost in the range of $1,600 to $1,700 per ounce range. Caylloma will finish just outside its guidance range due to relative metal prices used in gold equivalents. As you know, Caylloma has a significant base metal lead/zinc component to its production. Now turning to growth. For Diamba Sud project in Senegal continues to advance at pace on a fast-track approach. In mid-October, we released the Preliminary Economic Assessment for an open pit and conventional carbon-in-leach plant, confirming strong economics that support our goal of reaching a Definitive Feasibility Study and a construction decision in the first half of 2026. Using a gold price of $2,750, the after-tax internal rate of return of the project is 72%, and the net present value at a 5% discount is $563 million. The mineralization at Diamba Sud remains wide open, and we are drilling nonstop with 5 rigs, expecting to add resources by the time the DFS is published. On October 7, we filed the Environmental and Social Impact Assessment, expecting the certificate of acceptance in the first half of next year. Site camp early works are progressing with an approved $17 million Phase 1 budget, and the government is being very supportive, and we have received consent to move ahead with a Phase 2 early works, including the water dam excavations and excavations for other key infrastructure. We plan to fast track front-end engineering design activities during the feasibility work to shorten and derisk the development time line by securing long-lead equipment early. Diamba is a project that can bring additional 150,000 ounces of gold of annual production on average for the first 3 years of operations. Regarding the business environment in key jurisdictions for us, both Côte d’Ivoire and Argentina held national elections in late October. In Argentina, the government's electoral victory in Congress and Senate strengthened its mandate for advancing structural economic reforms. Argentina's business climate has improved significantly and we remain optimistic about the country's trajectory. In Côte d’Ivoire, President Alassane Ouattara was reelected for a fourth term with a decisive majority. We anticipate the continuation of pro-business and pro-investment policies that have made Côte d’Ivoire one of the fastest-growing and most resilient economies in West Africa. In summary, Q3 was a strong quarter for Fortuna. Our safety record continues to set new benchmarks. Our operations remain resilient and our growth projects are advancing according to plan. We entered the final quarter of the year with a solid balance sheet, strong cash generation and a clear path of near- to mid-term organic growth driven by Diamba Sud and Séguéla expanded gold output. I'll now hand the call over to David Whittle, our Chief Operating Officer for West Africa, and Cesar Velasco, Chief Operating Officer for LatAm, who will review their respective operational results. We can start with you, David. David Whittle: Thank you, Jorge. Séguéla achieved another impressive quarter, delivering excellent results in both production and safety. This positions Séguéla well to exceed upper production guidance for 2025. We have gold output now projected to surpass 150,000 ounces. Our dedication to safety and environmental excellence remains steadfast, and we are making steady progress toward our goal of zero harm across all our operations. I'm pleased to report that no injuries occurred at any of our West African locations during the quarter. At Séguéla, we produced 38,799 ounces of gold, maintaining consistency with prior quarters and surpassing the mine plan. Mining during the quarter totaled 272,000 tonnes of ore at an average grade of 3.66 grams per tonne gold, along with 4.43 million tonnes of waste, resulting in a strip ratio of 16.3:1. The processing plant treated 435,000 tonnes at an average grade of 3.01 grams per tonne gold, with throughput averaging 208 tonnes per hour for the quarter. Ore was primarily sourced from the Antenna, Ancien and Koula pits. During the quarter, we received permitting approvals for 5 satellite pits, including the Sunbird, Kingfisher and Badior open pits. Several major projects also advanced successfully over the third quarter. The 8.5 million TSF lift was completed, providing tailings storage at current throughputs until late 2029. The replacement of the transmission tower at the Sunbird pit, a $9 million project, progressed well, and we are now prepared to commence pre-mining operations for the Sunbird pit in Q4. The rock breaker and the primary crusher was commissioned and is operating effectively, further debottlenecking the processing circuit and the 6-megawatt solar plant project is expected to be complete in the first quarter of 2026, which will help to reduce power costs. Séguéla performance resulted in a cash cost of $698 per ounce and an all-in sustaining cost of $1,738 per ounce, both aligning with our budget. Site costs continue to be managed efficiently with the increased all-in sustaining costs primarily attributed to royalties on the higher gold price. Exploration drilling at the Sunbird underground project continued in the third quarter with encouraging results. The ongoing success of this drilling, combined with the results from the Kingfisher Deposit provides us with a resource base that offers further opportunities to optimize production from Séguéla. Whilst current process plant throughputs are focused on maximizing available capacity with minimal investment, we're now investigating in options to further enhance process plant throughput. Drilling is continuing with 5 drill rigs at the Sunbird underground deposit in Q4, aiming to further expand the underground resource. Engineering studies and permitting activities will continue in Q4 and 2026, with the expectation of commencing underground mining operations in 2027. The Kingfisher Deposit remains open in all directions and further drilling will be undertaken in 2026 to convert inferred resources to indicated status and further expand the resource. At our Diamba Sud project in Senegal, exploration, environmental permitting and feasibility activities made significant progress during the quarter, government approvals were received for early works programs, ESIA was submitted for approval and the PEA was published. Following the rainy season, drill rigs have been remobilized for further drilling at the Southern Arc deposit at Diamba with the aim of enhancing the resource base and building on the strong PEA results. Thank you, and back to you, Jorge. Jorge Durant: Thank you, David. Cesar? Cesar Velasco: Thank you, Jorge, and good afternoon, everyone. I am pleased to report that both Lindero and Caylloma ongoing multiple safety initiatives are driving continuous improvement and reinforcing a culture of accountability and care across all of our operations, delivering excellent safety performance. At Lindero in Argentina, we had a strong quarter, achieving our highest gold production this year. Gold output reached 24,417 ounces, a 4% rise from 23,550 ounces in the second quarter, driven by a 5% increase in gold grade and effective inventory recovery from the leach pad. We placed 1.7 million tonnes of ore on the leach pad at an average head grade of 0.60 grams per tonne containing about 32,775 ounces of gold. With 1.5 million tonnes of ore mined and a favorable strip ratio of 1.9:1, we are well aligned with our mining plan. Processing performance was robust with continued optimization of the crushing circuit achieving an average throughput of 1,061 tonnes per hour, about 8% above the 2024 average, demonstrating progress in our operational efficiency initiatives. However, on September 27, we experienced an unexpected shutdown of the primary crusher due to mechanical issues involving high amperage and overheating of the pitman shaft, specifically traced to the premature wear of the primary wear parts such as the bushings and bearings. Replacement parts have been secured and corrective actions are underway to resolve the structural misalignment. We anticipate the crusher will be fully operational by mid-November. Meanwhile, we have implemented effective mitigation strategies such as using a portable jaw crusher and direct Run-of-Mine ore screening to ensure uninterrupted operations. Consequently, we do not foresee any impact on our annual production target. Regarding costs, the cash cost in Q3 was $1,117 per ounce of gold compared to $1,148 per ounce in Q2, marking a 3% improvement due to higher ounces sold and stable operating conditions. The all-in sustaining cost decreased significantly to $1,570 per ounce from $1,783 per ounce in the second quarter, a notable 12% reduction, supported by lower costs, reduced sustaining capital, higher by-product credit and a 7.7% increase in ounces sold. Overall, Lindero delivered strong performance this quarter, supported by disciplined cost management, resilient production and solid margins of approximately $2,500 per ounce to our ASIC based on current gold prices. At Caylloma in Peru, we delivered another steady and reliable quarter of production, meeting operational expectations. The Caylloma mine continues to exceed all of its physical and cost targets for the year, reflecting strong operational execution. However, our reported metal equivalents are being impacted by the silver and base metal conversion factor, which affect the calculation of both the gold and silver equivalent production. In terms of costs, the cash cost per silver equivalent ounce was $17.92 compared to for $15.16 in Q2, mainly due to slightly lower silver production and higher realized silver prices. The all-in sustaining cost increased modestly to $25.17 for silver equivalent tonnes from $21.73 in Q2, primarily due to the same factors and fewer silver equivalent ounces sold. Despite these cost movements, Caylloma maintained healthy margins, supported by strong base metal prices and disciplined operational control. With the current strength in silver prices, we're looking to access some of the highest grade silver zones that Caylloma is known for. These areas, which are better suited to conventional mining methods are becoming economically attractive and once again, under the present price environment. In summary, the third quarter highlighted strong production growth at Lindero, steady performance at Caylloma and lower unit cost across the region. Our teams in Argentina and Peru continue to execute with discipline and focus, maintaining momentum in operational reliability, cost efficiency and safety as we move into the year's final quarter. Back to you, Jorge. Jorge Durant: Thank you. I'll now hand the call over to Luis, our CFO, who will review financial results. Luis Durant: Thank you. So we have reported net income attributable to Fortuna of $123.6 million or $0.40 per share. This result includes a $70 million noncash impairment reversal at the Lindero mine, which includes $17 million of low-grade stockpiles. After adjusting for noncash nonrecurring items, attributable net income was $51 million or $0.17 per share. This represents a strong 56% increase year-over-year and a 14% sequential increase over Q2. The growth was driven mainly by higher metal prices. The cash cost per ounce for the quarter was $942, broadly aligned with the prior quarter and slightly above Q3 of 2024 as a result of higher mine stripping ratios at Lindero and Séguéla after our mine plans. We have reported 2 nonoperational items impacting our results this quarter. The effect of our stock-based compensation of the increase in our share base during the period, representing a one-time increase to share-based expense of $6.3 million and a foreign exchange loss of $7.4 million. The foreign exchange loss was mostly attributable to our Lindero operations in Argentina as the peso experienced a sharp 14% devaluation in Q3. For the first 9 months of the year, our FX loss related to the Argentinian operations amounts to $10 million, of which over half is related to the accumulation of local currency cash balances. However, I want to emphasize that we implemented structures to preserve the value of these funds and the FX loss on local cash balances for the full year is fully offset in our income statement through the interest income, investment gains and derivative line items. We were able to restart repatriation in the month of July from Argentina, and under current conditions, we expect to maintain local cash balances at a minimum. In Q3, a total of $62 million were repatriated, net of withholding taxes. Our general and administration expenses for the quarter were $26.3 million. This represents an increase over the prior year of $12.6 million. This was due mainly to higher stock-based compensation as explained, plus an increase in corporate G&A of $4 million related mostly to timing of expenses. Our annual corporate G&A remains relatively stable at around $28 million to $30 million, and the breakdown is provided in Page 11 of our MD&A. Moving to our cash flow statement. Our capital expenditures for the quarter totaled $48.5 million. Of this, we classified $17 million of growth CapEx, which primarily consists of investments in the Diamba Sud project of $6.8 million and exploration activities of around $10 million. Our anticipated capital expenditures for the full year have adjusted upwards slightly from the $180 million previously disclosed to approximately $190 million. This increase primarily reflects added exploration allocations due to continued exploration success at Séguéla and Diamba. In terms of free cash flow, we generated $73.4 million from ongoing operations, up from $57.4 million in the prior quarter, reflecting the effect, again, of a higher gold price. And our net cash position increased by $51 million after growth CapEx and other items. All of this brings our total liquidity to $588 million, and our net cash position to $266 million. This represents an increase of over $200 million year-to-date. In the current price environment, we expect this trend to accelerate. That's it for me. Back to you, Jorge. Jorge Durant: We would now like to open the call to questions. Paul, please go ahead. Operator: [Operator Instructions] And the first question today is coming from Mohamed Sidibe from National Bank. Mohamed Sidibe: Maybe just starting with your strong balance sheet, strong free cash flow that you're printing and the elevated gold and silver prices. How are you thinking about your capital allocation priorities. I know you have Diamba coming up. But specifically as it relates to capital return to shareholders as you're looking into next year. Jorge Durant: As you pointed out, we have a pipeline of near-term growth. So that is the first priority we have with respect to capital allocation. We expect we'll be making a construction decision on Diamba Sud next year in the first half of the year. We're advancing early works that are trying to derisk the time line and shorten the time line also for first gold at Diamba by advancing these early works. We are also scoping right now the potential to expand our Séguéla process infrastructure. As you recall, Séguéla was originally designed at 1.25 million tonnes per annum. We're currently running the plant at 1.75 million tonnes per annum, and we're currently doing scoping -- starting scoping work to expand it to the range of 2.2 million, 2.3 million tonnes per annum. Additional to that, as you have seen, we're expanding exploration work across the 2 regions, LatAm and West Africa. We just expanded into Guinea through a JV with DeSoto. We are expanding our exploration in Argentina. We're currently drilling in Mexico. We're currently drilling in Peru. So that is our first priority and where we believe we can add most value right now. Second, we have our share buyback program in place. We were quite active with the share buyback program at the beginning of the year, end of last year. We repurchased approximately $30 million worth of stock. The share buyback program remains in place, and today is our preferred way to return to -- capital to shareholders. And we have made a pause in the last 2 quarters with the share buyback program, but we could be active in the market again anytime. Mohamed Sidibe: Great. And then maybe if I could shift to operations. So Lindero, the unexpected shutdown and mindful that this has no impact on your annual production target, given the mitigation measures. But how should we think about this for cost into Q4? Should we -- could we see any potential impacts on that front? And any color would be appreciated there. Jorge Durant: Yes. I'll let Cesar address the question. Cesar Velasco: Sure. Well, in particular to cost, we have been able to compensate some of those cost in specifically with regards to the portable rental jaw crusher. So we're offsetting that cost with other noncritical initiatives that we had in Lindero. So we don't expect our cost to be significantly impacted in Q4. That should address. Operator: [Operator Instructions] There were no other questions from the lines at this time. I will now hand the call back to Carlos Baca for closing remarks. Carlos Baca: Thank you, Paul. If there are no further questions, I'd like to thank everyone for joining us today. We appreciate your continued support and interest in Fortuna Mining. Have a great day. Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Unknown Executive: [Audio Gap] But before anything else, I just want to remind you, and I've done it previously, and now it's particularly important, the partial carve-out that took place in November last year with the carve-out of the Inmocemento Group. You know that this is very important because until the end of the financial year, the results in the bottom line will not be fully comparable, and I'm sure you've been able to see this. That's the reason why last year and until September 2024, we entered EUR 148.6 million corresponding to the carve-out of the cement and real estate activities. And as we already reported on the first -- in the first quarter, the euro has become stronger against other currencies. And so exchange rate differences have become quite significant. And this also is related to the adjustment we made in certain assets following the equity method in both areas of the environmental department. So this, together with the negative exchange rate differences of the provisions and the adjustments made together with the EUR 148.6 million corresponding to discontinued activities that have disappeared now, but were present last year. All of this explains the fall of the attributable net profit of this financial year. I also want to mention that it is also true that at the level of the P&L in the top line, the strength of the euro has already been noticeable with a certain impact, close to 1% of our earnings in terms of income and EBITDA. Well, having said this, our earnings are basically focused in the even quarters. Well, if you look at the evolution of our exploitation activities starting by the environment unit, what we have seen is that the turnover of environment went up by 11.5%, reaching EUR 3.4 billion. And here, I would have to mention the contribution from new contracts, both in Spain and the United States. This -- I should also add the effect of the acquisitions we carried out in the U.K., although this has been diluted slightly, but Urbaser, heavy recycling should be mentioned. Now in terms of geographies, you know that we have 4 platforms, starting by the Atlantic, which includes the business in Spain, which accounts for 50% of the income, and this business grew by 7%, up to EUR 1.7 billion. And here, we have kept evolving quite normally in our activities, both for collection, street cleaning and also there's been very good performance of other municipal services and the management of industrial waste. This is waste related with the private sector. Now as regards to the U.K. platform, income rose by double digits because of, first of all, the consolidation because of the acquisition of the U.K. Urbaser Group, and this is why we reached over EUR 700 million. And I would also like to mention that the underlying activities at a constant perimeter had a homogeneous evolution except for the landfill activity, which did experience a lower level of activity than in the previous year. Now in Central Europe, we are present in 6 or 7 countries in the region. As you know, in the Eurozone, income increased by 4.9%, reaching EUR 508 million. And we had a higher contribution, particularly in Poland and in the Czech Republic with an increase in the number of contracts, both for collection and treatment. And we did record, and this is a growing trend, year-on-year, showing negative variations, the selling prices of negative raw materials that we manage, particularly in treatment, which in Central Europe is quite significant. Now the fourth platform in environment was the United States and revenues were EUR 342.7 million, plus 24%. So we're growing very significantly. Just remember the acquisition in the Central North area of Florida of a company called Hell Recycling, which is in charge of processing different types of waste related with residential waste, but also collection progressed very well. We do have to mention, although it didn't have much of an effect in the turnover, an acquisition we carried out in July. So there was only a contribution for 2 months. This is a company in Fort Lauderdale devoted to the recovery of waste. And this is the advancement we had in recovery. We started this activity in the U.S. and also waste collection contracts evolved very well. And there's also the Hell Recycling business. And I also want to mention in the Atlantic platform, which also includes Spain, which I mentioned first, it also includes France and Portugal. Here, we reached EUR 111 million in revenues. The lion's share, about 7% is France, and this is the acquisition we carried out last year of the ESG group, which means that now we have our own legal presence in France for waste collection and street cleaning. And the underlying activity was also good. And Portugal, also made progress by 4.4%. So the EBITDA for the environment unit grew to 11% over EUR 500 million. This growth is absolutely very similar to the growth in revenues. So I don't have much to say about the stability of the margins, which persisted. The margin is 15.6% as compared with 15.7% of the previous period. Now if you talk about the water cycle group called Aqualia, here, the turnover increased by 8.7% to EUR 1.5 billion. Here, we had quite a homogeneous growth, both in integrated cycle, we -- in general, although there's been a little bit of everything, but we've increased both in terms of volumes and rates. And this was accompanied by a growth in the technology and network activity, which is essentially linked to the development of ESP, specific ESP for the Water sector. And it is very closely connected to our concession-based business. So it is induced by our activities -- our integrated activities. Now if you look at the different jurisdictions in Spain, we rose by over 11%, our revenues. Here, there was quite a significant increase, and this is a reflection of the activities, the health of the activities in the country. So in Spain, everything was very positive over the period. Now if we look at Central and Eastern Europe, but before that, I just want to remind you that the main stays here are the business that we own in the Czech Republic and Georgia, where we increased by 5.4%, EUR 196 million. In the Czech Republic, rates were revised. This was within the plans linked to our proprietary structure and the fact that we are a fully regulated business. And this has to do with the CapEx that we are -- so rates are reviewed as we review our CapEx. In Georgia, there was a significant increase in consumption. So this increase was more related with the increasing consumption rather than with an increase in rates, both in residential and industrial customers. And this made it possible both in the Czech Republic and Georgia to reach this 5.4%, and it's allowed us to compensate for the effect of the exchange rate, which I mentioned at the beginning because in Georgia, the local currency lost value, lost 5.4% with respect to the euro. In other European countries such as Portugal, Italy, France, here, the increase was 6.6%, EUR 87 million. Just to give you some color, there was a rate review in Sicily, although we still experienced the effect of the lack of water -- of crude water as a result of the drought. This is something that we managed to compensate for with increases in our rates. Now if we look at other markets, leaving Europe behind, if we look at the Americas, here, the turnover also rose by double digit, 12.6%, EUR 156.4 million. There was a consistent growth and quite a substantive growth in the U.S. based on the activities in that country. We reached EUR 67 million. And here, there was an increase in rates, and also there was an increase in consumption, similar to the consumption in Colombia, another important country in the Americas. And in Technologies and Networks, we also carried out the development of some plants in Mexico and Peru. Lastly, the last platform I want to mention within Aqualia, apart from Europe and the Americas is MENA, the Middle East and Africa. Well, it's really Northern Africa, Algeria and Egypt. Here, we did experience a slight fall of 4.8%, EUR 115 million. And this was because of the effect of the rate review in our contract in Algeria in the desalting plants where there were some adjustments introduced according to some rate measures. But this was compensated for because we had higher activity in countries like Saudi Arabia in our counseling and execution business in the -- in 2 clusters we have been awarded in the country. It's really 2 regions in Saudi Arabia. And we also had to compensate for the negative effect of the strengthening of the euro against the riyal. So all in all, the EBITDA followed a very stable pattern. It grew a little bit less than revenues, 5.2% to EUR 319.2 million. I would just mention that the margin, which was 23.8% as compared with 24.6% experienced a small variation because the contribution of Technology and Networks was slightly higher moving towards integrated cycle. So margins were structurally lower. And this, as you know, tends to give rise to small adjustments in the increase of EBIT versus revenues and the operational margin. Right. As far as construction is concerned, in the 9 months, the turnover became positive to over EUR 2 billion. Here, there were no surprises. I wouldn't mention any unexpected occurrence, everything went according to plan. Perhaps I should mention that at present, the infrastructure contracts are the most important ones, both roads and railways. Now in terms of the main markets, in the Spanish market, the turnover rose by 4.9% to EUR 921 million. We also made progress in works both -- well, it's rehabilitation of roads and some other works that we had to cut it out, which were unexpected. We carried out some work for the flash floods in Valencia. Now in other European countries, the increase was similar to that of Spain, about 5%, EUR 645 million. And here, we kept advancing in our important contracts in the Netherlands, then the railways in Romania, where we have a traditional presence. And just as the -- I just want to mention that the motorway exploited by FCC concessions in the country was completed in Wales in the U.K. Which -- since it's been completed, it ceased to contribute. Now in -- then I would like to mention other areas where there were large works that we -- in the United States and Canada, particularly in Toronto. This was a large road in Pennsylvania. And as I said, for Europe, these compensated for the satisfactory completion of the Maya train in Mexico. Finally, in the Middle East and Africa, the MENA area, like in Aqualia, we incorporated Australia into this region. And we did have a reduction in revenues, EUR 119 million. And here, we were not able to compensate for this loss with new works because there was -- we completed the works of the Riyadh metro in Saudi Arabia and also the customer completed the works were conducted in the NEOM tunnel, but both projects were extremely successful. There was some compensation from our project to develop social infrastructure in Cairns in Australia, in the northeast of the country. So the EBITDA, however, went down a little, 0.3%, EUR 121 million. Now the margin EBITDA sales stayed stable, 5.6%. I think that last year, it was 5.7%. But this is just the effect of a combination of the programming of different works. And in construction, I'm sure you've seen this in the report we have sent, the most important thing to mention here has to do with the increase in our portfolio because since December last year to the end of September, we had a growth of 46.8%. Our portfolio is approaching EUR 10 billion, EUR 9.3 billion. Here, we had quite a significant amount of international contracts, which account for 2/3 of total with an increase of 60.8%, over EUR 6 billion. And again, we can talk about the platforms where we are already consolidated. One of the most important projects was the Scarborough project in Canada together with a line of the New York Metro and the enlargement in Canada of another metro line. In Spain, we also had increases in our portfolio. So this increase was of 23.8%. So these were new contracts in Spain. We are specialized in the construction of stadiums, particularly in Valencia and also high-speed lines that are being built by the railway authorities. So it is important to mention that the increase of the -- the improvements are happening across our different departments, but I just wanted to make a specific mention to construction because the increase was particularly high. Now to finalize, I just want to talk about concessions. Here, the turnover reached EUR 81.4 million, growing by 38%. And given its relative size and its good evolution, well, you will have seen that this is the area that made the greatest progress. And here, there are 2 effects to be mentioned. One of them is the development of new business and the other one is the perimeter. But I want to say that traffic and the number of passengers in the infrastructures that we exploit has also made some contributions. So the organic perimeter also evolved healthily. But the business is basically -- our concessions are concentrated basically in Spain, EUR 77.9 million, an increase of 48.4%. Here, I just want to remind you that there's the kick-off of the 8 itinerary, a concession we have in the region of Aragón and a new project, which is for a motorway in Ibiza Island, and this started in June last year. Now internationally speaking, I just want to mention a concession that does make a contribution to our revenues. Another one -- we have another one that follows the equity method, but we have the Coatzacoalcos underwater tunnel, which evolved very well. But then we decided to remove one of the businesses in Portugal. But all in all, internationally, which is just COTUCO, we had an increase of 6.8%. So the EBITDA for concessions is EUR 44.6 million, an increase of 8.3% with respect to the previous year. As you know, and I want to mention it again, the EBITDA advanced less than revenues, but that was because of the development of the concession in Aragón before it starts operating. That's why its gross margin went down quite significantly, but there was no other effects for provisions or any other incident that could explain that difference between the variations of revenues and of EBITDA. Well, that's about all I had to share with you. As you may have seen, the results as compared with previous quarters were quite good with increases in excess of 7%. I might perhaps mention the evolution of the portfolio. You know that we are a group that has over 85% of its activity coming from the waste management business and the water integrated cycle -- integrated water cycle business. But our portfolio makes us -- well, it means that we are very reassured in terms of our future prospects. That's all from me. So if you have any questions, please do not hesitate to ask them. Operator: First question, why are the EBITDA margins going down for Water and Services in the first quarter -- in the third quarter? Unknown Executive: Well, services, I guess you mean environmental services. As I said before, for the environment, 15.6% as compared with 15.7%. I don't think it's a huge reduction. This variation is really very small. We did increase quite -- well, perhaps we increased in waste collection and other services, but the difference is really very, very small, practically negligible. In the case of Water, which is, I think, important to mention, the thing is that Technology and Networks is now more significant. That is where we include 2 types of projects. First of all, the things we do to develop works where we have a contract that we call essentially BOT that is we obtain a partial water cycle to construct a water treatment plant, a desalting plant and that normally is attached to a lower margin. But the area of Technology and Networks has to do with our integrated cycle concessions because we are -- these are works that cannot be postponed. This is just water consumption for drinking water for families. So we need to do this as fast as possible. So -- and 80% of the work we do under Technology and Network falls in this category. And even if the margin for us is very satisfactory, it is a lot lower than the margins of other businesses in concessions that may go from 25% to 40%. So when there's more in Technology and Networks, when there's more work in Technology and Networks, of course, it's logical that there should be a fall in the margins, but that's the only explanation. Operator: Next question, what was the reason for the selling off of an additional share in the Services unit? And how are you going to use the money obtained from the sale? Unknown Executive: Well, as you know, in this transaction, we have an agreement. We have signed the selling agreement. The money has not yet been paid to the group. I would say that the same -- the reason is the same as in 2018 when we sold a share of our Water business. Obviously, it was a minority share. So we retain full control of the activity. But what we did there is circulate the capital used in an efficient way. So we retain the operational control of the business. And this -- and so the know-how still lies with us and with our units. And the idea is basically to optimize the use of the capital invested by the group. This is the same thing we did for Aqualia. And what are we going to use the money for? Well, we'll have to wait, first of all, for the money to be paid to us. And when that happens, we will decide how to put it to the best use. Operator: Next question. What can we expect from the working capital for the end of the year? Unknown Executive: Well, with respect to the working capital, the evolution that we have experienced in the first 9 months has been quite homogeneous with respect to the activity we had until June. And let me look at the figures because I don't remember them off the top of my head. In December, yes, 2024, it was also homogeneous year-on-year. So the expansion we recorded was quite similar. And I would say that what we can expect is that we will have a recovery. We always recover. You know that -- you know it's difficult to quantify things under the working capital heading, but the expansion we had in September is quite similar to the one published in June. And it should go down by the end of the year. But this is only normal. It's part of the ordinary pattern of this chapter. Operator: Next question. What investments can we expect for 2025 and 2026? Unknown Executive: Well, in terms of investments, as any other group, we -- there's a combination of the ones that have been contracted and the ones we aspire to achieve. Last quarter, we achieved EUR 1 billion in payments for investments, and this is quite a significant figure given the size of our activity and our generation of cash flow. Now with the investments we have made until now, I think we -- I think that this year, we could stand at a similar level. Now for 2026, we could also achieve similar levels. I mentioned some investments that will have to be materialized. And you know that we are very selective in our activities. Last year, for example, they were concentrated in environment and water treatment. These are the 2 activities that demand the largest amount of CapEx. And of course, we aspire to grow, but in a very selective way. And in 2023, we'll stand at similar levels in terms of the application of our cash flow, similar to 2025, I mean. Operator: Next question. Will you have growth in construction at the end of 2025? Unknown Executive: Yes, I think we should. From the first half to the 9 months to the third quarter, you've seen that there's been some increase already. But I would just like for you to analyze our portfolio. Of course, we can't -- you can't really apply a simple equation. You can't say that if the portfolio has grown by 45%, revenues will also increase by the same measure. But this cannot be done because some of our new contracts are long-term contracts, railway contracts, but we want to establish a close connection with the customer, with early contractor involvement format where customers become more involved in the design phase. So by their very nature, these are long contracts with great technical complexities, but this also requires a greater collaboration from the customer so that the contract is longer term. And this, of course, makes it easier to manage the complexities of our contract. So what I want to say is that these contracts are going to be longer term. Of course, we could end up at the same variation of 1.2. But for a project based on projects -- for an activity based on projects such as construction, we feel really very comfortable because there's quite a large amount of visibility. There's no further questions. So if there's no further questions, I just want to thank you very much for your time. I guess that you will now have time to review all the documentation we have sent. And as I said, we remain at your entire disposal through the usual channels. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good afternoon, and welcome to A-Mark Precious Metals Conference Call for the fiscal first quarter ended September 30, 2025. My name is Kelly, and I will be your operator for this afternoon. Before this call, A-Mark issued its results for the fiscal first quarter 2026 in a press release, which is available in the Investor Relations section of the company's website at www.amark.com. You can find the link to the Investor Relations section at the top of the homepage. Joining us for today's call are A-Mark's CEO, Greg Roberts; and CFO, Cary Dickson. Following their remarks, we will open the call to your questions. Then before we conclude the call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of A-Mark's website. Now I would like to turn the call over to A-Mark's CEO, Mr. Greg Roberts. Sir, please proceed. Gregory Roberts: Thank you, Kelly, and good afternoon, everyone. Thanks for joining the call today. Today is an exciting day for A-Mark. As you may have seen in our press releases, we announced today the acquisition of Monex Deposit Company and our upcoming rebrand and relisting to gold.com. I'll touch on both before getting into the quarter. Monex is one of the nation's largest direct-to-consumer or DTC precious metals dealers. Since its founding in 1987, Monex has facilitated billions of dollars in transactions and built a full-service platform offering bullion and coin products. The business also includes a sizable secure storage offering, which now exceeds $630 million in assets under custody. I've known and worked with the Carabini family throughout my career, and we're excited to welcome Michael and his team under the A-Mark gold.com umbrella. This acquisition strengthens our DTC presence by leveraging Monex' well-established brand, reputation and loyal customer base. We also expect operational synergies that will enhance and streamline both organizations. Turning to our decision to rebrand and transfer our listing. We began laying the groundwork several years ago when JM Bullion acquired the gold.com domain. Once the GOLD ticker became available on the New York Stock Exchange, the timing was right to make the change. Gold.com embodies who we are as we strengthen our category leadership and help shape the future of precious metals, numismatics and other collectibles. This name change marks the first step in positioning us for continued long-term success, enhancing operational excellence and delivering value to customers, partners and shareholders. Investor interest in gold and silver has grown in recent years. And as we expand into adjacent categories such as wine, sports cards and other collectibles, now is the right time to modernize our corporate identity and how these assets are bought, sold and managed. While gold.com will serve as the corporate brand, our Wholesale Sales & Ancillary Services segment will continue to operate under the A-Mark name and brand. Our direct-to-consumer segments will continue to go to market through the portfolio of trusted brands and channels, including JM Bullion and Stack's Bowers, Collateral Finance, Goldline and will also retain their names. We're excited about this next chapter and look forward to the official exchange transfer on December 2. Now on to our quarter. Our results demonstrate the resiliency of our fully integrated platform and the early benefits of our recent acquisitions. While July and particularly August were marked by subdued demand and historically tight premium spreads, conditions improved meaningfully after Labor Day. For the quarter, we delivered $72.9 million in gross profit. This performance reflects the late quarter shift in consumer demand, combined with strong auction results from our recently acquired Stacks Bowers galleries. In September and October, we experienced a welcome increase in demand and expanded premium spreads. We have benefited from our strong balance sheet and our ability to manage our inventory levels to satisfy this increased demand. The ability to quickly ramp up production at both of our mints has proved to be timely as we have been moving through the second quarter. Although spot prices have come off all-time highs in the last two weeks, we are well positioned to take advantage of a continuation of elevated demand environment. Operationally, our investment in AMGL over the past several quarters has paid off as we integrate our recent acquisitions. This quarter, we successfully consolidated Pinehurst's operations, inventory and shipping with AMGL and have automated those initiatives. We're also continuing to rightsize AMS, and we expect additional savings as we centralize operations and capture further economies of scale. Internationally, our move to Asia with LPM has delivered sizable contributions this quarter. We believe the traction in the business is a strong indicator of what's ahead. Our fully integrated platform positions us to succeed across market environments. With that, I will turn the call over to our CFO, Cary Dickson, for a detailed financial review and to walk through our key operating metrics. Afterwards, I will return with additional comments on our business growth strategy for the coming fiscal year as well as take your questions. Cary? Cary Dickson: Thank you, Greg, and good afternoon to everybody. Our revenues for Q1 fiscal '26 increased 36% to $3.68 billion from $2.72 billion in Q1 of last year. Excluding an increase of $561 million of forward sales, our revenues increased $404 million or 27.6%, which was due to an increase in gold ounces sold and higher average selling prices of gold and silver, partially offset by a decrease in silver ounces sold. Revenues also increased due to the acquisitions of SGI, Pinehurst and AMS in the last two quarters of fiscal '25. Gross profit for Q1 fiscal '26 increased 68% to $72.9 million or 1.98% of revenue from $43.4 million or 1.6% of revenue in Q1 of last year. The increase was primarily due to higher gross profits earned by both the wholesale sale and ancillary services and direct-to-consumer segments, including the acquisitions of SGI, Pinehurst and AMS, which were not included in the same year ago quarter, partially offset by lower trading profits. SG&A expenses for Q1 fiscal '26 increased 125% to $59.8 million from $26.6 million in Q1 of last year. The overall increase is primarily due to increases in compensation expense of $19.5 million, advertising costs of $5.2 million, consulting and professional fees of $4.1 million, facilities expenses of $1.3 million and bank and service credit fees of $1.2 million. SG&A expenses for the three months ended September 30, '25, included expenses incurred by SGI, Pinehurst and AMS, which were not included in the same year ago period as they were not consolidated subsidiaries, and we have not acquired them yet. Depreciation and amortization for Q1 of '26 increased 61% to $7.6 million from $4.7 million in Q1. The increase was primarily due to an increase in amortization expense resulting from the increase in step-up of our intangible assets through the acquisitions that we've been talking about. Interest income for Q1 fiscal '26 decreased 21% to $5.6 million from $7.1 million in Q1 of last year. The decrease is primarily due to a decrease in other finance product income of $1 million and a decrease in interest income earned by our Secured Lending segment of $0.5 million. Interest expense for Q1 fiscal '26 increased 26% to $12.6 million from $10 million in Q1 of last year. The increase in interest expense is primarily due to an increase of $1.3 million related to precious metal leases, an increase of $0.6 million associated with our trading credit facility, an increase of $0.5 million related to product financing arrangements. Earnings from equity method investments of Q1 fiscal '26 decreased 257% to a loss of $0.9 million from earnings of $0.6 million profit in Q1 of last year. The decrease is due to decreased earnings from our equity method investees. Net loss attributable to the company for the first quarter of fiscal '26 totaled $0.9 million or $0.04 per diluted share. This compares to net income attributable to the company of $9 million or $0.37 per diluted share in Q1 of last year. Adjusted net income before provision for income taxes, a non-GAAP financial performance measure, which excludes depreciation, amortization, acquisition costs and contingent consideration fair value adjustments for Q1 '26 totaled $4.9 million, a decrease of 67% compared to $14.8 million in the same year ago quarter. EBITDA, a non-GAAP liquidity measure for Q1 fiscal '26 totaled $14.3 million, a 20% decrease compared to $17.8 million in the same quarter last year. Turning to our balance sheet. As of September 30, we had $89.2 million in cash compared to $77.7 million at the end of fiscal '25. Our nonrestricted inventories totaled $846.1 million as of September 30 compared to $794 million at the end of fiscal '25. That completes my financial summary. Now looking at our key operating metrics for the first fiscal quarter of '26. We sold 439,000 ounces of gold in Q1 fiscal '26, which was up 10% from Q1 of last year and up 27% from the prior quarter. We sold 10.4 million ounces of silver in Q1 fiscal '26, which was down 49% from Q1 of last year and down 34% from the prior quarter. The number of new customers in our DTC segment, which is defined as those who registered, set up a new account or made a purchase for the first time during the period was 69,400 in Q1 fiscal '26, which was up 25% from Q1 of last year and decreased 36% from last quarter. The number of total customers in our direct-to-consumer segment at the end of the first quarter was approximately $4.3 million, a 37% increase from the prior year. This year-over-year increase in total customers is predominantly due to the acquisitions of SGI, Pinehurst and AMS as well as organic growth of our JMB customer base. Finally, the number of secured loans at the end of September totaled 424, a decrease of 5% from June 30, '25, and a decrease of 25% from September 30, '24. Our secured loans receivable balance at the end of September was $103.6 million, a 10% increase from June 30, '25, and a 2% increase from September 30, '24. That concludes my prepared remarks. I'll now turn it back over to Greg for closing remarks. Gregory Roberts: Thank you, Cary. We've seen the momentum that began late in the first quarter carry into our second quarter, and we're cautiously optimistic about the year ahead. With the addition of Monex and our recent acquisitions, we're now better positioned to perform across all market environments and to capitalize on periods of heightened volatility. As we prepare for our transition to gold.com next month, this milestone underscores our vision to build the most trusted and globally recognized precious metals platform. Backed by the strength of our core business, the power of our integrated model and the momentum from our recent acquisitions, we have a solid foundation for sustained growth and profitable -- sustained and profitable growth. We remain confident in our long-term trajectory and our ability to create lasting value for our shareholders. That concludes my remarks. Operator, we can now open the line for questions. Operator: [Operator Instructions] Your first question is coming from Thomas Forte with Maxim Group. Thomas Forte: Yes. So Greg, congrats on all the advancements and the rebrand to gold.com. One question, one follow-up, and then I might get back in the queue. I wanted to ask you, Greg, for your current thoughts on strategic M&A. You've had a lot of transactions over the last 12 to 18 months. What's your current appetite for additional deals? And how should we think about areas of focus, domestic versus international, DTC and I guess, precious metals versus other collectibles. The recent examples have been wine and numismatics. Gregory Roberts: Yes. As always, I think this question, I answer it the same way. We're always looking at opportunities, always looking at pieces that we think fit in the overall goals and where we want to be going forward. We've digested, and we've digested the acquisitions we did earlier in the year. The team has done a great job getting those in a position where we can now start to see the benefits from the acquisitions. On the rare coin side, which generally has some correlation to precious metals prices from a buyer behavior perspective, we accomplished one of the largest auctions that Stack's Bowers has had in history in August and September. So we've seen great strength there. As we look for other opportunities, we're always open and always looking at ways to expand. I think we've done a lot in Asia over the last 24 months, and we're definitely seeing the benefits of those acquisitions pay off today. We have a great partner in Atkinsons in the U.K. Their business has been very strong over the last 24 months, and we would love to help Atkinsons grow in the U.K. As it relates to other geographical areas, there's nothing at the moment that is a must-have, I believe, for us, although we're -- if we see something we like, we'll talk about it. The Monex transaction is something that I've worked on for many quarters now, a company that has been a customer, the counterparty of A-Mark for over 25 years. They have a great model, a great customer base, and most importantly, management, the Carabini family are -- and others there are just great assets that we're bringing into the A-Mark fold. So we want to get that deal closed. We want to continue to look for synergies. As we've grown, as you can see from the numbers, our SG&A has grown, a lot of it having to do with new employees through the acquisitions. Our finance costs are up. A lot of that having to do with headwinds related to the precious metals financing overall macro business as well as we're financing the same amount of ounces at much higher spot prices right now. So I think our appetite is still there, and we'll continue to look for deals that we believe are accretive to the business. Thomas Forte: And then for my follow-up, and then I might get back in the queue. I really appreciate your thoughts on stablecoins and gold demand. So I think there's been a long-time debate or had been a long-time debate on kind of gold versus Bitcoin, and I see this as an example of gold and crypto. So I would appreciate your thoughts on stablecoins and gold demand. Gregory Roberts: I mean the gold demand has been incredible over the last 9 to 12 months, and it's reflected in the performance of the spot prices. And you have throughout the beginning of the year and most of last year, you had strong central bank buying. And I've talked about this before. China has been buying large quantities of gold for at least the last three or four years. And that demand has trickled down to other governments. I think you could look towards India, you could look towards Russia, you could look towards other countries that are kind of on the anti-dollar trade right now. And whether it be redeploying assets from maturing treasuries or just reallocation, you've seen central banks really leading. And to move the spot price of gold as much as it has moved, it's a very large amount of dollars that move that price. I think that throughout July and August, the spot prices continued to rise. And in the U.S., the domestic consumer, as I have talked about before, the domestic consumer was not really motivated by the higher spot prices. In fact, as we talked about last quarter, A-Mark was a terminal point of liquidity for a lot of people selling and taking profits at the spot prices. As I mentioned before and in the press release, we have seen a welcome change in September and October, where it does appear that there has been a lot of publicity. I think Goldman came out with something. Others have said the same that U.S. citizens should have a higher percentage of their investable assets in gold and silver, and we have definitely seen an uptick in September and October, and we have got back to a situation where there's been some tight supply on certain products and our premiums have finally started to grow a little bit. I think at JM Bullion in September and October premiums have probably gone up about 20% since August. And so that has been a shift in kind of what's going on in the gold market. And then finally, I think starting in October, we did see an increased demand for silver as silver got over $50. So I think our customers have taken a little breather the last week as spot prices have come off a little bit. But I think the major shift in what we saw in September and October were as gold and silver made new highs, we saw a shift in demand from our customers. So that was welcome and we hope it continues. Operator: Your next question is coming from Mike Baker with D.A. Davidson. Michael Baker: So you just sort of touched on it, but I was going to ask you, what's changed because in the past and even last year, when we saw really high prices, you didn't see the demand. In fact, as you said, you were providing liquidity. I guess you just sort of -- I was going to ask what has changed this time, but you sort of answered that. So I guess I'll pivot my question. How sustainable is this change? You said your customers have taken a bit of a breather in the last week, and we're not going to look at things on a week-to-week basis. I get that. But how sustainable is the better trends that you've seen in September and October? Is it that everyone sort of emptied out their closet of the gold they have. And so now there's no more selling to you and it's much more buying. Is that sustainable? And if you could, just take the last two months and what's sort of the run rate of the profitability of this business now relative to where you just finished? Gregory Roberts: Yes. I think as it relates to whether or not it's sustainable or not, I mean we've had extreme, extreme volatility and behavior of our customers -- it changes fairly regularly. Like I said, July and August were particularly August were about as slow as I have seen our business, which is, for the most part, reflective in our performance. I think that we had a great rebound in September and made up for a very slow period as well as extreme volatility and some extreme increases in financing costs in July and August. We continue to have a very volatile and erratic market as it relates to gold leases and repo, which are gold and silver leases and repo rates, which are a big component of how we finance our business. Those rates have been very volatile. The market has flipped a bit into backwardation, which is never great for us because we're short the market and we have a very big short book. So, in July and August, we did face some headwinds. As it relates to why the customer base in our DTC segment decided after Labor Day to change their behavior or their attitude, I don't have a single reason for that. I mean I do a lot of research. We do a lot of looking at behavior, look at macroeconomic issues. Certainly, I think the continued back and forth trade war with China was a big issue. I think the government shutdown has likely in its first few weeks, probably woke up a number of our customers to what's going to happen. Now the shutdown has become like just ho hum every day, we're shut down and who knows what's going to happen. And China has temporarily seems to have calmed down a little bit. So I think there are some macro things that have affected us. I think throughout October, there was a lot of focus in mainstream media on precious metals, rare earth metals, gold and silver. And I think the awareness was just higher than we have seen it since probably the Silicon Valley Bank crisis. We didn't -- unlike Silicon Valley Bank, we didn't get the feeling that our customers were fleeing to safety or looking for a place to put cash. It felt for the first time that there was a bit of FOMO related to the record spot prices. And so if that's the case, spot prices are down 8% from where they were a few weeks ago. We'll have to see whether that slows the behavior or whether or not our customers decide to buy the dip. As it relates to run rate, as it relates to how we're looking this quarter, I've gone about as far as I'm going to go saying with October being very strong on the heels of September. And we'll continue to update you on how we see the markets performing and how we're able to take advantage of it. Michael Baker: Fair enough. Thanks for the detail. If I could ask one more. Just about the expenses, we get that expenses are higher because of all the acquisitions that you've made. But at some point, the acquisitions make sense in that they drive higher sales, higher gross profit and you leverage the expenses just that EBITDA is -- goes up. Presumably, that's the outcome at some point. So any idea of when you start to sort of synergize some of these expenses or when that starts to show up a little bit more in the P&L such that EBITDA is increasing in line with the gross profit dollar increase? Gregory Roberts: Yes. I mean I think $73 million of gross profit in the quarter and almost $14 million in EBITDA, I was very satisfied with that for what we were experiencing as it relates to just the amount of ounces we were selling and the other factors I've already talked about. The company is digesting the acquisitions. My strategy is generally we try to buy great businesses with great management and we let them manage their businesses. At the same time, from a corporate standpoint, we are looking for redundancies, and we're looking for places to be more efficient. We don't want to keep spending more money on an apples-to-apples comparison. We want our expenses to go down, and we want our profits to go up. So that's something we're focused on. We are very, very focused last quarter and this quarter on ways that we can integrate ways we can reduce redundancy, ways we can relocate some of the employees and relocate some of the operations that have been run in remote locations to our Vegas facility. As we announced with this rebranding, we are going to be closing our offices in El Segundo, and we're going to be moving -- employees are going to be moving either to the new corporate offices in Orange County that are where Stack's has been located or they -- some employees are moving to Santa Monica where Goldline is located. So we are we do have a process that we're going through. And I think that the goal for us is are we reducing costs on an apples-to-apples basis? Are our costs efficient and moving in the right direction absent the acquisitions? And then total, as we get into quarters-over-quarters, are we able to be more efficient and deal with lower expenses across all the businesses. But at the moment, I thought based on how July and August started, I thought we got a lot out of the quarter. I think that the flipping of the switch for whatever reasons, some of it we've talked about, the customer base in our DTC business has really just they woke up and the business that profits we've been able to generate in that segment have been great in September, October. And we have also worked through a lot of inventory that we've been able to monetize and reposition at the A-Mark trading corporate level. And we're hoping that we see at the wholesale level, a drying up of excess supply and that A-Mark is going to reestablish itself as the go-to when you want to buy something and you need product at a wholesale level, not just when you're looking for liquidity to sell stuff to A-Mark. So these things for the last 60 days have been going in the right direction. So we'll try to continue that. Operator: [Operator Instructions] Your next question is coming from Andrew Scutt with ROTH Capital. Andrew Scutt: Congratulations on the announcements. First one for me, you guys kind of historically have done acquisitions, I guess, I would call them in piecemeal. And you did talk about the long-standing relationship with Monex, but was there any other factors that went in the decision to do this in one full swoop? Gregory Roberts: Yes. Like I said, this is a transaction I've been working on with Michael for a couple of years now, and it took -- the stars have aligned, and we felt this was a deal we wanted to go in 100%. And Michael was enthusiastic about taking some A-Mark's stock and being part of the A-Mark family as well as we were able to structure an earn-out that gave both sides some opportunities as it relates to whether or not the Monex businesses can grow and whether they can continue to perform or if it takes a little bit longer. So I think the structure of the deal and the willingness of both sides to make the move, it just fit for this transaction. It wasn't a transaction, I think, where either side really wanted to start with a 10% or 20% or 40% stake in the company. I think -- I know the business very well. I've been looking and diligencing the business for a long time. The business is very important to moving forward in what we're trying to accomplish. There is some -- it's a different model most of the customers store their metal and hold their metal in storage and are much more frequent traders of gold and silver as opposed to a cash and carry and take possession of the metal. So it's a little different model, but I believe it's got enough uncorrelation to it that in viewing it, particularly the last nine months, it felt that to me that this was a great move for us because I think we have a customer base that's a little bit different motivated, particularly through the slower periods that we've experienced the last six to nine months in our retail business. The Monex business has actually outperformed what I would expect. And I think the customer base is a little bit more of a -- it's a bit more of a high-frequency trading business where customers are actually able to move in and out and go between cash and go to metal that's in storage. I've talked about it before. Storage is a huge component of what we're focused on growing right now. And Monex provided us with $600 million to $700 million of storage right now. That's likely adding 50% to 75% of what we have under management in storage right now. And that's just storage fees and storage are paid day in, day out, and it's a good steady stream of income for us. And I think that the that their customer base was a bit more -- seems to have been a bit more motivated by the higher spot prices. And so it felt at this moment that there's not another model like this out there that we're familiar with. And just very happy with the 50 years they've been in business or 40 years they've been in business, and they have a very, very loyal customer base and a great management team. Andrew Scutt: Great. Well, I appreciate the color. And second one for me, a little bit more high level. So now that you've kind of made all these acquisitions, you have all these DTC brands under your umbrella, does it make sense to kind of combine a few of them and have a one-stop shop and say, here we are at gold.com? Or is there greater value in having multiple storefronts under multiple different brands? Gregory Roberts: Great question. I think about this all the time. And when we're doing acquisitions, one of the key diligence items we look at is what is the crossover from one brand to another as it relates to the customer base. If there is a high level of crossover, the brands may not be as important. If there's very, very low crossover, I view that as value in the brand and value in what the customer knows and what the customer is comfortable with. I think the Monex brand has been around forever. The Monex brand is well known throughout all of the retail precious metals business. So I love the brand. I have been familiar with the brand forever. So I don't see anything changing with that. I do think that our rebranding and our move to gold.com as an umbrella over our brands is important, and it's an important milestone. I do believe there -- having a an umbrella brand that can look for ways where the individual brands can be more familiar with each other or how there might be offerings that we can come up with that will be appealing to all the brands. I think this is an important step in that. I think the new logo we've developed will be launching December 1. We're launching gold.com precious metal products that are branding of the gold.com brand and the products that we have developed to this point are going to be incredible and they're going to bring that the gold.com website that will also be going online in early December. It is going to connect all the brands in one place. And they'll be -- if you want to buy gold, you're going to get to see all the different options that gold.com will offer you, and you'll be able to choose who you want to do business with within our ecosystem. So I'm very excited and very enthusiastic about this move. And I think in some way, what you're asking the question, part of our strategic plan is to use this great domain name that we bought, this great new website we've developed, this new great corporate location and this have the ability to promote one brand that encompasses everything and then introduce people to our distinct and different DTC platforms, I think, is going to be a great opportunity for the company. Operator: You have a follow-up question coming from Thomas Forte with Maxim Group. Thomas Forte: Greg, last one, I promise. So you've done a great job. Gregory Roberts: That's okay. Many as you want, Tom. Thomas Forte: Don't say that. The call go on more half an hour. So you've done a great job upgrading the technology and adding physical space to your logistics effort in Vegas. How should investors think about your logistics capacity given all the recent M&A activity? Gregory Roberts: We built this thing, and it is incredible. The automation that Thor and Brian have accomplished up in Vegas is -- it's better than anything I've ever seen. And we have onboarded a number of new clients there, some corporate clients that are new to us. But the ability for the facility to operate and the capacity that we can now get out of it is, I think we have absolutely the best in the business. I think we shipped in October, I want to say, 60,000 packages plus, which was a very strong month for us. I think we could have shipped 100,000 packages in October, if need be. So we have great capacity. We have onboarded, I know of at least three new customers that are outside of the A-Mark umbrella that are using our services as well as, as I said earlier, we've taken the Pinehurst logistics and inventory from Pinehurst, North Carolina, and we've moved that to Las Vegas. And now all the Pinehurst packages on eBay to their retail customers, to their wholesale customers, all those packages are being shipped out of Vegas. We need to continue to do that with our other brands and utilize the facility. But we are very well positioned if the market continues to perform or even gets better, we will still be able to get our customers' packages out within one or two days. And at the level of 100,000, 110,000 packages a month, to be able to do that. I think the moat around now gold.com, the moat is just very difficult for our competitors to address. I think that we can really promote and really separates us from others, our ability to store and to ship logistics. Operator: At this time, this does conclude our question-and-answer session. I'd now like to turn the call back over to Mr. Roberts for his closing remarks. Gregory Roberts: Okay. Thank you very much. Once again, thank you to all of our shareholders. There have been a lot of change, a lot going on here. We've continued to try to make what we think are great long-term moves as well as short-term adjustments that we need to make. Your continued interest and support is most appreciated. And I'd also like to thank all of our employees for their dedication and commitment to A-Mark's success. We look forward to keeping you apprised of A-Mark and gold.com's further developments, and we look forward to talking to you again in a few months, if not sooner. So thank you very much. Operator: Thank you. Before we conclude today's call, I would like to provide A-Mark's safe harbor statement that includes important cautions regarding forward-looking statements made during this call. During today's call, there were forward-looking statements made regarding future events. Statements that relate to A-Mark's future plans, objectives, expectations, performance, events and the like are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. These include statements regarding expectations with respect to growth, long-term success, operational enhancement, delivery of value, access to and credibility in the public markets, continuing execution on other steps in our strategic planning and anticipated cost savings. Future events, risks and uncertainties individually or in aggregate could cause actual results or circumstances to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include the following: a neutral or negative reaction of our customers, partners and public markets to the change of our name, our brand, other corporate identifiers and to our listing venue, our inability to seamlessly execute our rebranding strategy, potential confusion in the markets that we serve concerning our rebranding, difficulties with formulating and effectively executing on additional steps in our strategic plan and our inability to successfully expand into other categories of collectibles or to enhance how these new asset categories are managed or transacted. There are other factors affecting our business generally, which could cause our actual results to differ from those that we anticipate as a result of our rebranding program, including government regulations that might impede growth, particularly in Asia, including with respect to tariff policy, the inability to successfully integrate recently acquired businesses; changes in the current international political climate, which historically has favorably contributed to demand and volatility in the precious metal markets, but has also posed certain risks and uncertainties for the company, particularly in recent periods, increased competition for the company's higher-margin services, which could depress pricing; the failure of the company's business model to respond to changes in the market environment as anticipated; changes in consumer demand and preferences for precious metal products generally; potential negative effects that inflationary pressure may have on our business; the failure of our investee companies to maintain or address the preferences of their customer bases; general risks of doing business in the commodity markets; and the strategic business, economic, financial, political and governmental risks and other risk factors described in the company's public filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Finally, I would like to remind everyone that a recording of today's call will be available for replay via a link in the Investors section of the company's website. Thank you for joining us today for A-Mark's earnings call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the NRG Energy, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Brendan Mulhern, Head of Investor Relations. Please go ahead. Brendan Mulhern: Thank you. Good morning, and welcome to NRG Energy's Third Quarter 2025 Earnings Call. This morning's call is being broadcast live over the phone and via webcast. The webcast presentation and earnings release can be located in the Investors section of our website at www.nrg.com under Presentations and Webcast. Please note that today's discussion may contain forward-looking statements, which are based upon assumptions that we believe to be reasonable as of this date. Actual results may differ materially. We urge everyone to review the safe harbor in today's presentation as well as the risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation and earnings release. With that, I will now turn it over to Larry Coben, NRG's Chair, President and Chief Executive Officer. Lawrence Coben: Thank you, Brendan. Good morning, everyone, and thank you for your continued interest in NRG. I'm joined today by Bruce Chung, our Chief Financial Officer, and other members of our management team are also on the line and available to answer questions. Let's start with the key messages on Slide 4. Strong performance across all areas of the business led us to raise 2025 financial guidance by $100 million in late September. This is the third consecutive year we have increased our full year outlook. And today, we are reaffirming that higher range. We are also introducing 2026 guidance that aligns with our long-term growth targets. This represents NRG's stand-alone outlook and excludes any contribution from the LS Power acquisition. We will provide updated guidance that includes LS Power around the time of closing. We expanded our data center power agreements this quarter, bringing total contracted capacity to 445 megawatts. We also rapidly grew our pipeline of potential projects under joint development and letters of intent to 5.4 gigawatts. Together, these actions build on the agreement announced in August and reflect rapidly growing momentum and validation of our data center strategy. The LS Power acquisition remains on track. Financings were executed in September on favorable terms. All regulatory filings have been submitted, and we expect to close in the first quarter of 2026. Turning to Slide 5. Adjusted EPS for the third quarter was 32% higher than the same period last year, and adjusted EBITDA reached the highest quarterly level in company history. I'd like to pause to congratulate all 18,000 of our employees for that achievement. Our results reflect strong performance across both Energy and Smart Home. In Energy, supply optimization and disciplined commercial execution drove margin improvement across both our home and C&I businesses. In Smart Home, growth was supported by expanding our customer base, record retention and continued momentum in our home virtual power plant initiative. We also delivered top decile safety performance and completed the loan agreement for our second Texas Energy Fund project. Year-to-date, adjusted EPS is 36% higher than last year, reflecting strong performance across all parts of the business as well as continued cost discipline. These results keep us firmly on track to achieve our raised full year 2025 guidance ranges. On the right side of the slide, we are introducing 2026 guidance on a stand-alone basis. This serves as an interim view ahead of a full update after the LS Power acquisition closes when we will provide guidance for the combined company. Moving to Slide 6 for an update on market conditions. ERCOT experienced a mild summer with moderate pricing and strong growth in overall power use. Total consumption across Texas has increased nearly 30% over the past 5 years, driven by residential, commercial and industrial demand as electrification and onshoring of manufacturing accelerate. Data center development usage remains early with ramp schedules expected to add meaningful capacity over the next several years. Looking ahead, power demand is projected to outpace new supply, keeping the market structurally tight and reinforcing the need for reliable, dispatchable generation. Policymakers are responding through initiatives such as Senate Bill 6 in Texas and similar efforts in other regions focused on affordability, additionality and reliability. We are encouraged by the focus and progress being made to strengthen ERCOT and other competitive markets across the country. In this environment, NRG is expanding its portfolio of reliable and flexible capacity. Through the LS Power and Rockland acquisitions, the Texas Energy Fund projects and our home virtual power plant, we are adding 15 gigawatts of natural gas and 7 gigawatts of virtual power plant capacity. We also see about 6 gigawatts of additional opportunities through the GE Vernova partnership and our final TEF project that is still under review. Together, these actions strengthen our platform and position NRG to meet rising customer demand and support large load growth, including data centers across ERCOT, PJM and other key markets. Turning to Slide 7. We expanded our data center customer portfolio through 150 megawatts of new premium long-term power agreements, bringing total contracted capacity to 445 megawatts across ERCOT and PJM. This builds on the framework announced last quarter with the same customer. These sites located in Maryland and Illinois support edge data center development with access to high-capacity fiber and proximity to major U.S. cities. These projects will be built in PJM with operations beginning in 2028 and ramping through 2032. This agreement was signed above the midpoint of our prior $70 to $90 per megawatt hour target range. Given continued strength in customer demand and higher forward power curves, we are raising our target for new long-term data center agreements to above $80 per megawatt hour. This reflects sustained pricing improvement and NRG's leadership in providing reliable long-term power solutions for large load customers. We are advancing numerous additional opportunities, including up to 5.4 gigawatts of new capacity for data centers through 2032 under our GE Vernova and Kiewit partnership, supporting the principle of additionality. Since last quarter, signed letters of intent have increased 35%, underscoring customer engagement from multiple hyperscalers and data center developers as well as growing demand for new development. We also see several additional gigawatts of potential projects across our broader pipeline. As markets evolve to bring your own generation models, NRG is leading the next phase of data center growth. Turning to Slide 8. The LS Power acquisition remains firmly on track for a first quarter 2026 close. It strengthens our platform, broadens our earnings base and extends our reach across key competitive markets. It reinforces our position as one of the largest competitive generators in the country and increases our leverage to long-term demand growth. At announcement, the acquisition was immediately accretive across all key metrics, reflecting portfolio quality and an attractive purchase multiple. We also unveiled a 14% EPS CAGR through 2029, which does not -- I repeat, does not include any contribution from data centers and reflects pricing assumptions that are below current market levels. These factors, along with other upside opportunities underscore the significant potential ahead. Since announcement, incremental benefits, including 100% bonus depreciation have further enhanced the economics. All required filings have been submitted and financing was completed on terms better than originally projected. The transaction positions NRG for stronger long-term growth, greater scale and enhanced value creation as we bring the 2 platforms together. With that, I'll turn it over to Bruce for the financial review. Bruce Chung: Thank you, Larry. Beginning with Slide 10, NRG delivered strong financial and operational performance in the third quarter with $2.78 in adjusted earnings per share and $1.205 billion in adjusted EBITDA, representing a 32% and 14% increase from the same quarter of 2024, respectively. Adjusted net income was $537 million and free cash flow before growth was $828 million. Through the first 3 quarters of 2025, NRG delivered $7.17 of adjusted earnings per share and over $3.2 billion of adjusted EBITDA, a year-over-year increase of 36% and 12%, respectively. Our exceptional quarterly and year-to-date financial performance reflects continued execution in all of our businesses, driven primarily by a mix of expanded margins, favorable weather and excellent commercial and operational execution. Our Texas segment delivered third quarter and year-to-date adjusted EBITDA of $807 million and $1.618 billion, respectively, representing an improvement of 38% and 29% from the same periods in 2024. These results were driven by margin expansion across our operations in the region with lower realized supply costs and excellent optimization despite low summer volatility. The East segment contributed adjusted EBITDA of $107 million in the third quarter and $680 million through the first 3 quarters of 2025. These results reflect a modest decline from the same period of 2024, primarily driven by the net impact of higher supply costs throughout the region, partially offset by increased capacity revenues at our plants and favorable weather in the first quarter, which benefited our natural gas business. Our West Services Other segment had adjusted EBITDA of $19 million in the third quarter and $139 million for the first 3 quarters of 2025. The segment realized higher retail power margins, which were offset by the absence of earnings from the sale of our Airtron business in 2024 and the lease expiration at the Cottonwood facility in May 2025 when compared to the same period of the prior year. Our Smart Home business posted another impressive quarter and executed brilliantly through the key summer selling season, achieving adjusted EBITDA of $272 million in the third quarter and $803 million through the first 3 quarters of 2025. The segment continues to see record new customer adds and retention rates as well as expanded net service margins. Our consolidated free cash flow before growth was $828 million for the quarter and $2.035 billion for the first 3 quarters of 2025. Year-to-date free cash flow before growth exceeded the same period in 2024 by $597 million or 42%. The year-over-year increase is primarily driven by the higher year-to-date adjusted EBITDA, favorable working capital timing and receipt of the remaining insurance proceeds from our Paris Unit B claims. We expect some of the year-over-year favorability to moderate as working capital timing normalizes in the first -- in the fourth quarter and as we continue to invest in our plants through our scheduled maintenance program. Looking to the remainder of 2025, we are reaffirming the increased financial guidance we announced last month with ranges of $7.55 to $8.15 for adjusted EPS $3.875 billion to $4.025 billion for adjusted EBITDA and $2.1 billion to $2.25 billion for free cash flow before growth. Moving to Slide 11 for updates to our capital allocation for the remainder of 2025. This has been updated to reflect the new midpoint of our raised free cash flow before growth guidance target, setting the total capital available for allocation in 2025 at $2.7 billion. Note that this slide excludes proceeds received from the $4.9 billion of new debt raised in October, most of which will be allocated to fund the cash portion of the pending LS Power transaction. A few other updates from what I shared in our second quarter call are denoted in light blue. Starting with an update to liability management. The $52 million increase primarily reflects transaction costs and financing fees associated with the LS Power transaction. Integration costs increased by $20 million due to a shift in spend from 2024 to 2025. The net total remained largely consistent with our communicated expectation between the 2 years. We remain on track to execute the full $1.3 billion in share repurchases slated in 2025. Through October 31, we have executed $1.084 billion in share repurchases or nearly 85% of our planned annual total at a weighted average price of $125.35 and expect to complete the full amount of share repurchases by the end of the year. Other related activities increased due to higher tax withholdings related to equity compensation resulting from the increase in our share price. The increase in the revenue synergy growth plan reflects the strong customer growth our Smart Home segment has delivered through the year. Customer growth for the business was 9% year-over-year, well surpassing the targeted 5% to 6% net customer growth embedded in our growth plan. On other investments, we are showing a net $30 million inflow of capital related to our Texas new build program. As you may recall, the stipulated capital structure for projects under the Texas Energy Fund program is 60-40 debt to equity. In order to get our TDF projects to that target capital structure, the initial disbursement under the loan took into account previously spent development costs. Given that catch-up mechanism under the loan, the disbursements we received in 2025 exceeded the amount of capital we expect to spend on the projects, therefore, resulting in a net inflow of capital for the year. Finally, we are on track to finish the year with $158 million of unallocated capital, which we currently plan to roll over into 2026 and deploy as part of our 2026 capital allocation plan. Turning to the next slide. We are initiating our 2026 NRG stand-alone financial guidance at ranges of $3.925 billion to $4.175 billion for adjusted EBITDA, representing a midpoint of $4.05 billion and free cash flow before growth of $1.975 billion to $2.225 billion, representing a midpoint of $2.1 billion. We are not providing stand-alone EPS guidance as we acknowledge that EPS will change materially with the closing of the LS Power transaction due to associated accounting adjustments, pro forma capital allocation and other matters impacting any per share financial metrics. As you can see on the slide, we have included the same adjusted EBITDA and free cash flow before growth for the acquisition, which we provided when we originally announced the transaction in May. This, combined with the 2026 NRG stand-alone guidance that we are initiating today should remind people of the pro forma company's earnings profile. We will provide an updated pro forma view once the transaction is closed, which we -- which will include updates to items like energy and capacity prices, accelerated depreciation benefits and pro forma capital allocation, among others. On the bottom of the page, we have provided walks from the midpoint of our original 2025 guidance to the midpoint of our new 2026 guidance on a stand-alone NRG basis. For adjusted EBITDA, the net $200 million increase year-over-year is primarily driven by the addition of the Rockland assets acquired earlier in the year, the impact of higher power pricing in our Texas segment and the continued execution of our existing $750 million growth plan. The impact of higher power pricing in Texas that we are showing is consistent with the sensitivities we have provided in our previous earnings materials and reflect an increase in around-the-clock pricing from the $47 we previously used to $53 per megawatt hour, which reflects Texas pricing at the end of July. The sum total of these year-over-year increases is slightly offset by other minor drivers such as regulatory developments negatively impacting the Maryland and New York competitive retail markets and tariff impacts on our businesses. On free cash flow before growth, we are -- we expect strong year-over-year growth from core operations amounting to $145 million, comprised of the previously discussed EBITDA growth, partially offset by the continued investment in our generation fleet. After taking into account higher cash interest and taxes, we forecast free cash flow before growth to be flat year-over-year. The higher cash interest is largely driven by refinancing of very low-cost debt that was issued when the Fed funds rate hovered near 0%. The increase in cash taxes primarily relates to fewer federal tax credits available to offset income than in prior years. Just to reiterate, we will provide a more detailed update on pro forma financial metrics once we close the acquisition. I look forward to sharing that update with you soon. Moving to Slide 13 for a brief discussion on 2026 NRG stand-alone capital allocation. The key takeaway here is that we remain committed to our return of capital program through share repurchases of $1 billion and our planned 7% to 9% annualized growth of the common dividend per share. This is the case both on a stand-alone and pro forma basis. I'm also pleased to share that our Board has approved a new $3 billion share repurchase authorization to be executed through 2028. As you can imagine, certain elements of this chart, such as the starting point for excess cash and liability management will look very different after we close the acquisition. As such, I do not intend to go further into detail on this slide. We will provide a fulsome update on capital allocation alongside our key financial metrics once we close on the LS Assets acquisition. In closing, NRG has delivered outstanding financial and operational results through the first 3 quarters of this year, and we are poised to finish the year on a high note. The stand-alone 2026 financial guidance and capital allocation outlook I have shared today further demonstrates the solid growth and continued performance of our stand-alone base business. I look forward to providing you updated and detailed guidance for 2026 that includes the assets we are acquiring from LS Power following the closing of the transaction. With that, I'll turn it back to you, Larry. Lawrence Coben: Thank you, Bruce. Turning to Slide 15. 2025 has been an outstanding year across every part of our business, and our outlook continues to improve. Our near-term focus is on completing the LS Power acquisition and providing you with an updated long-term outlook following the close. We also continue expanding our data center portfolio, advancing our Texas energy projects, including completing the construction of the T.H. Wharton project and returning at least $1.3 billion to shareholders. These priorities reflect a disciplined approach to growth and capital allocation as we position NRG for 2026 and beyond, continuing to build a company defined by consistent execution and accelerating value creation. With that, we'll now open the line for questions. Operator: [Operator Instructions]. Our first question comes from Shar Pourreza with Wells Fargo. Lawrence Coben: Welcome back to the workforce. Shahriar Pourreza: I'm ready to go back to Garden to be honest. Lawrence Coben: I want to see the flowers. Shahriar Pourreza: So Larry, just do you think '26 is kind of that year you're going to be able to announce a data center agreement that includes new development as part of your GEV, Kiewit partnership? Lawrence Coben: Yes. Shahriar Pourreza: You tongue tied me again. Lawrence Coben: Well, you remember the last time I gave you a one-word answer, it showed up. So I'm giving you a one-word answer. Shahriar Pourreza: Any sense around timing next year? Are we thinking back half or earlier part of the year? Lawrence Coben: It's hard to tell, Shar. As my good friend, Max said yesterday, these are complex, but super excited by the process and never been more sure. Shahriar Pourreza: Got it. Okay. That's helpful. And then just lastly, just maybe share a little bit more about sort of the announced data center deals, how they kind of compare to those announced by your peers. So a little bit more color around the margins given other peer deals that come with generation linkages. Lawrence Coben: Yes. We put a little slide in the appendix, which kind of talks about margin and pricing. This is very similar to the one that we announced last quarter, just locationally different. Premium margin as a result of different things go into getting our premium margin on any deal, including land, including our commercial acumen. I mean I really need to say we have the best commercial team in the business at both gas and electricity, being able to really meet customer needs in a flexible way, all of those lead to the margin that you see on that appendix chart. Operator: Our next question comes from Julien Dumoulin-Smith with. Julien Dumoulin-Smith: Let's -- let me jump back to the -- let me ask the same question that our buddy just asked a second ago in a different way. Look, as far as GEV goes in this Kiewit partnership, do you have a certain time frame that you need to move some of this equipment, use it or lose it, if you will? Can you speak to that a little bit? Because I think that's probably an important nuance to speak to when you talk about your confidence and the time lines under which you're operating to execute on this. Lawrence Coben: Look, Julien, we haven't disclosed any time lines, but we're -- I'm very confident that we're going to meet all of the time lines that are required under that agreement. But what you're really trying to do, Julien, and I know is pin me to a month, and I'm not going to let you do that. Julien Dumoulin-Smith: Absolutely. You know what we're all trying. I mean start too. Lawrence Coben: [indiscernible] Well done, but... Julien Dumoulin-Smith: Not quite there. All right. I got it. Well, let me ask it this way. As far as it goes with the build your own power, BYOP as we're calling it, right, like there's clearly been an evolution in the marketplace. When you think about the scope of what's possible here, again, I know folks have been looking at co-located opportunities in the last couple of years, but now we firmly shifted. How meaningful, right? We've seen a few announcements here with a couple of hundred megawatts here, a couple of hundred megawatts this quarter. I mean when you say you're going to deliver updates next year, can you speak to BYOP and the scale of what's at hand here in terms of really building out contracted jet? Lawrence Coben: Sure. Look, just starting with the GEV, Kiewit deal, Julien, that's 5.4 gigs. So that's a good place to start from. I mean there are some things that could be added to that in a variety of ways that we're looking at. But I think if we brought even 5.4 gigs to the table, you would be and everyone would be super happy from us. So I mean, the scale -- I mean, that's kind of the scale that we're focused on right now, but we are looking at opportunities to see how we can make that even greater. Julien Dumoulin-Smith: Got it. All right. And then let me just shift this slightly. When you think about the focus here, I mean, a lot of conversation has been around your portfolio in Texas and ERCOT specifically. Can you speak a little bit more broadly? Obviously, you guys have Illinois site, PJM is talking increasingly about bringing new assets to fore. Illinois just passed legislation in recent weeks. For instance, is there an opportunity in the PJM portfolio to both add gen -- add gas and storage specifically and perhaps tap into some of these developments that have been recently put to kind of quell the state's needs for new capacity? Lawrence Coben: Absolutely, Julien. And we are working hard on that, and we'll really accelerate those efforts, of course, once LS closes because until we own the generation assets there, that will really fault us into being a significant player, but there's no grass growing under our feet there in the meantime. Julien Dumoulin-Smith: Got it. All right. And Illinois legislation, is there something for you guys to do there specifically to ask that more pointedly? Lawrence Coben: I don't think the legislation is really going to be the driver of this, Julien. So -- but as you know, we do have sites in Illinois. So... Operator: Our next question comes from Agnie Storozynski with Seaport. Agnieszka Storozynski: So first of all -- now I see the slide showing the sensitivity of your gross margin to changes in forward power curves. I mean we've had finally the move in curves we had waited for. And so I'm just wondering if anything has changed there? Are you waiting to update it for your enlarged portfolio? Any comments? Lawrence Coben: Agnie, you just hit the nail on the head. We are waiting to update it for our enlarged portfolio. Agnieszka Storozynski: Okay. And you're not going to give me any sense how -- especially the PJM price is moving, how they are impacting the pro forma EBITDA of the company for now? Lawrence Coben: Not at this stage. Well, certainly, we will provide, obviously, a very fulsome update soon after we close on the transaction. Agnieszka Storozynski: Okay. And then the second thing is, so we've had some companies, new power companies or pretending to be new power companies that have aspirations to build gas plants without any prior expertise in power. So I mean, it is surprising that they could be ahead of you in the pecking order. It's not for the fact that you guys actually have sites, have equipment, know how to hedge gas, et cetera. So is it that they just talk more about their opportunities versus you guys? Or do you still feel like you have a head start over those companies? Lawrence Coben: Agnie, I'm convinced that we're in a great position to do what I was describing. We had this a long time, so of you, there's a lot of announcements -- when I actually see to use Sam Altman's new term electrons flowing, then I will actually believe that they're real or you'll see steel in the ground. But we're not one -- we tell you what we've done. We don't tell you what we're going to do, and that's kind of my philosophy in all this. So there's going to be a lot of announcements because a lot of people think they're data center and power developers. Some of those are probably real, but I'm very, very comfortable with where we sit in the pecking order, both with respect to building power plants and with respect to hyperscalers. Agnieszka Storozynski: Okay. And then one more. I mean, we are still seeing a lot of assets, private assets being offered to companies like you, hopefully. You do have a large pending acquisition. And I'm just wondering if you would still have interest in single asset transactions before the LS Power transaction closes. Lawrence Coben: We look at everything. And if there's something that's economically attractive, that's a great fit for our portfolio, we would be interested. We don't feel we need to add any additional capacity given the LS acquisition, the Rockford acquisition and the TEF projects, but we are always opportunistic when these things are out there. Agnieszka Storozynski: And then lastly, Bruce, you mentioned the free cash flow guidance for '26 and the fact that you're sort of running out of the tax shield. I mean, the LS Power transaction brings the tax shield, right? So there would be presumably an improvement sort of free cash flow generation of the current business on the back of that transaction. Is that fair? Bruce Chung: Yes, I think that's generally a fair statement, Agnie. The one thing that I'll just clarify for you is that uptick in cash tax that we talk about on a stand-alone basis isn't necessarily related to our NOLs disappearing. It's really more about certain tax credits that we had from our days when we owned renewable assets that eventually expired. And so regardless of the LS transaction, we're still going to have a very sizable NOL position. But clearly, the LS transaction is going to give us even more, which should inure to a cash flow benefit. Operator: Next question comes from James West with Melius Research. James West: Larry, in your prepared comments, both at the beginning and the end, I think you made it very clear that you guys are not just standing still waiting to close OS, but you've got a lot of other things going on. If you were to kind of rank order what you're most excited about outside of that transaction, what would you say are the top kind of 1, 2, 3 other things or items that you're waiting to hopefully announce to us in the near term? Lawrence Coben: I'm going to do them in no particular order because otherwise, that's like picking favorites among your kids. James West: Understood. Lawrence Coben: I mean we have -- both on the C&I and on the retail side and energy and in Smart, we have a lot of -- people have kind of lost sight of. We have a very exciting growth plan where we're killing it. Second, our residential VPP excites me tremendously. And after LS close, I'm also even more excited about our demand response potential. So I look at all of those things. And I guess the fourth thing I would say is bringing our first project online and making progress on the other 2. So there's a lot going on here that we don't -- we haven't even begun to put into our numbers. And -- so even if there were no -- I just -- as a reminder, even if there were no data centers at all and no changes in power prices, we're still showing a 14% CAGR, and we still have a double-digit free cash flow discount rate. So I'm sorry, I'm super excited about that. I don't know where I could get in the market such as -- with not much downside, those kind of numbers, leaving out all the other great things that we're doing. So I am as bullish as I've ever been. Operator: Our next question comes from Nick Campanella with Barclays. Nicholas Campanella: Maybe I could just follow up on the BYOP combo, just your conversation with policymakers at the states you operate in, how does that look in terms of BYOP? How have the customer conversations evolved over the last 6 months? And is it a fair assumption that all deals going forward just need some type of additionality in this space now? Or how would you kind of frame that? Lawrence Coben: I mean I don't -- speaking to all deals is hard, but it starts with the Secretary of Energy, who's been very, very explicit on this. And I think as regulators more and more look at the affordability question and how to distribute the cost of this new power, the simplest way to do it and the fairest way to do it, I think, is probably bring your own gen. Now whether that's megawatt hour per megawatt hour or 75% or 50% or some other measure, I think, remains to be seen. But I think every policymaker is looking at this for 2 reasons. One is the affordability factor and two is everyone knows they need new power. Everyone knows they need new infrastructure. So to the extent if you're the governor of, say, New Jersey or Pennsylvania or somewhere like that, you would rather spread that cost across Amazon or Meta or Googles or Microsoft's billions of customers around the world rather than your own rate payers. So this is a trend that we started talking about a year ago and prepared for it with our GEV and Kiewit joint venture, and it's now really coming home to roost and accelerating in the last few months. Nicholas Campanella: Definitely recognize that. Maybe just with PJM being a more important jurisdiction pro forma of this LS Power deal. Can you talk about the capacity auction and just the prospects and timing for the collar to potentially be extended or just what you're advocating for with stakeholders, where you think the industry is heading and ultimately, what outcome you think would be good for the industry? Unknown Executive: It's Rob. Look, nothing's changed since the last auction as far as supply and demand. So I would expect that, that means that we're going to price at the top of that cap and collar. The -- as far as long term goes, they're looking at lots of different ways to solve the equation. Ultimately, we -- everybody is generally concerned about reliability and they're concerned about things like affordability. But in order to get reliability, you have to have price signals. And so the market has to reflect something for something to get built. As far as the collar being extended, we were supportive of the collar last time. I could see it being extended again because it provides certainty for everyone in the market. Whether or not the top end of that collar is at the right place, that's yet to be determined. Operator: Our next question comes from Carly Davenport with Goldman Sachs. Carly Davenport: Larry, you mentioned before your excitement about the resi VPP program and the pilot there. I guess, any updates on how that's tracking in terms of uptake? And is that something that we should expect to see sort of regular updates on in subsequent calls? Lawrence Coben: Yes. I'm going to kick that over to Brad. Unknown Executive: Thank you. Yes. No, we've been very pleased with the progress from VPP. So as you're aware, we did raise guidance earlier this year for the balance of '25. So we went from 20 megawatts to 150, and we remain on track for our 1 gig by year-end. We received a lot of...[indiscernible] We received a lot of great feedback from customers about the value and the experience of our offering. So we're really excited about that, and we're actually installing more customers than anticipated. And I think as we had shared in our last earnings, we're actually seeing the upgrade of additional equipment kind of 2x our expectations. But apart from that, we're also piloting some additional new home automation offerings which not only deliver the demand response, but will also help reduce home energy consumption, which will enable us to offer customers home energy savings. So as affordability and grid capacity become more critical, energy will really have the only solution to meet those needs to be able to reduce energy consumption and save customers money. So we're really excited about piloting that, not just in Texas, but we will also be taking that out to the East early next year. Carly Davenport: Great. Okay. That's super helpful. And then maybe just on the data center pipeline, you have one agreement with first delivery in '26, another in '28. I guess, is there any trends that you're seeing in terms of when customers are looking to be energized on these fields? Lawrence Coben: I mean I think they're looking to be energized as quickly as possible, but there are some bottlenecks, as you know, with interconnection and things of that nature as well as if you do really need to bring your own power plant, obviously, that doesn't occur in a day. So I think customers are -- would love to start ramping yesterday, and they're doing what they can to do that. But I think if I look at the graph from now through 2031, there's more and more power coming on ramping each of those years. So I don't think anybody comes to the table thinking, well, we really want to start in 2033, but I think they're also realistic about building their own businesses and the constraints that exist. Operator: Our next question comes from David Arcaro with Morgan Stanley. David Arcaro: When you say that you're -- let's see, on the data center power agreements, increasing your kind of expectations for pricing to now be above $80 a megawatt hour. What's that reflecting? Is that a reflection of where market prices have gone? And just thinking about the upper end of your prior $70 to $90 range, like does that upper end go up as well? Kind of curious just like would you be repricing like bring your own power type deals also upward? Lawrence Coben: I think everything is pricing upward as a result of increasing demand. If you look at the capital expenditure announcements by the hyperscalers, they continue to rapidly increase across the board. I think it's a recognition from people of the commercial -- of our rather unique ability commercially to supply them in ways that they want to be supplied and to bring new power to the table and just really heightened interest from multiple hyperscalers and developers in a very accelerating fashion, just kind of using the basic laws of supply and demand. So all of those are factors that led us to raise this really to kind of take the top of the range and raise the bottom of the range. David Arcaro: Got it. Okay. Great. That's helpful. Then separately, I was just wondering if you could comment on the retail competitive backdrop, retail -- your outlook for retail margins from here? Can they remain strong looking out at your forecast? Unknown Executive: Yes. We have -- this is Brad. We continue to see strong margins in Texas. And we have had -- primarily because it's a competitive marketplace. And so as prices have gone up, we've been able to maintain those margins. As I mentioned earlier, we are looking at solutions to help give some customers relief in terms of helping reduce energy consumption. As we know, affordability will be a challenge as everyone does raise prices. In the East, a little bit different dynamic when we're up against the price to compare. And so that one, we have seen a little bit of margin erosion that we are managing very closely. But as I mentioned earlier, being able to bring an integrated value proposition to the consumer that gets beyond competing for price per kilowatt hour and give them a solution that actually brings their energy consumption down and give them home protection and home automation in the home. We believe that's a solution that we will be able to scale and slightly change the conversation. So a little bit different dynamic, as you know, between the East and what we see in Texas. Operator: Our next question comes from Ryan Levine with Citi. Ryan Levine: Hoping to follow up on the Smart Home business. Good to see the 9% annual year-over-year growth there. What are you assuming for '26 stand-alone business contribution for Smart Home growth? And how do you see that trend evolving into your longer-term outlook? Lawrence Coben: Yes. In terms of customer counts, we're assuming something very similar to what we saw this year. We've seen really strong growth across really all of our channels of distribution. We're also launching more of a good, better, best. Historically, Vivint has been pushing the higher-end systems, but we're able to, as I mentioned earlier, offer a much more affordable entry-level offering that not only gives customers some security protection, but also that energy management savings that I touched on. So with the additional kind of good, better, best, it opens up new channels of distribution. And so we expect really strong growth in '26 as well. Bruce Chung: Ryan, I just want to remind when we announced that $750 million growth plan, we had indicated Smart Home net customer growth to be in that 5% to 6% range. And so I think when Brad alludes to the customer growth that we're assuming for '26, it's still going to be pretty consistent with that original growth plan -- probably higher. Ryan Levine: And then in terms of the hyperscaler data center conversations, I appreciate the additional guidance around pricing and momentum. But in terms of duration of the contracts, are you seeing any change there around the tenor of contracts that the customers are looking for as demand has continued to accelerate? Lawrence Coben: No, we still continue to see people wanting at least 10 years, some even more than that. So if anything, tenure will be increasing, particularly if you're going to bring your own generation, you really need a longer tenured contract in order to drive your own cost down. So we're seeing longer contracts, not shorter ones, Ryan. Ryan Levine: Okay. And anything around inflation provisions? Are they becoming more standardized around some of the other commercial terms embedded in these contracts? Lawrence Coben: I mean we are -- most of the contracts are going to be allowing us to pass through and allow us to keep our margins relatively fixed kind of across the board for a variety of factors. Operator: Our final question comes from Andrew Weisel with Scotiabank. Andrew Weisel: First question on buybacks. I see that you're guiding to a moderation in next year to $1 billion. I think you previously alluded to that. Forgive me, I'm still a bit new to the story. Is that a function of LS Power and TEF CapEx, which is sort of onetime in nature? Or should we think of the $1 billion as a good run rate going forward? I can do the math, $3 billion through 2028 kind of implies that. But how are you thinking about this longer term? Bruce Chung: Yes. It's really just staying consistent with what we had indicated when we announced the LS Power transaction, Andrew. We had indicated buybacks of $1 billion per year until we get through our deleveraging. And so that's all -- we just wanted to keep it consistent, recognizing that we were going to be updating capital allocation once we close. Andrew Weisel: Okay. That makes sense. And similarly, on that last point there, you said that you'll update all the financials when LS Power closes. Does that mean like an 8-K or press release as soon as it closes? Or are you talking about the 4Q update in February? Bruce Chung: I think it's really just going to be dependent on when we actually close and how that timing lines up with when we might otherwise regularly report earnings, fourth quarter earnings. And so we'll assess based on where things are lining up with respect to close to figure out what the best way to communicate with the investment community will be. Andrew Weisel: Okay. That makes sense. And one last one. You covered a lot of good details, so this is kind of a nuanced one, but I'm seeing some headlines that potential sale of the Gladstone asset in Australia. A lot of people might not even remember that you have that. But how are you thinking about that asset? And could there be value there? Bruce Chung: Look, I mean, we don't -- to the extent that there is value, it's really more -- it's going to be nominal at best. I wouldn't necessarily think of that as being a particularly significant driver. And if anything, it's really more to just continue to simplify our portfolio and streamline our operations. Operator: I'm showing no further questions at this time. I'd now like to turn it back to Larry Coben for closing remarks. Lawrence Coben: I want to thank you all for taking the time to listen and for your interest in NRG. I have never been more excited about our prospects as we are today, and I look forward to seeing you all on road shows and wherever so that we can discuss them in more detail. Thank you, operator, and thank you, everyone. Operator: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Today's call is being recorded. I'll now turn the call over to Jenny Chen, VP of Controls Transformation of Liberty Latin America. Jenny Chen: Good morning, and welcome to the Liberty Latin America's Third Quarter 2025 Investor Call. [Operator Instructions] Today's formal presentation materials can be found under the Investor Relations section of Liberty Latin America's website at www.lla.com. Following today's formal presentation, instruction will be given for a question-and-answer session. As a reminder, this call is being recorded. Today's remarks may include forward-looking statements, including the company's expectations with respect to its outlook and future growth prospects, and other information and statements that are not historic facts. Actual results may differ materially from those expressed or implied by these statements. For more information, please refer to the risk factors discussed in Liberty Latin America's most recent filed annual report on Form 10-K and quarterly report on Form 10-Q, along with the associated press release. Liberty Latin America disclaims any obligation to update any forward-looking statements or information to reflect any change in its expectation or in the condition on which any such statement or information is based. In addition, on this call, we will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendices to the presentation, which is accessible under the Investors section of our website. I would now like to turn the call over to our CEO, Mr. Balan Nair. Balan Nair: Thank you, Jenny, and welcome, everyone, to Liberty Latin America's Third Quarter 2025 Results Presentation. I will be running through our group highlights and an overview of our operating results by Credit Silo before Chris Noyes, our CFO, reviews the company's financial performance. We'll then get straight to your questions. But before we get into the details, let me start by taking a moment to recognize the hardship of our employees, customers, partners, communities, governments who bore the brunt of Hurricane Melissa in the Caribbean, especially in Jamaica. Their resilience is nothing short of amazing. Our commitment to this region is strong, and we will help with the recovery through our humanitarian and infrastructure rebuild. I will cover this in more detail in my commentary on Liberty Caribbean. As always, I'm joined by my executive team from across our operations, and I will invite them to contribute as needed during the Q&A following our prepared remarks. As a point of housekeeping, we will both be working from slides, which you can find on our website at www.lla.com. Starting on Slide 4 and our highlights. Our core business performed very well in Q3. We added over 100,000 postpaid net adds across the group, notably driven by Costa Rica and supported by fixed mobile convergence efforts and continuing prepaid to postpaid migration. This was the strongest quarter of postpaid additions across the group in 3 years. We reported $1.1 billion of revenue in Q3. This represented a return to year-over-year growth driven by better trends in B2B as we had anticipated. This, in turn, came about through a combination of better momentum on enterprise and government-related contracts as well as the easing of tough year-over-year comps on B2B, which we faced in the first half of the year. Residential revenue grew year-over-year this quarter as we continue to focus on innovative customer value propositions across the markets. We posted adjusted OIBDA of $433 million, reflecting a rebased year-over-year growth of 7% in the third quarter. This included rebased growth across all of our segments, including Puerto Rico. This performance was driven by good execution on cost initiatives as well as strong customer base management. We maintain our focus on lowering capital intensity. These efforts led to a 22% expansion in adjusted OIBDA less P&E additions year-over-year, bringing us to a margin of 26%. Today, and despite some recovery through this year, we continue to believe our share price does not fully reflect the intrinsic value of our underlying businesses. We remain focused on delivering organic growth and cash flow generation, which we believe is critical for share price appreciation. Additionally, as previously discussed, we continue to look across our array of assets in the group and evaluate opportunities to close the embedded discount in our stock price. Turning to Slide 6. I'll begin our operating review with the Cable & Wireless credit silo, which had another very solid quarter. This silo includes Liberty Caribbean, C&W Panama and our Liberty Networks segment. Starting with Liberty Caribbean. We reported another strong quarter. On the left of the slide, we present our mobile KPIs. Postpaid mobile additions remained strong with mobile ARPU showing a healthy expansion on a year-over-year and sequential basis. Moving to the center of the slide to our fixed KPIs, the broadband subscriber base remained flat in Q3 with gains in Jamaica offset by declines mainly in Trinidad. Other highlights include the launch of 5G in Barbados, becoming the second market in our Liberty Caribbean segment to offer 5G alongside cable. Now turning to Hurricane Melissa. Damage is significant in the rest of the country, while the major economic hub of Kingston in the more populated east has been much less impacted. The situation remains very dynamic and impacted by the speed of power restoration on the island. Our latest data suggests that we are very thankful that 100% of our staff is marked as safe. Secondly, mobile traffic on our network is back to 80% of pre-hurricane levels. In our fixed network, over 40% of our overall customers are online, while in the major metro areas, we are at over 80%. On the power side, over 50% of Jamaica's power service customers have power, and 14 out of 15 of our owned and operated stores are open now and are supplemented by 17 stores on wheels, 2 of which are dedicated to just our B2B customers. Jamaica is a key part of Liberty Caribbean, a region we have operated in for over 150 years. We will be working tirelessly to repair and rebuild our infrastructure, leveraging the vast experience of the local and central teams while continuing to bring in partners like PTI under Towers, JPS and Powers and others to quickly stand our services back up. During the hurricanes approach, we went live with a satellite partnership with Starlink Direct to Cell in Jamaica to offer emergency Direct to Cell connectivity for our mobile customers. This played a key role in helping customers stay connected in areas where the mobile network has been down, and we have seen more than 140,000 unique users successfully attached to this D2C technology. As recovery efforts continue, we are beginning to see customers returning to our mobile network. While it's too early to assess the full impact of the hurricane, we would remind investors that we maintain parametric insurance across the Caribbean. One of its advantages over traditional indemnity insurance is that it pays out quickly, which facilitates a more rapid repair and rebuild. Chris will provide more perspective on this in his section. Moving to Slide 7 and our C&W Panama segment. Starting on the left of the slide. We continue to deliver postpaid net adds as customers migrate from prepaid. While this is a deliberate strategy, we are also pleased to report a return to prepaid growth after 2 consecutive quarters of decline driven by lower churn and a higher proportion of rejoining customers. Moving to the center of the slide. We delivered another solid quarter of Internet subscriber additions. The more significant shift this quarter came from the B2B space. We have previously highlighted recent wins with government-related and in the enterprise space, and these deals are now beginning to flow through revenue. B2B revenue this quarter expanded 33% on a sequential basis and 14% on a year-over-year basis. Next to Slide 8 and our final segment within the C&W credit silo, Liberty Networks. On the left of the slide, we present our Q3 year-over-year revenue evolution. Our strong performance in wholesale reflects the strength of our core operations and the growing demand for bandwidth across the region. Enterprise remains a key growth engine with continued momentum in IT as a service and connectivity solutions, particularly in Colombia and the Dominican Republic. These services are helping us build a strong base of monthly recurring revenue, which supports long-term stability and positions us well for the future. From an operational perspective, in August, Liberty Networks announced a major milestone with the launch of MAYA-1.2, an enhanced system spanning 2,386 kilometers that doubles the capacity of the existing subsea cable MAYA-1, and will continue to deliver critical capacity. This strategic upgrade represents a long-term investment in regional infrastructure, strengthening international connectivity and digital resilience throughout the Caribbean and Central America. This investment will also clear the way for the installation of Manta, the new pan-regional subsea cable system. We remain on track and excited about monetizing this asset in the coming years. Turning to Slide 10 and Liberty Costa Rica. Starting on the left of the slide. The main driver of our top line continues to be postpaid mobile segment. Through the first 9 months of the year, we have added almost 130,000 postpaid subscribers, representing a 13% expansion on the Q4 2024 base with a particularly strong Q3 performance. One of the drivers is our successful commercial strategy of migrating prepaid subscribers to postpaid and the good pickup in our Planes Libre offering. This is the lower-end postpaid plan, but is nevertheless accretive. Prepaid to postpaid migration is supportive for ARPU and churn helping to offset broader competitive tensions. Having now acquired the 5G spectrum we were awarded earlier this year, we look forward to further strengthening our mobile leadership in Costa Rica through the deployment of our standalone 5G mobile network in partnership with Ericsson. Moving to the center of the slide. On the broadband side, we continue to do a solid job maintaining our subscriber base despite a competitive market. We continue to work on strengthening our commercial offering in the market. Early in Q3, we launched an offer for new and existing customers to have access to the most popular over-the-top platforms, included India Home Plan. This bold and meaningful value proposition unique for the Costa Rican market is anchored by a new brand claim: you want it, you got it. As we have highlighted in our 10-Q, the regulator in Costa Rica, Sutel, has issued a resolution prohibiting our proposed transaction with Millicom. This outcome was surprising, given we have worked closely with the regulator over a number of months to design the appropriate remedies to address any competitive market concerns. We have filed an appeal and would expect a response shortly. In the event our appeal is denied, we intend to drive cost savings in our operation that we held off pending the combination with TiVo. We are starting to lay the foundation for that as we speak. Moving to Slide 12 in our third credit silo, Liberty Puerto Rico. Starting on the left of the slide. Mobile performance showed greater stability with postpaid losses lower compared to Q2, with churn tracking in the right direction. Commercial efforts in the third quarter focused on the launch of our new postpaid value proposition, Liberty Mix. Early results have been supportive. Momentum on gross adds have picked up modestly through Q3 with an improving port-in port-out ratio. Perhaps more significant at this stage has been the support to gross adds ARPU with the higher tiering subscriber blend leading to a 40% increase in September versus the month prior to launch. On the fixed side, we continue to see some competitive pressure impacting our subbase, though ARPU is sequentially stable and up on a year-over-year basis following price increases earlier this year. We launched a new commercial campaign on our fixed offer with a central theme of reliability with 3 distinct components. Firstly, recognizing that many homes in Puerto Rico have generators given the frequent power outages on the island, we launched a product that allows our fixed service to be up and running during these power outages by defaulting to the mobile network. We also offer new software in our devices that drives a stronger Wi-Fi experience in the home. Confident in the reliability of our network, we are also incorporating a 30-day network guarantee for customers. As we look out over the coming months, we will continue to ramp up commercial efforts on our fixed mobile convergence offer, Liberty Loop. Given FMC penetration across a number of markets in the LLA Group, we know that Puerto Rico is a laggard at just 23%, of which only 10% are real FMC customers who have converged products and are receiving a financial or experience benefit from them. Our focus on FMC is increasing, and we expect this to be a good driver into 2026. With that, I'll pass you over to Chris Noyes, our Chief Financial Officer, who will take you through our financial performance before we move on to your questions. Chris? Christopher Noyes: Thanks, Bal. I'll now take you through our Q3 financial results, starting on Slide 14. We posted revenue of $1.1 billion and adjusted OIBDA of $433 million, reflecting rebased growth of 1% for revenue and 7% for adjusted OIBDA year-over-year. All of our operating businesses reported year-over-year rebased growth on both revenue and adjusted OIBDA with the exception of a decline in revenue at Liberty Puerto Rico. Sequentially, as compared to Q2, LLA's reported revenue increased 2% and adjusted OIBDA increased 4%, a solid uplift, which sets momentum into Q4. Reflecting both lower capital intensity with P&E additions at 13% of revenue in Q3 and continued adjusted OIBDA expansion, LLA posted adjusted OIBDA less P&E additions of $284 million in Q3, a 22% improvement year-over-year. Although we were up year-over-year on adjusted OIBDA less P&E additions, our reported adjusted FCF before partner distributions was $16 million in Q3, a decline year-over-year. Our cash flow performance in Q3 continues to be challenged on collections, principally from our government customers, some of which we anticipate to receive in Q4. In addition, our prior year quarter benefited by approximately $90 million due to the positive impact of handset monetization during the quarter and the proceeds from the Hurricane Barrel weather derivative payout. As mentioned previously and consistent with prior years, we expect robust free cash flow performance in Q4, even with the impact from Hurricane Melissa, which should be mitigated in part by proceeds from our parametric insurance program. Slide 15 recaps our Q3 results for the C&W credit silo, which consists of Liberty Caribbean, CWP and Liberty Networks. Starting with Liberty Caribbean. In Q3, we reported $369 million in revenue with 3% growth year-over-year on a rebased basis. This result reflects year-over-year rebased growth of 5% in residential fixed, while both residential mobile and B2B increased by 2%. Revenue performance was supported by continued growth in FMC as evidenced by the postpaid additions over the last year, selected price increases across geographies and products and a favorable comparison to the storm impacted Q3 2024. Adjusted OIBDA came in at $173 million, representing 10% rebased growth year-over-year. Besides revenue contribution, a key driver of the strong Q3 rebased growth was lower operating costs, reflecting the continued impact of Liberty Caribbean's comprehensive efficiency and savings program, and relatively flat direct costs on a higher revenue base. For Q3, Liberty Caribbean's adjusted OIBDA margin improved nearly 300 basis points year-over-year, reaching 47%. Building upon Balan's points relating to Hurricane Melissa, we are in the early stages of assessing the operational, financial and economic impact of the storm. There are a number of dependencies, including the timing of the return of power to parts of Jamaica, which will influence our ability to provide service to customers. We anticipate adverse impacts to RGUs revenue and adjusted OIBDA in Q4. As a point of reference, Jamaica generated about $108 million of revenue in Q3, which is less than 10% of LLA revenue. Next, moving to Cable & Wireless Panama. CWP delivered $199 million of revenue and $72 million of adjusted OIBDA with year-over-year rebased growth of 6% and 4% respectively. The top line increase was driven by 14% higher B2B revenue year-over-year, which reflects the solid pipeline we had in Q2, and we continue to see good B2B momentum into year-end. Adjusted OIBDA growth reflected the lower margin B2B project revenue, while we also realized improvement in network and labor costs over last year's Q3. Turning to Liberty Networks. We generated $117 million in revenue and $65 million in adjusted OIBDA with a year-over-year rebased increase of 6% and 10% respectively. The rebased growth rates are our strongest in about 2 years. Each of our 2 business segments experienced solid year-over-year revenue growth with 5% rebased for wholesale, driven by subsea capacity revenue and 6% rebased for enterprise, reflecting continued growth in managed services and higher B2B connectivity. Our adjusted OIBDA growth reflects the positive impact of the revenue increase as well as lower bad debt year-over-year. Aggregating all 3 operating segments within the C&W credit silo, we generated $662 million in revenue, reflecting a year-over-year rebased increase of 4% and $309 million in adjusted OIBDA, resulting in an 8% year-over-year rebased growth. Moving to Slide 16 and the Q3 results for our 2 credit silos: Liberty Puerto Rico and Liberty Costa Rica. On the left, Liberty Puerto Rico. Q3 revenue was $298 million with a 5% year-over-year rebased decline. The primary drivers of this decline are a 7% rebased decrease in mobile residential revenue and a 16% decrease in B2B, both of which primarily relate to subscriber losses stemming from the mobile network migration completed last year. Adjusted OIBDA of $96 million in Q3 reflects 7% rebased growth. Mitigating the revenue decline over the last year, a key factor behind the year-over-year adjusted OIBDA growth this quarter is a comprehensive cost reduction plan the business has undertaken in order to rightsize and streamline its operations given the lower revenue and subscriber base. Additionally, the business also benefited from lower bad debt expense year-over-year. Concluding with Costa Rica on the right, we delivered Q2 revenue of $155 million and adjusted OIBDA of $56 million, representing a 3% rebased revenue growth and 7% rebased adjusted OIBDA growth year-over-year. Performance was driven by our residential mobile business, which grew 7% on a rebased basis year-over-year and was fueled by higher postpaid volumes and strong equipment sales. In addition, the operating team has been focused on controlling costs, which supported margins this quarter and is in the process of working through a more comprehensive plan for 2026. Next to Slide 17 and our Q3 balance sheet metrics for LLA. We had $8.4 billion of total debt, $600 million of cash and $900 million of borrowing capacity at September 30, of which our Puerto Rican group accounted for $2.9 billion of debt, around $120 million of cash and roughly $170 million of borrowing capacity. On an LLA consolidated basis, we posted net leverage of 4.6x, a slight improvement from Q2, helped by the higher adjusted OIBDA in Q3 from across our operations. If we exclude Puerto Rico from the leverage calculation, our net leverage would fall about a turn to the mid-3s. With respect to Puerto Rico, there are 2 balance sheet developments to highlight. One, the Puerto Rican business successfully raised a $250 million secured financing, of which $200 million was borrowed during Q3 via an unrestricted subsidiary approach. This provided the business with near-term liquidity to continue investing in operations and more than half of the proceeds were used to repay a significant portion of its fully drawn RCF. Second, as highlighted in early August, the liability management process is underway, and the business is actively engaging with its various stakeholders. As you can appreciate, given the ongoing discussions with stakeholders in the business, we are not in a position to provide further updates at this stage as regards to both the expected outcome and the timing thereof. Turning to how we protect our assets from nat cat events. We use a robust parametric program across our C&W and LPR credit silos. Our weather derivative was triggered and should help us mitigate losses from property damage, business interruption and other impacts from Hurricane Melissa. We expect to receive $81 million in third-party proceeds before year-end. Moving to Slide 18 and to wrap up our prepared remarks. As a recap, Q3 was a very good quarter at the operating level with top line expansion and improved adjusted OIBDA. No doubt, it will take time to recover from Hurricane Melissa and Jamaica, but I do know our employees are resilient and up to the task. We remain focused on getting key communications up for our customers and are encouraged by the quick progression in lighting up service since the event. As I highlighted on the last slide, the payout from our parametric program will be invaluable to our Jamaican recovery and should go a ways to mitigating the overall financial impact. As we look to finish the year, several important points to reiterate. One, our commercial plans remain robust on both B2B and residential, and we will be focused on the seasonally strong holiday selling season across many of our markets. Two, our cost reduction and efficiency programs across LLA continue to deliver, which will support and underpin our adjusted OIBDA and cash flow as we move into 2026. And three, cash flow is expected to be strong in Q4, and we continue to work hard across all of our businesses to deliver on that objective. And finally, we at LLA remain focused on improving value for our shareholders as we fundamentally believe the share price doesn't reflect the value of our businesses. We are focused on organically growing the business, pursuing strategic initiatives and optimizing capital allocation. These 3 components will be helpful in unlocking incremental shareholder value. With that, operator, please open it up for questions. Operator: [Operator Instructions] Our first question today comes from Milena Okamura of Goldman Sachs. Unknown Analyst: The first one is on timing and progress of your cost-cutting initiatives. Are they expected to be mostly done by Q4, benefiting 2026 as well? Or is it more gradual process throughout the next year? And are there any specific regions or cost lines where you expect this to be particularly relevant? And the third question, sorry, is if you could give us more color on margin drivers for Liberty Networks. You mentioned a bad debt reduction, but was that the main driver for the margin expansion? Or there were other factors that supported? Balan Nair: Thank you for the question. So let me talk about our cost cutting. We embarked on this about literally about 20 months ago, and we're starting to see the benefits now certainly this year. And we anticipate it to follow through in 2026 as well. Our cost cutting continues through the end of this year and into the first half of next year as well. And there's a number of things that we look at. Clearly, cost of goods sold, the way we do COGS, there's a number of line items in there that we focused on. We also focused on other OpEx costs, including the tower leases. And of course, we also focused on labor. Where it makes sense, we've taken a very sharp look at the labor in our business. So my sense is that in 2026, there will be more opportunities in especially in the first half. But you see us also focus on revenue, and that's the other part of where we look at our margin expansion. Now on Liberty Networks margin drivers, there's a number of things that drove some of the margin expansion as we get off a lot of our IRUs acceleration, there's a lot of work that we've been doing. Bad debt has improved, as you pointed out. And Operator: Apologies, ladies and gentlemen, we have lost connection to the management team's line. Please be on pause till we resumed the call. Thank you. Please proceed. Balan Nair: I'm sorry, I think we lost our connection. I'm not sure at what point or where we dropped. Do you know where we dropped? Operator: You are at Liberty Networks, Balan. Liberty Networks, I would do again. Balan Nair: Okay. Yes, on the Liberty Networks, I think we were talking about margins on both sides in the OCF and OFCF level. And at an OCF level, as you pointed out that that has improved. There's a lot of things that we've done there, and we've also gone more and more to our monthly recurring revenue, taken off a lot of our -- coming to an end a lot of our IOU acceleration. And then, of course, at an OFCF level, our expenditure on project Manta is starting to grow. And the numbers are where we like it to be. We remain very bullish on this segment. Operator: Our next question of today comes from Ernesto Gonzalez of Morgan Stanley. Ernesto Gonzalez: So it's 2 from our end. The first one is on Puerto Rico. Could you please talk about room for additional margin expansion in the unit? And also on your cash uses outside of Puerto Rico, any details that you can share on priorities across deleveraging, buybacks, dividends and also any details on timing are greatly appreciated. Balan Nair: Okay. On the first part, you'll continue to see margin expansion in Puerto Rico as we continue to recover the business. This year, our focus in Puerto Rico has been on the cost side, a significant focus on both the OpEx line, CapEx line, cost of goods line. Every single line item in that business was scrutinized, and we are running it, I think, very, very efficiently. The second stage of our margin expansion there comes from revenue growth. And you can start seeing already the numbers are coming in, even though we didn't post a revenue growth number this quarter. I anticipate next year, we'll start to see some positive uptick from a lot of the hard work that's going in this year. Systems have improved. Our processes have improved. Our store process have improved. Our sales teams productivity has improved. In addition to that, we've started the launch of our FMC. And there are questions as to why have we waited so long for FMC. Well, there were a lot of things that we had to do to fix, especially on our IT systems. We continue to have 2 different billing systems on fixed and mobile, but we had to do a lot of work on the mobile side. And now we're able to completely link it. This is our lowest FMC penetration in all of LLA, and we see some really bright future. And in addition to that, our channels are also improving, and we've got lower cost channels coming in, in 2026 as we embark on more digital sales. So there's a lot of really positive things that will happen to improve the margins. Now your second question, I think you were talking about our cash position in LLA in general outside of Puerto Rico. I didn't quite catch your question. Ernesto Gonzalez: Sorry, it was on your uses of cash. So what do you expect to do across using the cash you're generating or you will generate for deleveraging buybacks, dividends and also any details on timing? Balan Nair: Okay. Great question. Well, of course, our capital allocation strategy, we revisit it constantly. You'll see a lot of our cash generation comes in towards the back end of the year in the fourth quarter. As Chris pointed out, we are very confident on our fourth quarter cash generation. And together with our Board, we will determine the traditional ways of looking at our capital allocation, whether it's stock buyback, paying down our debt or even considering issuing a dividend. Everything is on the table as we look at the deployment of that cash. Operator: Our next question comes from David Lopez of New Street Research. Unknown Analyst: A couple of questions, please. On Puerto Rico on the fixed business, I was wondering if you can comment on competition. I think you mentioned a bit more competition this quarter. Is it coming from traditional cable or fibre? Or is it fixed wireless access who is getting more traction? And the second question is on Jamaica. I don't know if you can maybe tell us what's the proportion of the network that needs to be rebuilt and the proportion of the network that needs to be repaired. And if you can give a bit more color on the deal with Starlink that you mentioned in the press release. Balan Nair: Okay. I'll start with the Puerto Rico part. Our fixed business there last year -- sorry, last year. This year, earlier this year, we took a price increase, and we saw churn bump up post the price increase. And in addition to that, of course, competitive pressures have increased in Puerto Rico. Our sense is that for the most part, our churn, by the way, still remains quite low, but the churn that we're seeing, we are mostly going to other fixed operators. They're not going to fixed wireless. That's where the churn -- our product is actually very competitive, both from a price standpoint. And from a speed standpoint, we are actually doing really well. And here's why we're excited about our fixed business going forward. We've launched a number of new products there. We've revised our pricing, like I said, with our FMC bundle, but we've also launched a couple of new products. One of it is our always-on product, we call it Kepon in Puerto Rico. And that was one of our disadvantage beginning of this year with a lot of power outages in Puerto Rico, where a competitor with fibre would probably not experience the outage if they have generators at home. Yet in the HFC plant, you would see an outage. But with this new Kepon product, the customer doesn't miss a beat at all. And we're quite excited about that. In addition to it, we've also improved our Wi-Fi in the home with a software upgrade that now makes us really one of, if not the best Wi-Fi in the home. So we feel really good between our FMC, our new products, our always-on product, and high reliability, and that's why we've also launched a 30-day moneyback guarantee to customers -- new customers that come into our network. So that's on the Puerto Rico phase. In Jamaica, we're still studying it. There's a number of things that we're looking at, right? A quite a bit of our outages right now is because of power or the lack of it. And as of today, the Jamaica power company, JPS, is about 50% back on in Jamaica. To our network specifically, it's more closer in the 40s, the mid-40s to our network where JPS has power too. So as the power comes back, you'll see our network recover. Now having said that, the hurricane did go through the west part of the island quite seriously and has damaged a number of our towers. But as you recall, we have -- we did a deal with Phoenix Tower, where with that deal PTI is responsible for the rebuild, and they've been great partners. They've put people on the ground, and they are rebuilding those towers on our behalf. So there will be some work, but there's more to come. I think we're still in the early days of evaluating both the network damage as well as what is really done because of power. And as power comes back, I think you'll see our network come back up as well. Yes, there was a third question on Starlink. Let me say it this way, they have been great partners. And the product that we launched, we did it in literally like 72 hours, which is the DTC product. And this was actually very, very well received by our customers. So the way it works is when you do not have access to our cell power, and so you don't have network access in your mobile phone, you can do text and very low bandwidth data like WhatsApp, low bandwidth WhatsApp through Starlink. And this kept a lot of our customers with full connectivity. So we felt really good about the product. The second part of what we're using Starlink for is in our B2B customers, we fired up Starlink as a backup to our fixed product. So where our fixed product is down, Starlink comes up. Now where there's no power into that business, then it doesn't matter what the method of connectivity is. But for the most part, we are already building up a lot of our B2B or fixed network because most of our B2B customers are in Kingston, and that's coming up. The second concentration of B2B customers is in Mobi up north, northwest. And in that area, power is still out. There's a lot of challenges there, but we are slowly rebuilding that part as well. And Starlink has been a really, really good partner of ours. Operator: Our next question comes from Matthew Harrigan of the Benchmark Company. Matthew Harrigan: We all know it's dangerous to draw inferences from the U.S. mobile market. Looking at your markets, people can't run out and buy an iPhone 17 Pro on a whim and conversely, favorably, you have a lot more penetration upside, particularly on postpaid. But 2 things in the U.S. market. T-Mobile is really doing well because they have such a high switching share because they have a better network. And in fact, if you run the numbers, the whole industry can slow down a lot and they can still grow nicely on account of the superior switching share. And then the cable operators, of course, have FMC advantages with the MVNO that they have with Verizon. And you arguably could be positioned for both of that as you get these good postpaid numbers in the Caribbean markets in particular. But would you say that's a factor? Would you say that even though people aren't buying the highest price point phones that there's some device innovation that's a factor because clearly, you're putting up really nice postpaid numbers. And then on the parametric insurance, because Melissa just had those record wind speeds and all that, and I know it's very precise and exactly where the speeds were recorded and all that, but it feels like you could get quite a disparity between the damage incurred and the payout. And it also feels like the insurance companies have to constantly appraise their approach in doing that because it feels like you could get some quirky results, bad and good for you or the insurance companies, depending where you get the wind speeds and where you get the actual damage because I'm sure you know at this point how fickle damage and both for life and property can be from a hurricane. Thanks and congratulations on the progress. And I'm very sorry in Jamaica. I've been there a number of times, a beautiful country. Balan Nair: Matthew, thanks for your comments. I agree with the first part of your comment that as we get more and more postpaid, there is a lot of stability in that revenue. And that's why we've been focusing a lot on that, and you get out of a lot of the washing machine of the prepaid business, even though we do love the prepaid business as well. And in most of our markets, you'll see our COGS is not as high because it's not an equipment-driven market. So it's really a great business for us on postpaid. On insurance, I'm going to let Chris comment, but I'll tell you, Chris and his team did a tremendous job. This is -- there's some luck involved clearly because of the path of the hurricane. But the way the hurricane parametric insurance was designed with the concentric rings, it was very thoughtful. And in this case, the path of the hurricane triggered the Westside ring and it triggered one of the other layers of the concentric rings from Kingston as well. We feel really good about this. And one of the great things that Chris did as well is that the payout is quick. So the NPV on this insurance is really good. But I'll ask Chris to give you a bit more color. Christopher Noyes: Yes. Nice to hear from you, Matt. I mean I think as we look at the parametric, I mean, it's highly, highly analytical and studied over hundreds of years of storms, and we focus on where the value in our business resides so that it is protected. So if it does go over an urban center that there is a recovery to help mitigate the damage on both BI and property. But it's always evolving each year. We continue to get smarter on trying to figure out the best ways to protect risk for our business. And we have a decade plus of knowledge here of continuing to evolve this particular parametric program. Operator: Thank you. We have no further questions. So that will conclude today's question-and-answer session. I'd like to hand the call back over to Balan Nair for any additional or closing remarks. Balan Nair: Thank you, operator, and thank you, everybody, on the call for your support. We are very pleased with our results this quarter, and we see it continuing in this trend. All our initiatives are kicking in. And as you can see, it's starting to yield very nicely. We feel the future is really bright here in LLA. Thank you very much again for your support. Operator: Ladies and gentlemen, this concludes Liberty Latin America's Third Quarter 2025 Investor Call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Latin America's website at www.lla.com, where you can also find a copy of today's presentation materials.
Operator: Good morning, ladies and gentlemen, and welcome to the Arq Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. I will now turn the conference over to Anthony Nathan. Please go ahead. Anthony Nathan: Thank you, operator. Good morning, everyone, and thank you for joining us today for our third quarter 2025 earnings results call. With me on the call today are Bob Rasmus, Arq's Chief Executive Officer; Jay Voncannon, Arq's Chief Financial Officer; and Stacia Hansen, Arq's Chief Accounting Officer. This conference call is being webcasted live within the Investors Section of our website, and a downloadable version of today's presentation is available there as well. A webcast replay will also be available on our site, and you can contact Arq's Investor Relations team at investors@arq.com. Let me remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified on Slide 2 of today's slide presentation, in our Form 10-K for the year ended December 31, 2024, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update these factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, it is especially important to review the presentation and today's remarks in conjunction with the GAAP references in the financial statements. With that, I would like to turn the call over to Bob. Robert Rasmus: Thank you, Anthony, and thanks to everyone for joining us this morning. Our PAC business delivered yet another strong quarter. The continued and ongoing turnaround of our PAC operations yielded strong financial results, driven primarily by continued average selling price strength of 7% over the prior year as well as a further 43% reduction in SG&A expenses. We also made progress on the granular activated carbon front, achieving first commercial production, delivering initial product and generating our first GAC revenues. Third quarter financial performance was achieved despite operating GAC at well below capacity, which significantly reduced our financial results. Our third quarter adjusted EBITDA of $5.2 million included the negative impact of several million dollars of inefficiencies caused by nonrecurring items associated with handling and post-commissioning costs for our granular activated carbon ramp as well as impacts due to inefficiencies driven by low early ramp volumes. We previously noted that early GAC production would carry elevated costs due to the high fixed expenses, meaning the first pounds produced would cost more than those made later. That proved true this quarter, but the impact of these dynamics was larger than expected. We expect profitability to improve as volumes ramp and production efficiencies are achieved. Turning back to our PAC business. Third quarter prices increased by approximately 7% versus the prior year period and 6% versus last quarter, reinforcing that our foundational PAC platform is not only sustainably profitable, but also capable of fully funding maintenance capital needs for the broader business. Driven by continued price improvements, higher volumes in 2025, broader end market diversification and disciplined SG&A reductions, the company is generating $16.7 million of adjusted EBITDA on a trailing 12-month basis. This marks a significant achievement both in absolute terms and relative to our starting point at the end of September 2023 when trailing 12-month adjusted EBITDA was a negative $8.7 million at the outset of the turnaround. This is more than a $25 million improvement in trailing 12-month adjusted EBITDA. I'm proud of what the team has accomplished and even more encouraged by the upside that still lies ahead. Turning now to our strategic investment in granular activated carbon. The operational ramp-up has been impacted by previously discussed design issues while processing the Corbin feedstock at scale. As a result, based on recent operational observations, we now expect to reach full GAC capacity sometime around mid-2026. While this timing adjustment is disappointing, we believe that this revised target is achievable. With that said, let me address head on the logical question of what has caused this extension. Our operation team is still working through certain design issues that have required refining and updating the process for handling the new Corbin waste-derived feedstock efficiently at scale. This feedstock differs from the traditional lignite coal that we have historically used to produce our PAC products. Specifically, the Corbin feedstock has some greater-than-anticipated variability, which due to design flaws and constraints has required adaptations to processing methodology. You might be wondering how this differs from the Red River commissioning challenges we faced earlier. To clarify, those earlier delays were about getting the plant up and running for the first time. The current issues are about scaling, reaching full efficient production of tens of millions of pounds. The delay in achieving nameplate GAC capacity is extremely frustrating. As we previously noted, design issues and flaws have impacted our production capacity, which combined with the inherent variability of our Arq Wetcake has required additional process and methodology changes. While we've solved several issues, we're continuing to explore additional options to further enhance performance and reduce operating costs. One potential solution is to blend or replace Corbin feedstock with low moisture coal. This should reduce feedstock variability as well as improve production rates and operating costs. We are working to resolve these challenges and are applying the same rigor and discipline utilized to successfully turn around the PAC business. Importantly, despite the challenges noted, we successfully produced initial on-specification commercial granular activated carbon volumes in Q3 and completed our first sales into a supply-constrained market. As news of our production start-up spread, we received numerous inbound requests for spot purchases. These purchase requests were at pricing levels above our existing contract rates. This is further evidence of the supply constraint and favorable long-term market dynamics. While our strategy remains centered on long-term contracts, these spot inquiries are priced above our initial agreements and could offer attractive diversification opportunities alongside our contracted sales. In addition, we have extended numerous GAC contracts to account for the updated timelines. We're also seeing positive results from ongoing renewable natural gas field testing and remain confident in our ability to capture value in that market once testing concludes. At the same time, the broader GAC water market provides a reliable outlet, and we expect both markets to grow significantly in the years ahead. Our operational focus is now on rapidly increasing volumes to leverage our fixed cost base and achieve consistent granular activated carbon profitability. As we previously discussed, we are also evaluating adjacent revenue opportunities that could further improve overall returns. This includes determining whether our Corbin feedstock can be used in profitable alternative applications creating diversified end use cases for the feedstock to maximize shareholder value. As such, I would like to provide an update on those efforts. We've previously indicated that there are 4 key product avenues of interest, including asphalt, purified coal, rare earth materials and synthetic graphite. Starting with asphalt, we're continuing our testing with a major asphalt company. Early indications show it could make asphalt last longer and perform better in cold weather. Second, purified coal. We have signed a nonbinding MOU to test using our material as a coal substitute for making silicon wafers used in semiconductors, with our partner covering all the initial cost if we elect to proceed. Next, rare earth minerals. With growing demand for U.S.-sourced materials, we're working with the DOE to explore potential government funding to help us test this at our Corbin facility with research starting in 2026. And finally, synthetic graphite. This potential product would benefit from the high purity of our Arq Wetcake, and we are currently pursuing government funding opportunities to evaluate its commercial potential. Importantly, these opportunities aren't mutually exclusive, meaning we could theoretically produce Arq Wetcake for asphalt blending while generating byproducts for rare earth markets from the same source material. Success with these alternative products could create a stand-alone business line in new markets by turning these products into revenue contributors and thereby further improving profitability and margins. Looking ahead, fundamentals for granular activated carbon remain very strong. With Phase 2 already essentially permitted, we continue to carefully evaluate future GAC facility expansions. Specifically, FID timing is now anticipated to coincide with reaching GAC Phase 1 nameplate capacity around mid-2026. We believe that the experiences gained from Phase 1, along with the ongoing improvements will provide a strong foundation for any future granular activated carbon expansion projects. With that, I'll now turn it over to Jay for a detailed financial review. Jay Voncannon: Thanks, Bob, and thanks, everyone, for joining us today. Notwithstanding the impact of the granular activated carbon ramp-up, Arq continued to deliver strong financial results during the third quarter. With revenue of $35.1 million, this continues to be driven largely by enhanced contract terms, including a 7% growth in average selling price year-on-year, in part the result of ongoing successful end market diversification. Our gross margin in the quarter was 28.8%, well below our steady-state margin of recent quarters, primarily due to the negative impact of GAC fixed production costs as we ramped up volumes. We continue to incur post-commissioning costs associated with preproduction feedstock used in our granular activated carbon line. Additional negative impact to margin this quarter was related to low volumes versus higher fixed cost. We generated positive adjusted EBITDA of approximately $5.2 million compared to adjusted EBITDA of $9 million in the prior year period. I would note that the -- consistent with many market participants beginning in Q1 2025, we have added back stock-based compensation as a part of our adjusted EBITDA calculation and revised corresponding 2024 adjusted EBITDA calculations for comparability. As Bob noted, this quarter saw a significant anticipated ramp-up costs associated with GAC. As we continue to work to get the GAC line to run rate capacity with only approximately 2 months of commercial production in Q3, margins were materially impacted by the high fixed production costs related to granular activated carbon. While we do not intend to split our business lines in the future for competitive reasons, I think it is important to note today that we achieved an extremely strong quarter in regards to our PAC performance. As noted earlier, our third quarter adjusted EBITDA performance of $5.2 million included several million dollars of nonrecurring expenses associated with handling and post-commissioning costs for our GAC ramp as well as impacts due to inefficiencies driven by low early ramp volumes. Q3 is often a strong quarter for us, but this was an especially solid quarter for our PAC business, demonstrating not only the impact of our enhanced pricing, but also our cost reduction initiatives. We incurred a net loss of approximately $700,000 versus net income of $1.6 million in Q3 of 2024, primarily attributable to the high fixed production cost on initial volumes from our Phase 1 GAC line as we continue to ramp up to nameplate capacity. Selling, general and administrative expenses totaled $4.6 million, reflecting a reduction of approximately 43% versus the prior year period. This reduction was primarily driven by payroll and benefits as well as general and administrative expenses. Research and development costs for the third quarter increased to $2.6 million, up from approximately $800,000 in the prior year quarter. This increase was primarily attributable to the ramp-up of the GAC line we discussed earlier. Overall, our performance in Q3 2025 demonstrates our ability to operate our PAC business efficiently such that it contributes very positively and sustainably to our economic position, while further enabling us to pursue and execute on anticipated high-growth and high-margin opportunities with our expanding GAC business. As always, we remain focused on enhancing the profitability of our PAC business even further, and I believe that is how a business which can, on a medium-term basis, feasibly generate significantly greater than our previous target of simply covering maintenance CapEx. To discuss the impacts of the quarter on our balance sheet, let me turn it over to our Chief Accounting Officer, Stacia Hansen. Stacia Hansen: Thanks, Jay. Turning to the balance sheet. We ended the third quarter with total cash of $15.5 million, of which approximately $7 million is unrestricted. This is compared to total cash of $22.2 million as of year-end 2024. This change was driven primarily by trailing CapEx spend at Red River relating to the GAC line and buildup of Arq Wetcake delivery and critical spare parts. Today, we are also reiterating our full year 2025 CapEx forecast of between $8 million and $12 million. This is particularly relevant given Bob's comments about potential work at Red River, which we do not believe will add materially to our budgeted CapEx for the year as we continue to expect to fund our operating and CapEx needs via our existing cash, cash generation, debt facilities and ongoing cost reduction initiatives. With that, I will turn things back to Bob. Robert Rasmus: Thanks, Jay and Stacia. Before we turn to questions, I'd like to leave you with 4 key takeaways. First, our PAC business continues to perform extremely well. As mentioned earlier, the $5.2 million of adjusted EBITDA we reported this quarter included the negative effect of several million dollars of nonrecurring items associated with activated carbon. This reflects the underlying strength of our foundational PAC business. Our PAC turnaround has exceeded expectations. And while we view PAC's long-term growth potential as more limited than that of granular activated carbon or our potential emerging product lines, it's now clear that this foundational business delivers meaningful and sustained value. I remain confident there is still room to further improve our PAC business. My goal has always been for PAC profitability to fully cover maintenance CapEx across the business, and I now believe that it can do even more than that. As a major shareholder, I see this, combined with our substantial asset base, which has a replacement value well in excess of $500 million, is a strong foundation for the company's long-term valuation. Second, while costs related to granular activated carbon ramp-up weighed on our financial results this quarter, it's important to recognize that we have now produced and sold commercial quantities of granular activated carbon from Red River, a major milestone for our company. My primary focus remains on driving profitability as we scale production. It is also important to highlight that we've overcome business challenges before. As I discussed earlier, we successfully transformed a loss-making PAC business to an attractive business generating attractive profit and cash flow. We are confident our best-in-class team will be able to work through the GAC production challenges. We will get this resolved. Third, granular activated carbon’s underlying market fundamentals remain exceptionally strong, which makes the delays in scaling production even more frustrating. The market opportunity is there for us to capture. And fourth, I believe our ongoing review of potential feedstock alternatives will ensure we are scaling this business as efficiently and profitably as possible. Separately, our assessment of potential alternative product opportunities creates additional diversification and upside for the long term. With that, I'll hand it back to our moderator to open for questions. Operator: [Operator Instructions] And the first question comes from Gerry Sweeney at ROTH Capital. Gerard Sweeney: Bob, I'm just going to -- I don't know if you can answer this or would want to answer this. But what -- how much GAC are you producing at spec? And I think what people want to know or what I would like to know is where you are today versus what nameplate capacity is? Robert Rasmus: We're producing less than we want to. That's for sure. What we're producing is on spec as it relates to that. You're right that for competitive reasons, I'm not going to -- and for other reasons, I'm not going to give you the specific answers. But it's clear that the suboptimal production volumes are impacting our gross margin and our financial results. Gerard Sweeney: Can you produce GAC level that we'll just say, breakeven while you test alternatives? Or is this going to be a drag until we get the problem solved? Robert Rasmus: And so if you look at it, what is breakeven, we have an idea what that is on that. But as we start out -- any time you start out a new production process, there are going to be costs associated with the ramp-up. The costs have clearly been greater than we had anticipated, and we've had some greater difficulty in ramping up the production volume as it relates to that. And progress isn't linear. We believe that the best thing to do long term is to both evaluate blending of a feedstock, drier feedstock to overcome some of these design issues. That will help us get to profitability and commercial production even faster. Gerard Sweeney: Speaking of alternatives, I'm assuming that's a drier feedstock that would be met coal, which is traditionally used as GAC and would that have an impact on margins? Robert Rasmus: First of all, we're going to do what's in the best economic interest for our shareholders. And we're evaluating blending drier coal as really one way to help overcome the design issues that have been affecting our ability to deal with the variable feedstock. And while we're evaluating that because the logical question is, we're also evaluating whether it makes sense to switch to drier coal. Why would we switch to drier coal? Well, if 1 of the 4 ultimate uses for carbon feedstock develop, it would account for all of the Corbin capacity and then some. So, it behooves us to evaluate alternative feedstock to maintain full optionality. And keep in mind, from an economic standpoint as well, as you mentioned in your question, Gerry, that the Corbin feedstock is essentially 50% water. We're paying to ship 50% water that we then take out of the product as it relates to that. So, we believe it's a distinct possibility that blending drier coal with the feedstock could also have positive CapEx implications. Gerard Sweeney: Got it. One more for me. Just want to understand the numbers, $5.2 million in EBITDA in the quarter, that does not include some of the extraneous costs that were incurred with this ramp-up, correct? So, in other words, that $5.2 million in EBITDA would have been higher by a couple of million dollars if these issues didn't arise, all things being equal, right? Robert Rasmus: Yes. So, the $5.2 million includes the negative impact of several million dollars of costs associated with the GAC. Now again, what's several million dollars, it's more than a couple as it relates to that. I'm not going to be specific, but I can try and provide an analogy. If you look at the gross margin of the last 4 quarters prior to this, so third quarter of '24 to second quarter of '25, and you added back those several million dollars in costs, our gross margin would have been several percentage points above the average for those 4 quarters. Gerard Sweeney: No. I mean, listen, 3Q -- ASPs were up year-over-year and coal plants aren't being shut down as fast. So, I mean there's demand for PAC out there. So, I mean, it would have been a very strong for the PAC business. I get it. Operator: The next question comes from George Gianarikas at Canaccord Genuity. George Gianarikas: I'd like to dig in some more on the Corbin feedstock. I'm just curious what -- can you go into a little bit more detail around what you mean about variability? And when did you figure out that this was an issue? And I'm assuming that there had been tests prior to starting production that indicated that this wouldn't. So just a little bit more detail as to exactly what you discovered and when? Robert Rasmus: Sure. This is really a design flaw issue. We always knew as part of our due diligence that there would be variability in the feedstock from Corbin. Regarding the design issues, we worked through many of those design flaws in the original engineering to just be able to complete commissioning and achieve commercial production. But those design flaws and some of those design flaws and constraints still impact our production on the granular Line 1 are essentially that the original engineering firm really failed to account for the moisture content and variability in the feedstock in the design of some of the openings and chutes and some of the -- if you consider what you have extremely sharp angles, which led to inefficiencies and led to plugging and tarring on that. So, we knew there was going to be variability, but that the design did not account for that. George Gianarikas: Right. So, this sort of begs the question if it's a design issue as opposed to necessarily a feedstock issue because the feedstock is something that you knew about going in, wouldn't -- why are you exploring other alternatives to feedstock as opposed to just redesigning the facility? Robert Rasmus: Redesigning the facility would cost more. We know that. And we think that -- one of the issues relates to, as I say, if you think of a 90-degree angle and you're trying to push product that has some moisture content or some sticky content through that 90-degree angle, it's going to catch on that -- the [ curbs ] and on the corners, et cetera. By blending it with drier coal and reducing that moisture content on the input, it makes it easier to make that it's less likely to stick for lack of a more technical term as it relates to going around those corners. So, it would be easier to blend that feedstock and cheaper than it would be to redesign and put in place the additional equipment. George Gianarikas: All right. And maybe just last question. In terms of -- I think it was asked previously as well. How do we think about the long-term margin implications of some of the changes you're making? Robert Rasmus: Yes. No, a couple of things. One, short term, there's clearly a negative impact from their ability or an inability to reach full run rate production on granular activated carbon. Long term, the granular activated carbon margins, we expect to be extremely strong for all the market fundamentals that I discussed in the prepared remarks and pricing continues to be even stronger than it was in terms of even a year ago as it relates to that. And if you look at one benefit of blending some drier coal, as I mentioned in my earlier question, is that we won't be shipping as much water that we're taking out of the system. So that in and of itself should lead to lower operating costs and improved margins. Operator: The next question comes from Aaron Spychalla at Craig-Hallum. Aaron Spychalla: Maybe just one on GAC. I mean, can you just -- maybe at a high level, just what gives you confidence in hitting the mid-2026 targets? I mean, have you started to implement some of these design tweaks? Or are you seeing some benefit from the changes you're making on the feedstock side? It doesn't sound like there's a lot of cost you're expecting, but just again, trying to just understand the confidence in reaching these targets. Robert Rasmus: Yes. Sure. Great question, Aaron. And I'm going to apologize in advance because it's going to be -- either depending on your point of view, long-winded or you ask what time it is, I'm going to tell you how to make a watch. But I think it's important to provide that context. As everybody knows, the design flaws led to the delays in commissioning the granular activated carbon facility earlier this year. And while we successfully addressed those issues to complete commissioning, the same design flaws as we've mentioned, have continued to affect our ongoing granular activated carbon production and the ramp-up to full capacity. And in answer to your question, I think it's important to provide context as to why and how we expect to achieve full run rate production around mid-2026. So going into that detail, and also this is some additional detail for George's question as well. The initial design and construction included a 320-foot off-gas line from the [indiscernible]. The design was not only inefficient but unworkable. And part of the original commissioning delay stemmed from addressing design defects in the system that led to the cooling of the line and subsequent tar and plugging and particulate plugging really. So, in collaboration with a new engineering firm, we determined that installing a thermal oxidizer and shortening that off-gas line from 320 feet to 28 feet was the best solution. Locating a suitable unit, a suitable thermal oxidizer was difficult as really only one with the required specifications existed in the U.S. We have secured that on a rental basis. And once installed, it enabled us to have successful plant commissioning and to start commercial production. And after getting that thermal oxidizer successfully in place and beginning production, we determined that the current rental thermal oxidizer could really only support production of about 15 million pounds of granular activated carbon per year. As a result, in working with that new design firm, we now plan to purchase and install a purpose-built thermal oxidizer, which is designed to support 25 million pounds of granular activated carbon production a year. The lead time for construction and installation of this new purpose-built 25-million-pound capable thermal oxidizer is why we have moved our expectations of full run rate production to around mid-2026. That is when we expect to receive and install that purpose-built thermal oxidizer. And once on site, installation will take about 6 days -- 1 day to cool the existing unit, 1 day for removal and 4 days for replacement and connections. The GAC production will have to pause for roughly 1 week during this process, but operations should quickly get to full run rate capacity once installation is complete because all we're changing then at that point is working through the full capacity of the -- having a thermal oxidizer, which allows us to get to 25 million pounds, and we're confident we'll be able to have solved the input issues prior to that time. Logical question is, what's it going to cost? The new thermal oxidizer will require an estimated total investment of $8 million to $10 million. That includes roughly $3 million for the equipment and the remainder is for installation. The vast majority of the spending will occur at the time of final shipment and installation. This will be funded as 2026 CapEx, and based on our conversations with current and potential lenders, along with our available cash and operating cash flow, we believe that this can be readily funded in a capital-efficient manner. And to minimize disruption, we plan to complete our biannual TAR during that same period, that way we avoid any additional planned downtime in '26 or '27. So, I apologize for being so long-winded, but I think it's important to show that -- the detail behind why we have changed our prognosis. Aaron Spychalla: No, I appreciate that color. That's helpful. And then you kind of talked to -- I mean, on the PAC business, if you back out a few million dollars, obviously, really good margin performance. It seems like the outlook still remains strong there. Can you just kind of talk about that and potential further diversification and kind of ASPs and just with the outlook on the PAC side? Robert Rasmus: Sure. We had, again, another strong quarter of average selling price increase. We were up 7% year-over-year, 6% quarter-to-quarter. That pace has abated somewhat from our previous quarters of 9% or better double-digit -- or excuse me, average selling price increases. And it was natural. We couldn't continue that cadence forever. We still expect to see continued improvement from the PAC business and the PAC-related results from a combination of increased volumes. We are still seeing increased average selling prices and also the additional fixed cost absorption related to additional volumes. As it relates to new markets, our sales force has done an outstanding job of looking to develop and penetrate additional markets. And those additional markets also have higher average selling prices than some of our additional outlets. So, we're optimistic about the future for PAC as our foundational business. Operator: The next question comes from Peter Gastreich at Water Tower Research. Peter Gastreich: Just a few, if I may. The first one is regarding the delay for the GAC, is there any risk or penalties that could be associated with the contracted customers for the delay? Robert Rasmus: Our customers have been great with this. We work closely with all of our contracted customers to provide visibility on production outlet -- output, excuse me, as it relates to their needs. All of our customers have worked with us to amend their orders or ordering cadence and all of our GAC contracts that were 1 year or less have been extended. So, I think that's a testament both to the strength of our relationships and the undersupplied nature of the market. But everything is going as well as it should be. Peter Gastreich: Okay. Great. So, my second question, just following on from the previous question about the PAC prices. Yes, congratulations. It's great to see. Even though the momentum has slowed year-on-year, you're still able to raise, which is really commendable. I just wanted to ask though, is that -- for that 7% increase, are we talking purely about the PAC there? Or are we seeing any kind of a net measurable impact from the GAC spot volumes that you mentioned? Robert Rasmus: So we didn't sell anything on the spot market. We're concentrated on meeting our customer contracted orders on that, which is the right thing to do from a relationship standpoint. So, all of the price increases that we referred to that 7% are coming from the PAC business. Peter Gastreich: Okay. Got it. Okay. And just a final question on the SG&A. So regarding the reduction in SG&A, how much of that can be sustained? And also for that, I understand that was allocated to cost of goods sold, why was that decision made? Jay Voncannon: Peter, this is Jay. Yes, the SG&A reductions are coming from prior year to this current year. And yes, those are definitely sustainable. We actually think that the -- we'll see as a percentage of revenue as the granular line comes up and starts coming up in '26, you'll start seeing SG&A as a percentage of revenue decline because we don't anticipate needing to increase the SG&A cost as we ramp up the GAC line. With regard to, I think, your second question there, which is on the reclassification into R&D, most of that -- we won't have that going forward. We did that reclass also in Q2 as it relates to preproduction volumes as we were commissioning -- bringing the granular activated line to a commissioning point. So, most of that cost that was reclassed in Q3 was the July and really like 1 week of August cost for preproduction volumes. Once we commissioned the facility, all of that cost has been running through the cost of goods sold line. And that's why we're seeing an impact, the negative -- or the margin in Q3 was negatively impacted by those fixed costs being spread across fewer pounds as we are not up to really a breakeven point yet for granular. Operator: The next question comes from Tim Moore at Clear Street. Tim Moore: I just want to follow up on an important thread. I mean it's great the GAC is going under way. That's a really important milestone. And you've got a lot of things to optimize before you add additional lines over the coming years. But I just want to really dig into one other thing. I get the SG&A reconciliation and Jay just went through that. But how should we think about really gross margin in the next 2 quarters until you get enough utilization underway on GAC? I was kind of under the impression that the really big drag was the June quarter and it won't be as bad in September, but you can expect a big step up? I mean, there should be a step-up in the December quarter for gross margin, right? Jay Voncannon: I mean what I would say is as we're producing volumes at this suboptimal point level, there's a lot of fixed cost at the plant that's getting -- as I said, getting spread across fewer volumes, which are dragging the gross margin. I would -- what I would say is that it's not the fixed cost is going to go up. So, the fixed cost is pretty stable. So, what we'll continue to see is probably in Q4 and in Q1 of next year, margins similar to what we produced in Q3. And it's until we're able to get the volume up and actually have more pounds to sell and spreading those costs across that greater pounds, then we'll see the margin improve. So, I would expect probably for the next 2 quarters and probably even some even into Q3 when we -- once we get the new oxidizer installed -- I mean Q2 of next year, get the new oxidizer installed that we'll probably see a fairly consistent gross margin. Now we're also expecting -- hopefully, we'll see a continued improvement in PAC as we have demonstrated over the last 12 months. And so that may offset some of that as we continue to grow and improve PAC performance going into next year as well. Tim Moore: That's really helpful color on the cadence of -- and the other question I had was -- I understand right now with GAC revenue not that much, it will be pretty sizable by the June quarter. And for competitive reasons, you might not want to disclose it. [ Cal Carbon ] is owned by another firm. It's a small sliver of their conglomerate. Do you think though at some point, I mean, given that it's 25 million pounds, we had another more lines that you think you would break out maybe a year or 2 from now or GAC revenue, just to have the difference and especially when maybe it starts cannibalizing PAC a little bit on the feedstock later on? Robert Rasmus: A couple of things on that. I think that, one, given the long-term favorable market dynamics, I think it's highly probable that we will build a line 2 and further increase capacity. You mentioned competitive reasons. I'll refer to it more as competitive tension. There's always competitive tension between the IR side of things and the sales side of things as to what we break out. As you know, I'm a big believer in providing detail, an informed investor is a good investor and is a long-term investor. The flip side of that is that we are the only public company. So, we're handing competitive information to our competitors on a platinum platter on that. And so, the long-winded answer is maybe. Jay Voncannon: What I would say also add to Bob's comments is once we get to the 25 million nameplate and then we add another line 2, and we're then at $50 million of capacity. I mean, we're probably -- we're at about 100 million pounds capacity on the PAC. There, you'll be able to -- again to see, you can do correlations and kind of -- it wouldn't take -- wouldn't be very difficult to back into what the ultimate margin is between the 2. So that will -- and as we continue to grow and we start seeing PAC get cannibalized, as you mentioned, yes, there probably will become a point where we'll be -- the bulk of our discussion in the MD&A and the Q will be around the granular business and the PAC will be just kind of a base level that we know and talk. Tim Moore: No, that's fine because I'll be off the back into the GAC revenue pretty closely when you lap a full year, just if you keep announcing average price increase when you start year-over-year on the GAC. Operator: We have no further questions. I will turn the call back over to Bob Rasmus for closing comments. Robert Rasmus: Thank you very much. Both short term and long term, the outlook for the powdered activated carbon business is strong. We also continue to expect even better performance from the PAC side, and this is a dramatic improvement from 2 years ago when the PAC business was a significant money loser. Short term there clearly remains some challenges to getting the granular activated carbon business up to full run rate. We're applying the same rigor, discipline, focus and resolve we successfully applied to the PAC business to solving these challenges. The long-term market dynamics for granular activated carbon remain extremely strong. And as a reminder, I'm fully aligned with shareholders with my minimum salary and my large stock ownership. I want this fixed as badly, if not more so than you all do, and we will get this resolved. So, thank you all for your interest, and we look forward to continued communication. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Good day, and welcome to the Unisys Corporation Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michaela Pawerski, Vice President of Investor Relations. Please go ahead. Michaela Pewarski: Thank you, operator. Good morning, everyone. Thank you for joining us. Yesterday afternoon, Unisys released its third-quarter 2025 financial results. Joining me to discuss those results are Mike Thomson, our CEO and President, and Deb McCann, our CFO. As a reminder, today's call contains estimates and other forward-looking statements within the meaning of the securities laws. We caution listeners that current expectations, assumptions, and beliefs forming the basis of these statements include factors beyond our ability to control or precisely estimate. This could cause results to differ materially from expectations. These items can be found in the forward-looking statements section of yesterday's earnings release furnished on Form 8-K and in our most recent Forms 10-K and 10-Q filed with the SEC. We do not assume any obligation to review or revise any forward-looking statements in light of future events. We will also refer to certain non-GAAP financial measures, such as non-GAAP operating profit or adjusted EBITDA, that exclude certain items such as postretirement expense, cost reduction activities, and other expenses the company believes are not indicative of its ongoing operations, as they may be unusual or nonrecurring. We believe these measures provide a more complete understanding of our financial performance. However, they are not intended to be a substitute for GAAP. Reconciliations for non-GAAP measures are provided within the presentation. Slides for today's call are available on our investor website. And with that, I'd like to turn the call over to Mike. Michael Thomson: Thank you, Michaela, and good morning, and thank you for joining us to discuss the company's third quarter 2025 financial results. We continue to demonstrate our steady focus on improving delivery and operational efficiency, which is helping us successfully navigate the macroeconomic uncertainty in the market and other headwinds impacting revenue. We remain on track to meet or exceed the midpoint of the improved non-GAAP operating profit margin guidance of 8% to 9% provided last quarter, as we expect to generate $110 million of pre-pension free cash flow for the full year. We're on track to meet our increased L&S expectations of $430 million for the current year, $40 million above our original expectations, supported by strong retention and consumption trends in our high-value software ecosystem. These trends have now helped generate upside in each of the past 3 years, and we're increasing our projection for out years to approximately $400 million of average annual L&S revenue for the 3 years of 2026 through 2028. The quarter also reflects our commitment to executing the pension strategy we laid out and the realization of the benefits we said we would achieve. We said we would remove substantially all market volatility from our aggregate U.S. pension contributions, and those have remained stable. Our pension debt has come down with our quarterly contributions, and we executed an annuity purchase in September to remove more than $300 million of U.S. pension liabilities, over half of our stated $600 million target by the end of 2026. While revenue was light relative to the color provided last quarter, much of this was related to timing, including a shift of a large license and support renewal, which closed early in the fourth quarter. Timing on Ex-L&S hardware pass-through also contributed to the quarterly miss on top line. Additionally, market dynamics affecting the PC cycle and IT budgets continue to cause clients to pause or delay project initiation, slow the pace of transition for some new business, and limit market penetration of newly introduced solutions. Some of the early signs of improvement we've seen at the U.S. state and local clients lost some steam as concerns about federal funding returned, leading up to the ongoing U.S. government shutdown. Our revised full-year outlook reflects some additional revenue timing elements, including a shift in expected fourth quarter revenue recognition from upfront to over time, which will generate future revenue. We could see some of the headwinds that challenged Ex-L&S growth this year persist for a few quarters, so we're acting quickly to adjust our approach to mitigate those impacts. At the same time, feedback from clients, partners, and industry analysts has only increased our confidence in the positioning of our solutions and our ability to establish baseline Ex-L&S growth over time. Meanwhile, we're still delivering on profit dollars and free cash flow priorities. The most important elements required to achieve that success are the continued execution of our L&S solution, which we continue to outperform, and the efficiency gains in Ex-L&S delivery, where we're stepping up our efforts. We have already made significant improvements in our Ex-L&S gross margin and have identified incremental opportunities within workforce optimization and the application of AI-driven productivity solutions. Looking at all these factors, we believe we're on a path to improving our growth profile over time, continuing to enhance profit, chip away at the pension deficit and liabilities, and ultimately fully remove our U.S. pension liabilities. Looking at client signings, the third quarter total contract value increased 15% year-over-year, driven by a strong quarter in Ex-L&S renewals. New business TCV of $124 million was in line with the solid levels of new business in the second quarter. Year-to-date, our new business signings are slightly positive relative to 2024, which was a strong year for new business signings, some of which are still building up their full revenue run rates and are showing expansion opportunities. The pricing environment remains competitive, which is not unusual. Clients want to share in the AI cost savings, and in some cases, their expectations may be unrealistic. We've also seen some competitors undercutting on price based on aggressive assumptions for the size and pace of future AI-related efficiencies, and we think that they're taking on a high degree of risk in those cases. We are seeing these dynamics on a handful of renewals and, in certain cases, have been willing to accept certain attrition, especially at clients prioritizing cost over value and offering limited potential for us to expand into higher-value solutions. We continue to take a disciplined approach aligned to our priorities of profit dollars and cash flow, and we believe clients are beginning to adjust their expectations as they're gaining knowledge on how the use of the emerging technology applies to their ecosystems, which allows us to build competitive advantages in our portfolio. We have large new business opportunities within our extensive existing client base, and many of our third-quarter wins highlight our ability to expand those relationships. In many cases, our wins reflect a close alignment between solution development and our clients' efficiency priorities. For example, in Digital Workplace Solutions, we signed a renewal with a global industrial manufacturing client that included significant new scope to transform and streamline IT support. As part of this engagement, we will transition the existing service desk to our next-generation service experience accelerator, and we'll also deploy virtual tech cafes and migrate IT service management capabilities to a new platform to streamline IT support without sacrificing quality. This engagement also includes a new scope in CA&I solutions, such as automating network operations monitoring to both improve processes and reduce costs. In cloud application and infrastructure solutions, we signed an expansion deal expected to drive significant cost savings for a public sector client in Australia. Leveraging our deep multi-cloud expertise, we proactively identified an opportunity to optimize their hybrid infrastructure by eliminating a high-cost platform, resulting in migration project work and ongoing managed services revenue for us and millions of dollars of annual cost savings for our clients. During the quarter, we renewed one of our largest public sector infrastructure managed services contracts, a 7-year extension to managed data center environments for a large U.S. state government. We also introduced a new cyber vault solution to protect critical infrastructure used by all of the state's cabinet-level agencies, spanning revenue, public health, transportation, and more. The enterprise computing solutions. We signed a new scope contract with a large European financial services client to consolidate some core systems onto one of our platforms. We will provide transformation services through our proven migration factory to accomplish this project and help our clients execute their simplification and rationalization program. Our deep expertise in the financial services sector has been a key driver of new business in the ECS segment. And in the third quarter, that also included a noteworthy new logo win for our modern core banking industry solution with a financial institution in Latin America. Branch banking remains an important channel in the region, and we've developed a differentiated offering that integrates branch and digital banking with central core banking technology, incorporating capabilities from our recent partnership with Thought Machine. Our innovative end-to-end offering will consolidate legacy systems for customer management, deposits, loans, accounting, treasury, and compliance into a single secure, scalable solution that will become the backbone of our clients' financial operations. I now want to discuss our solution portfolio, including some trends we're seeing in client demand and where we're focusing our investment, innovation, and partnership efforts. We allocate a significant portion of our capital expenditures to our ClearPath Forward solution in the ECS segment, which we discussed in more detail in an investor education session earlier this quarter, a recording of which is available on our investor website. A core element of our ClearPath Forward 2050 strategy is the continued evolution of our operating systems and the surrounding ecosystem of products, industry solutions, and modernization services. We are continually expanding several dimensions of ClearPath Forward, including speed, security, and resilience, to maintain a strong value proposition that has allowed us to retain clients for decades and support increasing consumption. In the third quarter, we released updates to one of our ClearPath Forward operating systems, expanding cloud compatibility and making significant post-quantum cryptography security algorithm enhancements. Looking at our industry solutions portfolio. In Travel and Transportation, we completed the integration of our in-transit system to our cargo portal, which means our platform now allows detailed tracking across the cargo journey in accordance with International Air Transport Association standards. In banking and financial services, we're seeing client interest in quantum-enhanced fraud detection for financial transactions, a topic on which members of our ECS team recently published research accepted by the International Conference on Quantum Artificial Intelligence following a rigorous peer review. In DWS and CA&I, we continue to invest in our AI-driven portfolio that's based on technology-led delivery models. This is beginning to allow us to show up in the market with higher-value offerings at better price points, making us more competitive in the market. This puts pressure on the top-line growth but allows for reduced cost of delivery and better margin profile. In Digital Workplace Solutions, we're already seeing this in the uptake of our service experience accelerator. During the quarter, we rolled out this solution to additional clients and continue to see roughly 40% deflections away from human support to automated support handled by our Agentic AI agents. Data from early client adopters also indicates an improvement in the end-user experience. In a service where marginal change has meaning, we're seeing a substantial 28% increase in user engagement and a 24% decrease in abandonment on average. Our knowledge management capabilities are identifying gaps in approximately 10% of support tickets and addressing them with automated content generation to improve the accuracy of the training data and the effectiveness of our Agentic AI agents. In field services, we've invested in Salesforce's agent force technology, which leverages Agentic AI to automate scheduling, rescheduling, and pre- and post-work summaries while continuously learning and making autonomous decisions to improve and optimize dispatch efficiency over time. During the quarter, Unisys became an authorized Apple product reseller, adding MacBooks and iPads to our existing device subscription service, which provides comprehensive life cycle management with intelligent device refresh and a flexible, predictable cost model. This partnership enables client decision-making based on the users' needs rather than supplier limitations. In Cloud, Applications & Infrastructure Solutions, our application factory is taking shape and yielding a growing pipeline of new opportunities. Application development is a bright spot within the public sector, with clients remaining interested in modernizing inefficient platforms, including for criminal justice information, identity access management, and licensing and permitting. We also continue to cross-sell and upsell new opportunities for our CA&I solutions at existing enterprise computing solution clients, primarily related to ClearPath Forward clients seeking to modernize their application layer and expand digital capabilities. We're also making a push to cross-sell CA&I solutions into our base of ECS clients in the financial services and public sectors that use our business process solutions, where we believe our workflow and process knowledge, combined with industry expertise, is a unique combination. In both DWS and CA&I, we continue to view the market of midsized enterprises, those with $1 billion to $5 billion of annual revenue, as a relatively untapped market opportunity where we have all the ingredients to effectively compete and source significant new revenue. These clients typically value personalized service, which they're not receiving from larger providers, and have less organizational complexity, allowing them to establish their relationship with us at a higher level and more quickly. Given that our digital workplace solutions are market-leading even for the largest enterprises, we see the mid-market commercial sector as a larger opportunity to build leadership and differentiation, particularly within our CA&I solutions. A top priority heading into year-end is defining more clearly a set of CA&I solutions tailored for this segment of the market and with a streamlined and repeatable sales motion. This involves solidifying preferred partners and building more standard architectural solutions and delivery frameworks, just as we've done in IT service management with Freshworks and EasyVista and in licensing and permitting with Clarity. We are already enhancing our cybersecurity portfolio in this manner, an area where our pipeline is growing and where we're seeing strong secular growth tailwinds and market demand. We're leaning in with partners like Dell and Microsoft to develop end-to-end security managed service playbooks, integrating security tooling, standardized solution frameworks, and repeatable sales motions. We've also begun designing a standard architecture for Unisys intelligent operations specific to midsized enterprises that can also incorporate private AI clouds. Running AI workloads exclusively in public cloud environments is very expensive and cost-prohibitive for mid-market clients. We're exploring potential technology partners with OEMs, data centers, and GPU as a service providers, so we can offer our clients alternative private AI frameworks with Unisys service wrappers to bring down those costs. Before turning the call over to Deb, I want to provide an update on the industry recognition, including the growing acknowledgment in higher-growth areas of the market. In the third quarter, we received a new leader ranking in cloud services for mid-market enterprises. We were also recognized for the first time or appeared in new reports in cybersecurity, Agentic AI services, and AI-driven application development. This was in addition to maintaining leader positions in a number of updated reports put out in multi-cloud, digital workplace, and generative AI services. These recognitions come from highly respected firms such as Avasant, Everest, IDC, and ISG and give credence to our strategic focus on application development, AI services, and penetration of the mid-market. The majority of the clients and prospects rely on industry experts in some manner when choosing IT service providers. So our steady rise in many quarters should open up new business opportunities in areas of the market we want to penetrate to support Ex-L&S growth in our new solutions. Finally, I want to mention that Unisys was named to Time Magazine's 2025 list of World's Best Companies for the first time, recognizing us amongst global organizations that exemplify excellence in today's corporate landscape. Our investments in upskilling and development opportunities for our employees are an important component of that excellence and support a stable workforce, maintaining our low voluntary attrition, which was 11.7% on a trailing 12-month basis. With that, I'll turn the call over to Deb to go through our financials in more detail. Debra McCann: Thank you, Mike, and good morning, everyone. As a reminder, my discussion today will reference slides from the supplemental presentation posted on our website. I will discuss total revenue growth, both as reported and in constant currency, and segment growth in constant currency only. I will also provide information excluding license and support or Ex-L&S to allow investors to assess the progress we are making outside the portion of ECS where revenue and profit recognition is tied to license renewal timing, which can be uneven between quarters. To echo Mike's comments, we remain in a good position to achieve our increased profitability and free cash flow outlook to maintain our strong liquidity position. And we took another step forward on the journey to removing our U.S. pensions with the annuity purchase we executed in September. While we have faced some Ex-L&S revenue headwinds, our license and support cash engine is being powered by our base of high-quality clients who continue to commit to and increase consumption on our platforms. At the same time, we are fine-tuning our strategy to ensure we capitalize on the advantages offered by technology like Agentic and generative AI and quantum encryption to expand the scope of our efficiency initiatives and deliver innovation that advances our clients' efficiency goals. Looking at our results in more detail, you can see on Slide 4 that third quarter revenue was $460 million, a decline of 7.4% year-over-year or 9% in constant currency. We had an approximate $12 million impact from the shift in timing on a license and support renewal that closed just outside the quarter, which will benefit L&S's fourth quarter revenue. Excluding license and support, third quarter revenue was $377 million, down 3.9% or 5.8% in constant currency. This was below our expectation of $390 million we shared with you last quarter, due to foreign exchange movement and dynamics I will cover now as I discuss the constant currency segment revenue. Digital Workplace Solutions revenue was $125 million in the quarter, down 5.8% year-over-year. Year-to-date, DWS revenue is down 2.9%. The third quarter decline was driven in part by the shift of low-margin hardware revenue, some in the fourth quarter and some into 2026. Volumes in some of our traditional PC field services were also lighter than we expected, and a pickup in PC refresh activity was dampened by Microsoft's extension of security support for the significant number of devices still running on Windows 10. Third quarter Cloud Applications and Infrastructure Solutions revenue was $180 million, a 6.8% decline compared to the prior year period. This segment has our highest public sector exposure, where activity levels have already been suppressed, and the uncertainty around federal funding heading into the government shutdown caused incremental slowing. That impact continues to be primarily concentrated at U.S. state and local governments, though we were pleased to secure meaningful renewal TCV with some of these clients at an improved margin. Year-to-date, CA&I revenue is down 5% due to volumes in the public sector. Enterprise computing solutions revenue was $133 million in the third quarter, a 13.9% year-over-year decline due to the cadence of L&S renewal signings, which have a higher fourth quarter concentration than last year. Within the segment, L&S revenue was $83 million compared to $105 million in the prior year quarter. Specialized services and next-generation compute solutions revenue grew 1.7%, benefiting from new business and application services we are delivering for clients in both travel and transportation and financial services. Trailing 12-month signings of approximately $2 billion translate to a book-to-bill of 1.1x for both the total company and our ex-L&S solutions, and we exited the quarter with a backlog of $2.8 billion, flat year-over-year. As Mike touched on, the complexity and pace of negotiations have continued to elongate cycles on some renewals in DWS and CA&I. Moving to Slide 6. Third quarter gross profit was $117 million, a 25.5% gross margin, down from 29.2% a year ago as a result of the cadence of L&S renewals. Ex-L&S gross profit was $70 million, and Ex-L&S gross margin was 18.6%, up 70 basis points year-over-year, largely due to lower cost reduction charges in the quarter. Excluding that benefit, we continued to make incremental gains in delivery efficiency to maintain profitability despite revenue decline. Our investments in workforce optimization are helping us hold on in, on incremental opportunities to improve delivery, and we plan to act quickly to capitalize on those. I will now touch briefly on segment gross profit. DWS's gross margin was 16.2% in the third quarter, essentially flat year-over-year. As Mike discussed, we are leaning heavily into technology to automate delivery. CA&I's gross margin was 19.6% in the third quarter, relatively flat year-on-year. We were pleased to maintain profitability, especially given the higher margin profile of CA&I solutions being impacted by public sector uncertainty. Segment margins continue to benefit from automation and optimizing workforce and labor markets, as well as synergies we are achieving from centralizing application capabilities. ECS's gross margin was 46.2% in the third quarter, down from 58.2% a year ago, which was due to the timing of L&S renewals and mix from integrated system sales. As a reminder, our L&S solutions have a fairly fixed cost base, and the very high concentration of license renewals is expected to drive a significant sequential increase in fourth quarter ECS gross margin. Moving to Slide 7. Third quarter GAAP operating loss was $34 million, which included a $55 million noncash goodwill impairment in the DWS segment related to the near-term industry dynamics, challenging volumes, and the pace of client signings. Non-GAAP operating profit was $25 million, a 5.4% non-GAAP operating margin, which is in line with our expectations for mid-single digits. SG&A in the third quarter declined slightly year-over-year and is down 8% year-to-date, driven by our initiatives to streamline corporate functions, real estate, and technology. We are pushing to accelerate the remaining cost takeouts and increase our overall rationalization program to maximize savings in 2026. We had a third-quarter net loss of $309 million, which included an approximate $228 million one-time noncash pension expense related to the annuity purchase transaction in the quarter. As we previously discussed, this is an important element of our pension removal strategy. The quarter also included a $4 million foreign exchange loss. As we mentioned last quarter, we ended our hedging program on intercompany loans, which removed the cash impact of the hedge settlements but increased P&L FX volatility, impacting GAAP net income. Adjusted net income was negative $6 million or a loss of $0.08 per share. Turning to Slide 8. Capital expenditures totaled approximately $18 million in the third quarter and $59 million year-to-date, relatively flat year-over-year. A significant portion of capital expenditures relates to relatively steady levels of solution development for our L&S platforms, while we maintain a capital-light strategy in our Ex-L&S solutions. Pre-pension free cash flow, which is free cash flow prior to pension and postretirement contributions, was $51 million in the third quarter and $15 million year-to-date. We generated $20 million of free cash flow in the third quarter, an improvement from $14 million in the prior year period. During the quarter, we made $30 million of contributions to our global pension plans and received a $25 million one-time payment related to a favorable legal settlement in the fourth quarter of 2024. Moving to Slide 9. Cash balances were $322 million as of September 30 compared to $377 million at year-end, reflecting our use of $50 million cash on hand as part of our $250 million discretionary pension contribution. Our liquidity position is strong with no major debt maturity until 2031, and our recently renewed $125 million asset-backed revolver remains undrawn. Our net leverage ratios are 1.8x and 3.7x, including pension deficit. We expect lower net leverage at year-end, given the strong profit contribution we expect from L&S renewals, and expect leverage to gradually come down over time as we contribute to our pensions, though not in a straight line. I will now provide an update on our global pension plans. Each year-end, we provide detailed estimated projections for expected global cash pension contributions and GAAP deficit relative to our quarterly updates. These projections change based on factors, including funding regulations and actuarial assumptions. The deficit is also impacted by our planned contributions, some of which go directly towards deficit reduction. After the upsized senior notes issuance in June and a one-time $250 million contribution, the pro forma 2024 year-end U.S. pension deficit was approximately $500 million. As of September 30, we estimate the deficit to be approximately $470 million. We are forecasting approximately $360 million of remaining cash contributions to our global pension plans in aggregate through 2029, which includes approximately $24 million of pension contributions in the fourth quarter, including both U.S. and international. Of the $360 million of contributions we are forecasting through 2029, approximately $230 million is associated with our U.S. qualified defined benefit plans, relatively unchanged from last quarter. As we discussed on last quarter's call and during our dedicated pension investor education event, the historical pension contribution volatility that was primarily in our U.S. qualified defined benefit plans was substantially removed by increasing fixed income allocations of plan assets to match the duration of plan liabilities. As a result, our contributions through 2029 are not expected to fluctuate more than 3% in aggregate per annum, providing a high degree of certainty as to our future funding requirements. During the quarter, we completed an annuity purchase that removed approximately $320 million of pension liabilities, more than half of the $600 million we aim to remove before the end of next year. This involves transferring $320 million of liabilities and a similar amount of planned assets to a third-party insurer. Annuity purchases reduce ongoing maintenance costs and allow us to remove liabilities at lower premiums than would be paid on a full takeout. I will now discuss our full-year financial guidance and additional color provided on Slide 10. For the full year, we now expect constant currency growth of negative 4% to negative 3%, which equates to a reported revenue decline of 3.6% to 2.6%, which continues to assume full-year license and support revenue of approximately $430 million. This implies fourth quarter revenue of approximately $570 million, which assumes $185 million to $190 million of L&S revenue. We expect to come in at or above the midpoint of our upwardly revised non-GAAP operating margin guidance range of 8% to 9%, implying a fourth quarter non-GAAP operating margin in the mid-teens due to the concentration of L&S revenue we expect. We are pleased that this translates to non-GAAP operating profit that is slightly above our original full-year guidance. This stems from the strength and stability in our ClearPath Forward software ecosystem, as well as diligent execution to enhance delivery and operational efficiency and foreign exchange favorability. We will continue to act with agility to remove additional costs where needed to align with revenue levels in certain areas of the business. We continue to expect to generate approximately $110 million of pre-pension free cash flow. This reflects full-year assumptions listed on Slide 10. As a reminder, pre-pension free cash flow is difficult to predict with precision, as the exact timing of some larger L&S collections and how those fall around year-end could shift collections between the fourth quarter and first quarter of 2026. Operator, please open the line for questions. Operator: [Operator instructions] Our first question will come from Rod Bourgeois of DeepDive Equity Research. Rod Bourgeois: I could ask a long-winded question on AI, but I'll make it short-winded. How are you seeing AI's impact overall on your P&L? Michael Thomson: Rod, it's Mike. Thanks so much for joining and for the question. Really appreciate it. Although a short-winded question, it may be a long-winded answer. As you would expect, lots of impacts in regard to the application of AI. In general, what I would say to you is that the impact of our transformation of our delivery model, which allows us to continue to deliver our solutions in a more, I'll say, cost-friendly way or reducing our delivery cost, certainly helps our margin profile, and we've seen a lot of green shoots in that regard. As I mentioned in some of my prepared remarks and Deb did as well, there's a knock-on impact to the top line for that. Typically, the AI component of a lower delivery cost means that our clients are seeing some of the benefit of that, and we share some of that savings with our clients, but it makes us obviously a lot more profitable and allows us to be a lot more competitive from a pricing perspective. We think that's the right way to approach that in regards to the new solution uptake. Then, obviously, as we continue to grow and add new logos to the mix, the application of those new logos certainly has an uplift that is much more top-line and bottom-line accretive because we've already baked that into our model. We're seeing, as you know, within our L&S business, increases in our consumption rate. We think that's pretty much driven by the application of AI across the board. This whole data abstraction layer, we are seeing some nice improvements in our HPC business. So clearly, with ClearPath Forward consumption, we've increased that guidance, as you know, and we're actually talking about the increase of the out years '26 through '28. I think we started that dialogue a couple of years back, thinking that would be about $360 million per annum. And now we're talking about $400 million on average per annum for those 3 years. So significant uptick in L&S related to consumption that we think is AI related. Certainly, AI in our delivery efficiency and hitting those real strategic objectives of increasing our profitability and our delivery. And in some of those cases, too, Rod, by the way, it's not only about just margin improvement in those accounts. We're looking at expansion and new scope, and growing those accounts in a bigger way through the application of this technology-led delivery. So the scale is one part of it, but certainly the volume is the other part. So we're obviously huge believers. We've talked for a while about how we think this is exponentially helping us to continue to compete on a greater and greater scale with some of our competitors. We've got it essentially sprinkled in throughout our delivery, whether that's in intelligent operations embedded in just AI management and orchestration of compute within CA&I, whether it's embedded in ECS from a ClearPath Forward delivery and navigation and whether it's in field services and/or service desk inside of DWS, all of our solutions essentially have that baked in and continue to grow in that manner. Rod Bourgeois: Then I guess as an extension of that and applying it to the results for the quarter, despite the revenue shortfall, you seem on track to meet your margin and free cash flow targets. So I'd like to ask what's enabling the margin performance to come through even though revenues are coming in less than planned? Michael Thomson: Yes. Great question, Rod. Thanks for that. Well, look, the first and most obvious is the increase in L&S. So that's obviously a higher profit component, and we're seeing a step-up in that, which is giving us margin pull-through. The second, and probably less obvious, is that there are plenty of green shoots embedded in Ex-L&S for our new solutions. We've had quite a bit of renewal activity this year. It's probably an unusually high renewal activity coming through in the year and being able to sign those accounts with our new solutions at a better margin profile and in a lot of cases, being able to expand either expansion of the work that we're doing or add new scope to those renewals is also benefiting us from a margin profile. So I think what you're really seeing here on the top line is you're seeing some reduction or accretion in top line related to either contracts that have accreted off or the slowness of some of the PC cycle or some hardware shifting. But all 3 of those are lower margin accreted off. And what we're adding is a higher margin addition. So right now, the top line is suffering a little bit from the accretion being a little higher than the addition, but we feel like that's the right path from our perspective, and we've tried our best here to fully delever what the risk is for the remainder of the year for the impacts that we've been seeing over time, whether that's the PC refresh cycle, whether that's a slowdown in the adoption of Microsoft 10 to 11 or whether that's just the uptake in project work in public sector due to the prevailing issues there in the U.S. with the government shutdown and others. So a little bit of a balance. But in general, it's allowed us, and I think it proves our margin continues to improve in our new solution delivery. I mean, just as a reminder, over the course of the last 3 years, we've improved that gross margin in Ex-L&S by almost 600 basis points, and we continue to see an opportunity to continue to see that expansion, regardless really on what's going on, on the top line. Debra McCann: And also, Rod, this is Deb. Just to add, we also increased some of the SG&A savings we talked about at Investor Day; we're accelerating some of those. Some of those were through 2026. We've accelerated some of those into '25, and we're ramping up our efforts overall on rationalizing our cost base. Michael Thomson: Yes. Look, I think Deb mentioned too in her prepared remarks around the variability of that workforce. So clearly, we're going to take some level of action to make sure that we continue the margin improvement that we've been seeing over the last couple of years. Rod Bourgeois: And then just a final quick one here as inputs to the modeling. Can you give your view on the pace of your delivery improvement going forward, and how that would impact Q4 cost reduction charges specifically? Michael Thomson: Yes. Thanks, Rod. So look, I mean, we've always been and continue to refine our delivery costs. And so there is some level of BAU cost reduction that you normally see. I would expect that you'll see some of that increment in Q4, and the cadence will probably be a little higher in Q4, just to mirror the variability in the workforce. I don't think it's going to be like a crazy significant increase in that, but there certainly will be actions taken to mitigate the exposure that we've seen on top line or some of the derisking efforts that we're going to do to maintain the margin profile. Operator: The next question comes from Mayank Tandon of Needham & Company. Unknown Analyst: This is Brandon on for Mayank. I guess I was just wondering what are you guys seeing on the demand front in cloud spending, particularly on the AI front. I know you guys mentioned like increased competition. But I guess what are you guys doing to navigate those increased competition dynamics that you guys are seeing? Michael Thomson: Brandon, thanks for the question, and thanks for your participation in the call. Look, the demand is certainly there. I will tell you, I was just on the road, frankly, in Europe, and met with a whole host of clients and just had what we call a CIO and CTO forum and had a big discussion with 20-some-odd potential clients and existing clients in that forum. So clearly, the demand is there for the application of AI. I think what we're bumping up against is the application of that technology into an ecosystem that is very sensitive. There are many attributes that need to be addressed, security being one of the primary ones involved with that. So there's money there, certainly to be spent. The demand is there. We continue to get validation from clients and industry analysts that our solutions are there and what they want. And as I mentioned, the competition continues to be fairly aggressive in that. So we've got to really make sure from a defensive posture that education is key and really having those dialogues around what that output looks like and why our client-centricity model and being, I think, a little bit pragmatic in how it gets adopted, where it gets adopted, and the time of adoption is really important. So there's an equal amount of hype as there is an equal amount of practicality in the adoption of these AI models. And I think from our perspective, we're taking a tack to really try to be very conscious around setting the right expectations with our clients, not promising things we can't deliver. And in some cases, where those expectations aren't met, then we have to attrit that potential client opportunity because we're not looking for a race to the bottom here. We're really talking about adding value and experience to our clients. And one of the stats I like to use when having discussions with our clients and potential clients is that for our top 50, on average, we've serviced those clients for roughly 20 years. You don't have that level of experience with the client base because you're looking at a short-term adoption of a technology.  We really like to think our technology is state-of-the-art, and we want to talk about the future and how we get our clients to the future. So the demand is certainly there. Our solutions certainly meet that demand. And the key is really about client education and setting an adoption road map.  Unknown Analyst: Then I know you guys last quarter, you guys touched on the public sector, I think specifically for the cloud business. I was wondering if you guys mentioned the call a little bit, but any update on that with the government shutdown in terms of client conversations and client demand with the shutdown?  Michael Thomson: Yes. Great question. Thanks, Brandon. So yes, we did talk about that last quarter. In fact, last quarter, we mentioned that we started to see a little bit of green shoots in the public sector and thought that sector was coming around a bit from a project orientation. That has reverted. That I'll say, the influx of project work is basically really quiet. Now, Deb mentioned in her remarks, and I think it's important, we've got a lot of renewals and have had a lot of renewals this year in the public sector, and are doing well to renew those particular accounts. But we're not seeing the uptick in the project work that we had started to see.  So there are a couple of areas where we're leaning in. We talked about that a little bit on the call, but we talked about the justice system. We talk about access management and things like that. There are what I would consider nondiscretionary areas in the public sector where the demand is fairly constant, and there's some project work in that space. But clearly, there continues to be a pause in project work in the public sector, specifically related to the U.S. public sector.  I wouldn't say that holds true across the board. We mentioned on the call about an Australian client that we had some good success with an expansion in other regions. But the U.S. public sector is also where a good chunk of our CA&I business is allocated. So there's definitely been a pause in project work there. And so the green shoots that we started to see in Q2 have really subsided. And I think there's a little bit of a wait-and-see approach here, and we expect that that's going to continue for a couple of quarters. So we're sitting tight. We're having good conversations with folks, but there's a lot of uncertainty there.  Operator: The next question comes from Anja  Soderstrom of Sidoti.  Anja Soderstrom: A lot of them have been covered already. But I think you mentioned you're starting to see pricing pressure. Is that something you only started to see now in the third quarter? Or can you talk a little bit more about that?  Michael Thomson: Yes. Now, we did mention that. I wouldn't say it's something we're just seeing in the third quarter. As you know, this is a highly competitive space that we're in. I would say in the third quarter and especially as we go through renewal cycles with clients, there are more and more players in that renewal cycle. And frankly, in a couple of instances, we've seen competitors really just undercut pricing to, in my mind, levels that we're just not willing to go to.  We've made a commitment as a management team that we're going to stay disciplined in the contracts that we're signing. We know we've got value. We know that we can bring that value to our clients. But we're not just going to sign contracts to maintain a top line if it's not helping our bottom line. Our objectives were very clear, and we continue to follow them. We're trying to grow profit dollars. We want that margin percentage to increase. We're increasing cash flow, or obviously moving positively in the cash flow arena. And we think that's the better way to drive shareholder value. And so that pricing pressure, I think, is certainly relevant and continues to be relevant in our discussions. But please don't take that comment to think that we're not competitive in pricing. We are. We're right there in every deal that we're talking about, but there's a limit to how far we're willing to go. And from our perspective, if the client doesn't have the capability for us to grow or the capability or want to move to our next-gen solutions, we're really not interested in just resigning a contract at lower values for the old delivery model.  Anja Soderstrom: And then also, just maybe go over some puts and takes for the free cash flow for 2026.  Michael Thomson: Sure. Deb, do you want to take that?  Debra McCann: Yes. So, as far as 2026, we're not giving guidance at this point for 2026, and we'll discuss that when we report the fourth quarter. But there are, to your point, a lot of moving pieces. So obviously, with the capital market transformation we did, right, we lowered our pension contributions, but the interest expense will move higher. And so there are moving parts that, as we're formulating our plan for '26, we'll lay out to you when we report that next quarter. But I think the key thing is the biggest driver, L&S, is clearly a big driver at a 70% margin. So as we finalize that number, we said on average $400 million, and those are 70% margins. So those have a big impact.  But I think what's most important is we feel we have a really strong liquidity position. So as we go into 2026, right now, our cash balance is $320 million. If you look at the cash color we've given to hit about $110 million pre-pension, that puts us about $390 million of cash by the end of the year. So we feel like we'll be entering 2026 in a good place from a liquidity perspective. And we also have that $125 million ABL, we just renewed that, which is also undrawn. So we feel good from a liquidity position. And as we shape the algorithm, what that's going to look like in '26, we feel confident in that.  Anja Soderstrom: And then also, if I understand correctly, the lower L&S this quarter was due to some being pushed into the fourth quarter and into 2026. Can you just elaborate on that a little bit and what you're seeing there?  Michael Thomson: Yes. So just to be clear, the push in the quarter got signed in the early days of Q4 for L&S. So that's not anything into '26. That is really just a shift of something we thought was going to sign by September 30, signed in October. All of it was signed, all of it is in-house. So, no real issue from an L&S cash perspective, just the quarterly timing. Deb, anything? Debra McCann: Yes. No, no, that's just all within this year.  Operator: [Operator Instructions]. And our next question will come from Arun Seshadri of Forza.  Arun Seshadri: Just a couple from me. It sounds like the book-to-bill is still pretty strong. So does that reflect confidence, I guess, were there timing impacts in Ex-L&S as well? And sort of what are you seeing in terms of that renewal activity? You talked a little bit about renewal activity being enhanced this year. I guess those 2 are potentially related. But any color there?  And then secondly, is there any way you could size that renewal in L&S that moved over to Q4, that would be helpful?  Michael Thomson: Yes. So I'll start that, and Deb, I'll ask you to kind of chime in here with some color as well. So you're right, the book-to-bill, I think we were at 1.1, is what we're talking about on book-to-bill. And clearly, that's a solid book-to-bill and happy with that, and aligned to our contracting models and our normal modeling for our forecasting. So, the renewal cycle that I talked about, and I was actually talking more about Ex-L&S. L&S, we've talked about the renewal cycle quite a bit.  And as we've indicated, that renewal cycle is actually increasing our L&S expectations over the next 3 years. So I'm going to discount that for a second, Arun, and based on your question, and really speak about Ex-L&S. So, for this year, just to give you a sample, the Ex-L&S renewal cycle for this year is about 3x what it will be for next year. So it gives you a sense of the baseline that we're actually renewing this year. And if you think about that, the resources it takes to go after all of those renewals are also obviously putting some pressure on the work that we're able to do in new logo acquisitions.  So there's a pretty high renewal cycle this year. We've been very successful in that renewal cycle. Now I'm not saying we've renewed every single contract that was out there. And a couple of them, as I've mentioned, we didn't because the investment that the client was looking for us to make was not conducive to the pricing that we expected to get. So, a couple of those contracts we did not renew. But the lion's share we did, and for many of those, we've actually renewed them at better margin profiles and have increased some scope and/or expansion in those accounts.  We've been pleased so far with the ability to renew those and to renew that work under our new delivery model. That's really key that we're converting these clients upon renewal to the delivery model that's technology-based, and that's an important element of that cycle because that brings in the enhanced margin profile.  So again, happy with the current book-to-bill, happy with the progress we're making on renewals. We have quite a bit of renewals coming up in Q4. Progress on those has been very good. So again, pleased with where we're at there. Would I have liked to win every single one and get them at higher margins? Sure. Is that a realistic assumption? Probably not. Deb, anything you want to add to that?  Debra McCann: Yes. Just as you can see, I mean, the TCV year-to-date, right, Ex-L&S renewals, is $572 million versus last year, $321 million. So, a 78% increase over last year, just to demonstrate how big the renewal cycle has been this year. And then, related to your point on the L&S renewal that shifted out, that was just a few days after the quarter. That was about $12 million we had mentioned of revenue that shifted out in 1 quarter. But it will not impact the full year.  Arun Seshadri: And you also have a fairly significant expectation, I think, for Q4 that's factored into the numbers, and it sounds like your confidence is pretty high in terms of those Ex-L&S renewals in Q4.  Michael Thomson: Yes. I think Deb's comment on the renewals was the L&S component. And of course, we're super confident in the L&S component. And we're also confident in the Ex-L&S component of renewals. So look, everything that we're not confident about has been baked into our updated guidance. So we feel pretty good about what's out there to close. And obviously, at this point in the year, we have pretty good insight into how the next couple of months are going to close out.  Debra McCann: Yes. But to your point, Arun, the L&S renewals, a few days slip, can shift. And so we mentioned that throughout the script, right, that we do have high expectations for Q4, which we feel confident in, but there is always that slip of an element.  Michael Thomson: Yes. Wonderful point, Deb. And really, if you think about it, Arun, our talk on that has always been around not if, but when. So we're really confident that it's going to renew, and we're very confident that it's going to renew in the timing that we expect it to. But as we've just seen in this quarter, a shift of a couple of days makes a difference.  Operator: The next question comes from Matthew Galinko of Maxim Group.  Matthew Galinko: If we see the other side of the government shutdown in the relatively near future, do you expect a quick return on forward momentum on project work that's been gummed up? Or how quickly do you see the market responding to things opening up?  Michael Thomson: Matt, thanks for the question. Good to talk to you again. Look, I don't think our expectations are that it's going to be a light switch effect where the government opens back up and all of a sudden, all this project work starts to open up immediately. As we indicated last quarter, we just started seeing some green shoots on that work, and then it shut back down. So we think that's going to linger, frankly, for a couple of quarters.  So do I think it's going to be like a Q1 recovery if the government opens up before then? No, I do not. We've got to reengage. They've got to reassess what the outputs of that government work are. The focus is going to be on nondiscretionary work first and then project work second. So we're baking into our expectation that, that's going to be several quarters prolonged.  Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Michael Thomson for any closing remarks.  Michael Thomson: Thank you, operator. Before we wrap up, I just want to reiterate a few key points we hope you take away from today's call. First, the trends remain strong in our most powerful profit and cash driver, which is L&S Support Solutions. We plan to meet our increased expectation of $430 million for this year and have increased our expectations for the average annual L&S revenue in our years from '26 through '28 to $400 million per year.  Second, while the market dynamics posted headwinds in our Ex-L&S business that we don't expect to dissipate overnight, we're adjusting our approach to mitigate those impacts. And importantly, we're continuing to deliver on our profit and cash flow objectives.  Then lastly, we're building momentum in our AI-led solutions with technology-first delivery models. This is making us more competitive, supporting our margins, and enabling us to scale our most differentiated innovation more quickly. And we're seeing more and more clients and industry analysts support the belief in that momentum. So I'd like to just make sure we take away those 3 points from today's call. And operator, thank you for your time, and you can close the call.  Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
Unknown Executive: [Audio Gap] But before anything else, I just want to remind you, and I've done it previously, and now it's particularly important, the partial carve-out that took place in November last year with the carve-out of the Inmocemento Group. You know that this is very important because until the end of the financial year, the results in the bottom line will not be fully comparable, and I'm sure you've been able to see this. That's the reason why last year and until September 2024, we entered EUR 148.6 million corresponding to the carve-out of the cement and real estate activities. And as we already reported on the first -- in the first quarter, the euro has become stronger against other currencies. And so exchange rate differences have become quite significant. And this also is related to the adjustment we made in certain assets following the equity method in both areas of the environmental department. So this, together with the negative exchange rate differences of the provisions and the adjustments made together with the EUR 148.6 million corresponding to discontinued activities that have disappeared now, but were present last year. All of this explains the fall of the attributable net profit of this financial year. I also want to mention that it is also true that at the level of the P&L in the top line, the strength of the euro has already been noticeable with a certain impact, close to 1% of our earnings in terms of income and EBITDA. Well, having said this, our earnings are basically focused in the even quarters. Well, if you look at the evolution of our exploitation activities starting by the environment unit, what we have seen is that the turnover of environment went up by 11.5%, reaching EUR 3.4 billion. And here, I would have to mention the contribution from new contracts, both in Spain and the United States. This -- I should also add the effect of the acquisitions we carried out in the U.K., although this has been diluted slightly, but Urbaser, heavy recycling should be mentioned. Now in terms of geographies, you know that we have 4 platforms, starting by the Atlantic, which includes the business in Spain, which accounts for 50% of the income, and this business grew by 7%, up to EUR 1.7 billion. And here, we have kept evolving quite normally in our activities, both for collection, street cleaning and also there's been very good performance of other municipal services and the management of industrial waste. This is waste related with the private sector. Now as regards to the U.K. platform, income rose by double digits because of, first of all, the consolidation because of the acquisition of the U.K. Urbaser Group, and this is why we reached over EUR 700 million. And I would also like to mention that the underlying activities at a constant perimeter had a homogeneous evolution except for the landfill activity, which did experience a lower level of activity than in the previous year. Now in Central Europe, we are present in 6 or 7 countries in the region. As you know, in the Eurozone, income increased by 4.9%, reaching EUR 508 million. And we had a higher contribution, particularly in Poland and in the Czech Republic with an increase in the number of contracts, both for collection and treatment. And we did record, and this is a growing trend, year-on-year, showing negative variations, the selling prices of negative raw materials that we manage, particularly in treatment, which in Central Europe is quite significant. Now the fourth platform in environment was the United States and revenues were EUR 342.7 million, plus 24%. So we're growing very significantly. Just remember the acquisition in the Central North area of Florida of a company called Hell Recycling, which is in charge of processing different types of waste related with residential waste, but also collection progressed very well. We do have to mention, although it didn't have much of an effect in the turnover, an acquisition we carried out in July. So there was only a contribution for 2 months. This is a company in Fort Lauderdale devoted to the recovery of waste. And this is the advancement we had in recovery. We started this activity in the U.S. and also waste collection contracts evolved very well. And there's also the Hell Recycling business. And I also want to mention in the Atlantic platform, which also includes Spain, which I mentioned first, it also includes France and Portugal. Here, we reached EUR 111 million in revenues. The lion's share, about 7% is France, and this is the acquisition we carried out last year of the ESG group, which means that now we have our own legal presence in France for waste collection and street cleaning. And the underlying activity was also good. And Portugal, also made progress by 4.4%. So the EBITDA for the environment unit grew to 11% over EUR 500 million. This growth is absolutely very similar to the growth in revenues. So I don't have much to say about the stability of the margins, which persisted. The margin is 15.6% as compared with 15.7% of the previous period. Now if you talk about the water cycle group called Aqualia, here, the turnover increased by 8.7% to EUR 1.5 billion. Here, we had quite a homogeneous growth, both in integrated cycle, we -- in general, although there's been a little bit of everything, but we've increased both in terms of volumes and rates. And this was accompanied by a growth in the technology and network activity, which is essentially linked to the development of ESP, specific ESP for the Water sector. And it is very closely connected to our concession-based business. So it is induced by our activities -- our integrated activities. Now if you look at the different jurisdictions in Spain, we rose by over 11%, our revenues. Here, there was quite a significant increase, and this is a reflection of the activities, the health of the activities in the country. So in Spain, everything was very positive over the period. Now if we look at Central and Eastern Europe, but before that, I just want to remind you that the main stays here are the business that we own in the Czech Republic and Georgia, where we increased by 5.4%, EUR 196 million. In the Czech Republic, rates were revised. This was within the plans linked to our proprietary structure and the fact that we are a fully regulated business. And this has to do with the CapEx that we are -- so rates are reviewed as we review our CapEx. In Georgia, there was a significant increase in consumption. So this increase was more related with the increasing consumption rather than with an increase in rates, both in residential and industrial customers. And this made it possible both in the Czech Republic and Georgia to reach this 5.4%, and it's allowed us to compensate for the effect of the exchange rate, which I mentioned at the beginning because in Georgia, the local currency lost value, lost 5.4% with respect to the euro. In other European countries such as Portugal, Italy, France, here, the increase was 6.6%, EUR 87 million. Just to give you some color, there was a rate review in Sicily, although we still experienced the effect of the lack of water -- of crude water as a result of the drought. This is something that we managed to compensate for with increases in our rates. Now if we look at other markets, leaving Europe behind, if we look at the Americas, here, the turnover also rose by double digit, 12.6%, EUR 156.4 million. There was a consistent growth and quite a substantive growth in the U.S. based on the activities in that country. We reached EUR 67 million. And here, there was an increase in rates, and also there was an increase in consumption, similar to the consumption in Colombia, another important country in the Americas. And in Technologies and Networks, we also carried out the development of some plants in Mexico and Peru. Lastly, the last platform I want to mention within Aqualia, apart from Europe and the Americas is MENA, the Middle East and Africa. Well, it's really Northern Africa, Algeria and Egypt. Here, we did experience a slight fall of 4.8%, EUR 115 million. And this was because of the effect of the rate review in our contract in Algeria in the desalting plants where there were some adjustments introduced according to some rate measures. But this was compensated for because we had higher activity in countries like Saudi Arabia in our counseling and execution business in the -- in 2 clusters we have been awarded in the country. It's really 2 regions in Saudi Arabia. And we also had to compensate for the negative effect of the strengthening of the euro against the riyal. So all in all, the EBITDA followed a very stable pattern. It grew a little bit less than revenues, 5.2% to EUR 319.2 million. I would just mention that the margin, which was 23.8% as compared with 24.6% experienced a small variation because the contribution of Technology and Networks was slightly higher moving towards integrated cycle. So margins were structurally lower. And this, as you know, tends to give rise to small adjustments in the increase of EBIT versus revenues and the operational margin. Right. As far as construction is concerned, in the 9 months, the turnover became positive to over EUR 2 billion. Here, there were no surprises. I wouldn't mention any unexpected occurrence, everything went according to plan. Perhaps I should mention that at present, the infrastructure contracts are the most important ones, both roads and railways. Now in terms of the main markets, in the Spanish market, the turnover rose by 4.9% to EUR 921 million. We also made progress in works both -- well, it's rehabilitation of roads and some other works that we had to cut it out, which were unexpected. We carried out some work for the flash floods in Valencia. Now in other European countries, the increase was similar to that of Spain, about 5%, EUR 645 million. And here, we kept advancing in our important contracts in the Netherlands, then the railways in Romania, where we have a traditional presence. And just as the -- I just want to mention that the motorway exploited by FCC concessions in the country was completed in Wales in the U.K. Which -- since it's been completed, it ceased to contribute. Now in -- then I would like to mention other areas where there were large works that we -- in the United States and Canada, particularly in Toronto. This was a large road in Pennsylvania. And as I said, for Europe, these compensated for the satisfactory completion of the Maya train in Mexico. Finally, in the Middle East and Africa, the MENA area, like in Aqualia, we incorporated Australia into this region. And we did have a reduction in revenues, EUR 119 million. And here, we were not able to compensate for this loss with new works because there was -- we completed the works of the Riyadh metro in Saudi Arabia and also the customer completed the works were conducted in the NEOM tunnel, but both projects were extremely successful. There was some compensation from our project to develop social infrastructure in Cairns in Australia, in the northeast of the country. So the EBITDA, however, went down a little, 0.3%, EUR 121 million. Now the margin EBITDA sales stayed stable, 5.6%. I think that last year, it was 5.7%. But this is just the effect of a combination of the programming of different works. And in construction, I'm sure you've seen this in the report we have sent, the most important thing to mention here has to do with the increase in our portfolio because since December last year to the end of September, we had a growth of 46.8%. Our portfolio is approaching EUR 10 billion, EUR 9.3 billion. Here, we had quite a significant amount of international contracts, which account for 2/3 of total with an increase of 60.8%, over EUR 6 billion. And again, we can talk about the platforms where we are already consolidated. One of the most important projects was the Scarborough project in Canada together with a line of the New York Metro and the enlargement in Canada of another metro line. In Spain, we also had increases in our portfolio. So this increase was of 23.8%. So these were new contracts in Spain. We are specialized in the construction of stadiums, particularly in Valencia and also high-speed lines that are being built by the railway authorities. So it is important to mention that the increase of the -- the improvements are happening across our different departments, but I just wanted to make a specific mention to construction because the increase was particularly high. Now to finalize, I just want to talk about concessions. Here, the turnover reached EUR 81.4 million, growing by 38%. And given its relative size and its good evolution, well, you will have seen that this is the area that made the greatest progress. And here, there are 2 effects to be mentioned. One of them is the development of new business and the other one is the perimeter. But I want to say that traffic and the number of passengers in the infrastructures that we exploit has also made some contributions. So the organic perimeter also evolved healthily. But the business is basically -- our concessions are concentrated basically in Spain, EUR 77.9 million, an increase of 48.4%. Here, I just want to remind you that there's the kick-off of the 8 itinerary, a concession we have in the region of Aragón and a new project, which is for a motorway in Ibiza Island, and this started in June last year. Now internationally speaking, I just want to mention a concession that does make a contribution to our revenues. Another one -- we have another one that follows the equity method, but we have the Coatzacoalcos underwater tunnel, which evolved very well. But then we decided to remove one of the businesses in Portugal. But all in all, internationally, which is just COTUCO, we had an increase of 6.8%. So the EBITDA for concessions is EUR 44.6 million, an increase of 8.3% with respect to the previous year. As you know, and I want to mention it again, the EBITDA advanced less than revenues, but that was because of the development of the concession in Aragón before it starts operating. That's why its gross margin went down quite significantly, but there was no other effects for provisions or any other incident that could explain that difference between the variations of revenues and of EBITDA. Well, that's about all I had to share with you. As you may have seen, the results as compared with previous quarters were quite good with increases in excess of 7%. I might perhaps mention the evolution of the portfolio. You know that we are a group that has over 85% of its activity coming from the waste management business and the water integrated cycle -- integrated water cycle business. But our portfolio makes us -- well, it means that we are very reassured in terms of our future prospects. That's all from me. So if you have any questions, please do not hesitate to ask them. Operator: First question, why are the EBITDA margins going down for Water and Services in the first quarter -- in the third quarter? Unknown Executive: Well, services, I guess you mean environmental services. As I said before, for the environment, 15.6% as compared with 15.7%. I don't think it's a huge reduction. This variation is really very small. We did increase quite -- well, perhaps we increased in waste collection and other services, but the difference is really very, very small, practically negligible. In the case of Water, which is, I think, important to mention, the thing is that Technology and Networks is now more significant. That is where we include 2 types of projects. First of all, the things we do to develop works where we have a contract that we call essentially BOT that is we obtain a partial water cycle to construct a water treatment plant, a desalting plant and that normally is attached to a lower margin. But the area of Technology and Networks has to do with our integrated cycle concessions because we are -- these are works that cannot be postponed. This is just water consumption for drinking water for families. So we need to do this as fast as possible. So -- and 80% of the work we do under Technology and Network falls in this category. And even if the margin for us is very satisfactory, it is a lot lower than the margins of other businesses in concessions that may go from 25% to 40%. So when there's more in Technology and Networks, when there's more work in Technology and Networks, of course, it's logical that there should be a fall in the margins, but that's the only explanation. Operator: Next question, what was the reason for the selling off of an additional share in the Services unit? And how are you going to use the money obtained from the sale? Unknown Executive: Well, as you know, in this transaction, we have an agreement. We have signed the selling agreement. The money has not yet been paid to the group. I would say that the same -- the reason is the same as in 2018 when we sold a share of our Water business. Obviously, it was a minority share. So we retain full control of the activity. But what we did there is circulate the capital used in an efficient way. So we retain the operational control of the business. And this -- and so the know-how still lies with us and with our units. And the idea is basically to optimize the use of the capital invested by the group. This is the same thing we did for Aqualia. And what are we going to use the money for? Well, we'll have to wait, first of all, for the money to be paid to us. And when that happens, we will decide how to put it to the best use. Operator: Next question. What can we expect from the working capital for the end of the year? Unknown Executive: Well, with respect to the working capital, the evolution that we have experienced in the first 9 months has been quite homogeneous with respect to the activity we had until June. And let me look at the figures because I don't remember them off the top of my head. In December, yes, 2024, it was also homogeneous year-on-year. So the expansion we recorded was quite similar. And I would say that what we can expect is that we will have a recovery. We always recover. You know that -- you know it's difficult to quantify things under the working capital heading, but the expansion we had in September is quite similar to the one published in June. And it should go down by the end of the year. But this is only normal. It's part of the ordinary pattern of this chapter. Operator: Next question. What investments can we expect for 2025 and 2026? Unknown Executive: Well, in terms of investments, as any other group, we -- there's a combination of the ones that have been contracted and the ones we aspire to achieve. Last quarter, we achieved EUR 1 billion in payments for investments, and this is quite a significant figure given the size of our activity and our generation of cash flow. Now with the investments we have made until now, I think we -- I think that this year, we could stand at a similar level. Now for 2026, we could also achieve similar levels. I mentioned some investments that will have to be materialized. And you know that we are very selective in our activities. Last year, for example, they were concentrated in environment and water treatment. These are the 2 activities that demand the largest amount of CapEx. And of course, we aspire to grow, but in a very selective way. And in 2023, we'll stand at similar levels in terms of the application of our cash flow, similar to 2025, I mean. Operator: Next question. Will you have growth in construction at the end of 2025? Unknown Executive: Yes, I think we should. From the first half to the 9 months to the third quarter, you've seen that there's been some increase already. But I would just like for you to analyze our portfolio. Of course, we can't -- you can't really apply a simple equation. You can't say that if the portfolio has grown by 45%, revenues will also increase by the same measure. But this cannot be done because some of our new contracts are long-term contracts, railway contracts, but we want to establish a close connection with the customer, with early contractor involvement format where customers become more involved in the design phase. So by their very nature, these are long contracts with great technical complexities, but this also requires a greater collaboration from the customer so that the contract is longer term. And this, of course, makes it easier to manage the complexities of our contract. So what I want to say is that these contracts are going to be longer term. Of course, we could end up at the same variation of 1.2. But for a project based on projects -- for an activity based on projects such as construction, we feel really very comfortable because there's quite a large amount of visibility. There's no further questions. So if there's no further questions, I just want to thank you very much for your time. I guess that you will now have time to review all the documentation we have sent. And as I said, we remain at your entire disposal through the usual channels. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, ladies and gentlemen, and welcome to the Talos Energy Third Quarter 2025 Earnings Call. [Operator Instructions]. This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference over to Mr. Clay Johnson, VP of Investor Relations. Clay Johnson: Thank you, operator. Good morning, everyone, and welcome to our third quarter 2025 earnings conference call. Joining me today to discuss our results are Paul Goodfellow, President and Chief Executive Officer; Zach Dailey, Executive Vice President, Chief Financial Officer; and Bill Langin, Executive Vice President, Exploration and Development. For our prepared remarks, please refer to our third quarter 2025 earnings presentation that is available on Talos' website under the Investor Relations section for a more detailed look at our results and operational update. Before we start, I'd like to remind you that our remarks will include forward-looking statements subject to various cautionary statements identified in our presentation and earnings release. Actual results may differ materially from those contemplated by the company. Factors that could cause these results to differ materially are set forth in yesterday's press release and our Form 10-Q for the period ending September 30, 2025, filed with the SEC. Forward-looking statements are based on assumptions as of today, and we undertake no obligations to update these statements as a result of new information or future events. During this call, we may present GAAP and non-GAAP financial measures. A reconciliation of certain non-GAAP to GAAP measures is included in yesterday's press release, which is furnished with our Form 8-K filed with the SEC and is available on our website. And now I'd like to turn the call over to Paul. Paul Goodfellow: Thank you, Clay, and good morning. I would like to start by thanking the entire Talos team for their hard work, dedication, and unwavering commitment to the safety and delivery of our business. The results we'll discuss today are a direct result of their efforts. We're pleased to report 0 serious injuries or fatalities year-to-date, underscoring our steadfast commitment to the health and well-being of our employees and contractors. Additionally, our environmental stewardship remains a core focus with a spill rate significantly below industry averages, exemplifying our commitment to protecting the community's environment in which we live and operate. Our team has made significant progress since we announced our enhanced corporate strategy in June. Our transformation into a leading pure-play offshore E&P company is centered around 3 strategic pillars: improving our business every day, growing production and profitability, and building a long-lived scale portfolio, all underpinned by a disciplined capital allocation framework. Since our strategy announcement, we've taken decisive steps to execute on this vision. I'd like to highlight a few key actions we've taken so far. We strengthened our leadership team with the appointments of Zach Dailey as Executive Vice President and Chief Financial Officer, and Bill Langin as Executive Vice President of Exploration and Development. Both bring deep oil and gas expertise and leadership to Talos. I want to welcome them to the Talos team. We continue to drive progress through our improving our business everyday initiative, surpassing our 2025 optimal performance plan targets during the quarter, further strengthening Talos' position as the low-cost E&P operator in the Gulf of America, and we've had a very promising exploration discovery at Daenery's. I'll share more details on that shortly. Now turning to third quarter results, which represented another quarter of consistently delivering on our commitments and executing on our strategy. I'd like to highlight a few key takeaways. First, we delivered outstanding operational performance that translated into strong financial results. Production of over 95,000 barrels of oil equivalent per day exceeded the high end of our guidance range, with approximately 70% comprised of oil. The absence of storm activity, solid base performance from our assets, and high facility uptime drove this outperformance. The team did an excellent job of operating our deepwater facilities, and huge recognition is deserved by all. A great example of operational excellence by our teams is the successful debottlenecking efforts at our Talos-operated Tarantula facility, which enabled production from the Katmai field to average over 36,000 barrels of oil equivalent per day. Additionally, we completed the Sunspear workover ahead of schedule and returned the well to production in late September. The well is back online and flowing to the Talos-owned Prince facility. The second key takeaway is the continued generation of free cash flow, underscoring the strength of our business model and the ability to convert operational success into meaningful free cash flow generation. During the quarter, we delivered $103 million in free cash flow, significantly exceeding consensus estimates. This performance reflects our disciplined capital allocation, great operational execution, and ongoing focus on cost management. The substantial free cash flow enables us to return capital to our shareholders and maintain a strong balance sheet, positioning us well for the long term. Year-to-date, we've generated approximately $400 million in free cash flow. We also delivered on our commitment to return capital to our shareholders. The robust free cash flow generation allowed us to repurchase approximately 5 million shares for $48 million in the quarter, and Zach will provide more details on our return to capital program later on. Looking at Slide 8, a key element of our strategy is driving continuous improvement across every part of our business. We set a year-end 2025 target of delivering an additional $25 million in free cash flow, and I'm proud to report that we have achieved that ahead of schedule during the third quarter, with over $40 million already realized. The team is actively working on incremental opportunities for the balance of 2025, and we look forward to sharing a further update on this at the end of the year. The accelerated delivery, combined with outstanding execution in exceeding our 2025 target, gives us excellent momentum towards achieving our annualized $100 million target in 2026 and beyond. Now I'd like to turn your attention to Slide 9. Our advantaged cost structure continues to differentiate us from our offshore peers. Year-to-date, we've successfully lowered our operating expenses by almost 10% from just under $17 a barrel in 2024 to $15.27 a barrel in the third quarter of this year. We've achieved these results by maintaining a laser focus on continuous improvement across our operations. This progress is driven by more than 60 initiatives implemented company-wide to reduce cost and enhance efficiency, all aligned with our commitment to improving the business every single day. These outcomes are especially noteworthy given the extensive facility turnarounds and maintenance activities carried out throughout 2025. Over the past 3 years, while the industry trend for E&Ps in the Gulf of America has been an increased cost structure, Talos' relentless efforts in proactively managing the cost base have resulted in a reduction in operating costs on a unit basis. In fact, for the first half of this year, our operating costs are on average 40% lower than those of the peer group. This advantaged cost structure has helped us to generate top decile EBITDA margins in the E&P sector for this year. While commodity price volatility remains an ongoing challenge across the industry, we remain focused on projects that offer low breakeven economics and more stable production profiles. Looking ahead to the fourth quarter and into early 2026, our teams will commence drilling activity at the Talos-operated Brutus, Cardona, and CPM projects and the non-operated [Indiscernible] and monument projects. These development projects have broken even at the $30 and $40 a barrel. We've improved our 2025 operational and financial outlook, reflecting continued progress in driving efficiency and disciplined capital execution. We now expect full-year oil and oil equivalent production to be approximately 3% higher than prior guidance. For the fourth quarter, we anticipate a production mix averaging 72% oil. In addition, we further reduced our full-year operating expense and capital guidance by 2%, driven by the structural cost savings from our optimal performance plan efforts. As we approach the end of 2025 and look ahead to '26, we will exit the year with strong operational momentum. While it is still early to talk about 2026 in detail, we expect our 2026 program to deliver flat year-over-year oil volumes while investing in both near-term development and longer cycle projects that will come online over the next couple of years. Our focus remains on delivering strong financial outcomes while continuing to invest in high-quality development projects for our future.  At Talos, we remain laser-focused on improving our business every day through driving efficiencies and further optimizing our advantaged cost structure. Now I'd like to provide a brief update on our successful discovery at Daenerys.  The well was drilled to a total vertical depth of approximately 33,200 feet and confirmed oil pay in multiple high-quality sub-salt Miocene sands, validating our geological models. We drilled the well ahead of schedule and under budget, demonstrating that we can deliver solid operational performance to underpin our growth strategy.  We've temporarily suspended the wellbore to preserve its future utility and are now planning an appraisal well, which we expect to spud in the second quarter of 2026. The appraisal program is designed to test the northern part of the prospect. It is strategically planned to penetrate multiple prospective intervals, enabling a thorough assessment of reservoir and fluid properties.  Additionally, the well has been engineered to support multiple future sidetracks, allowing for further appraisal and development. As part of our balanced capital program, exploration remains a vital element of Talos' strategy. We are committed to driving sustainable growth and value creation over time while maintaining strong operational execution underpinning near-term financial delivery. Successful exploration discoveries have the ability to add reserves, extend production horizons, and ultimately enhance shareholder returns.  The Daenerys discovery is a prime example of our second strategic pillar, continuing to pursue organic growth opportunities in the Gulf of America. And finally, we will continue to advance the third strategic pillar by selectively evaluating projects with significant potential in the Gulf of America and other conventional basins that align with our technical capabilities to ensure we are building a long-lived scale portfolio. And with that, I'd like to turn it over to Zach.  Zachary Dailey: Thanks, Paul, and thanks for the introduction. Talos is a great company with a bright future ahead, and I'm excited to join the team. The strategy Paul laid out a few months ago to be the leading pure-play offshore E&P is well underway, and the company delivered measurable results against that strategy during the third quarter.  As Talos' new CFO, I'll continue to focus on our disciplined capital allocation framework, maintaining a resilient balance sheet that prioritizes financial flexibility and returning capital to our shareholders. I'll now walk through a few key takeaways from our Q3 results and provide an update on other financial matters.  During the third quarter, we returned $48 million, or 47% of our free cash flow, to shareholders via share repurchases. Year-to-date, we've returned over $100 million to shareholders, reducing our outstanding share count by 6%. Going forward, we continue to see share repurchases as the preferred return vehicle, as there is compelling upside to our equity valuation.  Briefly addressing the balance sheet. As of the end of the third quarter, we held $333 million in cash and maintained a leverage ratio of just 0.7x. With an undrawn credit facility and approximately $1 billion in total liquidity at quarter's end, we're well-positioned to navigate the current oil price environment. We remain committed to a strong balance sheet, which provides the flexibility to execute our strategy, invest in high-return projects, and remain resilient through the commodity price cycle. During the quarter, we recorded a noncash impairment of $60 million related to the full cost ceiling test under the SEC guidelines. As a reminder, this test primarily compares the net capitalized cost of our oil and gas properties to the present value of future net cash flows from our proved reserves using a trailing 12-month pricing, which we expect to continue lower in the fourth quarter of the year.  Next, I want to highlight what I think is a positive and innovative development for Talos related to the offshore surety bond market in the Gulf of America. Recently, we've seen the surety market tighten substantially with reduced bond capacity and lower risk tolerance of surety providers, which has resulted in some offshore Gulf of America companies facing collateral calls from their surety providers.  As a reminder, our surety bond agreements give our surety providers the right to demand collateral up to the full amount of the bond at any time. In response to the rapidly evolving surety market, we worked proactively with our surety providers to develop a practical solution where they have agreed to forgo their right to demand additional collateral in exchange for Talos agreeing to post collateral of approximately 3% of our outstanding surety bond portfolio each year through 2031.  This equates to approximately $40 million to $45 million per year. The first year will be funded with a letter of credit, and we have the option over the next several years to fund the commitment with either LCs or cash. This novel approach, signed earlier this week, provides us with certainty amid volatility in the surety market.  Finally, let me share a quick overview of our hedge positions. For the fourth quarter, we've hedged approximately 24,000 barrels of oil per day with a floor price of $71 per barrel. Looking ahead to the first half of 2026, we've hedged roughly 25,000 barrels per day with floors above $63 per barrel. These hedge positions are an important component of our risk management strategy, providing cash flow protection and helping ensure stability in a volatile commodity price environment.  Finally, our disciplined approach to capital allocation and strong balance sheet are the foundation for our high-performing business that is well-positioned for the future. With that, I'll turn it over to Paul for his closing comments.  Paul Goodfellow: Thank you, Zach. In closing, our continued focus on capital discipline, operational excellence, and generating free cash flow has driven meaningful success throughout 2025. These efforts directly support our clear vision for Talos to become a leading pure-play offshore E&P, well-positioned to benefit from the growing importance of offshore resources in meeting global energy demand. We believe Talos is uniquely equipped to capitalize on this opportunity, and we look forward to keeping you updated on our progress. With that, we'll open the line for Q&A. Thank you.  Operator: [Operator Instructions]. So now your first question comes from Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I wanted to start digging into the strong run rate at Tarantula. Paul, your predecessor, had talked in 2024 about options to expand throughput, maybe closer to 40,000 a day. And I think you teased this option yourself last quarter. So, as we look at this run rate, was this just one-off strong execution? Or is this maybe the start of efforts to grow that throughput?  Paul Goodfellow: Yes. Thanks, Tim. It's very much the latter. And so, as I mentioned in the last quarter, we've had really strong performance from Katmai from the Katmai wells. And so we start to look at what is the best way to optimize that fully in alignment with sort of the strategic pillars that we have laid out, but we want to work our way into it. So what you've seen in the third quarter is the first step of that, which is maximizing throughput with the facility base that we have without actually injecting any additional capital into it. The second phase that we're looking at studying at the moment is, let's say, an expansion of about 20% capacity that will be through a larger debottlenecking study that we do in the first part of 2026, with execution throughout the remainder of '26 into the start of '27. The third phase of that, which we're also studying at the moment, is much larger and linked to the Katmai North opportunity and prospect that we have where we have proprietary seismic, very high-quality seismic using latest technologies such as the OBN technology to actually look at that opportunity and that broader expansion, which could be significant, would then be as a result in combination with the drilling and exploitation of Katmai North, if that's where we choose to go towards the end of '26 and '27. So it's very much a structured approach, very much fits in the fairway of improving our business each and every day by, yes, having a clear view and line on the enterprise, but working our way into it and making sure that each day we are a little bit better. Timothy Rezvan: So is it fair to assume we may get an update on your course or next steps with the 2026 guidance? Paul Goodfellow: We'll certainly give an update on where we are in that process as we talk about the '26 plan. Timothy Rezvan: And as my follow-up, I know the West Vela rig is scheduled to go back to Daenerys in the second quarter. You gave some context on what you're trying to do. Given that you had one penetration there, how do you think about the cost and maybe the timing of the second well relative to what you did the first time, because your first well did come in under budget and quicker than expected? Just any context on what you're doing there would be helpful. Paul Goodfellow: Thanks, Tim. Let me pass that over to Bill, who's joined us today, and he can provide some comments on that. William Moss: Yes. Thanks, Tim, and thanks, Paul. So I would say we're really proud of the teams here at Talos for the way the subsurface teams characterize the opportunity predrill and then the drilling organization for delivering really outstanding performance as they delivered that first well. So at the moment, yes, we are targeting a second quarter next year spud of the appraisal well to test a separate fault block to the north. And we'll penetrate multiple objective sections that we think have the opportunity to really push our decision forward on whether this is ultimately a development for us or not. Obviously, we'll target the same outstanding performance that the teams have delivered in the past to continue to demonstrate that, as we seek to grow, we can underpin that growth with outstanding performance. Operator: Our next question comes from Ms. Greta Drefke with Goldman Sachs. Margaret Drefke: I was wondering if you could provide a bit more color on the near-term opportunities remaining for the $100 million in savings plan beyond the $40 million that you've already executed on. Where do you think you have the clearest line of sight from here before year-end? Paul Goodfellow: Thanks, Greta. Look, let me start by saying we're incredibly proud of the organization in terms of how they've taken the challenge and not just delivered on it, but exceeded on it. I think when we started, many would have said it's an incredibly high bar that we've set. I think the organization has shown that through working in an integrated way, really challenging each other on where the opportunities are, that they've been able to deliver on that. And now it's about us building on that momentum as we go into 2026. And I think, as I've said before, there's no one simple and clear area where we see the biggest opportunity. The reality is, we see opportunities across the totality of all that we do. Clearly, there's a big focus on the capital expenditure. You just heard Bill talk about the drive we have to not only match the performance on the discovery well, but to try and beat that as we go into the appraisal mode, whether it's on how we think about the gathering of data from a seismic point of view. We've seen great progress on the operational front, both in terms of availability, uptime, cost of maintenance, et cetera, et cetera. And we also see, as I think I've mentioned before, opportunities in the supply chain space to actually work maybe more collaboratively against common outcomes with our great supply chain partners. And so there's not one particular line that we are driving against. We're looking at all our spending and all the opportunities for volume and value enhancement, and production enhancement as well. As we look into 2026, it's across that broad waterfront that we see the opportunities. And I think the split I've mentioned before, roughly 1/3, 1/3, 1/3 between production enhancement, the capital uplift, or the capital efficiency, and the commercial opportunities, probably still holds true, Greta. Margaret Drefke: Makes a lot of sense. Thank you very much. And then just a follow-up on costs. You outlined TE's operating cost structure in your slide deck and how it compares to some of the peers in the Gulf of America. Can you speak a bit about what the key drivers are in your view that allow for your lower cost structure? I would appreciate your view on the durability of that note. Paul Goodfellow: Yes. The answer to the second part of your question is we're building this as the normal way that we do work. So this is how we do work. It is not special for this quarter, which is why I think you've seen us build off the very strong foundation we had coming out of 2024 as we have driven through 2025. And clearly, it's about having that ownership mentality, which is core to everybody at Talos, that we act like an owner as we think about where to spend money and making sure we spend money that has a return on it. And whether that's for an operator out in a facility, making sure that we're driving maintenance from a proactive point of view, look after it versus fix it when it breaks, or whether it's in the development teams, thinking about how we can actually get more throughput through the facility. It really is that sort of building, that culture of excellence and always looking to be a little bit better tomorrow, that as a leadership team, we are trying to drive. Operator: Our next question comes from Michael Scialla with Stephens. Michael Scialla: I want to see if you could make a few more comments on Daenerys. You didn't give us any indication of the pay that was found with the discovery well. Any changes to the prospect size there? And I guess, based on Bill's comments, it sounds like the Northern Fault block needs to work for you to feel like you have a commercial discovery there. Is that fair? Paul Goodfellow: Thanks, Michael. Let me pass it to Bill again. William Moss: Sure. So we found through pay in 3 separate zones in Daenerys, all of which we think have the potential to exist across the fault to the north. But as we've seen repeatedly in the Gulf of Mexico over the past 10 years, we need to confirm the presence of those as we cross different geological boundaries. So, as we drill the fault block to the north, we need to test for the existence of those pay intervals and the fluid quality that exists there as well. And there is an additional prospective interval that we see as well. So we're hoping to see similar and if not better, results as we penetrate that other fault block. Michael Scialla: And is it reading too much into it that that fault block really needs to pan out before you would pursue a development? Or is there still enough resource there potentially to where you could have a commercial discovery even if you did not find what you're looking for with the Northern fault block? William Moss: It depends on the outcome. So there are multiple opportunities options for development. If we were to see a significantly positive outcome in that Northern fault block, it would dictate a very different development concept than if we were to see an average or more negative outcome. On the more negative side, we look to potentially combine with other opportunities in the area to create enough economic synergy to proceed as well. So at this point, it's not a non-op switch by any stretch. It will be highly dependent on what we see, not just in Varis, but how that neighborhood develops.  Paul Goodfellow: And I think, Michael, maybe to add to that, this is the art of exploration, which is very seldom is it a one penetration and all decisions become clear. We have a very clear road map dependent on how the next well goes. We may need a subsequent appraisal beyond that, dependent on what we find.  Clearly, we look at other opportunities within the local geological environment as well. And we appreciate the question, but we'll drill the appraisal well in the second quarter of next year. We'll update from that. And I think at that point, we'll have a much clearer picture, along with our partners, in terms of which is the pathway that we think is the best pathway for commerciality.  Michael Scialla: I want to ask about your CapEx guide. You've got a range in there still of $40 million difference between the low end and the high end, and we're 2 months away from the end of the year. So, anything you can say on the difference between the activity or events between the low and the high end?  Paul Goodfellow: Yes. I mean, look, as you come towards the end of the year, of course, there are projects that may start just in the year or may slip into the early part of 2026. Some of those in the nonoperated space are reliant on other projects that are proceeding them. And so it really is looking to give a guide around that uncertainty of that arbitrary line that's called December 31.  Michael Scialla: So, really just timing, you're not contemplating any different changes to the program at this point?  Paul Goodfellow: No.  Operator: Our next question will be with Phu Pham from ROTH Capital.  Phu Pham: So my first question is about the M&A. Last week, we saw a private U.S. producer, LLOG potential sale of $3 billion. So I just want to hear your thoughts about deals and about the M&A environment in general.  Paul Goodfellow: Thanks, Phu Pham. You're a little bit difficult to hear, but I think you're asking about the M&A environment on the back of LLOG. Look, I think as we said in our remarks, clearly, we keep an eye on what is happening in the market. We set ourselves a very high bar that we need to sort of pass to go beyond looking, and we look both within the Gulf of America as well as basins outside of that.  And I'm not going to speculate beyond that in terms of what we may or may not be looking at. But I'd just reiterate the same as we think about capital discipline and execution discipline, the way that we'll look at any inorganic opportunities, be it from the lease sale to anything that may be at the asset or the corporate side, will be with that same high bar of discipline and rigor.  Zachary Dailey: Paul, if I might complement the thing I'd add on top of that is any M&A opportunity, just like any exploration opportunity in or outside of the Gulf of America, we look for things that really complement our existing advantaged skill sets in the subsurface and our low-cost operations that we could bring to bear whether it's in exploration or on the M&A front, we think those are the types of opportunities that ultimately create value for our shareholders.  Phu Pham: And my second question, maybe about the production. We saw that this quarter, we did not have any storms, and I think production was better even though we exited the downtimes. So you said that part of the outperformance was that the uptime was better. So was there anything news? And are we going to continue to see that in the future?  Paul Goodfellow: Yes. So clearly, we benefited from a quiet storm season through the third quarter. And if you look at the sort of beat we have, that probably accounted for 2/3-ish of the beat, 2/3 to 3/4 of the production beat. But of course, the fact that we had really well-run operations where we're executing as planned allowed us to take advantage of that lack of storm. And so the 2 are somewhat interdependent.  Yes, we had the tailwind of no storms, but the sort of self-help of building a really robust, excellent operating organization allowed us to take advantage of that. And then on top of that, we saw a further uplift because of the throughput that we had, the debottlenecking that we've done, and the excellent operational base performance that the team has delivered.  Operator: And our last question for today will be with Nate Pendleton from Texas Capital.  Nathaniel Pendleton: Congrats on the strong quarter. While I understand that you have not officially guided to 2026 yet, looking at the schedule outlined on Slide 10, it seems that you have a nice cadence of projects coming online with first oil on 4 of these projects in the second half of 2026. With that in mind, how should we think about the shape of that production next year, given the commentary about the flat year-over-year outlook?  Paul Goodfellow: Thanks, Nate, and thanks for the comments. I mean, look, we're still in the process of building out the plan. There's a lot more that goes around the new oil projects that you're referring to on the slide there in terms of how we think about turnarounds and the maintenance that we need, how we think about the optimization activities that we will take on an asset-by-asset type of basis and of course, how we will plan around the hurricane period of the year again.  So I think the overall shape from a planning perspective will look similar to this year, which is you will see a dip in the middle of the year, primarily related to potential weather and some of the turnaround activities that we do with new oil being added, in the first half, from those first few projects that are out on the schedule. With a further uptick towards the back end of the year, as projects such as the non-operated MOU field come online. But I think the key is to think about the way we're framing it, which is driving towards flat oil production year-on-year.  Nathaniel Pendleton: And then perhaps for Zach here. Regarding the surety agreement that you talked about in the prepared remarks, is this an arrangement that you plan to use on future bonds? And can you provide some context on the outlook for the surety market, given it has been a point of focus for other industry peers as well?  Zachary Dailey: Yes. Thanks, Nate. I appreciate the question. This really is a positive development for Talos, and I'm glad you asked about it. Like you said, the offshore surety bond market has tightened over the last year or so. I think part of it is a lower risk tolerance from the sureties. There's been some reduced bond capacity. And like I said in my comments, other Gulf of America companies have faced collateral calls on their bonds.  So what we've done is proactively engaged our sureties and entered into a pretty unique agreement that's beneficial to both sides, and ultimately, it gives us certainty to plan our business amidst that volatile environment. So we're excited about putting that together, and it's positive for us.  Operator: Ladies and gentlemen, that was our last question for today. I will now turn the call back to Paul Goodfellow for closing comments. Please go ahead, Paul.  Paul Goodfellow: Thank you, Emma, and thank you all for joining today and for your interest in Talos. I'd like to close by again, just recognizing our dedicated teams and their commitment to provide safe, reliable, and responsible energy that is vital to power the world. And we look forward to updating you at the end of the year on our progress toward the strategic plan that we've laid out. And as always, I very, very much appreciate the questions and the interest that you show. Thank you all. Operator: Thank you very much, Paul. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Greetings, and welcome to the Fortuna Mining Corp. Q3 2025 Financial and Operational Results Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Carlos Baca, VP of Investor Relations at Fortuna Mining Corp. You may begin. Carlos Baca: Thank you, Paul. Good morning, ladies and gentlemen, and welcome to Fortuna Mining's conference call to discuss our financial and operational results for the third quarter of 2025. Hosting today's call on behalf of Fortuna are Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder; Luis Dario Ganoza, Chief Financial Officer; Cesar Velasco, Chief Operating Officer, Latin America; and David Whittle, Chief Operating Officer, West Africa. Today's earnings call presentation is available on our website at fortunamining.com. Statements made during this call are subject to the reader advisories included in yesterday's news release, the webcast presentation or management discussion and analysis and the risk factors outlined in our annual information form. All financial figures discussed today are in U.S. dollars unless otherwise stated. Technical information presented has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services and a qualified person as defined by National Instrument 43-101. I will now turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder of Fortuna Mining. Jorge Durant: Good morning, and thank you for joining us today. The third quarter was a strong one for Fortuna, not only in terms of operational delivery, financial results and continued buildup of Fortuna's balance sheet, but also in the meaningful progress we have made in positioning the company for the next stage of growth. But let's start with safety. By the end of October, we achieved 318 days or 9.7 million work hours without a lost time injury, our longest streak yet. Our total recordable injury frequency rate improved to 0.86, down from 1.6 a year ago. These results demonstrate our collective commitment to ensuring everyone returns home safe and sound. Turning to the numbers. We realized an average gold price of $3,467 per ounce, up 5% from the second quarter and up 20% from the first quarter of the year. Attributable net income reached $123.6 million or $0.40 per share, driven by a $69 million impairment reversal at our Lindero mine. Adjusted net income was $0.17 per share, impacted by higher share-based compensation due to a rising share price and a $7.4 million foreign exchange loss in Argentina, which both together account to approximately $0.04 per share. Our strong free cash flow from operations was $73 million with net cash from operating activities before working capital changes at $114 million or $0.37 per share, surpassing analyst consensus of $0.36. During the quarter, we recorded $13.5 million in withholding taxes related to the repatriation of $118 million from Argentina and Côte d’Ivoire. We expect regular repatriations moving forward. Overall, our business benefits from higher realized gold prices, improving margins and strong cash generation. As a result, our liquidity position at the end of the quarter stands at a solid $588 million with a growing net cash position of $266 million. This enables us to accelerate our pursuit of multiple high-value opportunities in the asset portfolio across different stages of the project life cycle. In Côte d’Ivoire, at Séguéla, our flagship mine, we are expanding the life of mine and boosting annual gold output through exploration success at Sunbird and Kingfisher deposits. In Senegal, our predevelopment stage Diamba Sud project boasts strong economics, advancing towards a construction decision in the first half of next year. In Salta, Argentina, we're excited to drill for gold at one of the largest untested high-level epithermal anomalies in the north of the country. The Cerro Lindo project, held privately for years, now offers us an exciting exploration opportunity. Our strategic investments announced this year in Awalé Resources and JV with DeSoto Resources position us with exciting gold prospects on both the Ivorian and Guinean sites of the prolific Siguiri Basin, which straddles these 2 countries. And we continue advancing a pipeline of early-stage projects in Mexico, Peru and Côte d’Ivoire. Our consolidated cash costs remained below $1,000 per ounce. And all-in sustaining cost at our mines is tracking within guidance. Lindero's all-in sustaining cost has been trending lower every quarter to the current $1,500 per ounce range, where we expect it will stabilize. At Séguéla, the story is inverse. We expect to complete the year on the upper end of guidance but we're coming from a low all-in sustaining cost of $1,290 in first quarter of the year to the current $1,738 in the third quarter. This is driven mainly by timing of capital investments and the impact of higher gold price on royalty payments. As key investments at Séguéla are completed in Q3 and into Q4 to support our 2026 expanded production of 160,000 to 180,000 ounces of gold, we expect to see all-in sustaining cost in the range of $1,600 to $1,700 per ounce range. Caylloma will finish just outside its guidance range due to relative metal prices used in gold equivalents. As you know, Caylloma has a significant base metal lead/zinc component to its production. Now turning to growth. For Diamba Sud project in Senegal continues to advance at pace on a fast-track approach. In mid-October, we released the Preliminary Economic Assessment for an open pit and conventional carbon-in-leach plant, confirming strong economics that support our goal of reaching a Definitive Feasibility Study and a construction decision in the first half of 2026. Using a gold price of $2,750, the after-tax internal rate of return of the project is 72%, and the net present value at a 5% discount is $563 million. The mineralization at Diamba Sud remains wide open, and we are drilling nonstop with 5 rigs, expecting to add resources by the time the DFS is published. On October 7, we filed the Environmental and Social Impact Assessment, expecting the certificate of acceptance in the first half of next year. Site camp early works are progressing with an approved $17 million Phase 1 budget, and the government is being very supportive, and we have received consent to move ahead with a Phase 2 early works, including the water dam excavations and excavations for other key infrastructure. We plan to fast track front-end engineering design activities during the feasibility work to shorten and derisk the development time line by securing long-lead equipment early. Diamba is a project that can bring additional 150,000 ounces of gold of annual production on average for the first 3 years of operations. Regarding the business environment in key jurisdictions for us, both Côte d’Ivoire and Argentina held national elections in late October. In Argentina, the government's electoral victory in Congress and Senate strengthened its mandate for advancing structural economic reforms. Argentina's business climate has improved significantly and we remain optimistic about the country's trajectory. In Côte d’Ivoire, President Alassane Ouattara was reelected for a fourth term with a decisive majority. We anticipate the continuation of pro-business and pro-investment policies that have made Côte d’Ivoire one of the fastest-growing and most resilient economies in West Africa. In summary, Q3 was a strong quarter for Fortuna. Our safety record continues to set new benchmarks. Our operations remain resilient and our growth projects are advancing according to plan. We entered the final quarter of the year with a solid balance sheet, strong cash generation and a clear path of near- to mid-term organic growth driven by Diamba Sud and Séguéla expanded gold output. I'll now hand the call over to David Whittle, our Chief Operating Officer for West Africa, and Cesar Velasco, Chief Operating Officer for LatAm, who will review their respective operational results. We can start with you, David. David Whittle: Thank you, Jorge. Séguéla achieved another impressive quarter, delivering excellent results in both production and safety. This positions Séguéla well to exceed upper production guidance for 2025. We have gold output now projected to surpass 150,000 ounces. Our dedication to safety and environmental excellence remains steadfast, and we are making steady progress toward our goal of zero harm across all our operations. I'm pleased to report that no injuries occurred at any of our West African locations during the quarter. At Séguéla, we produced 38,799 ounces of gold, maintaining consistency with prior quarters and surpassing the mine plan. Mining during the quarter totaled 272,000 tonnes of ore at an average grade of 3.66 grams per tonne gold, along with 4.43 million tonnes of waste, resulting in a strip ratio of 16.3:1. The processing plant treated 435,000 tonnes at an average grade of 3.01 grams per tonne gold, with throughput averaging 208 tonnes per hour for the quarter. Ore was primarily sourced from the Antenna, Ancien and Koula pits. During the quarter, we received permitting approvals for 5 satellite pits, including the Sunbird, Kingfisher and Badior open pits. Several major projects also advanced successfully over the third quarter. The 8.5 million TSF lift was completed, providing tailings storage at current throughputs until late 2029. The replacement of the transmission tower at the Sunbird pit, a $9 million project, progressed well, and we are now prepared to commence pre-mining operations for the Sunbird pit in Q4. The rock breaker and the primary crusher was commissioned and is operating effectively, further debottlenecking the processing circuit and the 6-megawatt solar plant project is expected to be complete in the first quarter of 2026, which will help to reduce power costs. Séguéla performance resulted in a cash cost of $698 per ounce and an all-in sustaining cost of $1,738 per ounce, both aligning with our budget. Site costs continue to be managed efficiently with the increased all-in sustaining costs primarily attributed to royalties on the higher gold price. Exploration drilling at the Sunbird underground project continued in the third quarter with encouraging results. The ongoing success of this drilling, combined with the results from the Kingfisher Deposit provides us with a resource base that offers further opportunities to optimize production from Séguéla. Whilst current process plant throughputs are focused on maximizing available capacity with minimal investment, we're now investigating in options to further enhance process plant throughput. Drilling is continuing with 5 drill rigs at the Sunbird underground deposit in Q4, aiming to further expand the underground resource. Engineering studies and permitting activities will continue in Q4 and 2026, with the expectation of commencing underground mining operations in 2027. The Kingfisher Deposit remains open in all directions and further drilling will be undertaken in 2026 to convert inferred resources to indicated status and further expand the resource. At our Diamba Sud project in Senegal, exploration, environmental permitting and feasibility activities made significant progress during the quarter, government approvals were received for early works programs, ESIA was submitted for approval and the PEA was published. Following the rainy season, drill rigs have been remobilized for further drilling at the Southern Arc deposit at Diamba with the aim of enhancing the resource base and building on the strong PEA results. Thank you, and back to you, Jorge. Jorge Durant: Thank you, David. Cesar? Cesar Velasco: Thank you, Jorge, and good afternoon, everyone. I am pleased to report that both Lindero and Caylloma ongoing multiple safety initiatives are driving continuous improvement and reinforcing a culture of accountability and care across all of our operations, delivering excellent safety performance. At Lindero in Argentina, we had a strong quarter, achieving our highest gold production this year. Gold output reached 24,417 ounces, a 4% rise from 23,550 ounces in the second quarter, driven by a 5% increase in gold grade and effective inventory recovery from the leach pad. We placed 1.7 million tonnes of ore on the leach pad at an average head grade of 0.60 grams per tonne containing about 32,775 ounces of gold. With 1.5 million tonnes of ore mined and a favorable strip ratio of 1.9:1, we are well aligned with our mining plan. Processing performance was robust with continued optimization of the crushing circuit achieving an average throughput of 1,061 tonnes per hour, about 8% above the 2024 average, demonstrating progress in our operational efficiency initiatives. However, on September 27, we experienced an unexpected shutdown of the primary crusher due to mechanical issues involving high amperage and overheating of the pitman shaft, specifically traced to the premature wear of the primary wear parts such as the bushings and bearings. Replacement parts have been secured and corrective actions are underway to resolve the structural misalignment. We anticipate the crusher will be fully operational by mid-November. Meanwhile, we have implemented effective mitigation strategies such as using a portable jaw crusher and direct Run-of-Mine ore screening to ensure uninterrupted operations. Consequently, we do not foresee any impact on our annual production target. Regarding costs, the cash cost in Q3 was $1,117 per ounce of gold compared to $1,148 per ounce in Q2, marking a 3% improvement due to higher ounces sold and stable operating conditions. The all-in sustaining cost decreased significantly to $1,570 per ounce from $1,783 per ounce in the second quarter, a notable 12% reduction, supported by lower costs, reduced sustaining capital, higher by-product credit and a 7.7% increase in ounces sold. Overall, Lindero delivered strong performance this quarter, supported by disciplined cost management, resilient production and solid margins of approximately $2,500 per ounce to our ASIC based on current gold prices. At Caylloma in Peru, we delivered another steady and reliable quarter of production, meeting operational expectations. The Caylloma mine continues to exceed all of its physical and cost targets for the year, reflecting strong operational execution. However, our reported metal equivalents are being impacted by the silver and base metal conversion factor, which affect the calculation of both the gold and silver equivalent production. In terms of costs, the cash cost per silver equivalent ounce was $17.92 compared to for $15.16 in Q2, mainly due to slightly lower silver production and higher realized silver prices. The all-in sustaining cost increased modestly to $25.17 for silver equivalent tonnes from $21.73 in Q2, primarily due to the same factors and fewer silver equivalent ounces sold. Despite these cost movements, Caylloma maintained healthy margins, supported by strong base metal prices and disciplined operational control. With the current strength in silver prices, we're looking to access some of the highest grade silver zones that Caylloma is known for. These areas, which are better suited to conventional mining methods are becoming economically attractive and once again, under the present price environment. In summary, the third quarter highlighted strong production growth at Lindero, steady performance at Caylloma and lower unit cost across the region. Our teams in Argentina and Peru continue to execute with discipline and focus, maintaining momentum in operational reliability, cost efficiency and safety as we move into the year's final quarter. Back to you, Jorge. Jorge Durant: Thank you. I'll now hand the call over to Luis, our CFO, who will review financial results. Luis Durant: Thank you. So we have reported net income attributable to Fortuna of $123.6 million or $0.40 per share. This result includes a $70 million noncash impairment reversal at the Lindero mine, which includes $17 million of low-grade stockpiles. After adjusting for noncash nonrecurring items, attributable net income was $51 million or $0.17 per share. This represents a strong 56% increase year-over-year and a 14% sequential increase over Q2. The growth was driven mainly by higher metal prices. The cash cost per ounce for the quarter was $942, broadly aligned with the prior quarter and slightly above Q3 of 2024 as a result of higher mine stripping ratios at Lindero and Séguéla after our mine plans. We have reported 2 nonoperational items impacting our results this quarter. The effect of our stock-based compensation of the increase in our share base during the period, representing a one-time increase to share-based expense of $6.3 million and a foreign exchange loss of $7.4 million. The foreign exchange loss was mostly attributable to our Lindero operations in Argentina as the peso experienced a sharp 14% devaluation in Q3. For the first 9 months of the year, our FX loss related to the Argentinian operations amounts to $10 million, of which over half is related to the accumulation of local currency cash balances. However, I want to emphasize that we implemented structures to preserve the value of these funds and the FX loss on local cash balances for the full year is fully offset in our income statement through the interest income, investment gains and derivative line items. We were able to restart repatriation in the month of July from Argentina, and under current conditions, we expect to maintain local cash balances at a minimum. In Q3, a total of $62 million were repatriated, net of withholding taxes. Our general and administration expenses for the quarter were $26.3 million. This represents an increase over the prior year of $12.6 million. This was due mainly to higher stock-based compensation as explained, plus an increase in corporate G&A of $4 million related mostly to timing of expenses. Our annual corporate G&A remains relatively stable at around $28 million to $30 million, and the breakdown is provided in Page 11 of our MD&A. Moving to our cash flow statement. Our capital expenditures for the quarter totaled $48.5 million. Of this, we classified $17 million of growth CapEx, which primarily consists of investments in the Diamba Sud project of $6.8 million and exploration activities of around $10 million. Our anticipated capital expenditures for the full year have adjusted upwards slightly from the $180 million previously disclosed to approximately $190 million. This increase primarily reflects added exploration allocations due to continued exploration success at Séguéla and Diamba. In terms of free cash flow, we generated $73.4 million from ongoing operations, up from $57.4 million in the prior quarter, reflecting the effect, again, of a higher gold price. And our net cash position increased by $51 million after growth CapEx and other items. All of this brings our total liquidity to $588 million, and our net cash position to $266 million. This represents an increase of over $200 million year-to-date. In the current price environment, we expect this trend to accelerate. That's it for me. Back to you, Jorge. Jorge Durant: We would now like to open the call to questions. Paul, please go ahead. Operator: [Operator Instructions] And the first question today is coming from Mohamed Sidibe from National Bank. Mohamed Sidibe: Maybe just starting with your strong balance sheet, strong free cash flow that you're printing and the elevated gold and silver prices. How are you thinking about your capital allocation priorities. I know you have Diamba coming up. But specifically as it relates to capital return to shareholders as you're looking into next year. Jorge Durant: As you pointed out, we have a pipeline of near-term growth. So that is the first priority we have with respect to capital allocation. We expect we'll be making a construction decision on Diamba Sud next year in the first half of the year. We're advancing early works that are trying to derisk the time line and shorten the time line also for first gold at Diamba by advancing these early works. We are also scoping right now the potential to expand our Séguéla process infrastructure. As you recall, Séguéla was originally designed at 1.25 million tonnes per annum. We're currently running the plant at 1.75 million tonnes per annum, and we're currently doing scoping -- starting scoping work to expand it to the range of 2.2 million, 2.3 million tonnes per annum. Additional to that, as you have seen, we're expanding exploration work across the 2 regions, LatAm and West Africa. We just expanded into Guinea through a JV with DeSoto. We are expanding our exploration in Argentina. We're currently drilling in Mexico. We're currently drilling in Peru. So that is our first priority and where we believe we can add most value right now. Second, we have our share buyback program in place. We were quite active with the share buyback program at the beginning of the year, end of last year. We repurchased approximately $30 million worth of stock. The share buyback program remains in place, and today is our preferred way to return to -- capital to shareholders. And we have made a pause in the last 2 quarters with the share buyback program, but we could be active in the market again anytime. Mohamed Sidibe: Great. And then maybe if I could shift to operations. So Lindero, the unexpected shutdown and mindful that this has no impact on your annual production target, given the mitigation measures. But how should we think about this for cost into Q4? Should we -- could we see any potential impacts on that front? And any color would be appreciated there. Jorge Durant: Yes. I'll let Cesar address the question. Cesar Velasco: Sure. Well, in particular to cost, we have been able to compensate some of those cost in specifically with regards to the portable rental jaw crusher. So we're offsetting that cost with other noncritical initiatives that we had in Lindero. So we don't expect our cost to be significantly impacted in Q4. That should address. Operator: [Operator Instructions] There were no other questions from the lines at this time. I will now hand the call back to Carlos Baca for closing remarks. Carlos Baca: Thank you, Paul. If there are no further questions, I'd like to thank everyone for joining us today. We appreciate your continued support and interest in Fortuna Mining. Have a great day. Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to Smith Micro Software's Financial Results for the Third Quarter ended September 30, 2025. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Charles Messman, Vice President of Marketing. Please go ahead, sir. Charles Messman: Thank you, operator. We appreciate you joining us today to discuss Smith Micro Software financial results for the third quarter ended September 30, 2025. By now, you should have received a copy of our press release with the financial results. If you do not have a copy and would like one, please visit the Investor Relations section of our website at www.smithmicro.com. On today's call, we have Bill Smith, our Chairman of the Board, President and Chief Executive Officer; and Tim Huffmyer, our Chief Operating Officer and Chief Financial Officer. Please note that some of the information you will hear during today's discussion consist of forward-looking statements, including, without limitations, those regarding the company's future revenue and profitability, our plans and expectations, new product development and availability, new and expanded market opportunities, future product deployments, growth by new and existing customers, operating expenses and the company's cash reserves. Forward-looking statements involve risks and uncertainties, which could cause actual results or trends to differ materially from those expressed or implied by our forward-looking statements. For more information, please refer to the risk factors included in our most recently filed Form 10-K. Smith Micro assumes no obligation to update any forward-looking statements, which speaks to the management's beliefs and assumptions only as of the date they are made. I'd want to point out that in our forthcoming prepared remarks, we will refer to specific non-GAAP financial measures. Please refer to our press release disseminated earlier today for a reconciliation of these non-GAAP financial measures. With that said, I'll turn the call over to Bill. Bill? William Smith: Thanks, Charlie, and thank you for joining us today for our third quarter 2025 conference call. I am pleased with the progress we have made overall as we continue to advance our discussions around key customer initiatives and identify new opportunities aimed at broadening the reach of our products, setting the stage for future growth. More recently, we implemented some strategic changes across our organization as part of a broader effort to realign our cost structure in line with our long-term business goals, strengthen our financial foundation and accelerate our path to profitability. These cost reduction measures will save the company approximately $7.2 million in annualized costs. The strategic organizational changes we've made affected approximately 30% of the overall workforce and were in part enabled by the completion of certain key development efforts. While difficult, these changes were a necessary and meaningful step forward toward enhancing organizational efficiencies and accelerating the company's path to profitability. We are building a culture of continuous improvement and operational efficiency, and we'll continue to assess and optimize our spending in the coming quarters, while we continue to invest in strategic areas that support innovation and to deliver exceptional value to our customers and stakeholders. We have also made several structural changes to streamline operations and enhance agility, which will enable us to accelerate the delivery of our solutions to market. The timing of these adjustments has been carefully planned and aligns with the completion of our core SafePath 8 platform development efforts. With these initial changes complete, we believe we will be very close to breakeven and expect to be profitable in mid-2026. Additionally, to further support our financial position and business objectives, we also announced a strategic round of financing, which Tim will cover in greater detail a little later in the call. With the opportunities that are in front of us and the efficiencies we have achieved, I truly believe we are entering a new phase of our journey as we progress to return the company back to growth and profitability. Regarding these opportunities, I am pleased to report that our pipeline remains strong and continues to grow. We are engaged in ongoing activities and customer trials in both North America and Europe. We are witnessing a meaningful shift in the carrier market that includes a renewed focus on family subscribers. As 5G growth begins to plateau, carriers are actively seeking new avenues for expansion, and families represent a high-value opportunity. They consistently demonstrate lower churn rates, higher lifetime value and increased spending across devices, data plans and services. Our expanded SafePath platform now offers a more comprehensive ecosystem of tools and flexible delivery mechanisms tailored to family needs. This not only opens new revenue streams, but more closely aligns with carriers' core business strategies, such as selling devices and rate plans rather than relying on traditional secondary sales of value-added services, which have become less of a priority. I believe we are very well positioned to capitalize on these changes. Now let's turn the call over to Tim for a deeper dive into our financials. I'll follow up with more updates later in the call. Tim? Timothy Huffmyer: Thanks, Bill. Let me start by covering a few recent transactions. As previously announced, in July, we closed a follow-on offering of approximately $1.5 million prior to fees and expenses. In September, we closed on a few notes purchase agreements, which provided approximately $1.2 million of cash to the company in exchange for short-term notes and warrants. In October, we announced a strategic cost reduction in our organization, as Bill indicated. This was primarily comprised of our workforce reorganization. It will result in a cost savings of $1.8 million per quarter as compared to the second quarter of 2025 or $7.2 million reduction in costs for 2026. This excludes payment of employee separation costs. As Bill indicated, these efforts are part of our broader initiative to realign the company's cost structure with long-term business goals, strengthen the financial foundation and accelerate our path to profitability. And finally, yesterday, we announced the completion of a private placement and follow-on offering. Both offerings have been priced based on the market value of the offered securities as of the time of signing the purchase agreement, and the company will issue approximately 4 million shares and an equivalent amount of warrants exercisable for 1 share of the company's common stock at an exercise price of $0.67 per share. The aggregate gross proceeds of the two offerings are expected to be approximately $2.7 million, which includes a committed investment of $1.5 million from Bill and the other Smith. We are excited about this additional funding round as the company pushes to expect -- to breakeven in 2026. Now let's cover the financial results for the third quarter of 2025. For the third quarter, we posted revenue of $4.3 million compared to $4.6 million for the same quarter of 2024, a decrease of approximately 6%. When compared to the second quarter of 2025, revenue decreased by $73,000 or 2%. Last quarter, we had guided to a revenue range of $4.4 million to $4.8 million, and we slightly missed that guidance. The reason for the lower-than-expected revenue is directly related to the company's expectation of launching an additional SafePath feature with an existing carrier customer. The contract for that feature did not get finalized as expected. Therefore, the revenue was not recognized. The company has completed the development effort related to this feature, and we will wait on prioritization from the carrier customer. Year-to-date revenues through September 30, 2025, were $13.4 million versus $15.6 million through the third quarter of last year, a decrease of approximately 14%. During the third quarter of 2025, Family Safety revenue was $3.5 million, which decreased by approximately $410,000 or 10% compared to the third quarter of the prior year. Family Safety revenues decreased by approximately $97,000 or 3% compared to the second quarter of 2025, primarily driven by the decline in the legacy Sprint Safe & Found revenue. During the third quarter of 2025, CommSuite revenue was $792,000, which increased by approximately $148,000 compared to the third quarter of 2024. Revenue from CommSuite increased by approximately $15,000 compared to the second quarter of 2025. As previously mentioned, we sold our ViewSpot product for $1.3 million on June 3. And as such, other than transition services fees, we will no longer have any future revenue from this product. ViewSpot revenue was $26,000 and $65,000 for the third quarter of 2025 and 2024, respectively. In the fourth quarter of 2025, we are expecting consolidated revenues to be in the range of approximately $4.2 million to $4.5 million. The upper end of this guidance range includes some initial revenue related to the launch of the previously referenced new feature at the existing carrier customer, which we previously anticipated would have occurred in the third quarter. For the third quarter of 2025, gross profit was $3.2 million compared to $3.3 million during the same period of the prior year, a decrease of $116,000, primarily due to the period-over-period decline in revenues. Gross margin was at 74% for the quarter compared to 72% realized in the third quarter of 2024. The gross profit of $3.2 million in the third quarter of 2025 matched sequentially the $3.2 million of gross profit realized in the second quarter of 2025. In the fourth quarter of 2025, we expect gross margin to be in the range of 74% to 76%. The increased margin percentage is directly related to lower costs from the cost reductions completed in October. For the year-to-date period ended September 30, 2025, gross profit was $9.8 million compared to $10.7 million during the corresponding period last year. Gross margin was 73% for the September 30, 2025 year-to-date period as compared to the 68% in the same period last year. Once we realize a full quarter of the cost benefits in 2026, we expect our margin percentages to be between 78% to 80%. Our longer-term gross margin target is 85%, which we will continue to work towards. GAAP operating expenses for the third quarter of 2025 were $7.7 million, a decrease of $2.1 million or 22% compared to the third quarter of 2024. The difference was a result of changes in personnel, stock compensation costs and other cost reduction activities. GAAP operating expenses for the year-to-date period ended September 30, 2025, were $34.5 million compared to $55.6 million in the prior year-to-date period, a decrease of $21.1 million or 38% compared to last year. This period-over-period decrease was primarily attributable to the goodwill impairment charge of $24 million recorded in the first quarter of 2024 as compared to the goodwill impairment charge of $11.1 million in the second quarter of 2025, coupled with the cost reduction activities that we have executed along with a decrease in amortization expense associated with our intangible assets. Non-GAAP operating expenses for the third quarter of 2025 were $5.7 million compared to $6.8 million in the third quarter of 2024, a decrease of approximately $1.1 million or 16%. Sequentially, non-GAAP operating expenses decreased by approximately $200,000 or 3% from the second quarter of 2025. We expect an approximate 15% decline in non-GAAP operating expenses in the fourth quarter of 2025 as compared to the third quarter of 2025 as we begin to see some of the impact of our most recent reorganization. Non-GAAP operating expenses for the year-to-date period through September 30, 2025, were $17.8 million compared to $22.4 million for the year-to-date period ended September 30, 2024, a decrease of $4.7 million or 21% compared to last year. As previously mentioned, we expect our 2026 non-GAAP operating expenses to be reduced by approximately $7.2 million as we realize the full benefit of the recent reorganization. The GAAP net loss attributable to common stockholders for the third quarter of 2025 was $5.2 million or $0.25 loss per share compared to a GAAP net loss of $6.4 million or $0.54 loss per share in the third quarter of 2024. GAAP net loss attributable to common stockholders for the 9 months ended September 30, 2025, was $25.4 million or $1.30 loss per share compared to GAAP net loss attributable to common stockholders of $44.3 million or $4.17 loss per share for the 9 months ended September 30, 2024. The non-GAAP net loss attributable to common stockholders for the third quarter of 2025 was $2.6 million or $0.12 loss per share compared to a non-GAAP net loss attributable to common stockholders of approximately $3.6 million or a $0.30 loss per share in the third quarter of 2024. Non-GAAP net loss attributable to common stockholders for the 9 months ended September 30, 2025, was $8.2 million or $0.42 loss per share compared to non-GAAP net loss attributable to common stockholders of $11.8 million or $1.11 loss per share for the 9 months ended September 30, 2024. Within today's press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metric. For the third quarter of 2025, the reconciliation includes adjustments for intangible asset amortization of $1.3 million, stock compensation expense of $600,000, depreciation expense of $71,000, changes to the fair value of warrants of $34,000 and a deemed dividend of $635,000. For the year-to-date period, the non-GAAP reconciliation includes adjustments for intangible asset amortization of $3.8 million, stock compensation expense of $2.8 million, goodwill impairment charge of $11.1 million, executive transition costs of $78,000, depreciation of $217,000, changes to the fair value of warrants of $137,000, a deemed dividend of $635,000, partially offset by the ViewSpot sale of $1.3 million. Due to our cumulative net losses over the past few years, our GAAP tax expense is primarily due to certain state and foreign income taxes. For non-GAAP purposes, we utilized a 0% tax rate for the third quarter of 2025 and 2024. The resulting non-GAAP tax expense reflects the actual income tax expense during the period. From a balance sheet perspective, we reported $1.4 million of cash and cash equivalents as of September 30, 2025. This concludes my financial review. Now back to you, Bill. William Smith: Thanks, Tim. As I mentioned at the beginning of the call, our SafePath platform is tailored for families and includes SafePath OS for Kids Phones and SafePath OS for Senior Phones. Carriers can deploy our SafePath OS software solution to offer devices from existing inventory that are tailored to meet the needs of kids and seniors and their families. This expansion has generated meaningful interest and opened several new conversations with our current and prospective carrier partners, and we have trials currently underway with mobile operators around the world. We remain focused on delivery and expect to get them to the finish line in the next few quarters. Now let me provide a quick update on our current customers. We remain enthusiastic with the continued rollout of our SafePath Kids solution with Orange Spain, which supports the 2-year rate plan for kids. We've maintained a strong partnership with the Orange Spain team, collaborating closely on new go-to-market opportunities. Concurrently, we are advancing the next phase of the product road map with a planned launch later this year that introduces new functionality designed to broaden our market reach. These enhancements have been strategically developed to meet evolving customer needs and are expected to be well received, strengthening our position in the region. We're also making solid progress with the expansion of our footprint beyond Spain with ongoing conversations across other Orange entities. These discussions are gaining traction and reflect growing interest in our solutions. More broadly, we have active trials and engagements across Europe, and I remain highly encouraged by the momentum of our current pipeline. With AT&T, we're actively collaborating our new marketing initiatives as we gear up for the upcoming holiday season. Many of these efforts are tied to a recent product update that significantly expands our market potential. Secure Family is now available to any family regardless of their mobile carrier that they use. It's no longer limited to AT&T wireless customers. This expansion not only broadens our addressable market, but also unlocks new cross-promotion opportunities. I am optimistic about the road ahead as we continue to build on our strong and trusted partnership with AT&T. I remain optimistic about our progress with Boost, especially as we explore new opportunities following the announcement of our expanded SafePath platform capabilities. These expanded offerings have sparked fresh conversations and opened the door to broader engagement. Additionally, we are seeing continued momentum through targeted holiday marketing campaigns and ongoing monthly messages, most notably around visual voice mail. These messages are set to run through the end of the year and further support our growth efforts. With T-Mobile, we remain energized by our continued discussion around the expansion of the SafePath platform and the new opportunities that it can deliver. As I discussed on our last call, T-Mobile has added additional team members to our working group who are very interested and engaged in our current solution as well as our portfolio expansion. With relationships continuing to strengthen across the organization, I believe there remains substantial growth potential ahead with T-Mobile. In conclusion, we believe we have taken key steps to strengthen the company's financial position, establishing a firm foundation from which we can grow. I truly believe the renewed family focus occurring in the carrier market worldwide opens an enormous new opportunity for Smith Micro Software. With the core development of our SafePath 8 platform complete, coupled with a new, faster and more agile delivery organization going forward, we are aligned well with the market today. Our Connected Life vision brings what I believe is the most expansive and powerful offering in the market today. Our family digital lifestyle ecosystem spans the entire family digital safety journey for families from kids to seniors and every family member in between. We are confident we are on a path to profitability. Our mission is not yet complete, but we have implemented the necessary steps to get us there. I am extremely confident in our plan and our team's ability to execute. With that, let me turn the call back to the operator for questions. Operator? Operator: [Operator Instructions] And at this time, we are showing no questions in the queue. So I would like to turn the conference call back over to Charles Messman for any closing remarks. Charles Messman: I want to thank everybody for joining today. Should you have further questions, please feel free to call us. Thank you, guys, and have an awesome day.
Operator: Hello, and welcome to the Excelerate Energy Third Quarter 2025 Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand it over to Craig Hicks, Vice President of Investor Relations. Please go ahead. Craig Hicks: Good morning, and thank you for joining Excelerate Energy's third quarter 2025 earnings call. Joining me today are Steven Kobos, President and CEO; Dana Armstrong, Chief Financial Officer; and Oliver Simpson, Chief Commercial Officer. Our third quarter earnings press release and presentation were published yesterday afternoon and are available on our website at ir.excelerateenergy.com. Before we begin, please note that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially. We undertake no obligation to update these statements. We'll also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found at the end of the presentation. With that, it is my pleasure to pass the call over to Steven Kobos. Steven Kobos: Thanks, Craig, and good morning, everyone. We appreciate you joining us to discuss our third quarter 2025 results. But before we turn to the business update, I want to begin by acknowledging the impact of Hurricane Melissa on Jamaica. Our thoughts are with those affected, especially our employees, their families and the communities we serve. We've been in close contact with our teams throughout, and we're grateful for their safety and for the care they've shown to one another and to the communities around them. Also, I want to note for you all that David Liner, our Chief Operating Officer, who's usually with us on these earnings calls, is currently on the ground in Jamaica, helping to coordinate our hurricane response and relief efforts. In the days leading up to landfall, our crisis management team activated contingency plans and conducted drills to ensure personal safety and operational resilience. On October 23, following direction from the harbor master, our FSRU at Old Harbour and our other mobile marina assets safely relocated offshore. Our teams then moved to ensure that all our critical systems and onshore operations were prepared and secured ahead of the storm. When Hurricane Melissa made landfall on the west side of the island, Montego Bay experienced severe conditions, but our infrastructure held and our teams responded quickly. The FSRU returned to port in Old Harbour on October 30th and regasification operations resumed on October 31st. The Clarendon CHP plant also restarted operations that same day. As of November 1st, the Montego Bay terminal was fully operational. Deliveries to small-scale customers have resumed. These deliveries were made possible through coordinated efforts to clear access routes and restore supply chains. I want to take a moment to thank our operations team in Jamaica. Their response was not only fast and effective, but it was also deeply responsible. They did what needed to be done, and they did it with care, discipline and quiet resolve. This isn't just a business when a sovereign and its people count on you for basic needs like reliable energy. That kind of trust carries weight. It's a relationship built on consistency, accountability and respect, and it's one we take seriously. That's why our response goes beyond restoring operations. We've mobilized relief funding, freshwater and essential supplies to support recovery efforts. We remain committed to standing with Jamaica, not just through this recovery, but in the long-term work of strengthening energy infrastructure across the region. We are proud to stand with the impacted communities as they begin to rebuild. I want to reassure our stakeholders that we have comprehensive insurance coverage for adverse weather events like this. With that insurance coverage, combined with our take-or-pay business model, we are confident that there will be limited financial impacts resulting from Hurricane Melissa. Now let's turn to the third quarter. Excelerate delivered another strong quarter, underscoring the strength of our infrastructure platform. I'll begin with a brief overview of our third quarter highlights and the current macro environment. Then I'll provide updates on 2 important developments, those being our recently executed terminal contract in Iraq and the continued growth of our operations in Jamaica. After that, I'll turn the call over to Dana, and she'll walk through the financials in more detail. Excelerate delivered record quarterly EBITDA of $129 million. This underscores the durability and diversification of our business model. With approximately 90% of our future contracted cash flows under take-or-pay agreements, portfolio of weighted average investment-grade counterparties and minimal commodity exposure, we continue to deliver predictable cash flows through market cycles. On the operational front, we've maintained high levels of asset reliability across our portfolio. Our global footprint and disciplined execution are enabling stable returns while advancing strategic growth opportunities that position us for long-term value creation. Let's turn for a moment to the LNG macro environment. The global LNG market is entering a new phase of accelerated growth. After a modest supply expansion over the past 3 years, approximately 200 million tonnes of incremental LNG supply is expected to come online between now and the end of the decade. This growth is expected to drive global LNG supply from approximately 430 million tonnes per annum in '25 to greater than 600 MTPA by 2030. As the ratio of global regas capacity to supply tightens, developing new regas infrastructure will become increasingly important. This imbalance is not theoretical. It's structural. Many emerging markets lack financing, permitting frameworks or time to build large-scale onshore terminals. Even in developed markets, infrastructure timelines often lag commercial opportunities. Excelerate Energy is purpose-built to solve this problem. We offer a range of scalable regasification solutions from FSRUs to converted LNG carriers to integrated downstream infrastructure, these solutions can be deployed rapidly, adapt to local constraints and unlock demand for gas was previously unavailable or uneconomical. More affordable LNG pricing is expected to drive incremental demand for natural gas, particularly in price-sensitive and infrastructure constrained markets. That demand will require more regasification infrastructure, not less. As we look ahead, Excelerate is preparing to meet the demand of the next wave of LNG growth. With our newest vessel, Hull 3407 now committed to the Iraq project, we are advancing plans to convert our existing LNG carrier, the Shenandoah into a floating storage and regasification unit. This conversion will expand our fleet's flexibility and allow us to respond more quickly to emerging opportunities. Engineering work is already underway, and we've initiated procurement of long lead items to compress the construction timeline and accelerate deployment. These steps reflect our continued focus on scalable, capital-efficient infrastructure that can be delivered where and when it's needed most. The recent announcement regarding Iraq is a powerful example of how Excelerate's integrated model creates differentiated value in markets where energy infrastructure is urgently needed. In October, we executed a definitive agreement with a subsidiary of Iraq's Ministry of Electricity to develop the country's first LNG import terminal at the Port of Khor Al Zubair. This agreement builds on extensive engagement with the government of Iraq over the past several years. We've worked closely with key stakeholders to shape a reliable solution that addresses the country's urgent energy needs and supports its long-term infrastructure goals. Iraq continues to face chronic power shortages and unreliable gas supply. These challenges have led to persistent load shedding and heavy reliance on imported gas from neighboring countries. Our integrated solution offers a fast-track path to energy security. Excelerate will deliver a turnkey package that includes an FSRU, fixed terminal assets, LNG supply and operational support. This integrated structure is strategically significant. Unlike a traditional FSRU charter where Excelerate provides regasification capacity alone, an integrated deal allows us to capture a broader portion of the value chain. This approach also creates multiple revenue streams and a more durable commercial framework. Iraq has already made meaningful progress on enabling infrastructure. A 40-kilometer pipeline connecting the jetty to the Tayan Pipeline Network is largely complete. Under the agreement, we will construct and operate the floating LNG import terminal. It's designed to accommodate up to 500 million standard cubic feet per day of regasification capacity. We also plan to repurpose an existing jetty at Khor Al Zubair port that has been deemed structurally suitable for FSRU operations. The project includes a 5-year agreement for regasification services and LNG supply. It's got extension options and a minimum contracted offtake of 250 million standard cubic feet a day. Let's call that equivalent to about 200 million tonnes per annum of LNG. We will deploy 3407, our newest FSRU and deliver the topside equipment and berth modifications required to enable operations of the jetty. So why is Hull 3407 a strategic fit for the project? Well, in addition to its high send out capacity, Hull 3407 offers best-in-class boil-off gas management, delivering strong operational efficiency and reliability. Its advanced design and flexible deployment make it well suited to meet Iraq's large-scale and urgent energy needs. The total project investment is expected to be approximately $450 million, inclusive of the cost of the FSRU. With the definitive agreement now in place, we're advancing project execution while continuing to derisk the opportunity through a take-or-pay contract structure, credit support, political risk insurance and strong support from the U.S. government. Political risk insurance provides added assurance for long-term stability, while U.S. government support reinforces confidence in the project and strengthens its strategic importance in the region. Together, these measures enhance certainty and create a strong foundation for successful execution. Now let's turn back to Jamaica. In the third quarter, the reliability of our Jamaica assets remained exceptional. They exceeded 99.8% across the platform. Integration continues to progress extremely well. We have continued to optimize our LNG and power platform by selling incremental gas volumes to existing customers, progressing commercial agreements with new small-scale customers on the island and throughout the Caribbean and improving the efficiency of our integrated operations. Jamaica also serves as a proof of concept for the scalable solutions we aim to replicate across our global footprint. Now more than ever, we are committed to investing in the critical infrastructure needed to help rebuild and strengthen Jamaica's energy network in the wake of Hurricane Melissa. We will work collaboratively with the government and our customers on the island to enhance the system's durability and ensure long-term reliability. To sum it up, Excelerate Energy is executing with discipline and delivering results. We're solving real infrastructure challenges in real markets, and we're doing it at scale. As we look ahead, we see significant opportunities to extend our platform into new regions and deepen our presence in existing ones. Our ability to deploy reliable LNG regasification infrastructure when and where it's needed most, position us well to meet rising demand and unlock new growth. Thank you for your continued support and confidence in Excelerate Energy. With that, I will turn the call over to Dana. Dana Armstrong: Thanks, Steven, and good morning, everyone. As stated by Steven, we had a great third quarter. We reported adjusted net income of $57 million, which is a sequential increase of $10 million or up 22% as compared to the second quarter of this year. Adjusted EBITDA for the third quarter was $129 million, up $22 million or up 21% versus the prior quarter. Adjusted net income and adjusted EBITDA for the third quarter increased from last quarter, primarily due to a full quarter of Jamaica margin and uplift from our second cargo delivery related to our Atlantic Basin supply, which utilized our new LNG carrier, the Excelerate Shenandoah. In comparison to our guidance range announced in August, we achieved considerable savings in the third quarter related to our Exemplar dry dock, which completed in September with less off-hire days than anticipated, along with lower costs than we had projected. Additionally, our third quarter performance was favorably impacted by lower-than-expected fuel costs for the Shenandoah. Turning to our balance sheet. Our balance sheet remains strong and continues to provide the stability and flexibility needed to execute on our long-term strategy and to navigate dynamic market conditions. For the 3 months ended September 30, our total debt, including finance leases, was $1.3 billion, and we had $463 million of cash and cash equivalents on hand. Additionally, all of the $500 million of capacity under our revolver was available for borrowings. At the end of the third quarter, we had $818 million of net debt and our 12-month trailing net leverage stood at roughly 2x. This strong balance sheet, combined with disciplined capital allocation and robust cash flow, gives us ample liquidity and financial flexibility to fund additional growth projects. Now I'd like to spend a few minutes on our capital allocation priorities. Our priorities have not changed. We remain focused on investing in accretive growth opportunities and delivering consistent shareholder returns through dividends and opportunistic share repurchases while preserving balance sheet strength to enable long-term strategic flexibility. This disciplined approach positions Excelerate to create sustainable long-term value while achieving attractive near-term returns. In line with this framework, on October 30th, our Board of Directors approved a quarterly cash dividend of $0.08 per share or $0.32 per share on an annualized basis. The dividend is payable on December 4th to Class A common stockholders of record as of the close of business on November 19th. Now let's turn to an update on our financial guidance. Based on our results to-date, we are increasing our previously communicated adjusted EBITDA guidance for 2025. For the full year, we now expect adjusted EBITDA to range between $435 million and $450 million. This revised guidance range incorporates the minimal financial impact we expect from Hurricane Melissa. Also, as a reminder, we delivered a seasonal cargo under our Atlantic Basin supply deal in the third quarter. Since the next Atlantic Basin delivery is expected to be in the first quarter of 2026, the fourth quarter of 2025 does not include EBITDA related to the Atlantic Basin. In regard to Hurricane Melissa, as Steven mentioned earlier, thanks to our comprehensive insurance coverage and the swift restoration of operations across our Jamaican assets following the storm, we currently expect only a limited impact on our fourth quarter results. For Excelerate overall, we expect maintenance CapEx to continue to range between $65 million and $75 million. Committed growth CapEx, which is defined as capital allocated and committed to specific infrastructure investments currently in execution, is still expected to range between $95 million and $105 million this year. Before I close, I want to speak briefly to the commercial deals we now have in place that will drive our financial outlook in the coming years. First, I'll start with the Iraq project and the placement of our new build Hull 3407. As Steven said, we are excited to have secured this opportunity. From a return perspective, the project is expected to have an EBITDA build multiple between 4.5x and 5x, which is consistent with the economics we expect for infrastructure projects that are fully integrated with LNG supply. Second, our Petrobangla QatarEnergy LNG supply deal begins in January 2026. This 15-year take-or-pay infrastructure-based contract is back-to-back to mitigate commodity risk and is expected to contribute $15 million of incremental EBITDA in 2026 and 2027 and then step up to $18 million of EBITDA in 2028, and thereafter. Third, our 2026 earnings will benefit from a full year of contribution from the integrated platform in Jamaica. Our assets in Jamaica have continued to exceed our operational expectations and have proven to be a great addition to our portfolio. As we've previously mentioned, we expect to add $80 million to $110 million of incremental EBITDA over the next 5 years, driven by Jamaica and broader Caribbean growth. We'll provide further detail on our 2026 guidance, including guidance around expected 2026 dry docks on our year-end earnings call in February of next year. In closing, Excelerate is well positioned to deliver long-term value for our shareholders. We remain focused on disciplined execution and are committed to investing in growth opportunities that will strengthen our long-term earnings potential while also returning capital to our shareholders. With that, we'll open up the call for Q&A. Operator: [Operator Instructions] Our first question for today comes from Wade Suki of Capital One. Wade Suki: Just the first one on Iraq, if I could. Just curious on the split between, let's call it, vessel and supply margin. Would it be safe to assume sort of like a 65-35 split between the 2? Steven Kobos: Wade, this is Steven. Frankly, I don't think that we are going to be breaking it down at this point. I mean, you should just really look at the integration of it. I think what Dana said, 4.5, 5 turn multiple based upon it. But look, there's some variability there. Minimum take is 250 million scuffs a day weight. I think I said on the call that was 200 million tonnes. Let's call that 2 million tonnes. Let me do the correction there. But it could easily go up to 500 million scuffs part of the year. So implicitly, there's some variability in that component. But at this point, what we want to point to is just that overall build multiple. Wade Suki: Absolutely. No, I appreciate that. Very attractive. I guess maybe just switching gears a little bit to the conversion. It sounds like we've sort of got a definitive move forward, all clear. Can you kind of remind us -- I know you've done some engineering work. I think you might have mentioned on a previous call having spent, I don't know, $30 million or just off the top of my head. Can you sort of remind us how you see that sort of timeline and capital cost to convert that vessel when it goes in the shipyard? Any way to kind of bracket the timeline around CapEx and I guess, dry dock time would be great. Steven Kobos: Wade, and as I mentioned, David is down in Jamaica right now. And in fact, I think you all saw our press release on some of our efforts down there. The Shenandoah, which is we're talking about is alongside in Kingston and is going to start offloading humanitarian supplies at noon, and we envision it's going to take about 12 hours to get that all offloaded. So I just want to give a shout out to the conversion candidate because she's doing good things for Jamaica and the people of Jamaica right now. The 30 million that you spoke to, Wade, I believe that was going to the acquisition cost of the Shenandoah that we spoke about before. That was, of course, kind of all in right after she had been dry docked right before delivery. In terms of what we've spoken to before, I think we've had a decent range saying, we're kind of thinking about 200 million all-in on a conversion. That varies between what you're starting with is the host ship. This will be the lower end of that. You can imply from that, that there will be more extensive CapEx than if the host vessel had been a TFDE vessel without geeking out too much on the shipping stuff. So I think we're consistent with that. Ultimately, I don't want to commit to a particular time frame in the yard on it. We're going to give ourselves plenty of time so that we can execute that in a good way. But I can assure you, we've just put away 3407 in a great home and our effort and our focus is on Shenandoah at this point. But wait, I'll ask your next question, which is what do you think -- what else? What else are you thinking about? We haven't given up on new buildings. We've had a team in Korea talking extensively and workshopping what a new generation could look like for different markets we're thinking about. So I don't want to indicate by virtue of the steps we're taking with Shenandoah that, that is an exclusive path forward. Wade Suki: Understood. And just appreciate your comments and efforts in Jamaica. I hope the rest of the island recovers quickly. Operator: Our next question comes from Chris Robertson of Deutsche Bank. Christopher Robertson: Just wondering if you guys could walk through what you're thinking on remaining spend on the new building asset currently under construction? And then how you're thinking about when work will commence at the jetty in Iraq, kind of your estimate around equipment and construction costs there just outside of the remaining new build CapEx? Steven Kobos: Okay. Chris, this is Steven. I think we're going to divide that question up. I'll let Dana speak first to what's left on delivery on 3407, then I'll let Oliver who was lead for some number of weeks in Baghdad on this project really fired up about it, let him speak to construction. But I'll tell you, we're trying to bring this online as quickly as we can. There is a pressing need for this for the people of Iraq. We need to help solve this load shedding. So the big picture is as soon as possible. But I'll hand it over to Dana. Dana Armstrong: Yes. on the newbuild, Chris, it's actually pretty simple. We've got $200 million left to pay, and that will be paid at delivery. So the total cost of the shipyard was about $340 million with some of our change orders. So $340 million shipyard costs, roughly about another 10% of ancillary costs for owner-furnished equipment and other items that's going to be over time. And then we -- that's just being paid over time. It's pretty small. But the big payment is $200 million when it's delivered next year. Oliver Simpson: Yes. And if I think on the Chris, if I take on the sort of Jetty side, on the in-country side in Iraq, as we mentioned, we're looking to get this up and running by summer '26. So really starting from now through next summer, that's how you'll see that CapEx build out. There are certain long lead items that either we've had in stock that we're able to deploy or that we're in the process of procuring. So we'll see that ramp-up on the overall jetty spend between now and next summer. Christopher Robertson: And just to summarize, the project is expected to cost $450 million, which is inclusive of the $340 million for the Hull 3407, then we should assume around $100 million or so of CapEx related to terminal construction. Dana Armstrong: Roughly, there's some ancillary costs on the new build. So the new build is roughly $370 million all in. And so the rest of that is the estimate for Iraq. Oliver Simpson: Yes. And Chris, just one. Sorry, I was going to just add one point of clarity on that. Just obviously, we're using an existing jetty in Khor Al Zubair. So that's why, I mean, generally, the cost of building a full jetty would be higher, but this is using an existing jetty and putting on the topside equipment and getting it ready for LNG operations. Christopher Robertson: I just wanted to shift focus a bit to your commercial discussions in the Caribbean outside of Jamaica. If you could comment where you're seeing more interest. Are you seeing interest in more small-scale onshore regas and transmission solutions? Are you seeing appetite for floating solutions? Or where are those conversations kind of focused right now? Oliver Simpson: So I'll take that again, Chris. And I think the answer is a little bit of all of the above. But I'd say I'd point to what just happened in Jamaica in the last week. Obviously, there was this -- Melissa was a Category 5 hurricane that came through, and we took off the FSRU was able to leave the birth, go to a safe place and come back. So I think there's certainly a lot of value in the floating solutions in terms of the critical infrastructure they are and how they can respond to these kind of events. So I would certainly expect conversations going forward to look at this as a big plus. But really, it's -- every island is unique, different availability of land onshore, different water depths. So with our technical team, we're looking at a wide range of solutions and really using Jamaica as a hub, which for us is that that's that critical commercial advantage we have, we can then develop different technical solutions for these different markets. And I'm seeing -- we're seeing good interest across the Caribbean to use LNG to displace liquid fuels. And so I think that's progressing well. Operator: Our next question comes from [ Brie ] Brooks of Northland Capital Markets. Robert Brooks: So just with the growth CapEx guide unchanged for this year, is it then right to assume the majority of the spending for the jetty in Iraq is then going to be coming in the first half of '26? Steven Kobos: Yes, Bobby, I think that's a safe bet. Robert Brooks: Got it. And then I want to just say my thoughts are with those affected by Hurricane Melissa and Jamaica, and it's great to hear how much you're helping the country get its feet back underneath itself. But -- and at the same time, it's great to hear how quickly your business operations got back up and running and how insulated your financial contributions from your assets are there. So my question is, is it right to think that all of your other assets have similar insurance coverage that would insulate you from natural disasters like this? Steven Kobos: Bobby, short answer, yes. I want to brag on the ops group, though, a little bit here because you all will remember when we were talking about some of the incremental maintenance CapEx we spent in Jamaica over the summer. And you may recall that involved putting in black start generators. It also included strengthening sea walls. And frankly, we said we're just wanting to take -- do the things that brought these assets up to an Excelerate standard. And thank God, we did because that -- those moves and planning and execution by the Excelerate operations team over the summer made a tremendous difference here. So I'm going to salute them. And just as a reminder that the type of uptime that they achieve around the globe is not an accident. So I'll make that point. I would say, in general, Bobby, most of the insurance programs on the floating assets, it's all quite similar on land-based assets. It's going to depend upon the type of the asset, but there's general commonality across the platform. Robert Brooks: Got it. That's really helpful color and great to hear that the -- you got to be able to execute those pieces to strengthen the operating base before the hurricane came in. And my last question is just, could you remind us, -- the contracts you have across the globe right now, there's none coming up, none expiring over the next couple of years or when's kind of the next one coming up where you could maybe move an asset to a different location? Steven Kobos: Bobby, you're always wanting us to optimize man, and we do too. We have 2 on Evergreen that we're always trying to get our hands on, obviously, Express and Expedient and we're continuing to look at ways to do that. That's going to be a catalyst, obviously. We've managed at this point to have higher contracted rates on most everything that we've been able to redeploy, and we would look for that to be the case if we can get our hands on those. But in general, then you've got Excelsior in Germany in 2028. That's a longer discussion. Excelsior since she's come online is sending maximum gas ashore. I'm proud, by the way, that as far as I know, she's taken all U.S. LNG since she came online in May. And that's a great asset that the German government has spent a lot of money importing the ports to work with Excelsior. We've spent a lot of money on Excelsior. We think it's a great asset. We'll be having further discussions about it down the road, but I'm really proud of that ship and everything she's doing. I understand she's kind of fully booked for next year. So bottom line is that asset is used. It's providing good value, and it remains cheap insurance but that's kind of a look at what's sort of near term out there. Operator: Our next question comes from Michael Scialla of Stephens. Michael Scialla: I'll start off by echoing everybody else's sentiments on commending you on your relief efforts for Jamaica. I wanted to ask, you've talked in the past about scaling the Jamaica model across the Caribbean. It sounds like now you're saying you want to do that across your global footprint. I don't know if I'm reading too much into that. Has anything changed there to have you make that comment at this point? Steven Kobos: Mike, this is Steven. I sure hope, I haven't been saying we only want to scale and grow the Caribbean. I mean this is a global company, and we want to do this all over the world. Michael Scialla: Anything in particular about Jamaica, though, that I guess, that you're seeing that is transferable to other areas of the globe? Steven Kobos: Yes. I mean, Mike, what I love is if you -- when we look back at 2025, we will have come to the market with 2 fully integrated deals. And we love what that does for us. It is -- I mean, you can see on what we're talking about Iraq and the project there, the build multiple that you're going to achieve, what we've always said, the returns that we're looking for are always going to be higher with integrated models. And look, we're built for this. We have the balance sheet for this. We have the credibility for this. We are not simply a capital leasing company. We're never going to be content to do that. We want to make a difference around the world. We want to be that go-to partner for sovereigns around the world. So yes, we haven't been shy. We want to be an integrated energy company in these markets. Now we wanted to go through our infrastructure, but we want to be the whole package. And you don't see a whole -- I mean, no offense, you don't see a lot of folks doing this around the world. So I think -- and it's going to be -- anyway, I'll leave it at that, but we're fired up. I think you can hear it in my voice. Michael Scialla: Definitely can. I wanted to ask on your gas sales are hard to predict. You haven't really guided on them in the past. You had a lot in the third quarter. Can you talk more about those? Did most of those go to Jamaica? Any of those cargoes go anywhere else? And any thoughts on future cargoes? Dana Armstrong: Mike, this is Dana. So yes, that was a great quarter for us from an LNG supply perspective. So we had a couple of things going on there. We had our Atlantic Basin supply that delivered in the third quarter, which had great performance. We also had really good performance in Jamaica and a little bit of volumes above our expectations. And then we had 2 cargoes delivered into the APAC region. So all of that combined to those numbers for the quarter. Operator: Our next question comes from Emma Schwartz of Jefferies. Emma Schwartz: Congrats on the Iraq deal and the strong quarterly results. It really looks strong, what you guys agreed to in Iraq, and that's really tied to the integration. Could you speak a little bit about the repeatability of integrated deals like this? And do you see integrated opportunities for the conversion candidate? Steven Kobos: This is Steven. We absolutely do. I mean that's why I kind of digressed talking about the coming LNG wave. I think the point I'd make to the listeners is we're executing on integration before that wave comes. It is coming. It is going to drive greater affordability on LNG. So I see the TAM that we're serving only increasing, and we continue to prove that we are the sort of company that can execute on it. We're continuing to put the tools in the toolbox that we need to deliver on it. I mean you see with Iraq, everything is coming together, and we've been planning for that for some time to be able to deliver that. So I absolutely believe -- we believe that the TAM is -- it's enormous to begin with. It's increasing. The commodity is going to be ever more affordable. It's going to drive more liquid fuel and other type of switching. And we are after those opportunities around the world, and we're going to continue to do that. Emma Schwartz: That's great to hear. For my second question, I was wondering if you could speak a little bit more about the dry docking this quarter. What drove the lower cost there? And is that kind of performance sustainable going forward? Steven Kobos: Emma, I think it would be unfair to David Liner, our COO, if I put him too much on the spot there. They did deliver a great dry docking. They now part of that was in the Baltic. We're taking it from Finland to Denmark. So logistically, it was fairly close. We were looking at different ways to advance some of the -- or perhaps more of the prep work on board before we went. We're looking at all types of lessons learned there. But for now, we're always trying to optimize dry docking, but I don't want to say that the lessons from one geographic location may transfer seamlessly to other dry docks. Well, frankly, I hope that we will not hope. We will have more insight for you on that at year-end. But I think it's a little far out from the execution and planning process to be able to commit to any particular timeline for those dry docks right now. Operator: At this time, we currently have no further questions. So I'll hand it back to CEO, Steven Kobos, for any further remarks. Steven Kobos: Thank you all for joining us today. Really enjoyed our call. There are obviously a lot of things going on in Jamaica. And I just want to repeat that our thoughts and prayers and well wishes are with the people of Jamaica. But thank you all for joining us. Exciting times for Excelerate, and we look forward to continuing these discussions in the future. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Good day, and welcome, everyone, to the RB Global Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Sameer Rathod. Please go ahead. Sameer Rathod: Hello, and good afternoon. Thank you for joining us today to discuss our Third Quarter results. Jim Kessler, our Chief Executive Officer; and Eric Guerin, our Chief Financial Officer, are on the call with me today. The following discussion will include forward-looking statements, including projections of future earnings, business and market trends. These statements should be considered in conjunction with the cautionary statements contained in our earnings release and periodic SEC report. On this call, we will also discuss certain non-GAAP financial measures. For the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures and the applicable reconciliation of the 2, see our earnings release and periodic SEC reports. At this time, I would like to turn the call over to our CEO, Jim Kessler. Jim? James Kessler: Thanks, Sameer, and good afternoon to everyone joining the call. To begin, I want to acknowledge the disciplined execution and commitment of our teammates. Their performance underpins our ability to consistently overdeliver on our operational and financial commitments, while advancing our strategic priorities that position us for long-term shareholder value creation. Our disciplined execution was evident again in the quarter, with adjusted EBITDA increasing 16% on a 7% increase in gross transactional value. Starting with the automotive sector, our momentum continued and unit volume increasing by 9% year-over-year. This marks the third consecutive quarter we have outpaced the market, achieving solid year-over-year gains and market share. On the back of this robust performance, we are pleased to announce a significant expansion of our partnership with the U.S. General Services Administration or GSA, where we expect to provide disposition services to approximately 35,000 remarketed vehicles on an annualized run rate basis. We have just started receiving vehicles and expect to reach full run rate in the second quarter of 2026. Over the past 5 years, we have supported GSA with new vehicle marshaling, preparing and delivering vehicles for use, while providing care, custody and control of fleet returns across our national network. Under the new award, our scope extends to remarket and fleet return vehicles through our marketplace, creating a true end-to-end solution. For GSA, this eliminates redundant handoffs and third-party transport from our yards, delivering meaningful cost savings and operational simplicity. This competitive win underscores the strength of our platform and the unmatched value we deliver to our customers and partners. Specifically, we believe there are 3 key reasons we secured this new award: first, the breadth and depth of our marketplace and buyer base, which drives superior liquidity and pricing; second, the scale and proximity of our U.S. physical footprint enable an efficient one-stop service; and lastly, our proven execution and service quality built over 5 years of partnership with GSA. As we advance our strategy for remarketed vehicles, Vehicles that are not salvage, we continue to see a substantial organic growth run rate in our targeted market segment. The dynamics for this space remain favorable and our differentiated approach grounded in operational efficiency, partner alignment and ability to leverage our real estate positions us to capture incremental share. We are confident our strategy will continue to enable us to deepen engagement with existing partners, while expanding into adjacent opportunities that complement our core capabilities. I am proud to share that our teammates continue to over deliver on our commitments, consistently exceeding service level targets even as we scaled volumes in the quarter. This operational discipline translates into tangible P&L benefits for our partners, reinforcing the value proposition of our platform. On time tow and total performance remained exceptional at 99.7% and 99.8%, respectively, for the quarter, underscoring the strength of our process improvements and investments. We have also continued to drive meaningful progress in the sign-to-settle cycle times, which delivers 2 key benefits: first, our partners experienced a lower depreciation as assets move more quickly through the marketplace; second, we are able to process more vehicles per acre of space, by reducing the sign-to-settle cycle time through a combination of branch incentives, IAA loan payoff, total procurement and our virtual inspection platform, we have effectively added approximately 25% incremental capacity in our yards compared to pre-transaction levels. This incremental capacity positions us well to support future volume growth. On the demand side, we saw continued strength this quarter. Our active buyer base expanded, underscoring the resilience of our platform and the team's success in driving deeper engagement. We broadened our reach by adding a new market alliance partner in Central America and further optimize our multichannel auction format to enhance price discovery and support premium price realization. These actions are translated into measurable outcomes, gross returns or salvage values as a percentage of pre-accident cash value, continue to expand supported an approximately 2.5% increase in the U.S. insurance average selling price. Moving to the commercial construction and transportation sector, our growth strategy is playing out. Despite a complex and dynamic macroeconomic environment, we drove 14% year-over-year GTV growth, excluding the impact of the Yellow Corporation bankruptcy last year. We remain committed to investing in growth, while also enhancing operational efficiency. This includes optimizing our territory manager network, deploying targeted productivity initiatives across the organization and thoughtfully execute strategic M&A. I am pleased to announce that we have entered into a definitive agreement to acquire Smith Broughton Auctioneers, and Allied Equipment Sales for approximately $38 million. This strategic tuck-in acquisition strengthens our geographic footprint in Western Australia. This transaction brings on board a highly capable team of sales professionals with deep local relationships and market knowledge. This acquisition enhances our ability to serve customers in key verticals and aligns well with our broader growth strategy in the region. We currently expect this acquisition to close by year's end. At RB Global, we never stop working to become more efficient. And in the third quarter, we realigned the executive leadership team and cascaded out a new operating model to the entire organization. This new transformative operating model is designed to unlock sustainable growth and drive long-term value for our shareholders. Senior leaders are driving a culture of clarity, focus and speed, ensuring every team member is focused on what matters most. Increase in transactional volumes and delivering exceptional customer experiences that drive tangible value for our partners. Under this new model, RB Global's senior leadership teams will provide strategic oversight, efficient scaling and promote best practices with functional support teams at the enterprise level, essentially providing a shared service function. In addition, we will have 2 specialized, high-performing marketplace execution teams that will each set enterprise-wide vision, growth strategy and operational discipline, while empowering brand-specific go-to-market teams to drive execution tailored to their unique marketplaces. Keeping our go-to-market leadership close to customers and the verticals they operate in helps to maximize the speed and efficiency, which buyers and sellers can do business on our platforms, add value for our partners and position the company for a strong future. In addition to looking for strategic acquisitions, our disciplined approach to growth recognizes that strategic pruning is essential to sharpen our focus in simplifying the organization. We chose to divest DDI Technologies in the fourth quarter. The team acquired this asset with the goal of using DDI Technology to reduce operational cycle times. After a comprehensive review, we determined that it will be more efficient to divest DDI to a third party. We are confident that our operating model not only preserves RB Global's legacy, but also sets the stage for the next generation of growth, resilience and shareholder value creation. We expect that our new operating model would generate over $25 million in total run rate savings by the second quarter of 2026. Our vision permeates the organization, and we are committed to over delivering for our customers, partners and investors as we build the future. I will now pass the call to Eric to review the financials and provide an update to the outlook. Eric Guerin: Thanks, Jim. Total GTV increased by 7%. Automotive GTV increased by 6%, driven by a 9% increase in unit volumes, partially offset by a decline in the average price per vehicle sold. Unit volume growth was driven by year-over-year increases in market share across salvage and remarketed vehicles as well as by organic growth from existing partners. U.S. insurance ASP increased approximately 2.5%. However, the average price per lot sold declined in automotive, primarily because of a higher proportion of remarketed vehicles were transacted compared to the prior year. In the third quarter, the macro environment remained favorable for salvage volumes, primarily due to the persistent inflation gap between vehicle repair costs and used vehicle values. This dynamic continues to drive an increase in the total loss ratio with CCC Intelligent Solutions estimating the total loss frequency across all categories rose by nearly 70 basis points to 22.6%, up from 21.9% in the same period last year. TTV in the commercial construction and transportation sector increased by 9%, driven by a higher average price per lot sold, partially offset by a 15% decline in lot volumes. Excluding the impact of the Yellow Corporation bankruptcy, unit volumes would have increased approximately 2% year-over-year. The average price per lot sold increased primarily due to improvements in the asset mix. The favorable mix reflects a decline in lot volumes from the rental and transportation sectors, where assets typically carry lower average selling prices. As Jim noted, excluding the impact of the Yellow Corporation bankruptcy from the prior period, the increase in GTV for the commercial construction and transportation sector would have been approximately 14%. Moving to service revenue. Service revenue increased 8% on higher GTV and a higher service revenue take rate. The service revenue take rate increased approximately 20 basis points year-over-year to 21.7%, driven by a higher average buyer fee rate structure, partially offset by a lower average commission rate and declines in our marketplace services businesses. Moving to adjusted EBITDA. Adjusted EBITDA increased 16% on GTV growth, expansion in our service revenue take rate and a higher inventory return. Our team remains focused on managing our cost structure to maximize profit flow-through in alignment with our broader organizational realignment, we recognized approximately $10 million in restructuring charges during the quarter, primarily related to severance costs. Our commitment to efficiency and disciplined execution was once again evident in the third quarter, as adjusted EBITDA as a percentage of GTV expanded to 8.4%, up from 7.8% in the prior year. This margin improvement reflects the early impact of our transformation initiatives and underscores our ability to drive leverage in the model as we scale. Adjusted earnings per share in the third quarter increased by 31%, driven by a higher operating income, a lower net interest expense and a lower adjusted tax rate. Our adjusted and GAAP tax rates came in lower than previously guided because we were able to capture certain additional tax deductions on our 2024 U.S. federal tax return, which we recently filed and expect to do the same for 2025 and in the future. These additional deductions have been reflected in our full year rate. As we look ahead, we now expect full year 2025 gross transaction value growth to range between 0% and 1%, broadly in line with what we communicated last quarter. We are raising our full year 2025 adjusted EBITDA guidance range to $1.35 billion to $1.38 billion, reflecting continued operational discipline. Please note our guidance does not incorporate any contribution from cat-related GTV, given the unknowable nature of extreme weather events. Recall that cat volumes contributed approximately $169 million in automotive GTV in the fourth quarter of 2024, which will affect the year-over-year growth comparison when we report the fourth quarter. With that, let's open the call for questions. Operator: [Operator Instructions] We'll take our first question from Sabahat Khan at RBC Capital Markets. Sabahat Khan: Just I guess starting off with the last comments there by Eric Guerin, the full year guidance, can you maybe just give us the set up on how you view both segments heading into the tail end of the year? Obviously, good performance here in Q3 relative to what the Street was expecting. But just curious kind of some of the puts and takes that you're seeing into the tail end of this year that led to this nudge up in guidance. Eric Guerin: Yes. So actually, the guidance, we tightened the range on GTV. So we didn't nudge it up. If you recall last quarter, I said 0% to 3%, but guided to the lower end of the range. So with one quarter left, I've just tightened that range to 0% to 1% on GTV. Was that your question you were referring... Sameer Rathod: So it was more on the EBITDA side on just like relative -- the Street expectations, the magnitude of the guide up on EBITDA versus maybe the outperformance, yes. Sorry, just to clarify. Eric Guerin: Yes. Yes, thank you. On the EBITDA side, we had strong performance in Q3, but was in line with what we were expecting. However, we did outperform a little bit with the operating model that we put in place, as I described, we have some savings on a run rate basis, that will be $25 million, but we do have some savings that will occur in the fourth quarter of this year, and I've incorporated some of that savings into the guide that I just described in my prepared remarks. Sameer Rathod: Great. And then just for my follow-up, I guess you can maybe shed some color on this agreement with the GSA. I guess it looks like from your material about 35,000 vehicle addition. Maybe if you can just walk us through what were you doing for them before sort of on the vehicle front on volume? And then should we assume the economics on these remarketed vehicles are similar to what you would collect on 35,000 vehicles if these were added on the salvage side. James Kessler: Yes. I'll start the conversation then pass to Eric to jump in. So I think as I mentioned in my comments, kind of think about we would take care of custody controls. So when they needed a car delivered it would show up to our site, we would get the car ready kind of think basic marshaling type of activities to make sure, it had a title, is ready to go, is clean. What this really adds to us is the disposition service that we were not doing for them. So we're really excited about to have the whole package in this agreement. And from the financial standpoint, I will pass it to Eric. Eric Guerin: Yes. So on the financial side, the model is a little bit different. But what I can say is that the ASPs will be accretive to our ASPs in the salvage space. There are some other services to Jim's comment that we'll be providing that will be revenue generating, but it's a little bit different model than the salvage model. Operator: We'll take our next question from Steve Hansen at Raymond James. Steven Hansen: Another small strategic tuck-in here in Western Australia, which is encouraging. That marks sort of the second acquisition you made in the space here in the recent year or so. What is the -- just maybe if you could just clarify on exactly what you're getting out of this deal, are there some additional white space specifically about that market that's the most appealing. And then more broadly is how do you view the broader landscape in other jurisdictions or even in the same jurisdictions here from a pipeline perspective. James Kessler: First, I'll start. Really excited about what the pipeline opportunity is across the globe here in the U.S. and international. We've been doing business in Canada for a long period of time, but we've been really more on the eastern side of Australia. So for us, this opens up the Western part of Australia, which gets us really excited. So more of a geography type of play as we think about being able to service all of Australia. And the team that we pick up, we're really excited about. They match really well from a culture standpoint of how Ritchie Bros. operates in Australia. So it really gives us the chance to service all of Australia instead of the eastern part of the business. Steven Hansen: That's very helpful. And just to follow up on some of the earlier commentary about volume and market share, particularly on the auto side. How do you feel about that opportunity for market share gains going forward. I think we've all been talking about and looking for evidence around that market share gain pattern, your reported results seems just that. But from a contract standpoint, do you have anything that you're working on and/or that you see visibility on that would help you grow domestic market share further or faster? Or should we just wait and see as a result, sort of trickle through? I mean what can you tell us at this point? James Kessler: Look, I'm going to go back to comments that I've probably said each quarter when the same question has come up. Our focus is really on what we can control. And what we can control is how we perform, and hopefully, you can see from the SLAs that I mentioned in my comments, when you're performing at this high 99% compliance level I believe the industry is noticing it. I believe the industry is appreciating and what we're bringing to the table. So it makes me very optimistic about what our future is, but we're not going to get into any kind of deals that aren't done or things that we can't talk about at this point. But based on our performance, we're really optimistic and we're really excited to compete in the space. Operator: Next, we'll move to Krista Friesen at CIBC. Krista Friesen: Maybe just back on the GTV growth. Pretty solid growth in the CC&T division. I appreciate some of this is likely due to J.M. Wood. But I was just wondering if you can break it down a bit more for us or quantify what was J.M. Wood versus organic? James Kessler: Yes. I'll pass this over to Eric. Eric Guerin: Yes. So on GTV, J.M. Wood actually does go across CC&T and a little bit in automotive. So I can tell you at a high level to our overall growth, it was about a 2% tailwind to our overall GTV. Krista Friesen: Okay. Great. And then maybe just on the geographic split, it looks like Canada and International continue to kind of be the drivers here. Is that changing at all as we get into Q4 here? Or are you hearing any changes from your customers in the U.S.? James Kessler: Yes. I'm not sure of the comment between Canada and International that you're referencing, but we saw growth across all the areas that we've done business in. Operator: [Operator Instructions] We'll go next to Craig Kennison at Baird. Craig Kennison: Eric, could I ask you just to explain the motivation behind narrowing that range in Q4? Obviously, you have one quarter left, but you took the top end down. Any factors that played a role in a slightly more conservative outlook? Eric Guerin: Yes. As we got through the third quarter, again, if you remember on Q2, I had a good indication of what the forecast looked like, but we could have had some additional movement in the back half of the year. And that's why I did keep the range at 0% to 3%, but indicated towards the lower end. And now with pretty much 3 months left in the year now, in fact, 2 months left in the year, I wanted to make sure I could provide a more pointed guide, and that's why I tightened the range to 0% to 1%. James Kessler: Yes. And Craig, just one thing I would add to Eric's comment is just as a reminder, last fourth quarter, we had a significant cat event that flew through to GTV. And I think Eric has shared what that number is. And at this point, we know the likelihood of any cat event happening and to help offset that isn't going to happen, unless something odd happens historically, that hasn't happened before. So kind of just keep that in mind as you think about looking at the numbers as we tighten the range, we are going up against a significant onetime event that happened last year that's not going to happen this year. Craig Kennison: Yes. And then as a follow-up, a bigger picture question on your automotive business. I recognize it's primarily a salvage based business, but we're getting a lot of calls from clients and investors who are more concerned about the adjacent used car space and that ecosystem. There have been some disappointments there and some subprime credit issues as well. Just can you clarify for all of us on the call, to what extent you're even exposed to any of those concerns on, I would say, that non-salvage whole car ecosystem? James Kessler: Yes. Just as a reminder, when we talk about our whole car business, again, think about cars that are whole cars, but are slightly damaged. It's very complementary to the salvage business and the buyer base that we have. And we're not really upstream in cars over a significant dollar amount like $15,000 and above. So we really have no exposure. We're really more into cars that I would call the whole cars, but slightly damaged is the majority of where we play. So think about a car that's less than $5,000 in that range. So we don't have any of the exposure. And anything that we go upstream is sort of like the GSA contract where you're -- there's a normal cycle of cars that come in, you're not dependent on the broader economic environment. Sameer Rathod: And Craig, I'd also add that on our whole car space, we do benefit a little bit from sub-prime because we do have a repossession business. So it's not necessarily a direct negative is what I would say. Operator: We'll go next to Gary Prestopino at Barrington. Gary Prestopino: Yes. Just a couple of questions here. I just want to be clear, this GSA contract is for whole cars, not any damaged cars. Are they really cars that are -- have got heavy mileage, heavy usage on and that it would appeal to your buyer base? James Kessler: Correct. These cars are going to go through a life cycle for and the people using the cars, right, which then at the end of the day would be cars that our buyer base would be very interested in. Gary Prestopino: So would they be more or less buy here, pay here dealers or exported overseas? James Kessler: I think it's a combination. I don't think we're going to get into specific of who's going to buy cars, but it will be a combination. Gary Prestopino: Okay. And then just any comments on the yellow iron sector. We really make too many comments on that on your narrative. Are you still seeing signers holding on to their equipment? James Kessler: Look, I think the way I would say, and I'll pass it over to Sameer or Eric to jump in. I think we're still in an uncertain period of time where with tariffs every time you turn around, something else is being said and something is being stopped and going with steel, everything like that. I would also just say interest rates and what's going to happen as the Fed made their comments that they're not sure about that there's going to be another cut. Any of those things from an uncertain period of time just creates uncertainty and I think our partners are trying to figure it out. And again, what we stay focused on, on this side is I think we're in a great spot when the dam kind of opens up and disposition services need to happen. But again, what we're trying to do is add value to our partners to make sure we're able to help them get value in their P&L and get them the recovery they need when they need it. Operator: And we'll take a follow-up from Steven Hansen at Raymond James. Steven Hansen: I just want to go back to the new operating model, just quickly, if I may. And I think you've articulated $25 million in run rate savings by the second quarter '26. It sounds like the line of sight on that savings is pretty clear, but just maybe any comments around sort of the pace of the rollout and what ultimately -- what milestones you'd be looking for to make sure you hit that $25 million mark and whether there's potential upside? James Kessler: So what I would just say real quick about the operating model just to make sure we're clear. This was not a cost cutting exercise that, that came out of the model. The model was really making sure role clarity focus for the organization. And as the company grows through acquisition, unfortunately, you create certain layers in the company that you might not need as you operate more efficiently and get clarity and focus. So for us, this wasn't just a cost cutting exercise, it was -- we want to be efficient. We want to create clarity. We want to create focus on the organization. And the one thing that was important for me is at some departments, we would have 8 levels of management in the organization and we really got that down to 4 or 5. So we have a good line of sight when we talk about numbers of transition periods who rolls off, when they roll off, all that kind of stuff. But again, this was not about that. And we do -- we would have plans as we think about what do we want to invest in and create a better return, all that kind of stuff, and I'll pass, if Eric wants to add any other color to my comments. Eric Guerin: Yes. I think to Jim's point, we have full line of sight to the $25 million. It started obviously at the top with Jim's leadership team, and we continue to roll the operating model through the full organization. And again, it's not about cost reduction. It's about how do we get closer to the customer and make sure we are meeting our expectations and our partners' expectations. Steven Hansen: Very helpful. And one last one, if I squeeze it in. Just Jim, back on your M&A commentary referencing the global landscape. I think in the past, you've referenced the appeal of some of the specialty narrower auctions and [ again ] has been raised in the past. Are those still avenues that you would like to pursue? Or is it going to be more of the J.M. Woods of the world and the latest one that we've seen here in Western Australia. James Kessler: No. I think there's 2 things that we're very interested in. One is a geography if that helps us fill out where we're currently doing business. But we definitely still like anyone that adds a vertical and expertise that we can take and scale across our network. So I would say they are the 2 things as we think about opportunities that kind of fit the profile of something that we would look at. Operator: And that concludes our Q&A session. I will now turn the conference back over to Jim Kessler for closing remarks. James Kessler: Thank you so much. In closing, I would like to thank the incredible RB Global team worldwide. The disciplined execution, hard work and dedication of our teammates continue to drive our strong performance and fuel the momentum we have in our business. I'm excited about the opportunities we have ahead of us and look forward to continue to over deliver on our commitments, while advancing our strategic priorities that position us for long-term shareholder value creation. Thank you for your continued support and interest in RB Global, and we look forward to talking to you next time. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to Henkel conference call. [Operator Instructions] I will now hand over to Leslie Iltgen, Head of Investor Relations. Please go ahead. Leslie Iltgen: Good morning, and a warm welcome to everyone joining Henkel's Q3 2025 Results Conference Call today. I'm Leslie Iltgen, Head of Henkel's Investor Relations. Today, I'm joined by our CEO, Carsten Knobel; and our CFO, Marco Swoboda. Carsten will begin with an overview of the key developments and highlights in the third quarter. Marco will then follow with a more detailed review of the company's financial performance. As always, following the presentation, we will open up the lines and Carsten and Marco will be happy to take your questions. Before handing over to Carsten, please let me remind you that this call will be recorded and a replay will be made available on our Investor Relations website shortly after this call. By asking a question during the Q&A session, you agree to both the live broadcasting as well as the recording of your question, including salutation to be published on our website. Also, please be reminded that this presentation contains the usual formal disclaimer in regard to forward-looking statements within the meaning of relevant U.S. legislation. It can also be accessed via our website at henkel.com. As always, the presentation and discussion are conducted subject to this disclaimer. With this, it is my pleasure to hand over to our CEO, Carsten Knobel. Carsten, please go ahead. Carsten Knobel: Thank you, Leslie, and good morning to everybody. Warm welcome also from my side joining our conference call today. As always, we do appreciate your interest in our company, and we look forward to answering your questions. Walking you through the key developments in the third quarter, we will elaborate on Henkel's business performance and the full year outlook in more detail. So let me move straight to the key topics and the highlights of the third quarter. In Q3, we saw a clear acceleration in our top line development. Both business units recorded positive organic sales growth in the quarter. Starting with Adhesive Technologies, they show the positive price and volume development. The latter being supported by a partial reversal of the negative working day impact we had seen in the first half as well as by a continued strong performance in Electronics & Industrials. Consumer brands showed a positive volume development in the third quarter, which is encouraging to see. Also, the merger is in its final stages and we will have successfully concluded the transformation of this business unit by the end of this year. And with that, clearly 1 year ahead of plan compared to what we had originally expected when we started this journey. From a regional perspective, North America stood out with good organic sales growth supported by both business units. Further, I can also confirm that we continue to see a strong gross margin and the bottom line development. In regards to share buyback, we are well on track, having executed around EUR 700 million as of end of October. And finally, when it comes to our full year guidance, the ranges remain unchanged. Let's now take a deeper look into our Adhesive Technologies business where global megatrends like sustainability, mobility, connectivity, digitalization and urbanization create ample opportunities for further growth and allow us to drive customer-driven innovations across many different industries and applications. And more specifically, I would like to do a deep dive into the field of electronics today and showcase how these global mega trends translate into attractive growth opportunities with the solutions we offer. Driven by key industry trends, such as the rise of AI, new ways to construct devices and components or even regulatory changes, such as the introduction of the right to repair, the different markets and industries where our electronic solutions came into play are undergoing a significant transformation. We can clearly observe how the scope and the value of material-based innovation is expanding. The rapid advancements of artificial intelligence, where we enable cutting-edge solutions for globally leading industry players, the evolution of component and device design, which leverages our materials expertise or the increasing regulatory focus on sustainability, which we facilitate through debonding technologies. These are only a couple of examples. Overall, Electronics Solutions are expected to show a high single-digit market growth potential in the coming years. We are strategically well positioned to capitalize on this momentum through our comprehensive and diversified portfolio in Electronics Solutions across industries. A prime example is our Semiconductor Packaging business, which is forecasted for long-term exponential growth. To illustrate the breadth and the impact of our offering, I will now highlight 1 representative solution from 3 of our key -- from our 4 key segments: Semiconductor Packaging, Consumer Devices and Industrials. The immense rise of generative AI is reshaping the data center as well as the semiconductor landscape. As AI becomes more compute intense, there is a sharp rise in demand for advanced packaging, interconnects and thermal solutions that can support high-performance systems. Our portfolio addresses these needs with cutting-edge materials for thermal dissipation, electrical protection and high reliability bonding, critical for next-generation GPUs, CPUs and memory modules, especially optical transceivers. These solutions are already being deployed by a globally leading semiconductor and data center players, helping them scale computing power, reduce cooling costs, and enhance system reliability. These positions -- or this positions us for double-digit growth through 2030, aligned with industry forecasts for AI-driven data center expansion. Looking at Consumer Electronics. The push towards frameless immersive displays is driving demand for innovative materials that support flexible and edge-to-edge designs. Our proprietary potting solution for flexible display protection directly addresses this trend. It enables manufacturers to reduce bezel size, unlocking more active display areas, which is a significant gain in user experience and device aesthetics. Furthermore, it does not only improve design capabilities, but also increases device protection, enables a faster and simplified manufacturing process and even contributes to environmental responsibility by reducing the amount of conventional molded plastics and reducing CO2 emissions in manufacturing. This solution has rapidly gained traction, scaling to a double-digit million euro business within 2 years, outperforming market expectations and reinforcing our leadership in display material innovation. And coming to our last example within Adhesive Technologies, the evolution of camera modules. The camera module market is experiencing rapid growth across several industries. This surge is driven by the rising demand for advanced imaging, especially in consumer devices and automotive applications. Adhesive Technologies is well positioned to support this evolution with the most robust total solution portfolio in the market. Our offerings cover all critical aspects of camera module and sensor assembly from lens bonding, active alignment and underfill to lens barrel attachment. These solutions don't only enhance functionality but also significantly improve reliability. In automotive, for example, our one-step UV curve lens bonding technology enables our customers to reduce CO2 emissions and decrease manufacturing time, whereas traditional processes needs 2 steps in manufacturing. Ultimately, this is a leading -- well, this is leading to a double-digit growth for consumer devices and automotive camera solutions following the market projections through 2030. And now moving to our Consumer Brands. I would like to highlight that by the year end, we will have successfully concluded the merger and with that, the transformation of this business. We fundamentally reshaped our business, streamlined our organizational setup, actively shaped our portfolio, optimized our supply chain and enhanced operational excellence globally. All of this was achieved 1 year earlier than originally anticipated at the time we announced the merger. And accordingly, we are well underway to reach the targeted net savings of at least EUR 525 million by end of this year. Overall, we significantly improved the quality of the business across multiple dimensions, while at the same time, investing clearly more behind our brands. We have successfully built a strong multi-category platform with enhanced efficiency and competitiveness. For example, we materially improved our rankings in FMCG relevance in terms of size in Europe. In addition, the retailer perception rating in the U.S. significantly improved, which shows that we clearly strengthened our retailer partnerships. Overall, this demonstrates that we develop towards a more stronger and more relevant player in the industry. We have thus laid the foundation for solid, sustainable and profitable growth in the years to come. In Laundry & Home Care, we are a strong global player with leading brands. In Laundry, we are ranked #2 globally in our active markets. We are shaping the future of laundry by focusing on selective strategic growth opportunities in key categories and also iconic brands. We are also leveraging our technology leadership to drive differentiation and value. In Home Care, we are ranked #1 globally in our active markets. We are driving market leadership by combining our investments with advanced technologies and setting new standards in dishwashing and toilet care. Two good examples of how we leverage the growth opportunities with our top brands in Laundry Care are Persil and Perwoll. In Q3, Persil delivered positive growth driven by strong volume contribution. With the new Persil Giant Discs, which of course, also include the trusted Persil quality in combination with its innovative triple action deep clean formula, we address the need to meet modern laundry demand with heavy loads, tougher stains, malodor control and brightness boost of vibrant clothes. Each disc delivers 2x the cleaning power of regular detergent and enables efficient laundry care with fewer discs. In the first step, the Persil Giant Discs were introduced in selected markets in Europe, including countries such as our home market in Germany, Belgium, more countries will follow in the coming months. Beyond value-adding innovations, Persil also stands out for its pioneering brand communication. Just recently, we launched our first generative AI-powered TV commercial in Germany, reimaging Persil's iconic, lady in white for a new era. This makes us a frontrunner and underlines our leading position in the laundry market. So let's take a look at the spot. [Presentation] Carsten Knobel: In Fabric Care, Perwoll is our #1 brand and a great example for successful brand development, delivering double-digit growth in Q3 with balanced price and volume development. This performance is an excellent example of how we drive brand equity based on tech-driven innovations. We have constantly expanded our formulation portfolio with several different formulations, serving specific customer needs. And just recently, we launched the first Fabric Care product for all light colors, including white clothes based on our innovative triple renew technology. This innovation has further strengthened Perwoll's market-leading position with a presence now in over 40 countries. The key growth driver is our strategic focus on addressing geographical white spots, and further expanding our global footprint, including recent country rollouts in Egypt, the U.K. and South Korea. These initiatives have delivered strong benefits including market share gains of 190 basis points year-to-date in Fabric Care. And with this, turning now to our top 10 brands. We continue to see strong growth momentum. In the third quarter, our top 10 brands delivered strong top line growth with both positive price and volume development. Our top 10 brands have been outperforming the total business unit's organic sales growth year-to-date by around 300 basis points, driving a continuous increase in the sales share, which now accounts for around 60%. We will continue to invest in innovations and in brand equity. And in this context, tech-driven innovations are key in order to enhance the valorization of our portfolio in Consumer Brands and drive further top line growth, and we are keeping up with the appropriate investment levels behind our brands in order to fuel further growth. And now turning to our full year outlook. The guidance ranges remain unchanged. We continue to expect that both the adjusted EBIT margin as well as the adjusted EPS growth at constant currency will be well within our current outlook ranges. However, in case there is no noticeable improvement of the economic environment until year-end, organic sales growth for the group is expected to come in at the lower end of our current guidance range. This would, by the way, already broadly correlate with current consensus expectations. And with this, a good moment now to hand over to Marco, who will lead you through the key financials in more detail. Marco? Marco Swoboda: Yes. Thanks, Carsten, and good morning to everyone in the call also from my side. Bidding on what Carsten already shared, let me provide some more color on the drivers of the group sales performance in the third quarter of fiscal 2025. We achieved organic sales growth of 1.4%, which was driven by positive volume development, while pricing was stable and more on the business unit related specifics, certainly in a minute. Acquisitions and divestments reduced sales by 2.9%, reflecting the recent divestment of our retailer brands business in North America. FX was a headwind of minus 4.8% in the third quarter, reflecting, in particular, the weaker dollar and the related currencies. In nominal terms, sales amounted to EUR 5.1 billion, thus 6.3% below the prior year. Now to the drivers in the respective regions. Starting with Asia Pacific, where we achieved very strong organic sales growth of plus 4.9%. The Adhesive Technologies business delivered a very strong increase, which was particularly driven by the continued growth dynamics of our Electronics business in China. The Consumer Brands business recorded positive growth, which was fueled by very strong growth in Hair. India, Middle East, Africa showed double-digit growth of 10%, and that was supported by both of our business units. In Latin America, sales were below prior year due to weaker performance in Adhesive Technologies. In contrast, Consumer Brands reported positive growth driven by a very strong increase in Hair. In Europe, sales came in at minus 2%. Adhesive Technologies was slightly below the prior year. And while Craftsmen, Construction & Professional achieved positive growth, Mobility & Electronics as well as Packaging & Consumer Goods were down year-on-year. Consumer Brands recorded a negative development, reflecting the continued challenging market environment, particularly in the Laundry & Home Care, while Hair showed good growth. Moving on to North America, where we achieved good growth of 2.3%, a clear sequential improvement versus Q2. This was supported by both of our business units. The good development in Adhesive Technologies was driven by Mobility & Electronics as well as Craftsmen, Construction & Professional. The Consumer Brands business also reached good growth, which was fueled by a very strong increase in Hair while Laundry & Home Care came in flat. The Professional business also grew very strongly, reflecting a clear improvement in the region. Turning now to Adhesive Technologies in more detail. We reached sales of EUR 2.7 billion in the third quarter of fiscal 2025. Organic sales growth was 2.5% with positive pricing and good volume growth, which was supported by a partial reversal of the negative working day impact, which we had faced in the first half of the year. As expected, Adhesive Technologies showed a sequential improvement with good organic sales growth in Q3 in a still demanding environment. Pricing remained in positive territory, which again reflects the strength of our market position globally and the broad portfolio serving a broad variety of different industries. We saw the highest volume growth in Q3 when comparing this year's quarters within a still demanding market environment, albeit being supported by a partial reversal of the negative working day impact, which had impacted volumes in the first half. Regarding the remainder of the year, we expect volumes to remain in positive territory, while pricing is expected to remain robust. Let me now turn to the performance in the individual business areas, where we saw different dynamics. Mobility & Electronics was again the main growth driver with a very strong increase of 5.9%. This increase was mainly driven by continued double-digit growth in Electronics and very strong growth in Industrials. This could more than offset the still muted performance in Automotive, where we continue to see a challenging market environment. Packaging & Consumer Goods came in slightly below prior year. And while Consumer Goods showed positive growth, Packaging was negative due to overall lower demand. Craftsmen, Construction & Professional delivered organic sales growth of 2.2%, and that was fueled by strong growth of manufacturing and maintenance, good growth in Construction and positive development in Consumer and Craftsmen. Now moving to Consumer Brands. The business generated sales of EUR 2.4 billion, organic sales growth came in at 0.4%, driven by positive volume development, while the overall pricing effect was negative. In Q3, volume development returned to positive territory, marking a strong sequential improvement and driving positive organic sales growth. Pricing was slightly negative, particularly due to Laundry & Home Care, which also reflects the currently challenging environment with regards to consumer sentiment, while pricing in Hair was in positive territory. Encouraging to see was a sequential acceleration of organic sales growth in North America, which was also mainly driven by Hair. Last but not least, we will continue with our strong investments behind our brands to fuel growth. Now turning to the performance by business area. Laundry & Home Care reported organic sales growth of minus 1.5%, reflecting a challenging market environment. Home Care posted an overall stable development with still very strong growth in the Dishwashing category. Laundry Care was negative due to fabric cleaning, while Fabric Care delivered double-digit growth supported by top brands such as Perwoll. What clearly stood out within Consumer Brands was the very strong growth in Hair, which was driven by both the Consumer and the Professional business. The very strong growth of the Consumer business was driven by coloration and styling. Our professional business also grew very strongly, supported by a clear improvement in the North America region. Organic sales growth in other Consumer businesses remained below the prior year due to Body Care in North America and Europe. As Carsten already mentioned earlier, the ranges of our sales and earnings guidance for 2025 remain unchanged. We continue to expect that both the adjusted EBIT margin for both the group as well as the 2 business units as well as the adjusted EPS growth at constant currencies will be well within our current outlook ranges. However, in case there is no noticeable improvement of the economic environment until year-end, organic sales growth for the group as well as for both business units is expected to come in at the low end of our current guidance ranges. This would, by the way, already broadly correlated with current consensus expectations. Our expectations regarding foreign exchange, acquisitions and divestments impact direct material prices, restructuring expenses and CapEx for fiscal 2025 remain unchanged. With that, back to you, Carsten. Carsten Knobel: Marco, thank you so much. I would like to conclude today's presentation by summarizing the key highlights of the quarter. First, we saw a clear acceleration in our top line development with both business units recording positive organic sales growth in the quarter. Adhesive Technologies continues its trajectory of consistent robust growth despite the challenging environment we are navigating. Consumer Brands reached positive volume development in Q3 and positive organic sales growth. The merger is in its final stages, and we will successfully conclude it by end of the year. And with that, clearly ahead of plan compared to what we had originally expected when we started this journey. And from a regional perspective, North America stood out with good organic sales growth supported by both business units. Second, also encouraging to see is the continued strong gross margin and bottom line development. Third, in regards to our share buyback, we are well on track having executed around EUR 700 million at the end of October. And finally, when it comes to our full year guidance, the ranges remain unchanged. And with that, back to the moderator for the Q&A. Operator: [Operator Instructions] Our first question comes from Guillaume Delmas from UBS. Guillaume Gerard Delmas: I've got a couple of questions, both on Consumer Brands. The first one is on pricing development in the quarter because it turned suddenly negative. So maybe to start with, is it something you had been planning for some time? Or was it more in reaction to a more challenging consumer maybe competition environment? And from a category and region point of view, was this negative pricing quite broad-based or just mostly down to a few specific country category combinations. And lastly on this, what would be the outlook? So as in negative pricing to stay in the coming quarters? Or was this just a one-off? And then my second question is on your 2025 guidance specifically for Consumer Brands organic sales growth. So you flagged low end of the organic sales growth range likely. But even the low end of the range would imply a mid-single-digit performance in Q4. That would be a very significant sequential acceleration. So just wondering what the drivers should be for this marked Q4 step-up? And if what you achieved in October supports this mid-single-digit organic sales growth ambition? Carsten Knobel: Guillaume, that was more a speech than a question, but happy to take the question. So we start with your pricing topic. I will take that and Marco will then take the question related more to the guidance also related to the top line. So let's get started on the first one. So first of all, Guillaume, we had really a good Q3 in HGB with really positive volumes. You know that's the first time in this year. And we have seen really a sequential improvement. As also projected, we started with a minus 5% we had in Q2 the minus 1%. We are now at plus 1%. And therefore, I think we can be really happy with that development first. And second, we also expect that the Q4 will be stronger than the Q3, not only related only to volume, but also especially related to the total OSG in that context. For sure, there is a pricing which is negative in the quarter, but we should not only look at 1 quarter because if you look at the pricing year-to-date, we are with pricing year-to-date in positive territory, and we also expect pricing to remain positive -- in positive territory for the full year. So we will not guide on a specific quarter between price and volume. But as I said, that is very clear. The pricing now specifically maybe to Q3, why is the pricing lower? It is particularly more related to Laundry, so not to all categories because that was also part of your question within our portfolio. Home, Hair, be it Consumer, be it Professional is in the territory of neutral to positive when it comes to pricing. So in that context, this is more Laundry related. And within Laundry, it is also more Europe related. You may have -- you noticed that and you know that after, I would say, a little bit better consumer sentiment in Q2, the consumer sentiment, especially turned down again in Q3, and that is also related to the consumer behavior. And in Europe, you know that private labels are more outspoken. And in that context, that was for sure was a little bit more there. And on top, the market overall in Laundry was negative, not related to Henkel, but in the overall context. And yes, we also took normally, which was also planned. As we said, second half will be stronger than first half. That was not only related to top line but also related to innovations and also customer-related activities. So therefore, we have also some selected promotions, which are more outspoken in the second half than in the first half, but this is -- because you also had the question, is it planned or reactive? That is, as I said, already we planned because we talked already about that at the beginning of the year. And on top, as it's also very clear, there is no change in our valorization strategy. I think that is something which is part of our strategy since the beginning. I think I have highlighted that also again today with the example of Perwoll where we, based on the valorization took quite significant also price increases. And we are confident that we have a good portfolio. I alluded to our top 10 brands and the percentage around 60%. And the good growth, not only in an individual quarter but also year-to-date with a good balance of price and volume. I stop here. And in that context, now I hand over to Marco because your second question was related to the overall outlook for top line for the full year, respectively, for quarter 4. Marco, please. Marco Swoboda: Yes. So to the drivers of Q4, what we assumed here. So first, you need to see that we do have easier comparables in the fourth quarter when you then compare that in particular also with Q3 and the quarters before that. So comps is one topic. And then as we highlighted earlier, we're going to -- we do see more of our innovations hitting the second half of the year, and we said that also before, that is even more geared towards the fourth quarter. So also here, assumption around our strong launch and relaunch activities is behind. So we have activities going on for Vidal Sassoon in China, for example, or even in Persil, we talked about the Giant Discs and also around activities of Perwoll and Gliss. . And promotional activities is the next driver, of course, that we start to accelerate. So should see also more traction on that in the fourth quarter. And then also some pricing that we do expect in Q4, especially in emerging markets. Of course, there's still a lot of volatility around, and we talked about the consumer sentiment volatility earlier, and that's why we did also flag uncertainties around that. Operator: The next question comes from Patrick Folan from Barclays. Patrick Folan: Just going back to the question on promotional activity stepped up in the period. Should we expect this to be something that comes through more in Europe in Q4 and maybe in 2026? And I guess, sticking with kind of Consumer on -- we're looking at October, I'm under the impression that you had some launches that came out in the period. How have they gone? Or do you have any exit rate on the performance within those launches? And just sticking within Consumer, you talked about the top 10 brands making up 60% of your portfolio, which you guys have been talking about throughout this year. Can you maybe share some color on how you plan to improve the remaining 40%? What are the drivers there to get that improving to drive the overall portfolio forward? Carsten Knobel: Patrick, so to the first one, as I mentioned before, we had already planned, as I said, that the second half should be more outspoken in terms of top line than the first, which was mainly related to our activities, which we had planned and where we clearly stated these are more back-end loaded means more pronounced in Q3 and Q4, and that's also happening. That's also the point that we have seen also a better volume development in Q3. And again, I said it's selective promotions. There is no strategy change. And for sure, this is related to the innovations we are taking in Q3 and Q4 and in order to support that, we have done that. For 2026, because that was also your question, please understand that I'm not talking today about that. We are -- for sure, we have clear ideas and plans how to do that, but I would like to state a little bit on that when we are beginning of the year in terms of announcing also the guidance for the year in that part. The second part of your question was related to the top 10 brands. First of all, yes, we are investing quite significantly behind the top 10 brands, means investments in R&D, means investments in marketing. Consequence is, for sure, focus on innovations related to the top brands. They also continued in Q3 to deliver above-average growth. And as you mentioned rightly, the sales share has significantly increased over the last years, and we will work continuously to increasing that top 10 brand share also in the future. When it is related to the other 40%, I think part of that is also related to our portfolio strategy. And I said that we have certain categories which is mainly related to our Body Care part in the -- besides the top 10 brands, which is core, but it's not the investment case. It is in a clear portfolio, more a cash cow. And in that context, it delivers quite significant support when it comes to gross margin, absolute gross margins in order to invest in our focus areas. And therefore, that part will always remain. And for the other part, it is like we have done that now over the last couple of years. We look at our portfolio constantly. And if there is no change in performance, we will take respective measures as we have taken, I would say, very clear and straightforward in the last couple of years. And on top, you know that the Laundry segment is currently facing a more pronounced competitive environment, also related to the point I made before that the market overall is negative in the context of the consumer sentiment, which is impacting consumer behavior, which is also a more trend in the direction to private label-oriented brands. But from my point of view, as I always pointed that out, that's a temporary development. If sentiment comes back, I would significantly see then also a shift again towards the branded labeled businesses. Patrick Folan: Just following up on that, just on private label. Can you maybe share where you're seeing the pressure in private label? Is it mainly Europe or any countries specifically you want to call out? Carsten Knobel: No, as indicated before, it is predominantly in Europe. The private label share in Europe is around 20%, and that's something which you don't see in any other region in the part when it comes to Laundry, yes, that is pure Laundry. Operator: The next question comes from David Hayes from Jefferies. David Hayes: So my question is on the margin but short term and long term. So just on the short term, you look at the Consumer challenges that you talked about. And so the beginning of the year, you were thinking Consumer could do up to 3% organic. Now you're targeting 0.5%, but you're still well within -- as you said in the release, well within the ranges on margin and earnings. So just trying to understand what is offsetting that challenge, particularly on pricing, how is the margin still well within the ranges that you started with at the beginning of the year? And then I guess, secondly, on the longer-term on margin, are you still confident with these pricing pressures that the trajectory hasn't changed to get to 16% plus as you've talked about previously? Or these challenges continue, is that something that you'd have to kind of capitulate on and take longer to get there? Carsten Knobel: So related to the short term, I think what we clearly said today is that we are confident in both businesses for the margin situation that we will be well within the ranges we have been setting up. And the main reasons behind that is predominantly in the Consumer space, it is the net savings we are taking out of the merger situation where I clearly pointed out, we will at least reach the EUR 525 million until the end of the year. A year earlier than expected. That does not mean that in '26 there will be nothing more coming. I'm only saying, we know we reached it significantly earlier. We have efficiency gains in both divisions when it comes to the production setup, the supply chain setup, which we are predominantly driving, again, also in the second phase of the merger, but also relevant for our Adhesives business. And the valorization part is also very clear. I mentioned it before, valorization brings a significantly higher gross margins. But the good thing behind is that we can invest significantly more behind our brands. And by that, also looking now to your long-term question, bringing our long-term, I would say, investment in terms of brands into the right direction. And last but not least, it's the mix effect, which is also again valid for both businesses. In the context of Consumer, it's more related to the really fantastic development in Hair, in Consumer and in Professional. And in Adhesives, for sure, I was relating to the Electronics part not only for today, but also the prospects into the direction of 2030. So all of that is not only related to short term, but also to long term or better to say midterm, that we will reach the margin of around 16%, which we, I would say -- not that I would say, which we concluded in 2024 that we will reach that to a midterm means 2 to 4 years, average is 3 years. So we are on the right track. And if you look over the last couple of years of our margin development is continuously improving that. Operator: The next question comes from Christian Faitz from Kepler Cheuvreux. Christian Faitz: A couple of questions, please, from my side. In Adhesives, would you see any remarkable sales or order trends at this point in time in Q4 that your salespeople are suggesting that are different from Q3, i.e., pickup in Automotive demand or something like that? And then on the Consumer side, I mean, I understand the negative trend in Laundry, consumers trading down to private labels, particularly in Europe. But certainly, congrats on the strong results in Hair within Consumer. But why are Consumers not trading down also on Hair? Or is that really your innovative portfolio versus a lower base that's driving that? Carsten Knobel: Christian, thank you for these 2 questions. I take the second one, which is related to your Consumer part. And I'll let Marco talk about the Adhesives part in terms of when you said the sales and the order trends in Q4 if they are different to Q3. So when it comes to Consumer, I cannot -- sometimes it's difficult to talk about history. But the Laundry segment, at least since I'm in business, and that's now since 30 years, that was always the situation that in that context, private label was, yes, especially in difficult times, quite strong or existing. Why is it not in here? Difficult to predict. The main reason, I would say, is for sure, the situation that, especially if you think about color, coloring your hair and also styling your hair, you are visible outside or from the outside. And I think that's something where people have a lot of loyalty and also want to have a lot of security and certainty that what you would like to see yourself on your body is -- or in that context on your head on your hair is something where you have security that you get the results you want. And on top, coloration is not an easy thing from a technology perspective and therefore, also quite high entry barriers to get into that business. That has also been the case that you don't see private labels even not being able to get into that technique or technology. That's -- this is for me, the major reason why you don't see that in these categories. And therefore, we are more than happy and also lucky that we are in the Hair business. That we're one of the, I would say, most outspoken worldwide players in that context being the clear -- now in the meantime, the clear #2 in the professional business of hair after a company which is located in Paris or in France. And I think we will continue to drive that trend and also very happy with the current results with over proportional growth. I would say I stop here and hand over to Marco for the Adhesive question. Marco? Marco Swoboda: Yes, Christian, to your first question on Adhesives and sales trend. I mean, it's clear we said it's a very volatile environment. So that's why sometimes we say what is the trend is not easy to say. But when you look at the group, what has remained very strong over the whole year, that is, of course, the Electronics part, and that has developed very nicely and the more difficult environment, for sure, we face in the Automotive sector. And from that perspective, the trend is not what we see very much different beginning of the Q3, but also we just are in the beginning of the Q3, quite obviously. And when you look at those trends, also now looking more then, of course, longer into the future, you see also that general trend hasn't much change yet. So still the volatility and uncertainty is seen also in the industrial markets. When you look also at the IPX forecast for 2026, for example, at the moment, IPX is expected to come in at around 1.7%. If that is so, that would be even below the level of 2025. But we also know that the IPX also is very volatile in the expectation, but that shows also at the moment, it's very difficult to identify a clear trend. And even for 2026, it's supposed to be a muted industrial environment for the time being. And the same is in particular true for the sub-index of the light vehicle production index for 2026. On the other hand, I see no indication that Electronics and also our Industrial business environment shouldn't continue to grow. So these trends even seem to persist until into 2026. We are in overall, of course, confident on our performance of the teams and see also the resilience of our businesses. And in so far, of course, we're going to make up our mind beginning of next year, how that will evolve together with also the latest news on consumer sentiment that, of course, we will then look at and come out like always with the guidance for next year in March. Operator: The next question comes from Tom Sykes from Deutsche Bank. Tom Sykes: Just 2 quick ones. One on the Adhesives business. How big now is the services side of the business? Or if you like, the total that's kind of non-strictly volume related and what's the growth of that be, please? And then just is it possible to expand a little on your productivity comments in Consumer because obviously, you have had this outsized productivity gain. Do you think the setup now is something which you can produce year in, year out, slightly higher productivity than you did do prior to the merger? Or is it a period where you do get some productivity gains, but they may be a little lower because you brought some of those forward, please? Carsten Knobel: So to your first question, Adhesives, I assume when you talk about services, you mean or you relate that to the point where we have now significantly invested in the last 1.5 years in the so-called MRO business, maintenance, repair, overall business. If you look at that, it's around 20% of the business overall. And what is for me very promising, we bought these 2 companies, Critical Infrastructure and Seal For life, I think on 2 reasons. First of all, to create a new category for us. We had a certain business on that, but we wanted to make it significantly bigger. This we reached with that. That's one. But the even more important question is we are here for our purposeful growth agenda, means we want to overproportionately grow. And I think that is happening. Both acquisitions, if we take them together, year-to-date are growing double digit. And I think that is in the context of where we are in. You just heard Marco describing the industry sentiment with an IPX of around 2% in this year and also not a significantly different situation of next year with currently a forecast of 1.7. I think it's very good to have these outstanding categories like MRO, but also like Electronics in that context. So that's for your first question. The second one was related to productivity gains, especially in the Consumer business. Here the point is that we did quite a lot in the last couple of years. You know that we splitted our EUR 525 million in 2 phases, EUR 275 million related to phase 1 and around EUR 250 million in phase 2. And I mentioned it before, we are not only well underway. We're really, really over-delivering on that. And we expect, for sure, also further gains. But of course, for sure, in a lower dimension as in the last couple of years. And I mentioned before, even for 2026, we will significantly be higher than the EUR 525 million what I mentioned before. And therefore, it's really -- we are really on a good track record when it comes to creating additional savings on that. We have around 40% SKU reduction. We have more than 20% of complexity reduction, taking SKUs out, streamlining the processes. And we will also, in the next couple of years, benefit from that part. As I mentioned before, you cannot expect the same pace in the context of what we did since 2023. Operator: The next question comes from Mikheil Omanadze from BNP Paribas. Mikheil Omanadze: I have 2, please. First, could you please maybe provide some color on the strong Hair delivery and quantify retail and salon growth. Was there anything of one-off nature helping during the quarter? Was there maybe some moves of inventories at retailers or distributors which helped that strong number? And the second question would be on raw materials. As we look into 2026, are there any noteworthy moves on your key inputs that we need to be aware of? Carsten Knobel: Yes. So I take the first question related to Hair and Marco takes the second on the raw materials. So I mentioned it before when I talked in the context of Tom's question. So the Hair business is really a fantastic business we have at hand. For sure, we don't know that only since today, but really that was also in our portfolio discussions, one of our key focus areas and by that, trying to get our global category lead in Hair further improved. You're specifically asking for the current performance. So the Hair business showed a significant sequential acceleration versus Q2, reaching a very strong growth in the quarter, above 4%. The Consumer business posted a very strong growth in Q3 with the strongest contribution from color and styling as the 2 categories. Styling was very strong in Q3, especially driven by Europe and a double-digit growth in North America and hair colorants same with significant growth in Europe and double-digit growth in EMEA. So that is the one. The Professional business, also a very strong quarter in Q3 where almost all regions were contributing positively. And we were -- and we saw a very strong growth in North America and double digit in LatAm. And I have to tell you out of my personal travels, I recently visited our U.S. Professional business in Los Angeles, where the headquarter is and which stands for a significant part of our Professional business worldwide. And I can only tell you, we're working here with a couple of brands, but it's really a great brand setup, a great setup overall. And I'm really very confident that's also what I would like to get across that this business is not only good today, but there's also a very bright future going forward. And as you know, we have over proportionately gross margins on that business, which is also very helpful in our portfolio transformation or in our valorization strategy. So I'm very positive about that with a very strong performance also today or year-to-date. Hope that helps, Mikheil, and now hand over for your second question when it comes to raw materials. Marco Swoboda: Yes, to raw materials, is sure the volatility in the market is strong. So there's some caveat to, of course, what we do see for next year. But broadly, what trends we see is for 2026 somewhat similar to this year. We see on the petrochemical feedstock side, that shall remain rather flat. So no significant increase, no significant decrease. While on the other hand, natural feedstocks for example, palm kernel oil, we expect a rather upward trend also to continue into 2026. . And then on the precious metal side that -- where we have seen quite some upward trends and that may continue. That is was suggested by the expert opinions for the time being. But I also need to point out that on the precious metal side, that is rather a pass-through on our end, so will not impact really our margin. So that's what we currently see for the market. Carsten Knobel: And with that, let me thank you for your questions. And let me also close today's call with reminding you of the upcoming financial reporting dates. We are looking forward to connecting with you again in March, to be precise, 11th of March when we will publish our annual report. And with this, we would like to thank you, in the name of Leslie and also Marco, to thank you for joining our call today. Have a good day. Take care, and goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Sappi Q4 2025 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Binnie, CEO. Please go ahead. Stephen Binnie: Good day. Thank you, everybody, for joining. As always, I'll go through the investor presentation calling out page numbers as I move through. I'm just starting briefly on page 2, just drawing your attention to the forward-looking statements disclosure. Turning to page 3, which is summarizing the year as a whole, the financial year 2025. And it's fair to say it was a challenging year, marked by ongoing global economic weakness. We did see difficult market conditions across all our segments actually, and obviously, partially driven by the weak economic conditions, but also the global trade tensions. As a result of all that, we saw downward pressure on selling prices. And from a materiality perspective, particularly on dissolving pulp, they dropped quite sharply during the year. And on the paper side, added to that, we have seen excess supply globally in our key market segments. Despite all those challenges, we did have some operational highlights. We saw our DWP and packaging volumes growing year-on-year. And in the graphic paper space, we were able to gain market share. Thrilled to say that we've obviously completed the Somerset PM2 conversion and expansion, and that's an important step in our strategy and the machine is performing well. In Europe, we continue to make further rationalization to take cost out of the business and to improve capacity utilization. Then on slide 4 is a summary of the quarter itself. Relative to the prior quarter, Q3 of this financial year, numbers up a little bit. However, the market conditions remained challenging. We did see sales volumes pick up for pulp and packaging, and we also benefited, obviously, because there was no maintenance shuts. Regionally, Europe continues to be in a challenging place. The economic situation there is still difficult for us. And across many of the paper grades, we see excess capacity. North America, obviously, beginning the ramp-up of the -- the Somerset 2 conversion. We saw improvements in volumes and modest improvement in profitability. Obviously, you're not at optimized levels, but we start to see that improvement come through. And in South Africa, I think South Africa had a pretty good quarter, actually. Obviously, lower dissolving pulp prices are the big story there. But on the packaging side, a reasonable quarter, albeit that on the packaging side, even selling prices there globally have an impact on the South African business. Slide 5 has the bridge from last year to the current year. And the big story is obviously the lower selling prices and its impact on our business. It's across all the segments, and that kind of dwarfs all the other variables when you look year-on-year to give us the $111 million. On Slide 6, we did see relative to the prior quarter, we did see variable costs coming down in each of the regions. Pulp at relatively low levels. And obviously, that benefits the paper business, but obviously indirectly has a negative impact on DWP prices. Energy prices coming down a little bit as well, but really across the board. And then turning to slide 7, which is the evolution of our net debt and our leverage over the last few years. And obviously, we saw the peak through the COVID period. We saw it coming down substantially. We made a decision to invest at Somerset, obviously. And then in the current year, we've got the higher CapEx, which is now behind us. We also were negatively impacted by the exchange rates, the fact that a significant proportion of our debt is denominated in euros. And when you convert that to dollars, you get the negative impact. But having said that now, the investments are now behind us, and we would expect our debt to start coming down. You saw it coming down a little bit in this quarter, and we would expect that to continue over the next quarters ahead and into the next few years. And then the debt maturity profile is reflected on page 8. And maybe just a couple of callouts. Firstly, on the short-term debt, which is 2026, you can see we've got a chunk of short-term debt in the box there, the $224 million. We are - and we did put out an announcement on this. We are in the process of terming out some of that debt and making good progress, and we'll give an update as soon as -- as soon as that's complete. Perhaps the other major refinancing that we've got coming up over the next few years is the 2028 bonds, Eurobonds, it is about at EUR 400 million. We obviously monitor the markets, and we'll pick the right time to refinance that as we move into the new year. And then on cash flow and CapEx, obviously, a tough year and lower profitability, which has meant that we utilized cash during the year and you add in the CapEx as well. So $360 million that we utilized during the year. CapEx going forward, 2026, we are estimating at $290 million. And then 2027, we're committed to keeping that below $300 million. We haven't finalized the number yet, but it will be below $300 million. Taking that forward into Page 10. As you all know, we gave a recent update on some of the work that we're doing on the balance sheet on the funding side. Obviously, with the lower profitability, our leverage ratio increased. And because of that, we proactively renegotiated our covenant levels through next year, great support from the banks, unanimous support, and we've negotiated significant -- enough headroom to manage through this peak time. We're terming out the short-term debt, as I said, and overall, with that debt reduction focus back to basics, focusing on productivity, cost containment. At the same time, we've obviously stopped the dividend, and we have some initiatives to reduce costs, particularly in the European business, and I've got a slide on that just now. The Thrive strategy is reflected on Page 11. And obviously, our focus in the short to medium term is this back to basics, but we must never lose sight of our strategic focus. And obviously, operational excellence is key to Back to Basics, maximizing productivity and efficiency and reducing costs. We continue to focus on enhancing trust across all our stakeholders. In terms of growing our business, we're not going to be taking on any projects or any material projects in the next couple of years. Our focus is on ramping up the projects that we've done and primarily, obviously, that's the Somerset PM2. Ultimately, we're laser-focused on getting the debt below $1 billion. We know it's going to take a couple of years, but with all the actions that we're taking, and we're confident that we'll get there in the medium term. And then obviously, with a strong focus on our maturity profile, which I talked about already. Slide 12, I'm not going to repeat because a lot of this is similar to the prior slide, just to say that we are in this consolidation phase, focused on costs, focused on efficiency, maximize production. We've got a $60 million target to take out costs in Europe, and that -- much of that's already been made public, but it's not just Europe. We are focusing on the other regions and at the corporate level. And on top of all that, working capital optimization. It's only once we complete all that, that we would consider dividend payments and any growth opportunities. The Slide 13 just talks about our capital allocation priorities, and I've touched on this. So I'm not going to repeat everything here. But obviously, strongly focused on reducing debt, ramping up on PM2, ensuring we get a return on capital employed above our costs -- above 2% of our WACC -- 2% above WACC. And then making sure that we optimize our product portfolio and matching graphic paper capacity to market demand. Slide 14 is a specific slide on Europe, which we thought would be useful. It just breaks down the $60 million saving that we've got. You can see it's across some -- the mills and at the corporate level or the central regional level. We're closing 2 machines at Alfeld, at Kirkniemi. At Ehingen, we are reducing shift details. And at Gratkorn, which is our #1 mill in Europe, looking at a number of initiatives to optimize product -- production and profitability. Then turning to the segments. And again, I'm not going to go into detail, but just to summarize, and I'm on Slide 16. The demand -- the underlying demand for DWP remains good. And we are fully sold out, and we continue to have our customers pushing for volume. The challenge is obviously that global prices have come off, and that's linked to various macroeconomic conditions. And I also think that the lower paper pulp prices have not helped as well with carouseling and substitution there. But overall, volumes are good. Also on the production side, things are going -- going better as well. Packaging, a really tough year -- sorry, Slide 17. Packaging, a tough year across all the regions, actually. Europe, a modest recovery. But as I said earlier, the European economy continues to be challenging, and there's overcapacity in all the key product categories. North America, we've begun that ramp-up. The machine is performing well. We're adding volumes, and we're confident that we'll continue to do that in the quarters ahead. South Africa had a very good citrus market season, which is our primary product -- that's our primary market for our South African containerboard business, a good season. The only challenge -- well, the one challenge we have is that global containerboard prices are weak, and that does have an impact on domestic selling prices. And then on graphics, we continue to be proactive in terms of managing our capacity. In North America, the domestic markets tightened. Obviously, we took out PM2 out of graphics. So that supported the market balance, and I think it has helped ensure that we have stable selling prices and good margins. Europe, the challenge in Europe is the excess supply, and that obviously impacted on selling prices in that region, which had a negative impact on profitability. And then Slide 19, just a very brief summary of the regions. And all in all, you can see selling prices across the board down. And then some of it, we did get cost savings in Europe to offset some of that, however, not enough. And then in North America, cost’s up, obviously, because we had the initial ramp-up at Somerset and that obviously impacts on efficiencies and usage and the likes. And then in South Africa, we did have some of the -- some of the raw material costs up year-on-year, some of the chemical costs and wood costs there. Slide 20 has some of our key awards and the highlights. I'm not going to go through all of them. We're particularly proud of our rankings in the Forbes Best Employer and top companies for women. We were 144 in the world for top companies for women, the second in South Africa, really very proud of that. But even best employers as well globally to come in at 289. And when you look at the companies on that list, we're very proud of that. Other than that, we continue to focus on our science-based targets and our wood certification, which gives us a strategic advantage. And then you can see the links to our reports there as well. Turning to the outlook, and I don't intend going through every bullet. I'm on Slide 22. I think it's fair to say that the market conditions continue to be challenging. We do believe that as we progressively move through 2026, things will get better. DWP has stabilized. You saw a little bit of an increase in that quarter, and we continue to think that that will be the case as we move through 2026. We'll obviously have the benefit of the ramp-up in PM2 as we progress quarter-on-quarter. And then on the graphics side, it's about proactively managing that capacity. The cost side, yes, some of the -- some of the raw material costs are relatively low, and we'll look for opportunities there. We do have a maintenance shut -- scheduled maintenance shut at Somerset. That's an 18-month shut, which will have an impact of about $20 million, and we obviously took that into account in our guidance. You've heard me say it many times, back to basics, focus on what we can control, focus on efficiency, focus on cost, debt reduction, very disciplined capital allocation. And taking all that into account and the shut, obviously, we estimate that the EBITDA for -- the adjusted EBITDA for the first quarter of 2026 will be below that of the first quarter we've just reported on. So, operator, I've gone through the presentation. I'm now going to put it back to you for questions. Operator: [Operator Instructions] Our first question comes from the line of Brian Morgan of RMB Morgan Stanley. Brian Morgan: Steve, if I can ask 2 questions. First question is on Europe. Pretty torrid quarter, September quarter, like saw what the rest of the -- the rest of the paper packaging management, but none of them were EBITDA negative. So just a question on that is, was there -- in terms of those machines that you closed during the quarter, were there sort of non-normal effects coming through EBITDA, which we can reverse out in coming quarters? Stephen Binnie: Brian, I think specifically, the two machines that we took out were negative -- negative EBITDA. Obviously, by taking those out and optimizing the product mix and the cost base associated with that, we do think we can get improvement there. One of the challenges we face is that at Alfa specifically, our energy costs have risen substantially since the pre-COVID times. And it’s -- it's meant that those -- those machines that we're closing became uncompetitive, and we've moved around our portfolio. And that combined with obviously all the other initiatives, we're focused on getting the packaging back to positive EBITDA. Brian Morgan: Okay. So, without -- without any tailwinds from the market, you'd expect that European business to turn EBITDA positive even modestly? Stephen Binnie: Are you talking about -- yes, in the year? Yes, next year, yes, definitely. Yes. Brian Morgan: Yes. Okay. 2026. So, without any tailwind, any pricing benefits or anything like that, you would expect an improvement? Stephen Binnie: Yes. Brian Morgan: Okay. Steve, could you just flesh out PMT now? Just I'd be interested to know if you worked out how much of an EBITDA headwind that conversion had for you through the course of FY '25? And then also, if you could just chat to us a little bit about how to think about maybe an EBITDA ramp-up. I know you don't give us numbers but just help us to think about how that might evolve over the next couple of quarters. Stephen Binnie: Yes. Interesting question. Look, I mean, obviously, we had the direct costs of the downtime, and we revealed that in the last two quarters, and I'm looking at my colleagues, I think it was $22 million and $21 million. So, there was about $40-odd million specifically. But then you obviously had the indirect impacts of the efficiencies at the mill. Brian, I don't have that as a specific number. But clearly, it's north of $10 million. I don't have that as a-- as an absolute number, but -- but it had a material impact on the profitability. Now obviously, on top of that, going forward, you're going to have the additional volumes because we've doubled the capacity of the machine. Now Q1, we've got the shut, and you've got to take that into account when you -- when you're quantifying profitability of the North American business. But progressively beyond that, we're still very confident in the ramp-up. We've been signing up customers. We've been adding volumes. Yes, obviously, the delay had an impact. Yes, we have that trade-off between price and volume, which we've got be – we’ve got to delicately manage. You know that and this is public, SDS prices in the U.S. have come down a lot over the course of the last 18 months. And we've got to carefully manage that, but we are confident on the ramp-up. And we know the machine is performing well. We know that the customers like the quality of the product coming off there. And we're still committed. We said it all along that by the time we get to the end of Q4 of this -- this new financial year, we're confident that the machine can be substantially full. Operator: Our next question comes from the line of James Twyman of Prescient. James Twyman: Two to start with from me. The first one is the energy credit gain that you always get in Europe in Q1. Could you give us some idea of the scale of that and whether that's included in your guidance? And secondly, the 5 measures you're doing in Europe, could you give us some idea about broadly when you expect them to give a return and when and what the costs are? Stephen Binnie: Okay. I think on the first one, just to clarify your question, obviously, energy costs in Europe have been rising, and there has been increased costs. And the way that these rebates work is that you incur the cost -- higher costs across the year. And then at the end of the year, you get rebates based on your usage. So it's an offset of the higher costs that you have during the course of the year. Yes, you're right. Typically, the rebates occur in Q1, but not always. And it's difficult to give a -- to pinpoint exactly when we get them. Typically, they're somewhere between EUR 20 million and EUR 30 million. And by the way, it's not unique to Sappi, it is over -- it's all the industry players in Europe. Typically, they are between EUR 20 million to EUR 30 million. We don't know the exact numbers as we sit here today for what we've done this year. We have a rough idea, but we don't know the exact. In terms of our guidance, yes, that would be incorporated into our guidance. James Twyman: Okay. So, you would have included that the number -- somewhere in that range of number in your Q1 guidance. Stephen Binnie: Indeed. But ____ 26:25 to stress, it is an operational -- it's an offset of an operational cost, I think, is the important point. And then your second question? James Twyman: Yes. Sorry, yes. My second question was just in terms of these 5 measures, your big measures you're doing in Europe. … When should we start expecting that return? And when do you expect the costs to -- that EUR 40 million of cost to be incurred? Stephen Binnie: Yes. I'll let Marco go into more detail. Just from our side, obviously, you have to be sensitive about the discussions with labor and following a process, which we've been going through. And maybe the other point before I hand to Marco, EUR 60 million benefits, EUR 40 million costs. Those are the headline numbers, but obviously, that's phased. And Marco, maybe you want to go into more detail. Marco Eikelenboom: Yes. Yes, James, this is very much a staged approach. We've highlighted the 5 units basically where most of the work will be done. We finalized the consultation process in Alfeld, Ehingen, Kirkniemi in the last couple of weeks, which means that we now can implement the social plans for the FTE reductions there. I would say most of that benefit we will see as of quarter 2 -- fiscal quarter 2 and the costs because some of the work on the -- particularly on the central organization have been done already in September, October. So the costs will be kind of divided over – over the quarter, quarter 1 and quarter 2. But the effects will mainly be as of quarter 2 next year. James Twyman: If I could sneak another one in. There have been substantial tariffs on importers into the U.S., from Asia and from Europe, which I think is around 15% at least. What has been the impact on domestic prices for paperboard and for coated fine paper? Obviously, the paperboard impact has been offset by other factors. But what have you been able to achieve in terms of price as a result of that? Marco Eikelenboom: Are you talking about European prices? James Twyman: No, U.S. prices in terms of the impact of the increased ____ 29:09 importers into the U.S. and... Stephen Binnie: Yes, that's a tricky question because you have your indirect impacts, and it creates opportunities for us. I'm not sure you can say that selling prices have gone up just because of tariffs. But Mike, I don't know if you want to elaborate further on the impact of tariffs on the European competitors on North American domestic prices. Michael Haws: 29:49 I guess my view on that, Steve, is that -- it hasn't had a direct impact on North American prices. There have been announcements from importers of increases and how much they're realizing, it would only be speculation on my part. And that has also allowed some of the markets to improve and orders to move from imported to domestic. Stephen Binnie: I think that's the important point, James, is that it's not so much for our domestic supply, it's not so much that it's been enabling us to increase selling prices. But what it is doing is creating opportunities for us to secure more volume. James Twyman: Okay. Well, maybe as an example, obviously, you're a big exporter to the U.S. from Europe. What have you found? Have you been able to raise prices? Or have you … Michael Haws: James, we're not a big exporter on boards. I think you were specifically talking boards, or was it -- was it graphic paper as well? James Twyman: Graphics as well, to be honest, sorry, yes. Michael Haws: Yes. So board we're not -- it's not material. Marco, would you -- would you want to talk on the graphics side? Marco Eikelenboom: Yes. On the graphics side, James, of course, we have tried to offset some of the increased cost due to the tariffs and to pass that on to our customer base, which, with the domestic competition in the U.S., is not easy. I would say that this has cost us volume, but we've been successful to around 50% of our -- of our incurred costs due to the tariffs. But it's not so much the pricing that we could get up. It's more the volumes that we -- that we started to lose because of this attempt that we did to pass on the tariffs. Operator: Our next question comes from the line of Sean Ungerer of Chronux Research. Sean Ungerer: Just the first question around the European cost savings. Just to be clear, as what’s been said on the call so far, sort of -- sort of run rate to sort of see these cost savings come through is only going to really filter through to the second half of the year. Is that the correct way to interpret that? Stephen Binnie: No. I think from -- you'll start to see it in Q2, so if I was to -- Marco touched on it, but you'll probably -- there'll be a little bit --there'll be some in Q2, more in Q3, Q4, and the final little chunk will be in Q1 of 2027 because a lot of these things that we -- these initiatives are happening now, as we speak, right? So you still have some of the costs in this quarter. But for the next 4 quarters beyond that you’ll -- the savings will progressively get larger. Sean Ungerer: Okay. Got it. And then just on the net debt target of below $1 billion, what is the sort of definition of medium term? Because if you look at the slide of the presentation, I think it sort of flags resuming dividends and growth, and considering share buybacks from 2028 when the target is reached. Am I interpreting that correctly? Or how should we think about that? Stephen Binnie: Yes. Look, it's hard to be definitive because clearly, it's going to be dependent on market conditions. We've obviously got a strong commitment to reducing CapEx over the next 3 years. I think that – I do think market conditions are going to improve, and profitability will pick up. Everybody can do their math. It's all going to depend on the level of profitability. If we can get back to normalized levels, we'll get there quickly. But I think it's going to -- it's going to be gradual. I mean, clearly, in 2026, market conditions are still relatively challenging. I do think we will get the ramp-up of Somerset. We will have better DP prices. Our CapEx is going to be $290 million. So I think there will be some strong cash generation this year. And then when you get to '27 and '28, I think there'll be further -- further cash generation. Listen, if it takes longer, obviously, we'll stay committed. We are laser-focused on getting this debt level down, and however long it takes, what's our best estimate? 3 or 4 years. Sean Ungerer: And then just to follow on another question around the packaging especially the pricing in North America. So if we sort of exclude the ramp-up of PM2, what is the core sort of board business pricing mix done sort of year-on-year at least? I mean, sort of listening to a couple of other competitors in the U.S., it seems like pricing was down about at least 3% to 4% year-on-year. Stephen Binnie: Yes, that’s right. Obviously, it depends on the mix and the different grades and all that kind of stuff. But if you look on average and some of the key product categories, you're talking $100 to $150 type decrease. Mike, I don't know if there's anything you want to add. Michael Haws: No, Steve, thank you. Sean Ungerer: That's great, and then, Steve, I appreciate the… Stephen Binnie: Mike, anything you want more? Sean Ungerer: No. No, we got it. Okay great. And then, Steve, I appreciate the guidance on the planned maintenance in Q1, and there's obviously a nice schedule for maintenance for the full year by quarter. Just trying to compare like-for-like compared to 2025, if we sort of strip out the [indiscernible] cost of ramp-up. I mean, what is your best estimate? Is planned maintenance going to be sort of roughly flat year-on-year or lower or higher…? We've obviously got a number for Q1. Stephen Binnie: If you -- yes, look, if you back out the whole Somerset thing, I mean, last year, you had -- in the U.S., you had Cloquet and this year, you've got Somerset. In South Africa, you've got Ngodwana, which you did have last year, oh there is, yes -- yes, it's on Page 28 -- yes, Page 28. So you've got different quarters, but you've got Ngodwana in both years. Perhaps a little bit higher would be -- and I'm looking at Graeme here. Cycle is a little bit higher because we've got that a little bit of a longer shut to fix the one piece of equipment that we need to spend time on, but it's not that material. Graeme? p id="60862666" name="Graeme Wild" type="E" /> No. I think more importantly, we're doing a full mill shut in that one just to do a full clean of systems that don't regularly get cleaned. So it is slightly longer, but not best material. Stephen Binnie: Yes so I think the conclusion out of all that, Sean, is that broadly -- I mean, obviously, Somerset -- taking out Somerset project last year, broadly, it's about the same as last year, maybe yes. Sean Ungerer: Okay. So call it like $70 million odd. Stephen Binnie: Yes. Sean Ungerer: Okay. Cool. And then, Steve, just going to North America in terms of coated freesheet. I mean, there's a couple of your competitors asked price increases for Q4. I'm assuming that will sort of benefit your business as well. Is there any sort of update there or traction or not -- no traction? Stephen Binnie: I'll let Mike go into more detail. Obviously, us taking out the machine has brought the market -- domestic market back into balance. And it does create opportunities on Somerset PM1. And I think we talked about that in our results announcement. So we'll obviously -- if there are opportunities to add value and make some graphics on PM1, we'll take advantage of that. But Mike, specifically to recent pricing moves in that. Michael Haws: I guess -- I guess the way I'd phrase that up, Steve, is the market is still overcapacity with the current coated freesheet assets in North America. And on the [web side], not as much traction as on the sheet side. The sheets are dominated by imports, which have had the tariff impact. And I'd kind of frame it up in that way. We are carouseling some graphic grades to PM1 as we're ramping up the volumes on -- at the Somerset mill. Stephen Binnie: So overall, there are certain grades where we've been able to get it, but others more challenging. But having said that, it's obviously a much tighter market conditions than Europe. Sean Ungerer: And then just last one for myself. I mean, what do you think is going to be the biggest catalyst in the short term to sort of see a rise in DP prices? Stephen Binnie: The biggest risk. Sean Ungerer: Catalyst. Stephen Binnie: Catalyst. Look, I do -- and again, I'll let Mohamed expand further. I think that it's clear that there's still a high correlation between paper pulp prices and DP prices. Obviously, paper pulp prices have gone up a little bit – little bit in recent months. And I know there's another price increase out there. I think that will help. And then obviously, secondly, as the kind of macroeconomic situation improves and the consumer environment gets better and the trade tensions that have been out there as they get resolved, I think all of that will help as well. So we think it's going to get progressively better. Mohamed, I don't know if there's anything you want to add there. Mohamed Mansoor: Yes, Steve, the only other thing I would just add is that the fiber prices also has a big impact on the DP price. And viscose staple fiber prices have stayed and operated in a fairly narrow band for a long time, but the operating rates have moved higher. The inventory levels have moved lower. And at some point, that's got to start showing up in the fiber prices moving up. And as soon as that happens, that is -- that could be a very important trigger to lift the DP price. Operator: [Operator Instructions] Our next question comes from the line of Lars Kjellberg from Stifel. Lars Kjellberg: I just want to come back to Somerset a bit. Steve, you talked about your great confidence in ramping up this machine over the next 12 -- 15 months or so. At the same time, most would say it's about 0.5 million tonnes of excess supply in the U.S. market and volumes are flat to down a couple of percent. So how will this be done? What is behind that confidence? What are your prime way to ramp your machine? Stephen Binnie: Yes. Look, I think it's a progressive process. We've been in discussions with customers for the last couple of years. And we know that we've got the best machines in the industry in the U.S. And we know that we are targeting the independent converters. So, it's going to be a progressive process. Some of our -- interestingly, and I'll let Mike expand further here. We've seen some reasonably good growth numbers in the last couple of months in terms of volumes coming out of the SBS markets. So it's a combination of -- in terms of the longer-term discussions that we've had, the -- our ability to service those independents and building on the relationships that we have. Clearly, and I said that on an earlier comment, there's going to be a price volume trade-off. And we've got to -- we've got to carefully manage that and optimize profitability as we go through that process. But Mike, do you want to talk further there? Michael Haws: I think if you -- if you just think about the market and the scale of the 2 assets that we now have as independent suppliers, it is absolutely the best largest scale machines in the SBS market. So we've got new equipment, highly technical. We've got a product match with our PM1 that was extremely well accepted in the field. And we're obviously a domestic supply. So we've seen opportunities as a result of some desire to switch to domestic from imports. And as the independent suppliers are looking to grow their business, they're clearly looking to grow with companies that are convicted around this business, which is clearly Sappi with the investments that we've made and not just the mill, but with our sales force, and our technology group with R&D. So we've had many business with customers. And I think it's a relationship piece that we're going to continue to build. And we feel as though things are progressing well. Is it a seller's market? It's clearly not. But we're making great progress and the product off the machine and the asset is running very, very well. Stephen Binnie: Lars, just -- and one other point to make is that remember, we have PM1 at Somerset. And we can -- and with margins healthy on the graphics side, we can leverage off that flexibility on PM1 as well on top of all the good stuff that's happening on PM2. Lars Kjellberg: Yes. Could you remind us also the yield benefit you would have relative to a standard U.S. SBS sheet and how you would compare with import FBB? Michael Haws: Probably we have about a 5% yield advantage up from SBS, which is a little bit less than FBB, but we also have a couple of fighter grades that we developed that are similar to FBB. Lars Kjellberg: Final question for me is, again, we're talking -- coming back to Europe, right, where there's -- as you pointed out, significant excess supply and it feels as if some volumes turning back that used to be exported from Europe. So are you seeing any incremental pressure from repatriation of overseas tonnes into the European market that makes that particular market when it comes to coated paper more challenging than it already is? Michael Haws: Look, that's one of the dynamics, isn't it, Lars? Yes, part of it, it is already there, and it's a continuing pressure point. Obviously, you have the indirect impact on tariffs, right, from the U.S., right? Other players can't get into the U.S., where do they look to sell their product in Europe. So it just compounds the challenges of Europe and adds to that excess capacity, and that's why it's very important that we're proactive taking -- matching our capacity to our demand and taking costs out of the business. So it just compounds the challenges we faced. Operator: There are no further questions. I will now hand back to Steve Binney. Please continue. Stephen Binnie: No, thank you. I just want to take the opportunity of thanking everybody for joining us today and look forward to discussing our results at the end of Q1. Thank you very much. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the VakifBank Audio Webcast Third Quarter 2025 Bank-only Earnings Results. [Operator Instructions] With that, I will leave the floor now to our host. First of all, Mr. Ali Tahan, the Head of International Banking and Investor Relations at VakifBank, and Ms. Ece Seda Yasan Yilmaz, the Head of Investor Relations, also at VakifBank. Speakers, the floor is yours. Ali Tahan: Thank you, Rob. Good afternoon, everybody, and welcome to VakifBank Third Quarter 2025 Earnings Presentation Call. As usual, I will be starting with the presentation quickly and thereafter, to the extent possible, leave the floor for the Q&A session. Starting with the first page in this quarter, in the third quarter of 2025, as you can see on the right-hand side above chart, we delivered TRY 11.9 billion quarterly net income, which is almost TRY 1 billion higher than the market consensus of TRY 10.9 billion. And this number itself comes with almost 20% increase on a Q-on-Q basis from TRY 10 billion to almost TRY 12 billion. And with this quarterly performance, year-to-date net income of VakifBank increased to TRY 42 billion, which is up by 54% compared to same term of the previous year. And with this 54% net income, we are glad to see that we outperformed the sector net income growth of 45%. And on top of this, we are still keeping TRY 4 billion free provisioning as a buffer in our balance sheet as of third quarter end. And on top of that, most importantly, as we will discuss more in detail, we will be delivering the best quarterly net income of 2025 within Q4 in the upcoming quarters, thanks to sizable potential interest income from our CPI linkers as we are one of the most conservative bank so far in terms of using the very conservative CPI estimation. With TRY 42 billion net income in the first 3 quarters period of the year, we delivered an ROE -- average ROE of 23% and quarterly it is 19%. And this 23% year-to-date average ROE, thanks to the strong Q4 of the year, we believe full year average ROE will be increasing to high 20s. Remember for the full year, we were guiding high 20s average ROE. And with a very strong Q4, we believe it will be easily achievable and doable. And another point I would like to take your attention on this slide is related to core banking revenues and pre-provisioning profit growth. On the core banking revenue side, similar to net income growth, we have another 56% year-over-year growth in our core banking revenues, reaching to almost TRY 140 billion. And in terms of this core banking revenue composition, we have slight increase in the share of net fee and commission income, which was 37% a year ago versus 38% as of today. And the remaining 62% is mainly coming from net interest income. And on the pre-provisioning profit side, the increase is much more visible with 147% increase compared to net income growth or core banking revenue growth, which take us to the conclusion that as a conservative state lender, we set aside provisioning too much for the credit risk and other different risk factors. To continue with the presentation for the sake of the time, I will be jumping to net interest margin page, where you can see the details on Slide 5. Starting with the net interest margin. Reported net interest margin in this quarter, as you can see with the red -- sorry, yellow dot line increased from 2.93% a quarter ago to 3.61% in this quarter, which corresponds to 68 basis points increase in just 1 quarter period of time. And similarly, swap adjusted net interest margin increased from 2.59% to 3.07% area, a very similar trend. And the good thing is those numbers achieved via a very conservative and humble CPI estimate. As you can see on the left-hand side above chart, as of third quarter, we used 26.9% CPI estimation during Q3, which is the lowest level among the peer group banks. But the eye-catching reality is despite such a very conservative CPI estimation, still reported net interest margin-wise as well as swap adjusted net interest margin-wise, VakifBank delivered one of the strongest quarterly performance within third quarter. As you know, in the beginning of November last week, October-to-October inflation announced officially with 32.9% area and all the correction will be reflected in Q4. And as a result of such big correction, we are expecting to receive additional TRY 16.5 billion additional interest income from CPI linkers. As you can see in the presentation, as of third quarter, we enjoyed almost TRY 20 billion interest income from CPI linkers. And on top of that, net-net total interest income from CPI linker portfolio will be reaching to TRY 35 billion, which will be the main driver of very strong quarterly performance within Q4. And another point I would like to take your attention is related to Turkish lira core spreads. Yes, it is true that for Q4, we will have additional sizable contribution from CPI linkers. But on top of that, additional positive news will be coming from the Turkish lira core spread development. As you can see on the below chart right-hand side, during Q3, we have additional expansion of Turkish lira core spreads, and now it reached to 450 basis points, which was 420 a quarter ago. So Q-on-Q-wise, Turkish lira core spreads extended by additional 30 basis points. And with the ongoing cycle, we believe within 2025, Turkish lira core spreads will reach to the peak level within Q4. So therefore, for the very short period net interest margin outlook for Q4, there will be a sizable contribution not only from CPI linker portfolio, but also from additional expansion of Turkish lira core spreads, it's coming, it's on the way. And therefore, we are quite optimistic for both Q4 net interest margin performance as well as overall profitability of the period actually. The next page is related to net fee and commission income. And on top of very eye-catching top line performance on the net interest margin and on the net interest income, another strong performance is visible on the fee and commission income side. Similar to net income growth, we also have outperformance in terms of yearly and quarterly growth on the fee income side. Total fees increased by 61% year-over-year versus 50% for the sector. And in terms of the quarterly evolution, we have another 19% quarterly fee income growth versus sector average of 14%. So therefore, core banking revenues, high-quality revenue generation capacity of the bank remain intact and further developed actually during the Q3. And in terms of the source of fee income, as you can see on the right-hand side, the bulk is coming mainly from the payment systems with more than 50% stake, followed by mainly lending-related fees, both cash lending as well as noncash lending. And in terms of quarterly and annual growth, the most visible growth rates are coming from payment systems and cash loans. And as a result of such strong performance on the fee income side, all fee-related KPIs seems to be in a very good shape like fee over OpEx or fee over income, fee total income. So therefore, on top of a very strong net interest margin performance, we are very happy to see and reflect another good results -- set of results on the fee income side. The next page is related to OpEx. And OpEx growth is more or less in line with the fee income. Both of them are above 60% year-over-year. And in terms of the OpEx rather than HR side, especially non-HR OpEx items like promotion expenses we are paying to payroll clients, this is the main driver of quarterly OpEx growth for Q3 as for the entire 2025. With Page 8, we can move to asset side. On the asset side, as of third quarter, our total balance sheet reached to TRY 5 trillion level, which corresponds to $120 billion equivalent. And out of this asset growth, more than 50% is coming from the lending side as the main activity. And on the lending side, in this quarter, we have a quarterly total lending growth of 9.1%, which is slightly higher than the sector average of 8.6%. So in this manner, on the total lending side, we continue to grow, and we continue to gain market share. And as of September end, our market share in total lending further increased to 12.5% area, which is the first ranking among the listed banks of Turkey. And in terms of the currency breakdown, we have another 9.8% quarterly lending growth, which is specifically the same compared to sector average. And on the hard currency side, we have additional 3.4% quarterly lending growth in dollar terms on the hard currency side. And when we look at the year-to-date numbers, year-to-date Turkish lira lending growth came at almost 29% and hard currency lending growth in dollar terms came at 18%. And these are the numbers actually we were sharing for the full year during the budget process. So on the lending side, as of September end, we are fully in line with the full year budget. In terms of the portfolio breakdown, during this quarter, most of the lending growth came from the SME side. So in this manner, third quarter was slightly different compared to first half of the year. Remember, during the first half of the year, quarterly lending growth was mainly coming from the corporate and commercial segment. But this time, due to commitment for some IFI-related projects, the main driver of lending growth was coming from the SME segment rather than corporate and commercial segment. And as a result of that, we have 16% Q-on-Q growth on the SME portfolio, which is followed by corporate and commercial segment with 7% quarterly growth. And on the retail side, we will continue to be on the conservative side and on the shy side. And therefore, our market share continued to diminish on the retail side, which is relatively lower compared to total market share on the total lending or our market share on the non-retail segment. Retail market share came down to 9.2%. However, on the corporate and commercial segment, we are almost reaching to 14% market share for both SME as well as non-SME side, which is fully in line with the strategy and the priority of the senior management. For the sake of the time, I am moving to Page 10, which is related to asset quality. On the asset quality, there are a couple of points I would like to share with you. Let me first start with the good part. The good part is related to collection performance. For the collection performance during this quarter, quarterly collection amount reached to almost TRY 6 billion, which is almost 2.5x higher than the last year average. So in this manner, collection numbers and collection performance seems to be in a very good shape, thanks to strong collateralization, thanks to our collateralized lending policy. That's the one part of the asset quality. The other part is related to simply ratios. And on the ratio side, we are calling this period as a normalization with the long-term average actually. At this stage, I would like to take your attention to NPL ratios. During this quarter, VakifBank NPL ratio further increased to 2.77%, which was 2.5% a quarter ago and which was almost 1.8% in the beginning of the year. So if we just look at from NPL ratio point of view, NPL ratio increased by almost 100 basis points year-to-date, mainly because of the NPL inflow driven by retail. And indeed, in this quarter, in terms of NPL inflows, we are having around TRY 19 billion NPL inflow. And out of this NPL inflow, almost TRY 11 billion is coming from the retail and credit card business and the remaining TRY 8.2 billion is coming from the corporate and commercial segments. And because of those NPL ratios -- because of those NPL inflows, NPL ratios are increasing. But on the flip side, it is normalizing with the sector average because if you look at the asset quality metrics from a long-term perspective, especially in this manner, as you can see in the middle of the page, we are indicating the NPL ratio of VakifBank during the period of 2008 to 2019. 2008 refers to the period with the global banking financial crisis period and 2019 simply refers to pre-pandemic period. And during that period of time, our NPL ratio in average was hovering around 4.3%. So from this perspective, actually, we are approaching to long-term cycle averages, which is also in line with our budget in terms of the budget and in terms of the expectations. For the full year, we were guiding up to 3% NPL ratio and 150 basis points net cost of risk. And indeed, as of today, we understand that those numbers and those guidance seems to be quite realistic as NPL ratio is hovering around 2.8% and full year cumulative net cost of risk is hovering around 154 basis points. So in this manner, especially related to NPL ratio, it is simply normalizing as the denominator effect to some extent is fading away. And the last point I would like to take your attention is related to slight contraction in the share of Stage 2 loans. As you can see on the right-hand side above chart, the share of Stage 2 loans within total loan portfolio contracted from 9.1% to 8.8%, but this is mainly simply a shift from Stage 2 to NPL. But within Stage 2, the share of restructured further increased from TRY 108 billion to almost TRY 125 billion, and this is simply a reflection of the regulation change, which simply makes easier for any kind of restructuring with the regulation introduced by the regulator as of July. With Page 11, we can move to deposit and liability side, starting with the deposit side. As of this quarter, for the first time, the amount of total onshore customer deposits exceeded TRY 3 trillion level. And year-to-date, our deposits increased by 23%. And in terms of the quarterly evolution, total deposit growth was up by 7.1% for Q3 specific and 23.4% year-to-date, and both numbers are slightly lower than the sector averages. In terms of the currency breakdown, our Turkish lira deposits are up by 5.7% and 18.8%, respectively, for quarterly and year-to-date. And those numbers are also slightly lower than sector trends. Because during 2025, we were mainly focusing in terms of making our deposit portfolio much more granular, much more retail-oriented and much more supported by the demand deposit side. And indeed, that strategy seems to be worked efficiently. In terms of the demand versus term deposit breakdown, the share of demand deposits in total increased to 30% area, which was less than 25% a year ago. And on top of that, the share of retail deposits also increased to 48%. These are the retail deposits and demand deposits. These are the main target areas for us in terms of deposit composition and all the numbers so far simply shows that this strategy worked very well, efficiently. The last -- another page I would like to take your attention is related to Page 13, where you can see the details of wholesale borrowings. As you know, during 2025 for Turkish banks, all wholesale borrowing channels are wide open and all of them are working efficiently. As of September end, total wholesale borrowing of VakifBank increased to $22.5 billion, which makes around 20% of total liabilities. And thanks to additional transactions we achieved during the first -- during October actually, that number further increased to almost $24 billion as of today with the new fresh DPR of $1 billion and with the recently issued additional Tier 1 of $500 million. Especially one important aspect of this very recent AT1 transaction is simply related to the fact that among all Turkish banks, including state banks and private banks, this transaction itself has the lowest yield with 8.2% and has the lowest reset spread margin. So therefore, we are extremely happy with the outcome and with the strategy. And our focus on the wholesale funding is still quite alive, especially with the further focus on long-dated IFI transactions and long-dated projects, and there will be much more transactions going forward. The last page I would like to take your attention is related to solvency ratios. As of September end, total reported CAR ratio materialized at 14.7%. Tier 1 ratio materialized at 12.34% and CET1 ratio materialized at 10.01% area. And as you can see on the right-hand side, we are also transparently showing the solvency ratios without BRSA forbearance measures, both bank-only basis and consolidated basis, including pre-provisioning. Given especially SIFI buffer, systematically important financial institution buffer, taken into consideration on a consolidated level rather than the bank-only level, we believe BRSA -- without BRSA forbearance numbers makes a lot of sense when we look at on a consolidated basis rather than bank-only basis, which take us to 9.56% as of September, which is quite a comfortable level compared to minimum requirements imposed by regulators as well as compared to our internal risk buffer. The last point I would like to share with you is related to the impact of very recent AT1 with the amount of $500 million. This transaction itself has a potential positive impact of 75 basis points in our Tier 1 ratio and Tier 2 ratio as of today. And that's the last point I would like to present to your attention. Thank you very much for your time, and thank you very much for listening to us. For the time being, we would like to conclude the presentation and leave the floor to Rob actually again. Thank you. Operator: Thank you, Mr. Ali Tahan. Thank you very much indeed. And yes, indeed folks, we're now going to start our question-and-answer session. [Operator Instructions] All right. Mr. Tahan, I see we have a written question. No audio questions so far, if you'd like to maybe have a look at that. [Operator Instructions] And I see we have written questions, Tahan, I hope you can hear me. Perhaps we can do that while we wait for an audio question. Ali Tahan: Sorry, Rob, I was muted actually. I couldn't reach out to you. Now I guess you are hearing to us. And we have one written question from Valentina from Barclays. She is asking different questions. Let me go over those questions. The first one is related to key guidance metrics and how VakifBank performed compared to guidance. She is also asking about 2026 guidance. As of today, unfortunately, given the budget process not finalized, we don't have the official guidance for 2026. But at least for 2025, we can try to summarize. In terms of the guidance on the lending side, for the Turkish lira lending growth, we were guiding high 20s. And as of now, we are already at 29%. So Q4 -- with Q4, I think we will be overshooting our Turkish lira loan growth. As of today, it is clear that Turkish lira lending growth will be above the 30%. And compared with the inflation, we understand full year Turkish lira lending growth will be in line with the inflation side. Given the year-end inflation is 32%, we believe Turkish lira lending growth for the full year will be also in line with the inflation growth on the Turkish lira lending side. On the hard currency lending side, we were guiding high teens in dollar terms for the full year. And as of September, it is already 18%, and it is already achieved actually. So for Q4, we don't expect too much room for hard currency lending. So more or less, it will be also the number for the full year. In terms of net cost of risk, it is also quite realistic. We were guiding 150 basis points net cost of risk. And as of September, on a cumulative basis, we are there actually. The specific number we are having is 154 basis points. On the swap adjusted net interest margin, we were guiding compared to previous year, 200 basis improvement. It will be also overshooting. I mean, probably the expansion on the swap adjusted net interest margin will be lower than what we were guiding. And I think in this manner, all the banks are in the same category compared to what we were expecting in the beginning of the year. We understand as of today, net interest margin expectations in the beginning of the year was quite optimistic and the numbers we are all delivering will be slightly lower than the guidance. So net-net, maybe rather than 200 basis points swap adjusted net interest margin improvement, we will end up with around 100 and 125 basis points net interest margin expansion. On the net income and OpEx growth, all of them were referring to above the inflation, and they are in line with each other. As you can see from September numbers, both on the fee income side as well as on the OpEx side, we have more than 60% growth on an annual basis for each, and this is also in line with the guidance. And all those numbers will take us to high 20s average ROE for the full year. That was our guidance. As of September, we are at 23% area, slightly lower than what we were guiding. But because of very strong net interest margin outlook and profitability outlook for Q4 because of the both core spread expansion as well as because of the sizable additional interest income from CPI linkers, we believe for the full year, high 20s average ROE is quite doable and realistic. So that was the brief summary of our guidance and what we achieved so far. For the second question, is related to asset quality. Do you see asset quality pressure in the SME or commercial segment? For the micro SMEs, partially, yes. However, for the midsized SME and for the commercial and corporate sector, we don't see a general weakness or we don't see a general trend actually. As you can see from the presentation so far, since the beginning of the year in the first 3 quarters of 2025, vast majority of NPL inflow was coming from the retail side. We believe going forward because of the restructuring easing, NPL inflow from the retail segment will be much more slower starting from Q4 onwards. And restructuring easing, which introduced from BRSA in July, it was an important game changer, and it will work efficiently. However, for the specific part of your question for the asset quality pressure in the SME, for micro SMEs, partially, we can say yes. But for the midsized SME and corporate and commercial segment, we don't see such general trend yet actually. The third question is related to hard currency liquidity as of third quarter. Maybe as of today and as of September, in terms of hard currency liquidity, all the banks are enjoying the most ample liquidity conditions in the hard currency. As of September end for us, it is hovering around $9 billion actually. And this number is one of the highest compared to the beginning of the year or compared to previous years. The next question is related to consolidated CET1 ratio. Does it include the free provisioning? Yes, that number assumes in case we are also releasing TRY 4 billion to the P&L actually. Without that number, it would be around 9.45%, 10 bps lower than what we are suggesting. I think that these are the questions. The last question is related to RWA without forbearance on consolidated and unconsolidated basis. We will come back on this via written e-mail to you, Valentina, after the call. I don't have the specific numbers with me for the time being. Another question is coming from the Goldman Sachs, Mikhail Butkov. Mikhail is asking simply would like to double check on CPI linker income contribution in Q4. Would it be TRY 16.4 billion incremental increase on top of normal income contribution? Yes, your understanding is correct, Mikhail. As of Q3, we are having around almost TRY 20 billion interest income from CPI portfolio. So with the actual numbers, given it is announced, we will make the full year correction and rather than TRY 20 billion, we will be enjoying around almost TRY 36 billion total interest income in Q4. I think that's the answer for your question. And the last question, actually a couple of questions. We have another question from Furkan Vefa Tirit. You were talking about TRY 35 billion income from CPI linkers. Is this the total CPI linker income in Q4? Yes, the total income in Q4 from CPI linkers will be TRY 35 billion. Where do you see the exit net interest margin for this year? And lastly, how do you see the net interest margin trajectory next year? I mean for the net interest margin side, of course, Q4 by far will be the strongest quarter of the year because of the peak level within 2025 of Turkish lira core spread evolution as well as because of the additional sizable interest income from CPI portfolio. So in terms of 2026, as we discussed, we will be discussing more in detail once the official budget is ready and approved by the Board, which is not the case. But in a [ bulk ] explanation, what we can tell to you, of course, we will be entering to the 2026 with a very good level of Turkish lira core spread level. And there will be more room for additional Turkish lira core spreads in the first half of the year as Central Bank of Turkey in our base case scenario, continue to cut rates. Of course, the level of cuts may not be as strong as 2025. Just to remind you, during 2025, Central Bank of Turkey start cutting rates by 350 basis points. And thereafter, [ they increased ] it to 250. And in the last MPC meeting, they cut by an additional 100 basis points. So in line with some of the research suggest in our base case scenario, we expect 100 bps rate cut at every MPC for next year. But as of today, of course, Central Bank of Turkey didn't announce yet the calendar and the number of MPC meetings for 2026. But as long as inflation is standing at the current trend, there will be more room for Central Bank of Turkey to cut rates. So therefore, it will be much more beneficial from Turkish lira core spread and expansion point of view. However, of course, at least in the first quarter compared to Q4, CPI linker contribution will be quite weak in the first quarter of 2026 compared to Q4 2025. But to some extent, it will be compensated by additional expansion of Turkish lira core spreads. These are the general trends for a very short period of time. But as of today, unfortunately, we are not in a position to quantify those trends in numbers. But of course, we will be happy to share our expectations once the budget is approved by our Board of Directors. Another question is coming from Mustafa Kemal Karaköse. Mustafa is asking, does ROE guidance include any provision reversal in the next quarter? What is breakeven NPL ratio in terms of required capital ratios? I mean we don't have any sensitivity for the second question. But for the first part, we -- in our base case scenario, we don't touch to remaining TRY 4 billion free provisioning, and we are still keeping it in our balance sheet. For your information, among the listed banks, top Tier 1 banks of Turkey, we are the only bank who still have free provisioning in the balance sheet. And in our base case scenario, when we are talking to high 20s full year average ROE, we don't take into consideration any free provisioning reversal. Rob, actually, these are the written questions I am seeing on the screens. As far as I understand, there is no audio questions. If there is any -- if I'm mistaken, please correct me. Otherwise, we will take 1 more minute for closing. Operator: Thank you, Mr. Tahan. Yes, indeed, no audio questions are coming through. And you're right, there don't seem to be any other written questions. So unless there are any other questions, I think, yes, we can -- you can move to the conclusion. Thank you, Mr. Tahan. Ali Tahan: Thank you. Thank you, Rob. Thank you very much for everybody for joining the call. Together with Ece and all IR colleagues in case of need, we are at your disposal and happy to answer any kind of follow-up questions. Thank you very much for your time and patience again and looking forward to talking in the first possible occasion. Operator: Thank you, Mr. Tahan. Thank you much for your presentation. And that, ladies and gentlemen, concludes today's conference call. We thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Lenzing AG Analyst Conference Call and Live Webcast. I am Matilda, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rohit Aggarwal, CEO. Please go ahead. Rohit Aggarwal: Thank you very much. Ladies and gentlemen, welcome to the presentation of Lenzing's results for the first 9 months 2025. With us today is also Nico Reiner, our CFO. Let's go through our agenda for today. I'll start with a summary of the key developments, followed by the market update as well as our refined strategy. Nico will then guide you through the financials, and I will talk about our investment highlights as well as the outlook. And as usual, at the end, we are looking forward to your questions in our Q&A session. Let's start with the overview of the key highlights for the first 3 quarters. The market continued to remain challenging, and it's even more important that we have refined our strategy with a clear focus on premiumization and excellence. Revenue and EBITDA continued to improve in the first 9 months, supported by a strong first quarter. However, market headwinds impacted us continuously in quarter 3. The market environment is marked by geopolitical uncertainty and especially the aggressive customs policy. EBITDA was additionally negatively impacted by restructuring one-offs. Operational excellence continues to be key for us, and we are further raising the bar on our agility and flexibility. Liquidity is one of our key priorities, and we made great progress. After this year's refinancing, our liquidity cushion reached a very solid level of EUR 1 billion. What remains unchanged are our core strengths, innovation and sustainability, where we were just confirmed as worldwide leader. This leads us to a confirmed EBITDA outlook by year-end. However, it needs to be said that visibility remains quite limited. International tariff measures have very much characterized the last couple of months globally. In Q1, markets were impacted only in a very limited way by tariff developments and Lenzing achieved a strong result. However, the escalation from reciprocal tariffs followed in early April. This has led to both supply and demand shocks impacting global value chains. Ongoing and repeatedly changing international tariff measures and the resulting uncertainty led to tangible stress along the textile value chain and impacting consumer confidence negatively. The direct impact for Lenzing is limited, however, leads to indirect effects on both demand and prices. On a more positive side, I can say that the nonwoven markets were less affected by these tariff developments. To mitigate the tariff impact, Lenzing took actions in 4 ways. Number one, we maintain very close contact to our customers and regional value chains to handle the situation in the best possible way and to strengthen demand visibility. Number two, we believe that we are better positioned than other fiber manufacturers given our global footprint, which allows us to shift fiber volumes between our production sites in order to manage cost and trade impact. Number three, we further strengthened our operational efficiency, which includes the target to reduce around 600 jobs in Austria, mainly in administration. Number four, we decided to start a review of strategic options, including a potential sale for the Indonesian production site, which supports our strategic focus on branded, high-performance fibers with higher margins. Let's look now in more detail how the markets have developed. The relevant markets for Lenzing are textiles, nonwovens on the fiber side as well as dissolved wood pulp. When adjusted for inflation, demand for apparel worldwide was up 2% in the first 9 months of 2025 versus a year ago. Consumer sentiment remains low, which is negatively impacting discretionary spending with elevated saving rate and a wait-and-see attitude. Growth driver was the U.S., which was driven by consumers pulling forward purchases in quarter 2 and quarter 3 in response to tariffs, while Europe and China were mostly flat in a challenging macro and cost of living environment. Let's turn our attention to nonwovens. Here, end markets show higher resiliency with a relatively stable consumer demand. Compared to previous years, the seasonality period with weaker demand lasted a bit longer into September. However, I can say that the development in October was promising given also a more positive sentiment towards 2026. The trend towards less plastics is ongoing, and the carbon footprint and other sustainability credentials are increasingly becoming a differentiator for nonwoven manufacturers and brands driven by consumer awareness and retail commitment, especially the U.S. and regulatory pressure in Europe. DWP demand is mostly driven by the production of regenerated cellulosic fibers. The production cuts we have seen in the viscose industry in quarter 2 were negatively impacting DWP demand and prices accordingly. As operating rates in viscose plants increased in quarter 3 and paper pulp prices stabilize, DWP prices saw some support, at least in U.S. dollar terms. Let's have now a look at the fiber prices on the Chinese market. Please keep in mind that prices shown on this slide are generic market prices. Generic viscose prices in China increased gradually in the third quarter in U.S. dollar terms. In July and August, demand improved and inventories fell as peak season was on the horizon. However, the pace of price increases remained cautious. At the end of September, the price of medium-grade generic viscose fiber stood just 2% higher compared to the end of second quarter at RMB 13,050 per ton. However, due to the weakened U.S. dollar, prices have decreased in euro terms, which is impacting Lenzing negatively. The situation on the cotton market did not change much in the third quarter, and international cotton prices fluctuated on a low level within the range. Dissolving pulp prices stopped falling in the third quarter with support from improved demand from viscose plants and some temporary supply constraints. In the third quarter, imported hardwood DWP prices went up by 2% to USD 818 per ton. Here again, prices in euro terms have decreased due to the weakened U.S. dollar. Lenzing prices are mainly traded at a premium compared to generic prices as the current share of specialties is at around 90%, and we are gradually withdrawing from the lower-margin commodity segments. Let us now turn to the development of costs. Energy and chemical costs remain significantly higher than historical levels, especially energy prices in Europe, but at least they decreased somewhat in quarter 3 compared to the second quarter. Geopolitical conflicts such as Russia, Ukraine and the Middle East continue to fuel the volatility of European gas prices. Lower demand due to warmer weather led to somewhat reduced gas prices in summer. Caustic soda prices remain high across regions, but reduced in general compared to Q2 due to weaker seasonal demand. Even with a slight improvement in the second quarter, both energy and chemical costs remain a major challenge for fiber production. As the relevant markets for us still show no signs of a sustainable recovery, it is even more important that we continue to keep our full focus on cost excellence, which remains a key pillar of our performance program. In 2024, we already realized over EUR 130 million in cost savings, and we do expect cost savings to further increase to annual cost savings of more than EUR 180 million for this year. We are clearly well on track to meet this target as well. To make it clear, we're talking about our recurring targets with an ongoing impact beyond this year as well. We can certainly be satisfied with our success so far, but there are still improvement areas ahead of us in order to maximize our full potential. As communicated about a month back, we are refining Lenzing strategy. Our refined strategy is built around 4 strategic priorities that together unlock value and prepare Lenzing for the future. Unlocking value happens in the first 2 pillars, premiumization and excellence. Premiumization means that we will concentrate more strongly on our branded and innovative fibers like TENCEL, VEOCEL and ECOVERO and gradually step back from less profitable commodity segments. By doing so, we improve margins and position Lenzing in areas where we can truly differentiate. The second is excellence. We are embedding a culture of efficiency and discipline across the group, not just through one-off savings, but by institutionalizing cost control, optimizing our footprint and streamlining structures. This makes us leaner, more agile and more resilient. We are implementing tough but necessary measures. By the end of 2025, around 300 positions will be reduced in Austria, mainly in overhead, supported by a social plan and with full assistance for those affected. This is expected to result in annual savings of over EUR 25 million from 2026 onwards. By 2027, another 300 positions will be reduced through internationalization as we strengthen our footprint in Asia and North America. Both measures will lead to total annual savings of more than EUR 45 million, latest fully effective before end of 2027. The third pillar is innovation. Now here, we will focus resources on fewer but higher impact projects, accelerating time to market and ensuring that our pipeline continues to provide the next generation of premium fibers, whether in textiles or nonwovens. And finally, sustainability. This has always been part of Lenzing's DNA, but going forward, it will be leveraged even more as a value driver. With growing regulation and customer demand for sustainable products, our leadership in this area is a true competitive advantage. Taken together, these 4 priorities, premiumization, excellence, innovation and sustainability ensure that we just don't react to changes in the market, but actively shape them, creating long-term value for customers, employees and shareholders. Innovation and sustainability remain the foundation of Lenzing's long-term strategy that they are what sets us apart from our competition. Even as we streamline, we will not compromise in these areas. On the innovation side, our pipeline continues to create real opportunities. One example is our new TENCEL HV100 fibers. The fiber features variable cut lengths designed to mirror the irregularities of natural fibers and brings undefined rawness of nature into TENCEL Lyocell portfolio for woven products such as denim. On the sustainability side, our leadership is recognized worldwide. We have just been reaffirmed our EcoVadis platinum status. And with this, Lenzing is now in the top 1% of companies in sustainability performance. We've also just been confirmed as a global leader in the Canopy sustainability ranking as we have taken once again first place in this year's Hot Button Report published by the Canadian nonprofit organization, Canopy. These achievements are not just certificates, they are an asset that strengthens our brand, enhances customer partnerships and increasingly drives premium pricing. And with this, I hand over now to Nico for an update on financials. Nico Reiner: Thank you, Rohit, and a warm welcome from my side as well. The third quarter was negatively impacted by weakened fiber demand in continuously challenging markets with revenues decreasing by 3% year-on-year. EBITDA decreased by EUR 27 million to EUR 72 million. This was partially driven by the decrease in revenue just to mention. In addition, one-off restructuring costs for the headcount reduction program to mitigate market impact in the amount of EUR 13 million have also negatively impacted EBITDA. Additionally to that is to mention that we had the annual maintenance shutdown of LDC in the third quarter. Looking at the first 9 months in total, both our revenues and our margins increased, thanks to the measures that we have actively taken. Revenue increased by EUR 14 million in the first 9 months compared to the 9 months of 2024 and reached EUR 1.97 billion. EBITDA increased by EUR 77 million to EUR 340 million as the number of CO2 certificates held continued to increase, we decided to sell some of them in the amount of EUR 37 million in the first 9 months of this year, which positively impacted the EBITDA. Depreciation was at EUR 320 million, including an impairment of EUR 82 million, which I will talk about on the next slide. This led to an EBIT of EUR 21 million, which compares to EUR 38 million in the first 9 months of '24. Income taxes amounted to EUR 6 million compared to EUR 78 million in the first 9 months of '24, and the financial result was minus EUR 119 million compared to minus EUR 72 million in the first 9 months of '24. As a result, there was a loss of EUR 169 million for Lenzing shareholders, which compares to a loss of EUR 135 million in the first 3 quarters of 2024. Let's make it clear. Even though Q3 was negatively impacted by one-offs such as the restructuring costs, we are not satisfied with the result. However, on a positive note, we saw some stability in fiber demand in September compared to July and August. And October looks also more promising with a currently quite stable order book situation. Let's move to the next slide. As communicated, our refined strategy also addresses reviewing selected sites, including the Indonesian plant where potential sale is under consideration. In this context, noncash impairment losses on noncurrent assets, in particular, property, plant and equipment of EUR 82.1 million were carried out. The impairment losses have a negative impact on EBIT, but not effect on EBITDA. EBIT, excluding the impact of the impairment, would have been slightly negative at minus EUR 6 million, which compares to minus EUR 88 million reported EBIT. Please note that this impairment amount is not audited for Q3 closing and therefore, subject to change. Looking now at cash flow. Trading working capital further decreased and was down by 6% compared to the end of the second quarter due to lower inventory levels. With regards to CapEx, Lenzing continues to put a clear focus on maintenance and license to operate projects as part of its performance program and CapEx remained on low levels of EUR 32 million in Q3. As you can see, we continue to have a very disciplined approach to capital allocation. As a result, unlevered free cash flow more than doubled to EUR 103 million in Q3, and we clearly continue to have a very clear focus on free cash flow generation. Let's move to the balance sheet. On the left side of the slide, we show the development of net financial debt. Even though the markets were challenging in the third quarter, net financial debt continues to move into the right direction and came further down by EUR 35 million to about EUR 1.4 billion by the end of September. On the right side, you see the development of our liquidity cushion, it increased by EUR 23 million compared to the end of last quarter and reached a very solid level of EUR 993 million. Let us look at our debt maturities on the next slide. Let's have a short recap on the refinancing measures we have taken recently. In October last year, we have converted the project financing of our Brazilian joint venture of USD 1 billion into a stand-alone corporate finance structure with a further shift of debt maturities. The successful placement of the new hybrid bond in the amount of EUR 500 million in July this year followed the EUR 545 million syndicated loan secured in May. Those measures marked further milestones in the professional and forward-looking management of our capital structure. With this, we have proven to have access to capital markets despite challenging times, and we have essentially secured our financing through 2027. We can now continue to fully focus on executing our successful performance program aimed at improving margins and free cash flow as well as implementing the refi strategy. With this, I hand over back to you, Rohit. Rohit Aggarwal: Thank you, Nico. Let me summarize now why Lenzing represents a compelling investment case today. First, we are recalibrating our asset base. That means moving away from a volume-driven model towards one that prioritizes economic value creation. We are reviewing underperforming assets, including the Indonesian side and focusing investment where returns are highest. Second, we are refocusing the organization. With leaner structures, institutionalized cost discipline and a stronger international footprint, particularly in North America and Asia, we are aligning resources with future growth opportunities. Third, we are resharpening our market focus. We are withdrawing from commoditized fibers and concentrating on premium branded products and resilient nonwoven applications. This makes our business less cyclical and more predictable. Finally, we are positioned to regain valuation. We combine a proven ability to execute, whether it's savings, refinancing, EBITDA growth with unique differentiation through innovation and sustainability. This is how we will restore investor competition and create long-term value. We now come to the outlook. I can clearly say that thanks to our performance program, the operational performance in the first 9 months 2025 was solid despite the still challenging market environment in the third quarter. In terms of fiber demand, I expect that we have already passed the low point with a positive development in September compared to July and August. As Nico also mentioned, we have seen continued promising developments in October and the order book situation looks currently quite stable. We assume relatively stable demand in pulp and have a cautious outlook on the generic fiber market development in the fourth quarter of 2025. We expect energy and raw material costs to remain on elevated levels. However, market visibility remains still on relatively low levels. While the market has not helped us so far, we continue to take the future in our own hands. We expect operational results to continue to be positively impacted by the performance program, and we keep the expectation for EBITDA for 2025 financial year to be higher than in the previous year. By 2027, we target approximately EUR 550 million EBITDA, assuming stable market conditions. With this, I will hand over back to the operator for Q&A. Operator: [Operator Instructions] The first question comes from the line of Christian Faitz from Kepler Cheuvreux. Christian Faitz: Two questions, please. First of all, your free cash flow continues to be on a nice good trajectory. Congrats on that. Would you be able to provide us a free cash flow guidance for the few months remaining in the year? And then second of all, can you tell us a bit about the capacity utilization? I note, obviously, your statements that things in terms of order income have improved, I guess, from September also into October. But where are your capacity utilizations at this point in time versus historical trends? Rohit Aggarwal: Thank you, Christian. First question with regard to potential outlook on the fourth quarter for the free cash flow, Nico, please? Nico Reiner: Yes. Thank you. So overall, as we have communicated now since, I think, meanwhile, 7 or 8 quarters, we are very much focused on generating free cash flow. And we are continuing this journey. So we overall will still work heavily to improve our free cash flow generation, and we are also clearly positive to have a positive further continuation of that story. But nevertheless, don't forget in the fourth quarter, there are always some one-timers, especially in regards to interest payments and so on. But overall, I think we will clearly continue the journey with a positive free cash flow for 2025. Christian Faitz: The second question with regards to the utilization, capacity utilization, can you give us some indication there? Rohit Aggarwal: Yes. Thanks, Christian, for that question. What I can say is the year has been a bit of a roller coaster given what we spoke about from a tariff leading to a lot of uncertainty in the value chain. So we've seen movements through the year, which were pretty strong starting quarter 1. We did see the books getting a bit slowdown in quarter 2, quarter 3, and then we are seeing now a recovery. At this point in time, I can say that we are running fairly back to normal capacity utilization. Of course, based on plants and products, it could vary slightly. But by and large, I would say we are recovering almost back to a full normalized state. Operator: [Operator Instructions] The next question comes from the line of Patrick Steiner from ODDO BHF. Patrick Steiner: Patrick Steiner speaking. Two questions from my side. Firstly, on your annual expected cost savings of EUR 45 million due to the personnel reduction of the roughly 600 jobs in Austria. You said it will take full effect by the end of 2027. What can we expect for 2026 and '27 in absolute terms? That's the first one. And the second one, in your Q3 report, you wrote that you expect that the passing of higher costs related to tariffs will lead to falling demand in the U.S. by next year at the latest. Could you please elaborate further on this and how this might hit you in terms of timing and so on? This would be nice. Rohit Aggarwal: Thank you, Patrick. So the first question with regards to the [ wave ] or how does EUR 45 million personnel cost reduction savings will be reflected in 2026 and 2027. This one for you, Nico, please. Nico Reiner: Yes, Patrick. So we do have our program here separated in 2 waves. So there is wave #1. Wave #1 would mean the first 300. And as already mentioned and commented during the presentation, there will be a EUR 25 million ticket jumping in 2026 and then as a continued improvement also going forward. And for the second phase of cosmos, here, we see further improvement starting already in 2027 and then fully being embedded in 2028. So in 2028, we see the additional EUR 20 million. So if you would sum it up EUR 25 million plus the EUR 20 million, that's the EUR 45 million ticket we have been talking. I think that gives a relatively clear picture. Unknown Executive: Then the second question from Patrick is with regards to the expected falling demand that we expect in the U.S. in terms of overall apparel demand. Rohit, please. Rohit Aggarwal: Yes. Sure, Patrick, thank you for that question. We've seen a bit of consumer behavior in Americas, which has been largely trying to circumvent or delay. And therefore, they have been doing -- putting forward their purchases in terms of apparel. So there have been a lot of pre-purchasing that has happened, and therefore, that we saw impact on the value chain kind of playing out through quarter 3. The prices are going to be looking to move up in the U.S. market. We expect that most of the retail would be affected. And we are continuously monitoring that very, very closely. Now if you look at and compare that to overall other supply chains outside textiles, we have seen that, by and large, those demands have stayed pretty flat in terms of -- and consumer behavior has not been impacted that significantly. But again, it's too early at this stage to make any prediction on how that will play out because it will be the scale of what level of price increases the retailers are able to put on the shelves and also how much of efficiency gains will happen in the supply chain through managing the cost mitigation around the tariffs. So -- but on our side, we are looking to continue to move our product into nonwovens and then we are able to find ways to offset our tariffs and then pass price increases where the contracts allow. Operator: [Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rohit Aggarwal for any closing remarks. Rohit Aggarwal: Well, thank you very much for joining us today, and we appreciate the questions. We hope to be able to see you again on March 19 when we will disclose our full year results for 2025. So look forward to interacting that time. Thank you very much for joining us again. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.