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Operator: Hello, and welcome to Clear Channel Outdoor Holdings, Inc. Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Also, as a reminder, this conference call is being recorded today. If you have any objections, please disconnect at this time. It's now my pleasure to turn the call over to Laura Kiernan, VP of Investor Relations. Laura, please go ahead. Laura Kiernan: Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO; and David Sailer, our CFO. They will provide an overview of the third quarter 2025 operating performance of Clear Channel Outdoor Holdings, Inc. We recommend that you download the third quarter 2025 earnings presentation located in the Financial Information section of our Investor Relations website and review the presentation during this call. After an introduction and review of our results, we will open the line for questions. Before we begin, I would like to remind everyone that during this call, we will make forward-looking statements regarding the company, including statements about its future financial performance and its strategic goals. All forward-looking statements involve risks and uncertainties, and there can be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations. Please review the statements of risk contained in our earnings press release and on our filings with the SEC. During today's call, we will also refer to certain measures that do not conform to generally accepted accounting principles. We provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of the earnings presentation. When reviewing the earnings presentation, it is important to reiterate that all European and Latin American operations are reported as discontinued operations for all periods presented. This includes our current business in Spain, our former business in Brazil, which was sold on October 1, our former businesses in Mexico, Chile and Peru, which were sold on February 5; and our former Europe North segment, which was sold on March 31. Our reported consolidated results include the America and Airport segments and Singapore. Also, please note that the information provided on this call speaks only to management's views as of today, November 6, 2025, and may no longer be accurate at the time of replay. Please see Slide 4 in the earnings presentation, and I will now turn the call over to Scott. Scott Wells: Good morning, everyone, and thank you for taking the time to join us today. Many thanks to those of you who were able to participate in our Investor Day in September. We hope you came away with a clear understanding of our vision, strategy and financial goals as we center all our efforts on accelerating our revenue growth in the U.S., increasing our cash generation and reducing debt. Turning to our results. On a consolidated basis, we generated revenue of $405.6 million, representing a year-over-year increase of 8.1%. This was driven by record third quarter revenue levels in both segments. Our Americas segment grew 5.9% with our 18th consecutive quarter of year-over-year local revenue growth, and Airports delivered another great quarter with 16.1% year-over-year revenue growth. We saw growth in key markets, including New York and San Francisco, in national and local sales channels and in digital and programmatic sales. Categories that continue to perform well across the company include banking, legal services and technology, including AI. We remain on track to achieve our financial guidance for the year as we benefit from our focus on customer centricity, accelerating technology capabilities and sales execution and further strengthening our balance sheet. Our transition into a U.S.-focused company has improved our risk profile while allowing us to focus our management team on a range of initiatives to drive more business across our platform while pursuing operating efficiencies through our zero-based budgeting effort. In addition to our financial results, we announced some important milestones during and shortly after the third quarter as we continue simplifying and derisking our company. On September 7, we entered into an agreement to sell our business in Spain to Atres Media for approximately $135 million. On October 1, we closed the sale of our business in Brazil for $15 million. Once the Spanish sale closes, we will have completed international divestitures worth nearly $900 million. We also continue to derisk our capital structure and extend our debt maturity profile with the August debt refinancing. We continue to strategically reinvest in our business and our digital conversion plan remains key as we leverage our reach, data analytics capabilities and verticalized sales teams to expand our presence in the broader advertising market and gain share. Last quarter, I spoke about the success we were having with pharma driven by our advances in technology, analytics and our go-to-market strategy. This quarter, I would like to share another example of how we are leveraging the power of our out-of-home scale to serve brands in major cities like New York with global events like the recent U.S. Open tennis tournament. For this year's tournament, we executed multiple campaigns for national advertisers looking to connect with the massive and highly attractive audience attending the U.S. Open. We delivered an unmatched advertising platform covering thousands of tennis fans throughout their journey from our inventory in the New York airports as they arrived to our newly expanded New York roadside inventory as they travel to and from the city and finally, through our high-profile inventory in and around city field, adjacent to the U.S. open venue. Our business is increasingly surrounding live events with powerful advertising displays in dynamic and integrated ways. This is also a great example of how we're performing on our expanded New York inventory, and I'm pleased to announce that we're ahead of our internal projections for these assets. They are on track to be cash flow positive in year 1. We've lapped the fixed cost site lease headwind and expect to see accelerating growth as we've now fully incorporated them into our network. Diving deeper into our airports platform to show the power of our inventory, a recent study by Nielsen Scarborough found that airports media is the perfect canvas on which to tell a brand story. According to the study, among frequent flyers who noticed airport advertising, 82% read the ads, 61% recalled seeing them and 57% took action after viewing an ad, a clear demonstration of the impact of this medium. Additionally, the study shows that experiential marketing works well in airport settings and in-person brand experiences are highly appealing with 89% of frequent flyers wanting to sample food or beverages and 62% interested in trying new products they had seen advertised in airports. As we execute on our revenue-driving initiatives, we are also on track to deliver a further reduction in our corporate costs. This is enabled by a combination of direct savings related to the sale of our international businesses as well as the additional efficiency opportunities stemming from our zero-based budgeting efforts, as I previously noted. We are on track to deliver the $50 million in corporate cost savings announced during our Investor Day. To sum it up, our business remains healthy in the fourth quarter, and we are on track to deliver on our financial guidance for the year. We now have 90% of our Q4 revenue guidance under contract and our business pipeline remains strong. In addition, we remain on track in pursuing the multiyear goals we discussed at Investor Day of 6% to 8% adjusted EBITDA growth, $200 million in AFFO and net leverage of 7 to 8x by the end of 2028. So the future looks bright for our company as we actively pursue what we believe is a substantial opportunity to unlock shareholder value as a U.S. focused organization and leader in our space. And with that, I will turn the call over to Dave for the financial review. David Sailer: Thanks, Scott. On to Slide 5 for an overview of our results. The amounts I refer to are for the third quarter of 2025 and the percent changes are the third quarter 2025 compared to the third quarter of 2024, unless otherwise noted. Our results this quarter continued the steady trend we've seen all year with solid revenue growth and strong liquidity, positioning us well to achieve our year-end guidance. Consolidated revenue for the quarter was $405.6 million, an 8.1% increase, in line with our guidance. The increase was driven in part by strong digital revenue and growth across all sales channels. Adjusted EBITDA for the quarter was $132.5 million, up 9.5% and AFFO was $30.5 million, up 62.5%, both within our expectations. On to Slide 6 for the Americas segment third quarter results. America revenue was $310 million, up 5.9%, in line with guidance. The increase reflected growth across both print and digital revenue with continued benefit from the MTA Roadside billboard contract and improvements in the San Francisco Bay Area. Mobile sales were up 5.7% and national sales were up 6.1% on a comparable basis. Segment adjusted EBITDA was $133.4 million, up 3.9% with a segment adjusted EBITDA margin of 43.1%. Please see Slide 7 for a review of the third quarter results for Airports. Airports delivered another great quarter with revenue of $95.6 million, up 16.1%, in line with guidance. The increase was driven by digital revenue up 37.4% and strong performance in national sales, which grew 25.2%. Mobile sales were up 3% on a comparable basis. Segment adjusted EBITDA was $21.9 million, up 29.2% with a segment adjusted EBITDA margin of 22.9%. Moving on to Slide 8. CapEx totaled $13.2 million in the third quarter, down 25.9%, driven by lower digital spend and reduced contractual spend on shelters. Now on to Slide 9. We ended the quarter with liquidity of $366 million, which includes $155 million of cash and $211 million available under the revolvers. Following the amendments of our revolving credit facilities in the second quarter, which extended maturities through June 2030, we completed a $2.05 billion senior secured note offering in August, refinancing $2 billion of existing notes and increasing our weighted average time to maturity to 4.8 years at the time of the refinancing. Through this refinancing and our second quarter debt buybacks, we have maintained essentially flat annualized cash interest, and this does not include interest savings of approximately $28 million from the prepayment of the CCIBV term loans. Now on to Slide 10 and our guidance for the fourth quarter and full year of 2025. For the fourth quarter, we expect consolidated revenue to be within $441 million to $456 million, representing a 3% to 7% increase over the same period in the prior year. We expect America revenue to be within $322 million to $332 million, representing a 4% to 7% increase over the same period in the prior year and Airports revenue to be within $119 million to $124 million, representing a 3% to 7% increase over the same period in the prior year. Given our year-to-date performance and our outlook for the fourth quarter, we've tightened our consolidated full year revenue guidance range. We now expect consolidated revenue to be within $1.584 billion to $1.599 billion for the year, representing a 5% to 6% increase over the prior year. We continue to expect full year adjusted EBITDA to be within $490 million to $505 million, up 3% to 6% from last year, and we now expect full year AFFO to be within $85 million to $95 million, up 45% to 62% from last year. And we continue to expect full year CapEx to be within $60 million to $70 million. And following our recent capital markets transactions, we continue to anticipate future annualized cash interest of approximately $390 million, assuming no additional activity. As we discussed during Investor Day, we are powering our cash flow flywheel, including growing revenue, expanding margins, increasing AFFO and reducing debt. Through this meaningful debt reduction, we are actively converting enterprise value from debt to equity. And now let me turn the call back to Scott before we take your questions. Scott Wells: Thanks, Dave. To summarize, we believe we are at a pivotal moment with industry trends in our favor, irreplaceable premium inventory and strong digital capabilities that together create real growth opportunities. The disruption in search and linear TV ad markets makes this the most exciting ad market in which we've operated. As the last mass visual medium with increasing analytic firepower, our industry is poised to gain share if we do the things we need to do. I believe we are doing those things and excited about the opportunities that lie ahead. To that end, I want to thank our company-wide team for their continued dedication and hard work as we pursue this great opportunity. We are confident in our ability to achieve our near-term guidance and long-term goals, including sustainable top line growth, expanded margins and meaningful deleveraging in line with what we discussed on our Investor Day. For those of you who don't recall, we described adjusted EBITDA growth of approximately $115 million by year-end 2028 and applied our then current multiple, yielding value creation of roughly $1.3 billion. We added to that further debt paydown of about $400 million in the same time frame. Taken together, we see this as an opportunity for value creation of approximately $1.7 billion for shareholders based on the plan we laid out with further upside if we realize some of the discontinuities we discussed or see improvement in our valuation multiple. With a streamlined business and a growing digital portfolio, we expect to enter 2026 from a position of strength. And now we welcome your questions. Operator? Operator: [Operator Instructions] Our first question is from Aaron Watts from Deutsche Bank. Aaron Watts: A couple of questions for me. I wanted to start with one on the ad environment for both the billboard and airports unit. Can you provide a bit more detail around how advertiser behavior to close out the year is setting the stage for early '26? And I know we've all been waiting for some stronger tailwinds from the ad market. Curious if you feel that momentum building. Scott Wells: Thanks, Aaron. This is always a tough question to answer from our little quarter of the world. But we really like what we're seeing in the marketplace right now. The year has built how we expected it would. And if you go back to our earlier earnings calls, we sort of described how we thought it would build, and it very much has had momentum build. And has had good strength. We've seen it both in local and in national and probably relative to kind of prior quarters in our book, national has probably been better than what it has been in the last couple of years, and we see that continuing into 2026. I don't know how much I generalize that to the total ad market because I don't have visibility. And I do think the things we called out on Investor Day around disruption in search and disruption in linear TV are providing us some tailwinds. We certainly are hearing from advertisers that we're picking up some share as a result of those disruptions. Aaron Watts: Okay. That's helpful. And then if I could ask one more. There was a report about interest in the company from a third party. We've also seen public comments from your shareholders encouraging consideration of strategic alternatives. Can you provide us with an update on where all that stands? And has any of this changed how you and the Board are thinking about the strategic future of the company? Scott Wells: Aaron, we're a public company. You know the rules on this as well as I do. So I'm not going to be able to comment on market speculation. Aaron Watts: Okay. Fair enough. If I could squeeze one last one in, maybe for Dave. You ended third quarter with around $150 million of cash held in the U.S., assuming Spain closes as expected, you'll have further liquidity coming in. Remind us what minimum amount of cash you would like to keep on hand day-to-day and how you're thinking about priorities for allocation of that excess cash above the minimum over the near-term horizon. David Sailer: Sure. Thanks for the question. Look, now that we're a U.S. focused business, I've mentioned this in the past. We're probably targeting between $50 million and $75 million of a minimum amount of cash. I think, allows us to weather the seasonality of our business. We have stronger cash generation in the second half of the year. But we're looking to deploy cash in a disciplined way, prioritizing our near-term debt as we look forward. But prioritizing the paydown of debt, as we mentioned before, is a priority for the business, in addition to obviously investing in the business as well. Operator: Our next question is from David Karnovsky from JPMorgan. David Karnovsky: Scott, you noted in the release strength in the Northern California market for billboard and airport. I was hoping to just drill in more. Maybe you could speak to what's improved, where you're seeing that incremental demand? And then just as a follow-up, just with the government shutdown, any impact here either due to government as a category or maybe looking ahead, just the potential for air traffic reductions and what that could mean to the airports business? Scott Wells: Sure. Thanks, David. On NORCAL, there are a few things that have been going San Francisco's way of late. And I think number one is that the city reputation has bounced back, and that has caused broader advertiser interest in the market. A couple of years ago, we suffered as the kind of reputation of where San Francisco was degraded. We're now benefiting from a lot of changes that the city has made cleaning itself up and making progress, and that has helped. I think the second thing and from a dollar level, this might actually be bigger, but it's just kind of one vertical, but it's the tech vertical and specifically AI has been absolutely focused on out-of-home as a vehicle to promote the companies that are emerging in that space, both the big ones and smaller ones. So whenever you have a geographic area with finite inventory where there's a lot of competition to get the word out, that is good. We are a supply and demand business, and this is something that we're benefiting from both in the road side and in airports. So we're very happy about the direction San Francisco is moving in right now. On your second point about government shutdowns, we have not seen anything disrupting things to date. Obviously, we are watching it very closely, but we really have not seen a drop in air traffic. The delays have been episodic and around the system, but have not, at this point, driven any dialogue. So, really nothing to report on that. Probably for us, the government shutdown impacts us more in our Washington, Baltimore market, where just that is not an area that advertisers are necessarily prioritizing much because commercial activity is somewhat diminished in that area. But honestly, it's not enough for us to see in the numbers at this point. Anyway, I'm just saying that, that would be more where I would look at our portfolio for an impact of it. Operator: Our next question is from Lance Vitanza from TD Cowen. Lance Vitanza: Nice job on the quarter. On the Americas, you mentioned strength in San Francisco and New York, but not in L.A. And I'm wondering if you could give an update on the prospects for, I guess, entertainment as a national category, but also L.A. as a local market. And then actually, I'll just throw in auto insurance as a national category, too. I'd be curious to know how those 3 are shaping up. Scott Wells: Great. Okay. Lance, that's a broad field. Let me deal with L.A. first. We'll come back to insurance. This has been a tough year in L.A. starting with the fires in January and all of the movement in the entertainment space. Entertainment is being cultivated by lots of different cities around the country and around the world, frankly, for production. And I think we've all seen the articles exploring how entertainment is "moving out of L.Aâ€. I think L.A. would still very much assert itself as the entertainment capital of the world. But that obviously is something that is coveted and that other people are impacting. And we have not seen the entertainment vertical. It's been kind of a laggard all year for us. I don't think that makes us think that that's a permanent condition, but L.A. is going through a phase like many cities go through. I mean we just talked about San Francisco with David a minute ago. The outlook in 2023 was very bleak. And here we are 2 years later, and it's a shining star. And I think I'm a big believer in L.A. I'm a big believer in L.A. bouncing itself back. And as the entertainment industry evolves and as the rebuilding starts to take hold, which has taken longer, I think, than any of us would have hoped, I think you're going to see L.A. reassert itself and get itself moving in the right direction again. I do have a lot of faith that Los Angelinos are going to burnish their city and get it moving in the right direction. But it has been a laggard for us this year. We're looking forward to talking about its renaissance though soon. In auto insurance, that's a brighter picture. That market, and you and I have talked about this a lot in the last couple of years. They were a really big category for us pre-COVID. Post-COVID, they had shrunk quite a lot. And we're seeing auto insurance come back and the activity that I'm seeing heading into 2026 makes me feel like this is going to have some durability. So I'm hopeful that we'll be talking about auto insurance as a success story for us here over the next couple of years. It's moved in the right direction. It will be a grower for us this year, but I think there's still plenty of upside to that vertical for us. Lance Vitanza: If I could pivot to New York, and you've talked a bit about that in the prepared remarks, but I'm concerned about New York City going forward and perhaps falling into a sort of a San Francisco style slide. And so I'm just wondering if you could just clarify relative to, I guess, OUTFRONT is really the big competitor. Are you more or less exposed to the New York City marketplace in terms of like revenue contribution relative to other areas? Scott Wells: So I don't know their numbers off the top of my head, but I would guess that they are more exposed than we because MTA Subway is a bigger contract than the Port Authority and airports, and they probably have, of the other assets sprinkling around probably somewhat more. But you need to talk to them about what percentage of their revenue it is. For us, it's an increased percentage as a result of the roadside contract MTA that we picked up a year ago. But we very much believe that New Yorkers have grit and that they're going to navigate the uncertainty that the most recent election lays out just fine. So we feel good about New York. We feel good about New York as a cultural and commercial center for the country and for, frankly, the world. So I appreciate your concern, but we feel good about New York's prospects. Lance Vitanza: One last one, if I could, regarding the Spain sale. If I recall, this is your second attempt at selling the asset. And so I'm wondering if there's anything in particular that makes you more comfortable that this transaction ultimately gets approved, whereas the last one, if I recall, got blown up by the regulators. Scott Wells: Your recollection is correct. The first attempted sale was to a direct competitor in the marketplace. This sale is to someone who does not participate in the out-of-home space. They are a media company, but they don't participate in out-of-home. It's in the regulators' hands, Lance, but I can assure you, we did a lot of diligence on that as we were evaluating the process, and we're hopeful that this will be something that is acceptable to the regulator. Operator: Our next question is from [ Avi ] Steiner from JPMorgan. Avi Steiner: A fair bit has already been asked. Maybe 1 or 2 things here. Political was a minor bump in the past from a revenue perspective, but I couldn't help notice more political advertising on billboards, at least on my commute than in recent memory, both from candidates and also new prediction market betting sites. And I was wondering if, a, that was helpful at all into the November election. I'm not looking for specific guidance. And is that potential upside as you kind of think into next year? Scott Wells: Thanks, Avi. And I appreciate that you're noting billboards and other outdoor advertising on your commute. You're like many of the commuters out there. We -- political is down this year as a result of a presidential year. So to your specific question, it was not a contributor, particularly to our Q3 results. I do think we have been working as have our competitors for years to get political campaigns to use out-of-home more. The U.S. is probably uniquely for our -- particularly state and federal elections, a smaller user of out-of-home than other geographies around the world, which it should not be. That doesn't make a lot of sense. Politicians, the world overuse out-of-home with a lot of success and U.S. politicians take a page out of that playbook. So that's my advertisement. But look, I think that 2026 it won't be like a presidential year, but I do think that there's some prospect of some uplift from it, not something that I think is going to make or break our year, but this is a category we'd like to see spend more with us. Avi Steiner: Great. And one last one for me. This was a slower tuck-in acquisition year for, I would say, most of the industry. And as you look into '26, do you think there might be more opportunities to kind of, at the margin, bolster the portfolio? And if so, I'm curious where you think seller expectations might be among maybe the smaller operators. Scott Wells: Thanks, Avi. Yes, look, expectations are always high among the smaller operators on what payment is due and things like that. It's always hard to call what the macro M&A market is going to be like. Obviously, our participation in that market is always pretty limited just given our balance sheet. We are very targeted. Obviously, one of the things we have talked about in our creative commercial solutions is partnering with the people to be able to do some of that, and that may be something that changes our participation in it. But I think with M&A in this space, it's a question of the operators being comfortable that they're selling into a good environment. And I think the environment is solid. So it was a quiet year in 2025, but I would not be surprised if we saw a little bit more activity I don't think that we've had an environment that people's expectations should be wildly out of the realm, but that's probably a positive in terms of being likely to get activity done, but don't really have a deeply informed view of that. Operator: Our next question is from Daniel Osley from Wells Fargo. Daniel Osley: So you recently launched your new in-campaign measurement solution and some of your peers have also released new measurement tools as well. So taking a step back, can you speak to the progress you're seeing in addressing out-of-home's historical measurement challenges? Any early feedback you've gotten from advertisers? And are there any updates on GeoPath? Scott Wells: Great. Thanks, Daniel, and thanks for noticing all of the activity and measurement in our space. I think it's exciting and it's a positive for the industry. On the in-flight insights to which you refer, feedback from advertisers has been positive. We've sold a number of campaigns with it, and it's definitely driving a lot of dialogue right now. So I'm optimistic that, that's going to be something that's a good tool in our toolbox. To your broader question about GeoPath, there is an industry effort going on where the Boards of the [ OAAA ] and Geopath have brought in an industry expert to help us develop a viewpoint on what next-generation outdoor measurement should be. And that effort is ongoing. It's going smoothly. It's in the stage now where vendors are being solicited and an architecture is being framed out. And I would expect that's something that Q1 of next year, we're going to get to a point where we have a sense of what investment is required and we can have the industry conversation about how we actually make that happen. It's not at a point that we can say it's going to happen in exactly one form or another, but I'm encouraged by the enthusiasm every part of the out-of-home community has, the buy side and the sell side for taking a hard look at this. I think everybody recognizes that a better quality currency that everybody can be very, very confident in would be a positive development. Daniel Osley: That's helpful. And as a quick follow-up, to the extent that you've started conversations with advertisers on term renewals, can you speak to how those conversations are going and how any price increases are coming in compared to prior years? Scott Wells: Great. Yes. No, thanks, Daniel. You remember our calendar well. For other folks, we always talk about our upfront, our version of an upfront happening kind of between October and February. So we're kind of a quarter of a way in-ish to the time frame on that. And we're encouraged. The early dialogue has been positive. We're seeing solid increases as we do the renewals and there are definitely some very positive developments in terms of people looking to expand their footprint. So touch wood, it's off to a good start, Daniel. Operator: Our final question is from Pat Sholl from Barrington Research. Patrick Sholl: With the CapEx guidance that you provided, to the extent that we get, I guess, a favorable resolution of the tariff issue, would you look to accelerate that in the coming years? Scott Wells: Look, from a tariff standpoint, there's been a little bit of an effect from a company standpoint. We're seeing an increase in steel. But overall, that really has not had really any impact from a CapEx standpoint and what we're going to invest in the business. You probably noticed our CapEx was down in the third quarter, and that's really more on timing of when we're putting digital in the ground. So not really a huge impact. We also had some shelter that we had to do last year, which we did not this year, which is really driving CapEx being down year-over-year. Airports is pretty consistent year-over-year third quarter last year to this year. But overall, going back from a tariff standpoint, I think the team, we've managed that pretty well. We'll see where that goes into next year, but that really hasn't been part of the decision-making process from a CapEx standpoint. Patrick Sholl: Okay. And then I guess with the sales process in Brazil largely, all the international markets largely complete, do you have like an update on just like the expense reduction expectations for on the corporate side or like any additional cost takeouts on that? Or is that largely complete? Scott Wells: No. It's very similar to what we talked about during Investor Day when we were a global company with all our business units in Europe and Latin America and the U.S., we had corporate expenses roughly in the $135 million range. We mentioned on Investor Day, we went through the process that we're going to take $50 million of cost out, which would leave you in the mid-80s range from a corporate expense standpoint. During that call, we had line of sight to roughly $40 million of that $50 million. We're working on that, and we'll get to that run rate sometime in 2026. So I think that's all on track from that standpoint. very similar to what we talked about during Investor Day. Operator: There are no more questions. So I'll now turn the call back over to Scott Wells for any closing remarks. Scott Wells: Thank you. And I'd like to thank all of our listeners again for taking the time to listen to our call. Like we said before, this is an exciting time in our industry and for our company. I wanted to end by reiterating what we've tried to make clear in each of our investor updates. Our Board, consistent with its fiduciary duties, is open to all avenues to create long-term shareholder value. The Board and company are actively working with advisers to evaluate a range of available pathways to do so. We can't guarantee that any particular outcome will be achieved, and we plan to make an update only if and when there's something concrete to report. But make no mistake, this is an effort about which the Board is very serious. Thanks again for joining our call.
Operator: Good day, and welcome to the Netlist Third Quarter 2025 Earnings Conference Call and Webcast, [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Smargiassi, Investor Relations. Please go ahead. Michael Smargiassi: Thank you, Dave, and good day, everyone. Welcome to the Netlist Third Quarter 2025 Conference Call. Leading today's call will be Chuck Hong, Chief Executive Officer of Netlist; and Gail Sasaki, Chief Financial Officer. As a reminder, you can access the earnings release and a replay of today's call on the Investors section of the Netlist website at netlist.com. Before we start the call, I would note that today's presentation of Netlist results and the answers to questions may include forward-looking statements, which are based on current expectations. The actual results could differ materially from those projected in the forward-looking statements because of the number of risks and uncertainties that are expressed in the call, annual and current SEC filings and the cautionary statements contained in today's press release. Netlist assumes no obligation to update forward-looking statements. I will now turn the call over to Chuck. Chuck Hong: Thank you, Mike, and hello, everyone. Since our last call, we continue to make further progress on product and IP initiatives. We filed a new legal action, again, Samsung at the ITC and further strengthened our cash position. The memory market has entered a period of shortage. And we believe that this will continue for the foreseeable future, all the way through 2027, when additional capacity is brought online. AI-related demand is consuming the majority of DRAM and NAND capacity, leaving very little availability for the rest of the market. Pricing has increased significantly for most product categories in the last several months, and it is forecasted to continue on this upward trend. Netlist is well positioned to capitalize on these market trends through innovative IP and custom memory solutions such as the Lightning DDR5 DIMM for overclocked and low-latency memory module for servers. Lightning in particular -- Lightning provides faster memory performance, which is particularly important in markets such as quantitative trading, where the reduction of even a microsecond and executing a trade can bring about a significant improvement in the performance of the customers' systems. At the moment, a global OEM as well as half dozen system integrators continue with their qualification of our Lightning products. We expect some of these qualifications to be completed by the end of the year and provide meaningful contribution to revenues next year. On the R&D side, we continue to work on the CXL-based solutions such as the CXL NVDIMM as well as low-power MRDIMM. Netlist invented the NVDIMM over a decade ago, and we continue to innovate in this segment with data backup solutions that will leverage the versatility of the CXL channel. The LP-MRDIMM will be a critical technology in the years ahead as the current generation of MRDIMM has shown to consume excessive power. And power, we know is a critical variable in AI computing. MRDIMM is likely to replace the RDIMM in the next generation of servers, but only if the power consumption of these memory modules can be lower. Thus, the LP-MRDIMM is being pursued by the broader industry -- broader memory industry, but Netlist is the only company that is designing a solution with significant power savings as well as lower latency without sacrificing error correction or chip kill. On the IP front, in the past 2 years, Netlist has obtained 2 jury verdicts awarding combined total damages of $421 million for willful infringement of its patents by Samsung. Samsung has also lost 3 district court cases against Netlist and their bid to somehow revive a terminated license. Despite this, Samsung continues its unauthorized use of Netlist's intellectual property. At the end of September, Netlist expanded, it's -- at the end of September, Netlist expanded the defense of its IP by initiating legal proceedings before the U.S. International Trade Commission, or the ITC. Netlist is seeking exclusion and cease and desist order against Samsung, Google and Supermicro, which would direct U.S. customs and border protection to stop Samsung memory products that infringe on Netlist IP from entering the U.S. The ITC does not order monetary damages. The IP at issue in the ITC action include Netlist Patents 366, 731, 608, 523, 035 and 087. Each patent read on one or more of the following products: DDR5 memory modules, such as DDR5, RDIMM, UDIMM, SODIMM and MRDIMM and HBM or high-bandwidth memory. The ITC is an independent agency of the executive branch that investigates and makes the termination against unfair acts of import trade that violate U.S. IP rights. The process of bringing legal action before the ITC differs from core proceedings and is much quicker in duration, typically around a year to receive an initial determination. The ITC will review Netlist's complaint to decide if it should institute an investigation. This review process occurs within 30 days of filing and our filing was September 30. If the ITC decides to institute an investigation, it assigns an administrative law judge to the case. Within 45 days of institution, the judge sets a target date for an evidentiary hearing or a trial and the issuing of a final decision. The evidentiary hearing or trial is administered by the administrative law judge or the ALJ. There is no jury. This hearing typically takes place a year after institution and is followed by an initial determination issued by the ALJ. The ITC's commissioners may review the initial determination at the party's request or of their own volition. If review, the commission may affirm, modify, reverse or remain all or part of the initial determination and will issue a final determination. In order to find the violation of Section 337 of the Tariff Act, the ITC investigation must determine that there is infringement of a valid U.S. patent that relates to an imported product and that the patent is being used in an existing domestic industry. A party may appeal final determination to the U.S. Court of Appeals for the Federal Circuit. However, regardless of any appellate process, once the ITC makes its determination and this determination is ratified by the U.S. trade representative within 60 days, the import ban of the infringing product goes into effect immediately. The ITC ceased operation during the federal government shutdown, which will impact the timing of the ITC process just outlined. Netlist filed its complaint on September 30 and the federal government shutdown started the next day. Netlist has previously litigated 2 prior cases at the IT seat. Let's now move on to the federal court actions, which include 3 separate jury verdicts that awarded Netlist combined damages of $866 million for the willful infringement of its patents by Samsung and Micron. In addition, we now have 4 separate actions filed this year in the U.S. District Court for the Eastern District of Texas against Samsung and Micron and their distributor, Avnet. In these cases, Netlist is asserting new patents covering next-generation HBM and DDR5 memory technologies. In the Eastern District of Texas, one case against Samsung, Netlist secured an order finalizing $303 million of damages award in July 2024. Samsung filed an appeal, and we estimate that the appeal hearing will take place sometime mid next year. In the Eastern District of Texas case 2 against Samsung, where Netlist was awarded $118 million in damages, post-trial briefing has been completed. We expect the court to rule on these post-trial motions in the coming months. In the $445 million damages award against Micron, this case has concluded in the district court, Micron filed an appeal with the Federal Circuit, and we are currently in the briefing process. In the breach of contract case against Samsung, again, which Samsung has lost 3 separate times, Samsung has filed a notice of appeal before the U.S. Court of Appeals for the Ninth Circuit. We expect this process to approximately 16 to 18 months. Regarding IPRs, oral arguments before the U.S. Court of Appeals for the Federal Circuit has been set for several patents, the 314, 506 and the 608 patent in early December 2025. We expect the Federal Circuit to issue its decision on these appeals, and these are important appeals in later in December this year or early this year. In closing, Netlist remains active in advocating for the rights of patent owners. Over the past several weeks, I've had the opportunity to meet with government officials in Washington, D.C. and was encouraged by these discussions. We welcome the constructive reforms brought on by new leadership at the patent office that could bring a more balanced approach to the IPR process. We also urge Congress to take action on several patent reform bills that are currently under review. We believe these bills, if enacted, will bring much more clarity to the issues of patent eligibility, patent enforcement and provide American innovators a predictable framework on which to create new groundbreaking technologies and provide assurances that their innovations will be protected from unauthorized use. Now I'll turn the call over to Gail for the financial review. Gail Sasaki: Okay. Thanks, Chuck. For the quarter ended September 27, 2025, revenue was $42.2 million reflecting solid demand from both our OEM and resale customers and in line with our expectations. While we do not formally guide given booking and shipping for the fourth quarter of 2025 to date and subject to the visibility we have today, we currently expect fourth quarter revenue to be slightly higher than the third quarter of 2025. Operating expense for the third quarter 2025 declined 17% compared to the prior year's quarter and declined 38% on a 9-month basis. Net loss improved by -- net loss for the third quarter 2025 declined 25% compared to the prior year's quarter and declined by 45% for the 9-month period. We ended the third quarter with cash and cash equivalents and restricted cash of $20.8 million compared to the $29 million at the end of second quarter with minimal debt. After the end of the third quarter, we raised $10 million through a registered direct offering. With a $10 million working capital line of credit from our bank and approximately $74 million available on the equity line of credit, we continue to maintain significant financial flexibility and liquidity. And as always, we manage the operational cash cycle very carefully. Inventory churn improved by 17 days over last year and the overall cash cycle improved by 2 days over last year's Q3 and by 16 days over last quarter. Operator, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from Suji Desilva with ROTH MKM. Sujeeva De Silva: So the products that you're talking about, Chuck, and seeing opportunity in AI infrastructure into calendar '26, can you talk about which products, which AI infrastructure server platforms they may target? And what could be the magnitude of contribution potentially in '26, maybe ranges there? Chuck Hong: We've made -- Suji, we've made good progress with the Lightning line of products. These are the fastest server memory. Most of them go into high-frequency trading, quantitative trading the Chicago area, New York area and the commodity markets and in the stock exchanges. So they are being qualified at one of the top 2 server OEMs in the world, along with probably half a dozen other major system integrators. We believe -- we're making good progress. We have clearly a product that has industry-leading low latency and speed. And we expect those to -- we're seeing revenues already. We've seen some revenues probably in the 4%, 5% of our overall revenues in the last few quarters came from this line of product. We believe once these are qualified as some of the bigger players, bigger server manufacturers, we will certainly get into next year to double-digit percentage of the overall revenues with these lighting line of products. Sujeeva De Silva: Okay. All right. And then I'm just curious of the ITC process and the government shutdown. Are really -- are all the processes that you talked about pause at this point? Are some proceeding in the traditional branch? Or any color there would be helpful. Chuck Hong: So the ITC was part of the government shutdown, and we filed September 30 against Samsung and to stop them as well as Google and Supermicro, which are major customers of Samsung. And what we're -- just to give you kind of context of what we're trying to accomplish, it is a significant dollar value of memory products coming into the U.S. As we've indicated, we've gone through 5 federal court trials over the last 3 years with Samsung, against Samsung. We won them all, and yet they continue to -- they continue to engage and infringement and selling of infringement. We are committed to shutting them down in the U.S. That's what we're committed to seeing this process through all the way to the end. These guys are beyond the pale in terms of the -- just unapologetic and just -- they just go about ignoring IP rights of U.S. patent holders. So -- we believe that since District Court, they award dollars, but they do not provide since eBay, there is no injunctive relief at the -- from District Court rulings. So ITC is injunctive relief. There is no dollar damages. So the only way to stop people who are completely ignoring U.S. laws and patent laws is to stop their business. And that's what we aim to do. The government shutdown will impact us -- will not impact us at all. As soon as it reopens, our filing will be put on to the Federal Register. And then the 30-day clock will start to a decision on institution. Once the case is instituted, it goes forward, investigating patent infringement as well as patent validity. And the third prong, which is industry, whether these patents are being practiced in the U.S. in terms of U.S. domestic industry and products that are built and shipped into the U.S. -- in the U.S. Those will be investigated and there'll be a decision. We've been to the ITC twice before. We understand the process. We understand the impact that it can create to bring some of the infringing parties to their consensus. So that is what we're committed to seeing that process all the way through to the end. Sujeeva De Silva: Okay. I appreciate that color. And then Gail, maybe you could talk about the litigation expense trend you're expecting from here. I know the ITC expenses are second half '25 and they fall off or they remain? Any color there would be helpful. Gail Sasaki: Sure. Well, we are on track to have reduced our legal fee expense by 50% over last year. ITC expenses will occur in 2026 towards kind of increasing over time towards the end of the year when the trial will actually occur. So we continue to believe that there will be a reduced amount of legal expenses compared to 2024, but probably about the same in 2026 as has been for 2025. Chuck Hong: Suji still on? Sujeeva De Silva: Yes. I'm here. Chuck Hong: Yes. I just -- I kind of ended on perhaps a negative note regarding Samsung. I just want to highlight that there are good actors and bad actors. We have Hynix, which is a licensee. They respect U.S. IP laws. They've licensed from us. They are the #1 supplier of HBM products to NVIDIA in the AI space. And they have also committed -- announced a plan to invest $4 billion in building of the HBM in the U.S and Lafayette, Indiana in a joint venture with Purdue. Now that contrasts completely with a bad actor, who is way behind in the HBM technology. They are a very small player as a supplier into the U.S. for HBM. They have not taken a license in the last 5 years. And they have announced no plans to build HBMs in the U.S. So that, I think, is the contract that we're looking at. It's not everybody is flouting the laws and getting a free ride. There are good actors that abide by the IP laws of the U.S., and there are others. And it provides a huge contrast and we're trying to correct that, create parity amongst the different implementers. They all have to respect the rights of IP holders in the U.S. Sujeeva De Silva: Appreciate you pointing out the model that works through the U.S. there. Operator: This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to Devon Energy's Third Quarter 2025 Conference Call. [Operator Instructions] This call is being recorded. I'd now like to turn the call over to Mr. Chris Carr, Director of Investor Relations. You may begin. Christopher Carr: Good morning, and thank you for joining us on the call today. Last night, we issued Devon's third quarter earnings release and presentation materials. Throughout the call today, we will make references to these materials to support prepared remarks. The release and slides can be found in the Investors section of the Devon website. Joining me on the call today are Clay Gaspar, Chief Executive Officer; Jeff Ritenour, Chief Financial Officer; John Raines, SVP, Asset Management; Tom Hellman, SVP E&P Operations; and Trey Lowe, SVP and Chief Technology Officer. As a reminder, this call will include forward-looking statements as defined under U.S. securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast. Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay. Clay Gaspar: Thank you, Chris. Good morning, everyone, and thank you for joining us. Let's begin with Slide 2. With outstanding execution and innovation from every part of our organization, Devon delivered another outstanding quarter. I'm proud of our team's performance. We exceeded the midpoint of guidance on every key metric, including production, operating costs and capital. These results mark our strongest performance of the year, highlighting the exceptional quality of our assets and our unwavering commitment to operational efficiency and cost control. Building on this performance, we continue to advance our business optimization plan, firmly on track to generate an incremental $1 billion of annual pretax free cash flow. As we enter the fourth quarter, we have already achieved more than 60% of our target, underscoring both the effectiveness and urgency of our approach. These initiatives go beyond cost reductions. They are fundamentally reshaping our business by enhancing margins and boosting capital efficiency across our portfolio. The output of these compounding efforts show up in our strong preliminary outlook for 2026, which Jeff will discuss in more detail. Despite persistent macro headwinds, these achievements directly contributed to our resilient free cash flow as we returned over $400 million to shareholders in the quarter and retired $485 million of debt, demonstrating our focus on delivering meaningful value to our shareholders. Beyond business optimization, we continue to unlock significant value throughout our portfolio. While getting into the details on a later slide, our teams have capitalized on a multitude of opportunities to drive additional value for the organization. Collectively, these achievements reinforce Devon's momentum and position us exceptionally well for the remainder of 2025 and into 2026. Let's flip to Slide 4 and take a deeper look at the quarter. Our relentless focus on production optimization continues to drive our outperformance. With oil production exceeding the midpoint of guidance by 3,000 barrels per day, the outstanding efforts of our teams to reduce artificial lift failure rates and improve workover efficiencies resulted in a 5% reduction in operating costs compared to the start of the year. Additionally, effective cost management drove our capital investment 10% below the first half run rate. These accomplishments, combined with other ongoing initiatives, led to robust free cash flow of $820 million in the third quarter and enabled us to deliver substantial cash returns to our shareholders. Moving to Slide 5. Our consistent track record of disciplined execution and tireless pursuit of capital efficiency is evident. Quarter after quarter, we drive meaningful improvements to our outlook. This momentum is reflected in our updated guidance, where we've raised our full year production expectations every quarter this year while reducing capital by $400 million since our preliminary guidance. These are not isolated wins. They result directly from our steadfast commitment to operational excellence, our culture of continuous improvement and a rapid adoption of leading-edge technologies across our portfolio. Now looking at Slide 6. This continuous improvement is also resulting in top-tier performance versus our competitors. Our well productivity stands in the upper echelon of our peers, reflecting the strength of our asset portfolio and the execution of our teams across every basin. On the right-hand side, our disciplined approach to capital allocation is evident in our industry-leading capital efficiency, setting us apart in a highly competitive space. These achievements highlight the power of our advantaged portfolio and the rigor of our capital allocation process and the ability of our people to drive superior results. And with our extensive inventory, we are well positioned to continue this strong performance moving forward. Turning to our business optimization initiative highlighted on Slide 7. Our teams are outperforming expectations and delivering results well ahead of schedule. We have already captured more than 60% of our ambitious $1 billion target. When we originally launched this initiative, our focus was for year-end 2025 was $300 million in value uplift. As shown on the left side of the slide, we are on pace to double that milestone this year alone. This exceptional progress is highlighted this quarter by our significant progress in capital efficiency and production optimization on the right side, and we are fully confident in our ability to deliver these substantial cash flow improvements as we advance towards 2026. Driving this rapid progress is our outstanding execution. With greater visibility and confidence in our 2025 full year production volumes, we anticipate a sustainable increase in free cash flow of $150 million resulting from incremental 20,000 BOE per day above our initial baseline when this initiative began. This reflects further acceleration from our outlook from last quarter, highlighting the urgency of our efforts. When we announced the plan in April, we recognized that the market wouldn't immediately price the aspirational $1 billion of incremental free cash flow in our share price. We knew we would have to earn it. While the plan is still in flight, I'm encouraged that Devon's stock is starting to feel a bit of relative appreciation to our peers. That said, I believe that we have much more ground to gain, and I look forward to earning that value in time. Slide 8 showcases key examples of the initiatives our teams are pursuing to meet targets in each category. These represent some of the most impactful efforts currently underway. As our teams proactively implement these initiatives, we remain confident in our ability to achieve our targets and maintain clear line of sight to our objective. Turning to Slide 9. I'd like to highlight several portfolio optimization actions we've taken on this year, which are delivering an uplift of over $1 billion to enterprise NAV. Importantly, these gains are in addition to the improvements through our ongoing business optimization initiatives. Early in the year, we signed an agreement to dissolve our joint venture in the Eagle Ford, giving us control of our development and the ability to reduce well costs and significantly enhance returns. In Q2, we completed the sale of the Matterhorn Pipeline and subsequently acquired the remaining interest in Cotton Draw Midstream. Last quarter, we executed 2 strategic gas marketing agreements that expanded our natural gas sales portfolio into premium markets. In Q3, we acquired approximately 60 net locations in New Mexico for $170 million, increasing our runway of high-return opportunities in Delaware. And finally, we've benefited from the Water Bridge IPO, which now provides a public marker for our investment valued at greater than $400 million. These actions showcase our team's initiative and strategic thinking to create shareholder value. As we execute our business plan, we will seek further opportunities to optimize capital allocation, efficiency, costs and asset mix. We remain committed to continuous improvement, innovation and technological leadership, taking decisive steps to strengthen our operations and deliver strong shareholder returns. With that, I'll hand the call over to Jeff. Jeffrey Ritenour: Thanks, Clay. Turning to Slide 10. Devon delivered another quarter of strong financial results. In the third quarter, we generated operating cash flow of $1.7 billion. After funding capital requirements, free cash flow totaled $820 million. This robust free cash flow generation enabled us to return significant value to shareholders, including $151 million in dividends and $250 million in share repurchases. We remain committed to our capital allocation framework, balancing high-return investments with substantial cash returns to shareholders. Moving to Slide 11. Devon's financial strength and liquidity continue to set us apart. We ended the quarter with $4.3 billion in total liquidity, including $1.3 billion in cash. Our net debt-to-EBITDA ratio remains low at 0.9x, underscoring our commitment to a strong balance sheet. As part of our disciplined capital return framework, we accelerated the retirement of $485 million in debt this quarter, completing the repayment ahead of schedule and generating approximately $30 million in annual interest savings. With this action, we've now achieved nearly $1 billion towards our $2.5 billion debt reduction target. Looking ahead, our next maturity is our $1 billion term loan due in September of 2026. We remain focused on executing our debt reduction strategy and maintaining the financial flexibility that supports Devon's value-enhancing growth. Beyond debt reduction, we also used cash on hand to acquire all outstanding noncontrolling interest in Cotton Draw Midstream, saving $50 million in annual distributions and secured additional resources in the Delaware, as Clay mentioned earlier. These timely transactions reinforce the value of maintaining an investment-grade balance sheet and ample liquidity. As we approach 2026, we're determined to accelerate our operational momentum, prioritizing per share growth, maximizing free cash flow and making targeted reinvestments for sustained success. Slide 12 highlights the key attributes supporting our strong preliminary outlook for 2026. Given ongoing commodity price volatility, we're taking a disciplined approach to capital planning. We intend to maintain consistent activity levels to keep production around 845,000 BOE per day with oil production at approximately 388,000 barrels per day. With macroeconomic uncertainty and an appearance of a well-supplied oil market, we do not plan to add incremental barrels to the market at this time. To support this production profile in 2026, we anticipate capital investment of $3.5 billion to $3.7 billion, a reduction of $500 million compared to our maintenance capital levels just 1 year ago. Importantly, we can fund this program below $45 WTI, including the dividend, providing significant flexibility. This disciplined plan positions us to generate strong free cash flow at current prices and deliver a free cash flow yield that exceeds the broader market. Regarding free cash flow allocation, our financial framework provides flexibility to deliver market-leading cash returns to shareholders and achieve our debt reduction objectives. We'll continue to target share repurchases of $200 million to $300 million per quarter, and we'll retain free cash flow beyond share repurchases on the balance sheet to efficiently reduce net leverage. Complete 2026 guidance will be provided on our February call after the budget is finalized with our Board. In summary, Devon had all the key attributes to thrive in today's environment and create value well into the future. Our high-quality portfolio provides a solid foundation while our disciplined strategy keeps us focused on growing per share value and generating free cash flow. With a strong balance sheet, we are positioned to deliver lasting value and confidently navigate whatever the market brings. With that, I'll now turn the call back over to Chris for Q&A. Christopher Carr: Thanks, Jeff. We'll now open the call to Q&A. [Operator Instructions] With that, operator, we'll take our first question. Operator: Our first question comes from Neil Mehta with Goldman Sachs. Neil Mehta: Yes. Thanks so much for the visibility as we look into 2026. And I think the capital efficiency and the cost savings is really starting to materialize, including in the guidance. So maybe that's where we start off, which is where we are in the business optimization program and the $1 billion. You gave us a little bit of color on Slide 8, but kind of unpack what's left to do in the journey. And if you end up surprising to the upside relative to the initial guide, where could that be? Clay Gaspar: Yes, Neil, I appreciate it. This is Clay. We're incredibly proud. This was a big, hairy, audacious goal. When Jeff and I started first contemplating, one, what was the metric we wanted to focus on, and that was sustainable free cash flow and then how audacious should it be and what kind of time frame should we put it around? I can tell you there was a tremendous amount of discomfort around the organization and just amongst Jeff and I on how do we get there from here. But what we knew, I mean, deep in our soul was that you get the flywheel starting to turn, and there's so much that continues to come our way. Right now, we have over 80 parallel work streams on different ideas. So the progress that we've made essentially in 1/3 of the time to accomplish 60% of the results, I can tell you, I'm even more encouraged about what this leads to. The most important measure of success will be locking these earnings in and building into the culture of the organization, benchmarking, hunger for more creative ways of creating value. And like I said, there is much more to come from this. Trey, you may jump in and just throw a couple of pieces of color of ideas that you have. Robert Lowe: You bet. I appreciate the question, Neil. We've -- Clay mentioned the 80 work streams that we have ongoing. The early results that we saw, a lot of them show up very quickly in the capital side of our business on the drilling completions operations. Over the last quarter, last kind of 4, 5 months, we've seen a lot of new ideas arriving from our production department. And we continue to see those starting to show up now in our forecast and what's going forward. One of the examples I mentioned even a quarter ago was our focus on automating and using our technology stack to help us with our downtime. We've made a ton of progress over the last 3 months on that one and scaled that across the organization. And now we're working on the next phase of using even more kind of AI to underpin what we're trying to do to continue to look at our faults and what causes those faults. And we're going to see those type of examples show up. We estimate over $10 million on that work stream in 2026, but that shows up and that's sticky, like Clay said, and we'll see that in our base production. And those are the types of things that we're looking forward to in the future. All of that is underpinned by really a desire across our employee base to use technology. At this point, essentially all of our office-based employees are using AI to help them with productivity gains. And we're right now on the very tip of what we call Wave 2 and Wave 3 is where you're implementing that AI in our work processes. So a lot of momentum there, a lot of excitement across all of our organization to continue to move the ball down the field, and everything is looking good. Neil Mehta: Appreciate the color, guys. And then as you think about setting that CapEx budget for '26, you probably took a view on different product lines on the services side. And just talk about -- we're trying to isolate the structural cost improvements, which you talked about in the answer to the first question versus more of the cyclical stuff. So can you talk about the service environment right now and which product lines you're seeing deflation and which ones -- which of the cost items you're seeing flat to inflation? Clay Gaspar: Neil, we feel really good about our positioning ahead of what could be a really challenging 2026. We look like the market is exceptionally well supplied, maybe potentially oversupplied. And so as a kid that grew up on the Gulf Coast, we know how to prepare for a hurricane. And when the storms come and you make sure you got your balance sheet right, you got your operations really buckled down. You got the teams focused on the right things, and then that helps drive through those troubling times. So when I think about what could come from 2026 and how we think about this preliminary guide, we've taken out any assumptions of inflation or deflation, really kind of time stamp where we're at today. We don't know where commodity prices are going to go in subsequent activities and therefore, subsequent deflation. So just consider that flat to where we're at today, and then we're prepared for whatever comes our way from a macro standpoint. Operator: Our next question comes from Arun Jayaram with JPMorgan. Arun Jayaram: I was wondering if you could maybe elaborate on what you're doing to kind of manage your base production. You highlighted in the release that it's leading to maybe 20 MBOE per day of production uplift and a pretty meaningful improvement in cash flow from those efforts. And maybe talk about your views on the sustainability as we think about go forward 2026 beyond. Clay Gaspar: Thanks for the question, Arun. This, I think, is really important for us to spend a little time on. So I really appreciate the angle on this one. We -- it's pretty easy to quantify savings on that side of the equation. It's harder to quantify these wins. And we've been very clear from the beginning. This is not just a cost reduction program. This is a value enhancement program, and that should come on both sides of the ledger. This what you're talking about is more value enhancement. And I can be honest with you, it's really hard to measure how much downtime would we have had theoretically, how much are we gaining incrementally from the actions, but that's exactly what this attempt is. We're trying to be exceptionally credible. At the same time, we know that this is a hard number to precisely quantify. I'll ask John to dig in on a couple of things that we're doing to measure this, quantify this and then how we're seeing wins. John Raines: Yes, Arun. I appreciate the question. I think Clay hit it well. When you look at the full year, we've had a really strong production beat. And the first thing I would say on that is when you look at that production beat and you break it down, we certainly beat on our wedge. We've had some outperformance on our wells. We've had a little bit of acceleration. But overall, the biggest part of that production beat comes from our base, and we feel that, that's very measurable. Now we've got, and I think Clay said earlier, over 80 work streams on our business optimization. We've got a ton of these that go towards the base. I'm going to talk about a few that I think have contributed the most this year. We've got a combination of technology and good blocking and tackling. I'll start with a project that I'm very proud of that we've deployed in the Delaware Basin. Really, this deploys some next-generation technology. You've heard me talk about it before. But this is our smart gas lift project in the Delaware Basin. What we're seeking to do here is essentially to deploy AI models that continuously optimize the optimal rate of gas injection for gas lift wells that sit on centralized gas lift systems. This is a project that we piloted back in Q2. And we saw tremendous results here. We saw a 3% to 5% uplift. And we talked about moving to a pilot 2 on that. We saw success that was so good that we've moved essentially into full deployment of that in the Delaware Basin. And we expect to be complete roughly by year-end on that. The beauty of this project is we also have application in the Williston Basin. We have application in the Eagle Ford. And so this is going to be a project that's going to have ongoing sustainable results to our base production, and we're super excited about that. Probably a couple of other projects I'll hit on, and Clay mentioned this in our opening remarks, but we've had a tremendous focus on workover optimization this year. I'd say this year, this really started last year. We're looking at every which way that we can get better on our workover operations from operational efficiency all the way to safety. We took advantage early in the year. We made some changes in the organization to focus on this. We've got leads that work together to look at best practices across our basins. And when you look at what we've done there operationally, we've looked at advanced KPIs to manage our rig fleet. We've looked at design optimization. We've looked at equipment standardization. And really, we've looked at planning optimization. Not only have we been able to pull a ton of cost out of the system, but we've been able to lower the amount of time that we're spending on pad with these workovers. And essentially, what we've seen is we're getting our wells back quicker. And when we try to break down how much base contribution this had or the contribution to the base beat, we think it's over 2,000 barrels a day net production that we're seeing so far this year. And importantly, we think that's sustainable. I think maybe the last example I'll provide, we've had a really tremendous focus on failure rate reduction and optimization. We've had this throughout the portfolio. I'll brag on the Rockies team a little bit here. Over the course of the last 18 months, we really looked at our artificial lift failures. We did some very intensive look backs on that front. We did some proactive redesign there. And when we look back at the reduction in failure rate, we're tracking towards something that's 25%. And so again, that's a good example of a project that takes cost out of the system, but it also increases our uptime pretty significantly. And so a lot of really good projects in the queue like that, but we think these are all importantly, very sustainable to the base production overall. Arun Jayaram: Maybe just a follow-up. Your Rockies production has been trending maybe a little bit better than we had been modeling. In fact, if you look -- you grew your oil 7,000 barrels a day sequentially and you're relatively flat versus the 4Q 2024 number. So maybe talk to us a little bit about what's been driving that and maybe how the overall integration with Grayson Mill assets has been going? John Raines: Yes, I'll start with the integration of the Grayson Mill assets. That integration is roughly complete. It's gone really well. We've had a lot of bidirectional lessons learned there, everything from midstream to the base operations to learning more and more about the reservoir, how to drill these wells, how to complete these wells. So I can't say enough good things about how that integration has gone. When you talk specifically about the production, you're seeing a few things there. One, again, on the wedge, we're seeing well results that meet or exceed our expectation. And so we've continued to be very pleasantly surprised with the good production we've seen, the good well results, especially as we focus on the western side of the play. But Neil -- or excuse me, Arun, a lot of what I just said around the base is really what's driving that sequential improvement. And I would say the Rockies team has really led the way on that. That artificial lift failure reduction that I talked about as a huge driver for us in the Rockies. And specifically, we've seen our workover rig count in the Rockies come down the most and probably the biggest contribution to the base come from the Rockies. So really proud of the work they've done, and I can't emphasize enough how important that base uplift has been for us there. Clay Gaspar: Yes. Arun, I just want to jump in on John's comments. As we talk about the workover rigs, especially, a lot of this motivation, I can tell you, was around safety. The workover rigs was something the industry was really struggling with. And with this hyper focus, we found incremental value, cost savings, production efficiency and maybe most importantly, safety improvement as well. So really proud of all the teams that are working on that, and that's been kind of around the industry focus. So great progress on that. Thanks again for the questions, Arun. Operator: Our next question comes from Neal Dingmann with William Blair. Neal Dingmann: I was late last quarter. Clay, my first question is just on M&A. Specifically, I couldn't help but notice. I mean, you guys did a great job on the ground game being active on New Mexico lease sales. So I'm just wondering, with that said, do you all anticipate the ground game such as this, maybe in New Mexico or other states around other plays continue to represent a significant portion of your M&A? Clay Gaspar: Thanks for the question, Neal. Yes, I would say this is very important. We've done a lot of this work quietly kind of on the backs of trades, 40 acres in, 40 acres out. I mean, just hard work every single day that can be incredibly value creative. We've had some more opportunities with state lease sales and upcoming federal lease sales. That's definitely something we want to participate. We'll look at it objectively as we do all incremental investments, but really excited about that opportunity and definitely something we want to play an active role in. Clearly, we have. And we think we have -- with the flywheel, the machine that we have running in the Delaware Basin, in particular, I think it's a great opportunity for us to leverage not just the skill sets, the momentum that the team has, the technology, the benefit from the business optimization, all of those things, but also the mechanics of being there, boots on the ground every single day has a great ability to scale. So we think we have every right to be on the front end of that and successful thus far. Neal Dingmann: Great. Great point. And then that leads me to my second question, Clay. I can't help but notice just how much you continue to advance the Delaware, not only just better wells, but you continue to recognize more resource just undeveloping -- kind of developing more rock. So I guess with that said and just how well you're doing there, does that cause you to think about differently maybe one of your other plays like the Anadarko or PRB where you have less scale and 1 rig and I'd suggest investors are not giving you full credit. I mean why -- any thought about potentially reallocating selling something and reallocating into the more -- even more in the Delaware where you continue to see all this upside? Clay Gaspar: Yes, Neal, as you know, we look at this stuff all of the time. Our Board -- this is an imperative that our Board has for us to be thinking about all of the art of the possible. And that certainly means we're not going to be in these 5 basins exactly as constructed for the indefinite future. Objectively, we need to think about what's the right opportunity for us for how these positions would fit given the market demands, but also thinking about what the opportunities are to continue to scale and grow and make sure that we've got a sustainable value-creating business going forward. When you look back at the 50-plus year history of Devon, and I would say any organization that survived 50 years in this very tough business, we have reinvented ourselves a number of times along the way. We always will remain objective about what that could mean going forward. And again, this is regular conversations that we have with our Board as we should about thinking the longevity of creating long-term shareholder value. It's just fundamental to what we do. Operator: Our next question comes from Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: Clay, I wonder if I could come back to the business optimization for a second. I think I've maybe been confused about something, and I'm looking for some clarity. You have some of the legacy midstream contracts rolling off. But my understanding is it's beyond the time line of the $1 billion target. So I'm thinking EnLink specifically. So can you tell us what's included in the remaining $400 million? And it sounds like there might be an upside case for that based on some of these longer-dated contracts. Sorry if I'm getting that wrong. Clay Gaspar: No, I think you're exactly right, Doug. I think there is upside. One of the things that we debated early, I can tell you the original construction from the team that was presented to Jeff and I as we were thinking about what could this look like? It was actually a 3-year look, and that includes some other things that we know we're going to have in kind of year 3 of this opportunity. I can tell you there's additional wins in years 3, 4, 5 and for the foreseeable future. We've really focused on '25 and '26 wins. And as you pointed out, there are some really material specifically in the gas contract world that comes out further than that. I'll ask Jeff to dig into some of those opportunities. Jeffrey Ritenour: Yes, Doug, just to be clear, so in the business optimization guidance that we rolled out to get to the $1 billion of free cash flow starting in January of 2027. The bulk of that, that relates to the commercial opportunities is what we talked about in the previous quarters, which is reduced fees on gathering, processing, transportation and fractionation. Most of that's on gas and NGLs, specific to the Delaware Basin. So the lion's share and bulk of that really resides in the Delaware. T. Hat's where you're going to get this incremental uplift, if you will, of the commercial opportunities that we highlighted specific to the $1 billion. As Clay just said, beyond 2027 and beyond, there'll be other opportunities across our portfolio where we could see some incremental benefit. But in the $1 billion, the real driver of that is what we're seeing in the Delaware specific to our gas and NGL contracts. Douglas George Blyth Leggate: That's very helpful. I guess it would be a bit of a stretch to ask you to quantify the upside at this point, but maybe that's for another call. My follow-up is a little self-serving, I'm afraid. And I just want to make sure I'm not misinterpreting or overstating this. But if I look back to the legacy commitment from when you were still COO, Clay, you used to talk about 70% of your free cash flow coming back to shareholders. It seems that your presentation deck has adjusted that a little bit to now include debt reduction in your shareholder returns. Is that the right interpretation? Because obviously, we're big fans of that. I just wanted to clarify with you if that's how you're thinking about it. Clay Gaspar: Yes, I appreciate that. I mean I think it is a fundamental piece of how we think about returning value to shareholders. And certainly, ahead of what could be a pretty choppy year in 2026, I think we want to make sure that we are thinking about debt, debt structure, how we capitalize the company and that we're prepared for anything that comes ahead. So there was an opportunity for us to take the $485 million down. We certainly consider that part of, again, returning cash in various forms to shareholders. And obviously, we had an illustration this time that included that. So yes, I appreciate your support over the years for debt reduction. This is a very -- it's a challenging business. We think the more that you can be prepared for the storms, the storms turn into real opportunities. And I think that's where Devon is positioned today that when these challenges come ahead, we're going to be front-footed and on the -- have an opportunity to really be -- to turn them into a value-creating opportunity rather than just a defensive posture. Douglas George Blyth Leggate: Sounds like an M&A question, Clay, but I'll leave it there. Clay Gaspar: Thank you, Doug. Appreciate it. Operator: Our next question comes from Scott Gruber with Citigroup. Scott Gruber: I want to come back to the production optimization bucket. great gains there. I think the bulk of that effort hits production and therefore, a reduction in your maintenance CapEx needs. I think there's also an LOE benefit as well. How does that split? And we see your LOE rolling lower. How should we think about the LOE cost in '26? Clay Gaspar: Yes, Scott, that's a great question. And it is -- this manifests in a few different categories, and some of them are cost reductions. As you mentioned, LOE, we've seen a significant improvement quarter-over-quarter. We'll continue to see benefits there. It shows up, obviously, in the maintenance capital requiring us to drill fewer wells. I think our original plan versus the plan we're executing now, we're actually drilling 20 fewer wells this year because of these kind of benefits, essentially lowering that burden of maintenance capital and as a side benefit, prolonging the really high-quality portfolio that we have. I might ask John to see if he has anything else to add to that. John Raines: Yes, As we originally contemplated this, you're absolutely right. There's a component of our production optimization target that's LOE -- there's a component that is production uplift. There's even a little bit there that is pulling capital out of the system. What I'll tell you right now is the way that we're looking at the $150 million, that's essentially all of the production uplift at this point in time. We have had some success on LOE over the course of the year. I think if you look back to Q1 and you break it out from the number we disclosed, LOE plus GPT, we're sitting about $6.50 a barrel. I want to say this quarter, we're sitting just above $610 a barrel, so about a 6% improvement year-over-year. LOE is pretty sticky and it lags. So as we go into 2026, we expect ongoing reductions on LOE, and you'll see more LOE contribution show up within production optimization. But essentially, what we're taking credit for up to this point is that base uplift that I mentioned earlier. Scott Gruber: I appreciate that color. And with the efforts reducing your well count how do we think about the TIL count that's embedded in your '26 preliminary guide here? Clay Gaspar: Yes. I think that's obviously contemplated as we get both more efficient on how quickly we can execute, drilling, completion, building facilities and then the effectiveness of those completions and how they contribute. Again, we're in a base capital mode -- excuse me, a base oil production mode and the lower maintenance capital is certainly reflected by that preliminary $3.6 billion guide, which again is a substantial improvement from where we were 12 months ago when we were providing a preliminary guide for 2025. So we are winning significantly on that. That's showing up in the numbers. I continue to be encouraged by the work that we're doing and the great efforts of the team and how this is showing up and will continue to show up in time. Scott Gruber: But should we think about the '25 TIL count kind of less 20 as a starting point for '26? Is that fair? Clay Gaspar: Look, I don't know if we want to get into details of that. But here's what I would tell you is take the preliminary guide, start with the numbers that we're guiding on 2025 as of today. And I think that's a good kind of relative application and allocation. Again, we've mentioned no additional deflation is baked in. So I think that's a good starting point for assumptions. And then obviously, when we come back to you early in the year with firm guidance, we'll have a lot more details to share with you then. Operator: Our next question comes from Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: Kind of going back to M&A, there's been a lot of industry interest in the Anadarko and specifically M&A in the Anadarko. And maybe a 2-part question there. I mean, being located there in Oklahoma, what do you make of the interest in that basin? And what do you think is driving kind of the renewed interest? And does the level of interest kind of make you reconsider your -- the Anadarko's place in your portfolio? Clay Gaspar: Yes, Kevin, would say on the first question, obviously, it's gas oriented. It's positioned well. It's not backed up behind Waha. So there's some structural advantages of the Mid-Continent, the Anadarko Basin that we benefit from today. And certainly, we're very aware of that, and we take great pride in that. I'll go back to my earlier comments. We consider everything all the time. Our Board is very inquisitive and very thoughtful about how do we build the right term -- right long-term shareholder opportunity value set. How do we think about the portfolio. You have to remember, we're always consuming the front end of our portfolio. So how are we backfilling with quantity and quality of the portfolio to make sure that we have a very substantial and solid 10-year runway in front of us. All of those things are considered. And so as markets change and we see other things, we have interest, we have interest in other things, all of that certainly comes into play, but no additional details to share with you on that today, but I appreciate you asking. Kevin MacCurdy: Got you. And then as a follow-up, I really like the details on Slide 9. I think that highlights the value creation that you've had that doesn't always kind of show up in the production numbers. I guess a question on Waterbridge. Is there any operational reasons that you would keep that equity interest? Clay Gaspar: Yes, Kevin, I'd probably put it in the same category. We've done a lot of deals kind of adjacent to our core business. Think about something like Matterhorn, where we entered that opportunity. The key there was really specific to Matterhorn, making sure that we had gas takeaway from the basin. That was the phenomenal or the fundamental importance that we did. By underwriting that, we ensured that, that pipe was built. We have a significant position on that. We've retained that volume on the pipe. We also benefited from an equity position. We made a very, very substantial return on that. We're very proud of that. But again, the objective was making sure that, that pipe was built and making sure that we had our ability to get our gas to market. Similarly, with Waterbridge, the main objective there is making sure that we're thinking a lot about a super system -- we reserved poor space. That's very proactive in our industry. John's probably tell you a little bit more about that when I hand it to him. But I can tell you, the really fundamental and important piece of this was to make sure that we have our water taken care of in the Delaware Basin. And through this JV, this partnership, we've secured that. Now as a very beneficial byproduct, we have a substantial ownership in a publicly traded entity that's done very well. There's no reason we have to hang on to it. By the same token, it's a great investment. And I would tell you, we're not -- we have to sell either in that position. So it's option value for us. We have a lot of that in our organization, and we continue to evaluate that just as we do with other things in our portfolio, and it's a regular part of the conversation we have with our Board. John, anything else you want to add? John Raines: Clay, I think you covered it really well. I would say the relationship there remains very important to us. Operationally, we work with those guys every day. We've got a very multifaceted water management effort in the Delaware Basin. That's both to manage cost but manage future risk associated with water. I've talked about this before on our calls, but our first call on water is always to go to recycle. We've got a big recycle operation in the basin. In New Mexico, we've got a large water midstream presence. We probably don't talk about enough. That gives us a lot of flexibility there. We've got a lot of strategic offloads. Many of those offloads are WaterBridge. And then when you get into Texas, we really leverage our WaterBridge relationship to give us diversity of options across the play there. So we feel really good about how that's working operationally. Operator: Our next question comes from Kalei Akamine with Bank of America. Kaleinoheaokealaula Akamine: I want to start with the Wolfcamp B drilling program for this year, and maybe this one is for John. So production in the Delaware has been holding up quite well this year. Can you kind of compare how the Wolfcamp B results are comparing to your expectations? And then for 2026, do you anticipate this zone comprising a similar proportion of the program? John Raines: Kalei, appreciate the questions. I would say Wolfcamp B is performing very well relative to our expectations for the year. You probably heard me mention this on the last call. When you look at 2025, we've got a very diversified program as far as the zones that we're targeting for the full year. We're looking at about 30% Wolfcamp B or deep Wolfcamp, about 30% Upper Wolfcamp, about 30% Bone Spring and the remainder in the Avalon. What you're really seeing, you're going to see some volatility in terms of zone mix each quarter. A lot of our Wolfcamp B wells have come on in the first quarter and really the first half of the year. So we've had a little bit of a run at seeing how those wells are performing. And generally speaking, I'd say they're mostly meeting our expectations with quite a few of those wells beating our expectations. What I think you can expect from us going forward for 2026, it's too early to get in and talk specifically about zone mix throughout the year. But I think Clay said earlier, you can expect some stability, some consistency in how we're thinking about our overall Delaware program. And as we've shifted more into this multi-zone co-development, from a well productivity standpoint, we took that trade-off to go a little bit lower this year in exchange for better NPV overall and for a longer inventory runway. But I think you can expect that well productivity to be very consistent going forward for the next couple of years. Clay Gaspar: Yes. And if I could add, I'm going to ask Tom just to add a little bit more about our D&C efficiency that we continue to see in the Delaware Basin. I mean, I think it's very important as we think about all of these additional zones. The Wolfcamp B is just a touch deeper. But as we start expanding to the geographic edges and up and down the zone, so to speak, that efficiency really contributes as well. So Tom, just maybe a little bit on how we're thinking about on the efficiency gains there. Thomas Hellman: Yes, Clay. It's been really interesting this year. We've been really leaning into benchmarking in the Delaware Basin and using the AI tools on top of that. We have both AI tools that help us on sort of the new school, where we can predict -- use the AI to look at the parameters, the drilling parameters that really help us predict how to drill faster on the current well. And we're even using AI tools right now to help us trip faster and drill curves faster and even running casing faster, all about 30% faster. Each one of those saves us millions of dollars. And now in the Delaware Basin, we have a new record at about 1,800 feet per day. That really screens well versus all of our fastest peers. So Clay, it's looking really good, and I think the AI tools and the benchmarking is really coming through for us. Kaleinoheaokealaula Akamine: That's awesome. I appreciate that detailed answer. My follow-up is on the lease sales. So yesterday, that sale was a state sale, but this presidential administration has put federal lease sales back on the table, and they should occur with a pretty steady cadence. How are you guys thinking about those? And do you anticipate that being a part of your cash allocation priorities for'26? Clay Gaspar: Yes, great question. And I think, as I mentioned earlier, I think this is something we should be able to compete exceptionally well. We've got an existing footprint, the momentum of the organization, the efficiencies Tom was just talking about around D&C, the infrastructure that we have, including Water Bridge, the relationships that we have with the gas midstream partners. And then, of course, the existing infrastructure of the people applying this business optimization, the technology puts us in a really good position to be super competitive. So when we look at those, you bet, we'll be participating in the process. There's some really interesting land. We're thrilled to have the BLM open up some of these opportunities. And there's some pretty material lease sales coming up. So yes, we -- as we've shown on the last lease sale, we want to be part of the process. And at the same time, we want to be very objective about how do we create value, full cycle value from these opportunities. So yes, count us in as part of the process. And as long as -- alongside everything that we're doing on the ground game, including trades, small acquisitions, ground floor leasing in all the basins we're doing. We just see a real interesting opportunity coming in the Delaware. So definitely leaning in that direction. Operator: We have no further questions. And so I'd like to turn the call back over to Chris for closing comments. Christopher Carr: Yes. Thank you for your interest in Devon today. If there are any further questions, please reach out to the Investor Relations team. Have a good day. Thanks. Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.
Operator: Greetings, and welcome to the Q3 2025 Cummins Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Arens, Executive Director of Investor Relations. Thank you, sir. You may begin. Nicholas Arens: Thank you, Maria. Good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the third quarter of 2025. Participating with me today are Jennifer Rumsey, our Chair and Chief Executive Officer; and Mark Smith, our Chief Financial Officer. We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information that you will hear or be given today will consist of forward-looking statements within the meaning of the Securities Exchange Act of 1934. Such statements express our forecasts, expectations, hopes, beliefs and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of risks and uncertainties. More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission, particularly the Risk Factors and section of the most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During the course of this call, we will be discussing certain non-GAAP financial measures, and we will refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website within the Investor Relations section at cummins.com. With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off. Jennifer Rumsey: Thank you, Nick. Good morning, everyone. I'll start with a summary of our third quarter accomplishments and financial results. Then I will discuss our sales and end market trends by region. Finally, I'll provide an update on how we are navigating the evolving trade and policy landscapes, along with our market outlook for the remainder of the year. Mark will then take you through more details of our third quarter financial performance. Before getting into the details of our results, I want to take a moment to highlight a few major accomplishments from the third quarter. In September, we announced a collaboration with Komatsu to develop hybrid powertrains for surface haulage heavy mining equipment. This joint development effort will leverage the breadth and scale of Komatsu's and Cummins' global capabilities to enable the acceleration of optimized hybrid solutions for mining. Retrofit hybrid solutions hold the potential to help mining customers accelerate their decarbonization journey today while lowering the cost of operations of their installed fleet assets. We are excited about this opportunity to bridge current operational needs with future low-carbon goals to support our customers' sustainability efforts. Additionally, our latest 15-liter engine delivered standout results during this quarter's Run on Less –- Messy Middle event hosted by the North America Council for Freight Efficiency. Three of the 13 participating fleets ran the new X15N natural gas engine through some of the most demanding duty cycles of the demonstration, showcasing its ability to deliver true heavy-duty performance while unlocking the cost and emissions benefits of natural gas. At the same event, our X15 diesel led in fuel economy and operational efficiency, reinforcing its position as a benchmark for dependable high-performance power. These results highlight the growing adoption of Cummins' technologies and the tangible value customers are experiencing from our advanced powertrain solutions, all produced here in the U.S. Now I will comment on the overall company performance for the third quarter of 2025 and cover some of our key markets. Sales for the third quarter were $8.3 billion, a decrease of 2% compared to the third quarter of 2024. Lower sales were primarily driven by weaker North America heavy and medium-duty truck demand with unit volumes declining 40% from a year ago, which was largely offset by continued strength in our global power generation markets, higher light-duty truck volumes and favorable pricing. EBITDA was $1.2 billion or 14.3% compared to $1.4 billion or 16.4% a year ago. Third quarter 2025 results included $240 million of noncash charges related to our electrolyzer business within the Accelera segment, reflecting lower demand expectations due to reduced U.S. government incentives and slower market development internationally. Excluding those charges, EBITDA was $1.4 billion or 17.2% of sales, an increase of 80 basis points from a year ago as the benefits of higher power generation and light-duty truck volume, pricing, operational efficiencies and lower compensation expenses more than offset declines in North American truck volumes and the unfavorable impact from tariffs. We did increase the proportion of tariff costs recovered through pricing and other mitigation actions in the third quarter compared to the second quarter. However, the magnitude of total tariff costs increased from Q2 as expected and the net impact to Cummins was negative year-over-year. Our third quarter revenues in North America decreased 4% compared to 2024. Industry production of heavy-duty trucks in the third quarter was 46,000 units, down 34% from 2024 levels. While our heavy-duty unit sales were 16,000, down 38% from a year ago. Industry production of medium-duty trucks was 20,000 units in the third quarter of 2025, a decrease of 51%, while our unit sales were 17,000, down 55% from 2024. We shipped 40,000 engines to Stellantis for use in their Ram pickups in the third quarter of 2025, up 44% from 2024 levels, driven by a ramp-up of model year '25 product, which was launched earlier this year. Revenues for North America power generation equipment increased 27%, driven by continued strength in data center demand. Our international revenues increased by 2% in the third quarter of 2025 compared to a year ago. Third quarter revenues in China, including joint ventures, were $1.7 billion, up 16% from a very weak quarter last year as stronger unit demand was partially offset by unfavorable product mix and weaker part sales. Industry demand for medium- and heavy-duty trucks in China was 311,000 units, an increase of 50% from last year. Our sales and units, including joint ventures, were 41,000, an increase of 35%. The increase in the China market size was primarily due to higher-than-expected domestic demand driven by NS4 scrapping incentives. Industry demand for excavators in China in the third quarter was 54,000 units, an increase of 22% from 2024 levels. Our units sold, including joint ventures, were 9,000, an increase of 18%. The increase in the China market size is primarily driven by domestic rural development and small infrastructure projects as well as strong export demand. Sales of power generation equipment in China increased 26% in the third quarter due to accelerating data center demand. Third quarter revenues in India, including joint venture, were $713 million, an increase of 3% from a year ago as stronger demand across markets was partially offset by depreciation of the rupee against the dollar. Industry truck production increased 6% from 2024, while our shipments increased 8%, driven primarily by domestic demand recovery as well as a pre-buy in advance of the potential goods and service tax rate changes. Power Generation revenues increased 41% in the third quarter, driven by strong data center demand. To summarize, we achieved strong results led by record performance in our Power Systems and Distribution segments, which were offset by sharp declines in the North America heavy- and medium-duty truck demand, which negatively impacted our Engine and Components businesses. We expect the near-term weakness in North America on-highway truck markets to persist at least through the end of this year. Across all North America on-highway applications, we anticipate unit shipments declining approximately 15% from third quarter levels with most of the reduction expected in light- and heavy-duty trucks. This reflects some normalization in light-duty trucks after a strong Q3 ramp-up in the new model production along with fewer production days in the quarter and continued weakness in heavy-duty trucks. While we believe Q4 on-highway Engine production could mark the bottom of this cycle, the pace of recovery in these markets will depend on broader economic sentiment and the clarity of trade and regulatory policies. While near-term challenges remain in our shorter cycle markets, we continue to see strong demand for power generation equipment beyond this year. The global trade and policy landscapes remain dynamic, presenting ongoing challenges across our industry. As anticipated, tariff costs increased in the third quarter. We are nearing full recovery for those tariffs announced prior to the third quarter and are currently assessing any incremental impacts from the more recent announcements, including the medium- and heavy-duty vehicle Section 232 proclamation. We believe, overall, we are well positioned to support our customers and keep the U.S. economy moving with our long-established strategy of making products in the U.S. for the U.S. market. Rising geopolitical tensions could also pose risks to semiconductor supply and other products that utilize rare earth minerals, potentially impacting our supply chain and broader industry production. So far this year, we have not experienced significant disruptions to our production, and we are actively monitoring this evolving situation and taking steps to mitigate risk where we can. The reduction of government incentives in the U.S. to support the adoption of green hydrogen, along with slower-than-expected market development in some international markets has contributed to significantly lower demand for our electrolyzer products. As a result, we are undergoing a strategic review of our electrolyzer business to assess the best path forward, and there may be further charges as we respond to a very weak demand outlook. 2025 has presented significant challenges for our industry, as I've outlined, requiring us to focus even more on cost containment and risk mitigation than we had anticipated at the start of the year. Our experienced leadership team and dedicated employees have worked tirelessly to navigate these dynamics and also capitalize on the growing demand for power generation equipment and significantly improve company performance cycle over cycle. Looking ahead, we are hopeful that global trade policy will stabilize and that the administration's review of the 2027 EPA regulations will conclude in the coming months. This clarity will be critical for our industry and will support our plan to reinstate guidance for 2026 in February. Now let me turn it over to Mark. Mark Smith: Thank you, Jen, and good morning, everyone. We delivered strong results in what can be best described as a tale of 2 economies, certainly here in the U.S. Key takeaways today are: number one, business trends in the third quarter played out as we communicated at a high level 3 months ago. Demand for our Power Systems and Distribution businesses remains very strong, driven in part by rising demand for backup power for data centers. U.S. truck production, on the other hand, slowed sharply with our shipments in heavy- and medium-duty truck engines down 27% from the second quarter, right in the middle of our uninspiring projection of a decline of between 25% and 30%. Our margins were strong with sales growth in Power Systems and Distribution converted into EBITDA margin expansion and cost containment efforts across the company helped mitigate the impact of declining truck volumes in the U.S. And thirdly, also as we projected, the negative impact of tariffs continued to grow in the third quarter. However, we managed the net hit to our profitability through price recovery and other actions, and the proportion of cost recovery in the third quarter increased sequentially. Fourth, our operating cash flow was strong at $1.3 billion in the quarter. Amongst those highlights, it's worth reinforcing that we're extending our track record of meaningfully improving our performance cycle over cycle. Now let's take a little closer look at our results. Our revenues were $8.3 billion, down 2% from a year ago. Sales in North America decreased 4%, while international revenues increased 2%. EBITDA was $1.2 billion or 14.3% of sales for the quarter compared to $1.4 billion or 16.4% of sales a year ago. Third quarter 2025 results included $240 million of noncash charges related to our electrolyzer business within the Accelera segment. Excluding those charges, EBITDA was $1.4 billion or 17.2% of sales. The higher EBITDA percent, excluding the noncash charges, was driven by higher power generation demand and light-duty truck volumes, pricing, strong operational efficiencies and lower compensation expenses, all of which was partially offset by lower North American truck demand and the unfavorable impact of tariffs. Now I will go into more -- a little bit more detail by line item. Gross margin for the quarter was $2.1 billion or 25.6% of sales compared to $2.2 billion or 25.7% of sales last year. 2025 margins included a $30 million noncash charge for inventory write-downs for our electrolyzer business, which were part of the previously mentioned noncash charges for Accelera. Excluding those charges, gross margin percent was 26%, improved from the prior year as a result of higher power generation demand and light-duty truck volumes, pricing, operational improvements, all offsetting negative truck and tariff impacts. Selling, admin and research expenses were $1.1 billion or 13.6% of sales compared to $1.2 billion or 13.8% of sales and reflected strong cost control across the company. Joint venture income of $104 million increased $5 million from the prior year. This increase was driven by higher China volumes within our Engine and Power Systems segments. That was the primary driver. Other income decreased to a negative $186 million compared to $22 million of income from the prior year, which was primarily a result of the $200 million noncash goodwill impairment to the electrolyzer segment. Interest expense was $83 million, flat with the prior year. The all-in effective tax rate in the third quarter was 32.7%, which included $36 million or $0.26 per diluted share of increased tax expense related to the One Big Beautiful Bill Act as a result of reduced foreign income deduction and research and development credits. We do anticipate cash benefits from our elections under this recent U.S. tax legislation, but the current period income statement impact was negative. All-in net earnings for the quarter were $536 million or $3.86 per diluted share compared to $809 million or $5.86 per diluted share a year ago. Accelera noncash charges were $240 million or $1.73 per diluted share. Excluding the Accelera charges and the impact of adopting the recent U.S. tax legislation changes, our net earnings were $812 million or $5.85 per diluted share, down just $0.01 on a 40% decline in U.S. truck volumes. Operating cash flow was $1.3 billion compared to $640 million a year ago. We have significantly improved our credit metrics since absorbing the Meritor acquisition and are now in a position of greater flexibility for capital allocation. Now let me comment a little bit more on segment performance and the remainder of 2025. Tariff costs impacted all of our operating segments. In the interest of time, I'm not going to call that out 5 times as I discuss each individual segment performance. For the Engine segment, third quarter revenues were $2.6 billion, a decrease of 11% from a year ago. EBITDA was 10%, a decrease from 14.7% as weaker North American and heavy-duty truck volumes, the costs and additional overhead of investing and deploying new engine platforms ahead of the 2027 emissions regulations, some weaker aftermarket sales were partially offset by higher volumes and pricing related to the launch of updated products in light-duty markets and overall disciplined cost management. Components segment revenue was $2.3 billion, a decrease of 15% from a year ago. EBITDA was 12.5% compared to 12.9% of sales a year ago as weaker on-highway demand in North America was partially offset by operational efficiencies, tight cost management and lower product coverage costs. In the Distribution segment, revenues increased 7% from a year ago to a record $3.2 billion and EBITDA was also a record 15.5% compared to 12.5% of sales a year ago, driven by higher power generation demand and higher aftermarket earnings. In the Power Systems segment, revenues were a record $2 billion, an increase of 18% from a year ago. EBITDA dollars were also a record at $457 million, increasing as a percent of sales from 19.4% to 22.9%, driven by strong volume, particularly in data center applications, positive pricing and effective capacity expansions in a cost-effective way. Accelera revenues increased 10% to a record $121 million as increased e-mobility sales partially offset lower electrolyzer installations. Our EBITDA loss, excluding noncash charges, of $96 million compared to an EBITDA loss of $115 million a year ago, reflecting a lower cost base resulting from the actions that we took in the fourth quarter of 2024. In summary, we delivered strong profitability for the third quarter as a result of improved operational execution, strong demand in power generation markets and pricing that more than offset the sharp declines in North American truck markets and unfavorable impacts from tariffs, although it has to be noted that all of these factors were not uniform across each individual segment. While we saw an increased impact from tariffs in the third quarter, we've worked hard to mitigate the impact and expect to enter the fourth quarter close to a price/cost neutral position for tariffs or for those tariffs that were announced prior to the third quarter. The ongoing addition and adjustment of tariffs continues to present challenges. In summary, our third quarter results underscored Cummins' strong financial position and ability to navigate ongoing uncertainty. Our diversified portfolio and global network leave us well positioned to support our customers and continue to drive improvement in performance cycle over cycle. As we've discussed, we expect demand for Power Systems and Distribution to remain strong through the fourth quarter and going into 2026. At the risk of sounding cautiously optimistic, I hope that demand in North American on-highway markets is close to bottoming in the fourth quarter in what has been a protracted and difficult slowdown. We do anticipate a further 15% decline in our engine shipments to on-highway markets in the fourth quarter compared to the third quarter. We are hopeful of reinstating our guidance in February as we have more -- we hope to have more clarity on trade and regulatory policies that hopefully will provide stability for the North American truck industry and the broader industrial economy. As these markets recover, we are confident in our ability to build on this year's strong performance and continue delivering value to shareholders. Now let me turn it back over to Nick. Nicholas Arens: Thank you, Mark. [Operator Instructions] Operator, we are ready for our first question. Operator: [Operator Instructions] Our first question comes from Jamie Cook with Truist Securities. Jamie Cook: Congratulations on a nice quarter. I guess 2 questions. One, Mark, how you're thinking about Engine margins in the fourth quarter and the ability to cover tariff costs or how to think about margins would be my first question. I guess then just my second question. As we think about Power Systems, obviously, the margins were very strong in the quarter. Just trying to think through how we think about 2026, the ability to ramp production more? How you're thinking about price cost? And I guess, Mark, do we need to raise the margin targets in Power Systems? Mark Smith: High-quality questions to answer. Let's start with the Engine business, and then Jen can comment on Power Systems. Yes, I think there are a number of things that the Engine business is dealing with that provide great complexity, right? We've got product changeover. We're preparing, hopefully, to launch new platforms. We've got some additional extra costs. We saw some slowdown in parts in the third quarter, and we're having to maintain this higher engineering budget until we get through the product launches. Having said all that, they're doing a lot. The leadership team within the Engine business across the company doing a lot to manage their costs. Hopefully, we're getting towards the low point. So I think, yes, I wouldn't expect with what I know right now to see a dramatically different performance from the Engine business, albeit on lower volumes in the fourth quarter. Clearly, volume is a temporary downward pressure given short quarters and inflated ramp-up, which we're excited about on the Ram pickup, which will kind of ease a bit. But overall, I think, well, hopefully, we're moving towards the bottom in terms of the pressures on the Engine business and Components. Jennifer Rumsey: And Jamie, on the power gen, we've -- obviously, we've seen really strong performance from both Power Systems and Distribution business. In Power Systems, in particular, we've been on a couple of year journey to really fix some of the underlying performance of that business, look at rationalizing the products that we're offering, how do we leverage the footprint that we have, get more strategic on how we're pricing in the market. And we did that at the same time that the power generation demand has grown at a really high rate, and we've been able to invest modestly in capacity expansion, about $200 million, bringing in new products kind of exactly the right time. So that really has been firing on all cylinders, if you would, and delivering incremental margins that are touching on 50%. So what I would say is we are committed to continuing to invest for profitable growth in that business. We had record order intake in Q3. So we think that the demand remains strong, in particular for data centers and that we will continue to invest as it makes sense in capacity and products to profitably grow and improve business performance, but I would not expect it to stay at that trajectory of incremental margin improvement as we go into future years. Operator: Our next question comes from Angel Castillo with Morgan Stanley. Angel Castillo Malpica: Congrats on another strong quarter here. Jen, I was hoping you could just kind of expand on your last comments that you just made about capacity additions. I think at this point, you're well kind of ahead of your expectations at Investor Day on data center sales. And as you mentioned, you already have that doubling of kind of large diesel engines capacity underway. But just in light of kind of the stronger demand, can you maybe walk us through what work or kind of assessments you might be doing on the back end to understand whether there is a need or a desire to kind of do either additional capacity investments in large diesel engines or potentially and maybe more importantly, are you exploring any potential for expanding your lines on the natural gas engine to kind of increase to the larger engine sizes to perhaps pursue some of the kind of prime power opportunities that we're seeing out there for data centers as they look for other prime power kind of speed to power opportunities? So just kind of any comments on the kind of this longer-term backdrop given the strong demand we're seeing? Jennifer Rumsey: Yes. So first, I'd say our focus has really been on this capacity investment that we've talked about. We're reaching the end of that doubling in capacity on large engines, as you noted, and position has heavily been in the backup power for data centers with the products that we have that we're selling into the market today. I'm really pleased with the execution of that team. We've tracked kind of ahead of schedule on that capacity expansion. We're reaching the end as we come to the end of the year. And just to give you a sense, in 2024, for data center power generation, our total revenue for the company was $2.6 billion. About half of that was in Power Systems. About half of that was in DBU because one of the unique things that we have is engine, some of the key components and auxiliaries that we sell to that market plus the channel. So we're getting benefit in both PSU and DBU. For '25, we expect that revenue into the data center market is going to be up 30% to 35%. It's been ramping up Q4 last year. We had a nice bump up, continuing to ramp up this year. And so we'll be kind of at that full run rate on that product expansion for data centers. And then that leads to kind of the second part of your question is really focused now on what's next? Are there additional places where we want to do a capacity expansion of the products that we have because we think that, that demand in that market is going to remain strong? So we're actively looking at that. With the products that we have, engines for peak shaving, should we invest in prime power engines or more natural gas engines? So no decisions there. But certainly, those are things that we're looking at, and we'll continue to share as we make decisions on where we want to go next in the data center. Mark Smith: Yes. And then just on the component technologies, we're also selling to other customers as well, somewhat akin to the components business story. So yes, it's exciting to be talking about investment with visibility and the returns in that business. Angel Castillo Malpica: That's very helpful. And then just for my follow-up, Mark, on the Section 232, could you help us quantify, I guess, how much the headwind is in 3Q and 4Q on kind of a gross basis? And any comments or kind of way to maybe put guardrails around the potential for getting a similar rebate on engines manufactured in the U.S. as we've seen, I think, the U.S. trucks manufacturers get? And what is kind of the financial impact of that as we think about potentially 2026 if getting such a rebate? Mark Smith: Tell you what, I've got exactly the same questions that you've got. And we've got -- we need to know a lot more details than we've currently got to be able to predict that. What I will say is we're in a -- we are a strong manufacturer of engines in our plants here in the U.S. So we're really well positioned to help our customers and navigate through. But honestly, all these modelings, I know it's important in some regards, but the actual details, there's 5 or 6 questions that we need a lot more details to be able to calculate it, let alone communicate it. So what I would say is we're in a strong position given our footprint, and we'll remain a strong partner to our customers through all of this. And you can generally tell from our tone that stability going forward would be really, really helpful. For what is outside of a broad economic recession or what I'd call a hard emissions change, this is the sharpest decline in truck orders that many of you who have been here a long time have witnessed. And it's not all down to tariffs, but they also don't help with that uncertainty. So look forward to more clarity, even more so the stability, but we're in a good position overall. And we're trying to work through all these collaboratively with customers and suppliers. It's been a huge demand on all participants. Operator: Our next question comes from David Raso with Evercore. David Raso: Thinking about a delta between '25 and '26, the actions taken in Accelera sort of set up an interesting dynamic there. What percent of the losses right now are electrolyzers? How should we think about the actions taken sort of the decision around that business? How much that can improve the size of the losses from '25 to '26? Mark Smith: Yes. What I would say is all we've recorded in this quarter, the really noncash impairment charge is mostly goodwill write-down, which is disappointing, but necessarily given the weaker outlook. So I would say what we've done really doesn't so far, David, hasn't -- doesn't do much to change the trajectory. But as Jen pointed out, we obviously have been and continue to look very closely at further actions we can do to reduce the rate of losses. It's less than half of the total of the overall Accelera segment. But yes, watch for updates on that from us. David Raso: Okay. And actions that would help reduce that loss. I mean once you make that decision on the write-down, I would think there's harder decisions playing out behind the scenes on cost. Are those actions that could help '26 or is there a longer time frame when I think of the delta between '25 and '26? Mark Smith: There are different types of actions, but we are conscious if there's a lower demand environment, we're not -- nobody is comfortable sitting at the losses that we're at when the demand environments change. So we're looking at all that, and we'll be transparent when we've concluded that here, but we're working on it right now. Jennifer Rumsey: It's fair to say strategically, we're continuing to look at the Accelera portfolio in light of how markets are moving, slowdown that's happening and what technologies we think are most likely to win. And then investing in the places that we see the opportunity to position ourselves for the medium and long term and looking at how we reduce losses in other areas. At the end of last year, we did that in the fuel cell part of the business, and we're continuing to execute some of those changes. And now we're looking at electrolyzers, as Mark noted. Mark Smith: It's fair to describe the decline in revenue outlook as sharp and dramatic and merits further close review, which is ongoing right now. Operator: Our next question comes from Rob Wertheimer with Melius Research. Robert Wertheimer: Thanks for all the comments on direction. It's very helpful. On nat gas and data centers and prime power, I mean, Cummins obviously has very successful nat gas platforms in different engines. So I wonder if you could give us a mini teach-in on what that entails? Is it a hard engineering challenge to bring it to large engines? Is it you need a lot of operating hours? Maybe what goes into that decision? And then I wonder if you could just talk about any changes. I mean you guys were ahead of the data center boom or capitalizing on that. Anything shifting now? Any change in data center design? Is it all of them use -- back up the ratio? Just maybe what's evolved in the market over the last few months? Jennifer Rumsey: Yes. So as you said, I mean, Cummins has strength in engine, research and development and manufacturing capability. We understand natural gas. So the question is, we have a certain portfolio of natural gas products today and assessing what is -- if there's demand for natural gas for data centers, what's the right product? If we don't have it today -- our development is a multiyear development cycle, typically, but we have the capability to do that if we think that, that is going to be attractive growth opportunities. So that's how I would think about natural gas. In terms of the data center landscape, what you see is high reliability is absolutely critical. So the need to have backup power to ensure that high reliability is not going to go away. They don't run that often. Really, where the challenge is, is more on the prime power and can the grid support it and how do they solve the prime power challenge. And so that's where using a backup genset maybe for peak shaving or additional sources of prime power or what data centers are out exploring. And as I mentioned in my comments earlier, I think we have ability to do some peak shaving with products that we have today. We've started to invest in some stationary energy storage solutions that could be used in data center applications, and we're continuing to evaluate where else we think we're positioned to invest and get attractive returns. Operator: Our next question comes from Kyle Menges with Citigroup. Kyle Menges: I was hoping if you could just talk a little bit more about Accelera and actually just looking at the performance and -- I mean, it seems like you're actually still on track to hit the midpoint, if not a little bit above the full year guide within Accelera on revenues for this year. It sounds like e-mobility had some nice growth in the quarter as well. So it would be helpful just to hear about the growth you're seeing in new mobility versus electrolyzers and then also maybe at a high level, the differences in profitability that you're seeing right now between the e-mobility piece of Accelera and the electrolyzer piece. Mark Smith: Yes. I would say most of the actual sales in e-mobility are bus applications, a lot of it here in the U.S. and that's continuing, and we're in a great position there. There's lots of other explorations and discussions. There's been a big shakeout even in the e-mobility industry given, I would say, lower prospects for accelerated growth, even though we're growing the overall -- everybody's projections for growth has come down, and that's led to a shakeout certainly in a lot of the start-up, some of the less well-capitalized participants. So I think there's still a lot of discussion and future opportunity for Cummins in e-mobility. And I think that's been generally been a good story that as the volumes and we've released new iterations of products that we've moved from, yes, significant losses and negative gross margin to something a lot more stable and sustainable going forward. It's still somewhat muted, right, in the grand scheme of a $35 billion company, but we've seen clear progress there, and we're positive and staying invested there. On electrolyzers, we went back a couple of years, we had pretty ambitious targets for growth and we were tracking that trajectory every quarter. It was -- we were tracking years out where do we need to be, and we were on that curve for significant revenue growth for quite some time. And the reality is, yes, it's dried up faster than anything I have seen in my career for a variety of reasons, especially here in the U.S., but also some of the adoption in international markets. So whilst, yes, we probably guided a little cautiously going into the new year, not knowing exactly what would happen. So we're not way off on the revenue from the guidance that we no longer have, but the one that we originally gave. But yes, it's just internally, it's surprised even us to the downside. And so that's why. It might look to you like we're on track, but electrolyzer is way off. And it's not just for now, but then that leaves the orders as a big gestation period between taking an order, shipping a product, having it installed, recognizing the revenue. And so not only is that shorter orders now, that's leaving like a hole in the projections going forward for the next couple of years. So that's why we're acting now. So it's tough, very tough in ex e-mobility, but we're pleased with the progress, and I don't want that to be lost from the e-mobility team. Kyle Menges: That's helpful, Mark. And then just a follow-up on clarifying some of your comments on the emission margins and maybe just thinking about some of the puts and takes into the fourth quarter on Engine margins as you start to neutralize tariffs even though volumes could still be down sequentially. I mean, I guess the question when you said Engine could be kind of similar to the third quarter, does that mean that you have confidence in doing roughly 10% EBITDA margin again in the fourth quarter? Or are we talking about similar decrementals in which case you could be talking about 8% EBITDA margins for Engine in the fourth quarter based on volume... Mark Smith: I'll just say it out here and this -- you can all -- I don't expect to have 8% margins in the fourth quarter in the Engine business, but some of the factors -- the volume is going down, not we expect it to. I'm unfortunately, confident, but we hope that's a bottoming. We also saw a slowdown in parts. We hope that doesn't continue. And then, yes, all the other things that we're doing on cost, productivity, managing through tariffs can all help mitigate. It's certainly not going to be dramatically better. We're dealing with more headwinds. I've tried to be clear about that. So hopefully, that helps. I would just say, there's always a bit of seasonality, fourth quarter going into the holiday period. Those usually get exaggerated when you're in a weak economic environment. But just now, we're working hard. The Engine business is working hard every day to get this balance right. And what you can see from our financial reports that we disclosed the engineering costs by segment, by quarter. You can see our engineering costs are up year-over-year because we're still in this prelaunch development, not yet final certain regulations. So that's got to continue, but that shouldn't be a step worse in the fourth quarter. So don't expect magic, but don't expect 8% EBITDA with what I know right now. Jennifer Rumsey: I'll just add a couple of points. I mean we've been working to flex down plants and so seeing that action coming through the full Q4 as well as the Engine business has seen more than its share of the net tariff impact that impacted them in Q3, but we get to more full recovery. In Q4, it will reduce. Mark Smith: Yes. I mean there's always some natural variation across some of the businesses. In general, as we've said, we expect Power Systems and Distribution to be strong. It's -- no quarters are ever identical to the prior one, even if it looks similar on the top line. Pressure is still there on Engine business and Components. We still got a tight control on costs and we're figuring out what else we can do on Accelera. That's the headline. And then as I mentioned, we've also done a lot to improve our credit metrics, which gives us flexibility for capital allocation going forward. So as much as troughs are tough, they also give you -- working through them effectively gives you that platform and that confidence to move forward when demand improves. Unfortunately, I wish I could be more bullish and say we're super confident. We feel like we're getting to the closer -- to the bottom of the trough on on-highway. We think the trends on power generation, data centers, which benefit Power Systems and Distribution are going to continue. So hopefully, we get this coming together of strong demand across the company at some point here in the not-too-distant future. It's a little elusive right now on trucks. But we feel, given how long it's been and how far it's been down, that is a question of time in a cyclical business. But it's not imminent that it's going to turn up. Operator: Our next question comes from Tami Zakaria with JPMorgan. Tami Zakaria: Great quarter, and thanks for your time. Are you able to speak to the distribution or services opportunity you see long-term as you're selling these gensets and probably have a very sizable installed base right now? What is the typical expectancy of these? Is there a scenario where we would see the first wave of aftermarket services picking up for those units that you've sold over the last 12 to 24 months? So any way to comment on that or quantify that? Jennifer Rumsey: So Tami, for data centers, the distribution business gets revenue on the front end for a lot of the customers as they do the installation and some of the additional components and product around the engine and the genset in the data center. There's not a lot of aftermarket revenue in data center backup power because they don't run that often. So there's some service and support that we provide to those customers to ensure they stay up. It's not the same if you think about like a mining application or a heavy-duty truck application. That said, our installed base has been growing and those other applications that do drive more aftermarket content. So we believe aftermarket, in general, will be a tailwind for the Distribution business and especially as customers come back, there's a little bit of waiting on service that isn't necessary right now because of business financial conditions, but we think that we'll see some improvement in aftermarket as Mark had noted. Tami Zakaria: Understood. That's very helpful. And if NOx 2027 is not delayed after review, how are you thinking about the cadence of any product launches in 2026 tied to that? Jennifer Rumsey: Yes. Great. Well, we continue to maintain our focus on development of the new products that we're launching for '27 and feel good about how we're positioned with the new platforms and technology that we're bringing to our customers. It's important to understand, we've never had this level of uncertainty around regulation. So that's certainly been challenging and keeping our team focused on the launches ahead, starting to work with our supply base on different scenarios and what that could mean to try to ensure we can offer a product to our customers as we understand that decision. And really, we've been engaging closely with the EPA as they look at opportunities to try to take some cost out of that rule and also just emphasizing the need to get certainty as soon as possible. And I think everybody, all the OEMs in the industry are pushing on that certainty point. So we're prepared to launch, really hoping to give that certainty on direction in the not-too-distant future. And assuming that the '27 regulations largely stay in place as they are today, we'll be ready to launch our products into the market in '27. Operator: Our next question comes from Steven Fisher with UBS. Steven Fisher: Congrats on the power results. Just curious on the international data center opportunities relative to the U.S., how do you see those being different? And is there any difference in the momentum there? And how are the competitive dynamics differ internationally versus on the domestic side? Jennifer Rumsey: If you look at the data center market, I mean, we see strong and growing demand in U.S. and China. Those are the kind of the standouts. There's growth globally. You heard in some of my numbers on how the market is moving. We're seeing investment in data centers and other markets around the world. But the 2 biggest areas are really U.S. and China. And of course, everybody is trying to figure out how to get in and compete in that market. So we're well -- very well positioned today and really trying to focus on continuing to maintain a strong position with our products as others try to figure out how do they take advantage of those market opportunities. Mark Smith: Okay, and then... Steven Fisher: Go ahead, Mark. Mark Smith: I was going to say, obviously, in China, you tend -- in most of our markets, you tend to see more presence of local competition or trying to get in than we do in the U.S. or in other markets. Steven Fisher: That makes sense. And then on the Power Systems margins in general, obviously, still very strong, and you talked about the 50% incrementals before. I guess just noticing as the year has progressed, the segment's margins have kind of flattened out a little bit. I'm just kind of curious what's driving that? Are there other things outside of data centers that are restraining that? I know at the beginning of the year, we talked a lot about the aftermarket components in there. Maybe that was just fluctuating a little bit. Just curious how to think about sort of that flattening that we're seeing over the course of this year. Mark Smith: I would say the general -- so that's the great news. There is some natural variation between aftermarket, all goods segments. So some of that sometimes is at play a little bit. The good news, Steve -- back to somebody asking that should we raise the targets? I really like the way you think. I'm sure Jenny and the team might be dialing in. If not, we'll relay that to them later. But yes, really proud of the work that we've done there. And with rising demand, yes, there's some capacity investment. We're expecting earnings growth. Let's just put it out there. We're expecting earnings growth from here going into next year with what we know right now. Operator: Our next question comes from Noah Kaye with Oppenheimer. Noah Kaye: Jen, I think you framed it well and talked about the level of uncertainty right now as you prepare for next year's product launch vis-a-vis the regulations. But as you kind of get into year-end budgetary planning, is it fair to think of as a baseline that engineering and development spend can be a potential tailwind into next year? Or would you expect it to be a headwind if the base case of unchanged regulations goes forward? Jennifer Rumsey: In the base case of unchanged regulation, I would think of our research spend is pretty flat through next year when we launch the product, and then we'll have the ability to start decreasing that after that. And then I would think about just in terms of demand, that's where our -- as we're planning for next year, that's where the highest error bars are is what's going to happen in on-highway demand. As Mark noted, we think we're reaching the bottom. We think there's some upside. When does that happen given the capacity that's been taken out as we've responded to this big down cycle, how quickly will capacity be added back once demand starts to come up? So I'm thinking about some revenue increase at some point in the year, but R&D is staying pretty flat. Mark Smith: Yes. Accelera probably won't be growing, and there's always the question of what are we investing in the future, whether that's in Engines and Components or in Power Systems or future technologies. But yes, not a dramatic change for the next year. There's just natural inflation because a lot of those costs are people costs. There is some natural inflation that we're always counting against. So it will not be a significant tailwind, let's put it like that. Longer term, yes, but not tomorrow. Jennifer Rumsey: Yes. Noah Kaye: Yes, yes, yes. And on that topic of investing, and I want to tie it back to the discussion around the prime power opportunity. 30% of data center sites could be using prime power in some form 5 years out from now. You've got fuel cell in the portfolio. You've got battery. You've got natural gas and diesel gen. How do you think about tying together some of those elements, including what might sit in Accelera today to go after expanded wallet share if prime power becomes more of a growth opportunity? Jennifer Rumsey: Yes. Well, our strategy really has been to maintain a portfolio of solutions likely across different customers and markets. There's not going to be one answer. I think our strong position in engines as power demand grows and as energy transition pushes out, positions us really well. We're really more focused, frankly, in both power generation and in mobile applications on the battery opportunities where we think there's more opportunity versus fuel cell. We -- as you know, we've slowed down some of the investment and work in the fuel cell side. And there'll be more to say if we have a clear investment that we think is going to be attractive on the prime side. But today, we're really focused on continuing to execute on some of the investments that we've made to expand capacity in standby and being disciplined in how we think about additional investments into that market. Mark Smith: Yes, I think the great thing with what we've done right now, it's relatively modest investments for a lot of growth with quite high predictability of returns. So we're definitely enjoying that in our financial results. Should do more going forward. Operator: Our next question comes from Scott Group with Wolfe Research. Cole Couzens: This is Cole on for Scott. Maybe just to expand on Engine margins, it sounds like the net tariff impact peaked in 3Q as you recover more price and ramp down facilities in 4Q. But as you look ahead to 2026, a 3.75% rebate is not immaterial. How much could this positively impact margins in 1Q or throughout 2026, all else equal? Mark Smith: I just can't -- I simply can't answer that. I wouldn't be thinking about tariffs as margin improvement things. It's been a big cost headwind that we've been trying to recover and work with all that we can to mitigate the cost. I think -- I understand why you're asking it, but we are not framing tariffs as a margin opportunity in any way, shape or form. It's been a big hindrance to our industry. And hopefully, we get stability and relief. Cole Couzens: Okay. Fair enough. Mark Smith: You're right. Going into Q4, we are -- it is true, we're catching up more with the recovery of the tariffs. I'd correct myself, but anything incremental, that's not the way we're thinking about it. We're hoping there's a platform for greater demand for the end user customers. Jennifer Rumsey: Yes, just to reiterate Mark's point, the way to think about it is if we get stability in tariffs and customers start ordering again, that will help our margins because we'll be utilizing our plants more, but by itself as a margin improvement. We're just trying to cover the cost basically. Mark Smith: Yes. And we don't know enough to know all these -- the nuances of any recently announced things, rebates or other things. There's just a lot more detail. Even the emissions regulations, it's great to get the headline. There's a gazillion things that you need to know between that as to how that actually works financially, practically and other things. So we'd love to give you more clarity, we just can't. Cole Couzens: Yes, all makes sense. And maybe just on the competitive dynamic, there's like a lot of moving pieces with certain OEMs now either in a better or worse competitive position due to these new Section 232 tariffs. How do you expect this to impact your share position across the Engine business moving forward? Mark Smith: We are in a strong position to support all of our customers with our U.S. base, and we've got -- the great news is we've got great penetration across multiple brands and OEMs and our -- generally, the trend has been for our customer demand for Cummins products has been rising in heavy- and medium-duty truck over the last few years. So we feel like we're really well positioned, but it's obviously been very complex for all involved and continues to be so. Operator: Our final question comes from Chad Dillard with Bernstein. Charles Albert Dillard: So just given the market demand for standby power, I think you guys talked about record level of orders this past quarter. Does Cummins need to expand capacity beyond what you've already announced? And then I was hoping you could comment on, I guess, the role of standby power as more prime power moves behind the meter. Jennifer Rumsey: Yes. So from a capacity perspective, certainly, we're looking at in addition to evaluating our -- if we do anything on the prime power side, which we've talked a lot about this morning. We are evaluating are there places that we can continue to invest in capacity because we do see such strong demand and whether it's orders we took last quarter, it's the conversations we are having with some of our customers around the world, we think that, that demand is going to continue. And so if there's places that we think we can invest and take capacity up, we will be evaluating that, certainly. And we still think that in the coming years, this demand for prime power is going to continue. While I do think that there tends to be a hype cycle around technology, fundamentally, the need to store more data in the cloud, whether it's AI or other driven is a trend that's going to continue to grow. Charles Albert Dillard: And then second question, just on tariffs. So can you quantify the gross tariff impact in 2025? And then what's the split between IEPA versus 232? And if we do get IEPA rollback, I mean, should we consider this more like a pass-through? Mark Smith: We have not provided the guidance on the gross amounts generally, but the net position has been negative for the company, and we're in the tens of millions of dollars of negative impact each quarter so far. That's what I can tell you. And what happens, I'm just not going to speculate. We just don't know enough for what happens. But we -- as we said, as clear as I possibly can, we've been battling to offset costs on the industry. It's not a margin -- it's a margin dilutor even if we recover it, right? Jennifer Rumsey: There's a lot of moving parts between IEPA and 232 tariffs and uncertainty around that. So really, we want to understand the details on that before we provide any color on what that looks like. The great news is we make our engines and our gensets for the U.S. here in the U.S., and the team has done an outstanding job of navigating a lot of change and challenge and working to recover the cost of those tariffs. So really proud of what they've done given the environment that we've been navigating this year. Mark Smith: All right. Appreciate it, everybody. Thanks for joining us. Nicholas Arens: That concludes our teleconference for today. Thank you all for participating and your continued interest. As always, the Investor Relations team will be available for questions after the call. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the NCR Voyix Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. And I would now like to turn the conference over to Sarah Schneider. Thank you. Please go ahead. Sarah Jane Schneider: Good morning, and thank you for joining our third quarter 2025 earnings conference call. This morning, we issued our earnings release reporting financials for the quarter ended September 30, 2025. A copy of the earnings release and the presentation that we will reference during this call are available on the Investor Relations section of our website, which can be found at www.ncrvoyix.com and have been filed with the SEC. With me on the call today are Jim Kelly, our Chief Executive Officer; Nick East, our Chief Product Officer; Beimnet Tadele, President, Restaurants; Darren Wilson, President, Retail; and Brian Webb-Walsh, our Chief Financial Officer. This call is being recorded, and the webcast is available on the Investor Relations section of our website. Before we begin, please be advised that remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our earnings release and our other reports filed with the SEC. We caution you not to play undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. In addition, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this morning and our supplemental materials available on the Investor Relations section of our website. With that, I would now like to turn the call over to Jim. James Kelly: Thanks, Sarah, and good morning, everyone. Thank you for joining us for our third quarter earnings call. Beginning with our performance, we are pleased with our third quarter results, which reflect continued progress towards the financial and operational objectives we set at the beginning of the year. I previously outlined a clear strategy to reposition the company as a software-led business, supported by robust payments and service capabilities. We remain focused on executing against each of our strategic initiatives and driving profitable growth for the company. A key milestone in our strategic shift to becoming a platform powered software and services provider is the outsourcing of our hardware business. The ODM implementation remains on revised schedule with a phased transition to Ennoconn beginning in January. Cross-functional teams across engineering, supply chain and technical operations are actively finalizing readiness activities, validating integrations and preparing customer support processes to ensure a smooth transition. This shift will reduce capital intensity, streamline our operating model and enable greater focus on our high-margin software and services businesses. We are also modernizing legacy commercial structures across our installed base. As multiyear software and services contracts come up for renewal, we are introducing price escalators to better align pricing with the value we deliver. We are applying the same disciplined approach to our payments contracts. This, coupled with the completion of the migration from the former JetPay front end, will provide us a foundation to scale payments more broadly. Our focus on expanding our payments presence across the enterprise, grocery, fuel and restaurant verticals will further strengthen recurring revenue and enhance our long-term growth profile. Looking ahead, the company's primary growth driver will be the acceleration of innovation across the Voyix Commerce platform. NCR Voyix has the advantage of deep domain experience in nearly 3 decades of enterprise software development backed by more than 50 proprietary applications and thousands of purpose-built features created in direct response to customer needs. We understand how retailers and restaurants operate. And what they require to run their stores efficiently; serve their customers and scale their businesses. We have now paired that industry experience and extensive application library with AI-enabled development, significantly accelerating the time to market for our microservices architecture and new platform capabilities. Further, this approach enables us to extend the VCP to additional vertical and geographic markets at a faster pace and with greater precision. As the new solutions are deployed across our customer base, we expect higher margin software and connected payments revenue to represent a greater portion of our total revenue and enhance our growth profile. Customer engagement continues to reinforce our strategy and product direction. At the NACS show last month, we previewed only our next-generation platform solutions and the feedback was overwhelmingly positive. We demonstrated our ability to deliver the cloud capabilities customers have been asking for to align with their modernization priorities and validate the relevance of our platform roadmap. We expect this momentum to continue as we prepare for the NRF show in January, where we will introduce a broader suite of software and payment innovations for additional retailers. On January 9, we will have the honor of ringing the closing bell at the New York Stock Exchange to commemorate 100 years since our initial public offering in 1926, a milestone achieved by only 40 public companies in the NYSE's history. This achievement reflects both the longevity and our ability to adapt and lead through market change. As we celebrate a century of progress, we remain guided by the same commitment to innovate and disciplined execution that has defined our success for generations. With that, I will turn the call over to Nick, who will discuss our product acceleration initiatives and the formal introduction of the VCP and microservices architecture at the NRF Show. Nick East: Thanks, Jim, and good morning. Our software journey began 15 years ago with strategic investments and acquisitions to build a portfolio of category-leading, retail and restaurant applications. Today, these solutions power a significant share of global commerce, serving retailers and restaurants across more than 35 countries and representing approximately $1.4 trillion in transaction volume. Our software constitutes a significant portion of the industry's business logic library, the comprehensive brain trust that represents a massive collection of codified industry wisdom. That software value and the transaction volumes it powers every day is undeniable, but it's also trapped within a prior-generation architecture, making it slower to update and harder to integrate, the kind of friction modern architectures eliminate and our customers have demanded. Beginning in 2018, we initiated a push for modernization that is now reaching a tipping point. First, we built a SaaS-based microservices platform in the cloud, which today connects nearly 78,000 of our retail and restaurant sites and enables online and in-store transactions, 24/7 for some of the largest operators in the world. Second, we re-architected our powerful monolithic applications into microservices, unified them on a modern code base with open APIs and secure, resilient operations baked in. And third, we acquired the industry's only edge native application engine designed to meet the run-time challenges of modern retail and restaurant environments, enabling customers to deliver change in their physical locations at the pace of their best digital channels and without the dependency on any specific hardware manufacturer. Consumer expectations continue to rise as technology cycles accelerate. Our customers are seeing us as a partner who will help them move faster, innovate confidently and scale profitably. NCL Voyix is positioned to be the platform-powered leader in unified commerce for retail and restaurants. Our mission is simple: to enable our customers to accelerate new possibilities, to make every experience seamless so they keep their customers coming back. Our domain and technology experts are leveraging our extensive software footprint, together with the modern architecture of the Voyix Commerce platform to accelerate the delivery of our next-generation applications across our entire portfolio now with the added advantage of AI-enabled development tools. AI is not merely layered on top of our platform, rather it is integrated into the build, deployment and support of our customer environments. AI is enabling us to accelerate the availability of our application across markets and formats. As an example of bringing innovation to market this quarter, 3 grocery brands went live in the U.S. and Europe with our new, modernized point-of-sale application. Each migrated from an older on-premise point of sale and began its state-wide rollouts that will accelerate in 2026. The go-lives exceeded customer expectations, underscoring the agility and reliability of our platform and its role in delivering improved customer experiences. We expect this momentum to build in 2026 with more customers migrating from our current solutions and new customers adopting our platform applications for their differentiated market capabilities. We are also seeing increasing demand for cloud-native microservices-based architectures in the restaurant space, driven by the same forces we've experienced in retail, the need for faster innovation, easier integration and more flexible deployment. Given our deep expertise and proven success in modernizing retail technology, we have chosen to bring our market-leading restaurant point-of-sale application onto the same VCP architecture. This creates a unified modern foundation across our businesses, accelerating our road map and enhancing value for retailers and restaurants, and an increasing number of brands that operate combined retail and restaurant formats. As an illustration into how this modern architecture has been received, we showcased the integration of our cloud-native microservices kitchen application within convenience store environments at the NACS show last month in Chicago. Customers will be able to place food orders directly from a modern pump interface and pick them up inside the store, enhancing convenience while creating new in-store revenue opportunities. The integration of our kitchen application into the retail point of sale was completed in less than a week as both were built on the microservices architecture. To validate our expansion efforts, we recently completed a comprehensive competitive market analysis, supported by a third-party research firm with engagements from industry analysts to assess our positioning. The results of this 6-month review were clear. Our strategy is aligned with that of our existing customers and the broader market. The VCP enables retailers and our restaurants to simplify their ability to accelerate their business. Additionally, our product road map delivers solutions to both enhance the consumer experience and optimize operational efficiencies, while our proprietary domain assets are highly differentiated. As we now shift into activation mode, rolling out our commercial programs and scaling our production environments, we remain excited about the outcomes our initiatives will drive for both our customers and our business. We look forward to showcasing our latest innovations at the National Retail Federation show in New York this January. This will be followed by 6 additional conferences across the markets we serve. We invite investors to join us at the Javits Center to experience the solutions firsthand and engage with our teams and customers. With that, I'll turn the call over to Benny to discuss our Restaurant's performance. Beimnet Tadele: Thanks, Nick. In the third quarter, our restaurant business signed more than 200 new software and services customers. Our platform and payment sites increased 6% and 2%, respectively. Software ARR increased 3% and total ARR increased 7% in the quarter. In our Enterprise division, we signed a multiyear platform and point-of-sale agreement with Marco's Pizza, one of the fastest-growing pizza chains in the United States, to support its global expansion efforts. The initial phase of this rollout will commence in Mexico before the end of the year, followed by subsequent international locations. This partnership reflects the strength of our global footprint and offering, and we anticipate further growth in our enterprise business worldwide. As Jim and Nick mentioned, the company recently made the decision to leverage our edge-enabled microservices architecture to bring our Aloha next-generation point of sale to market, beginning with enterprise restaurants. The customer response to the initial preview of our edge-enabled microservices architecture has been incredibly positive, validating our strategy and reinforcing the depth of our enterprise relationships. We plan to begin lab testing the Aloha next-generation point of sale for targeted formats in the first quarter of 2026, with a broad availability across all segments by the third quarter. I'm excited about the significant growth opportunity as we deploy our edge-enabled dual cloud microservices applications and continue transforming the future of restaurant operations. In payments, customer adoption of our payments gateway solution continues to grow. This quarter, one of our existing software customers a, Mexican fast casual restaurant with nearly 600 sites, selected Voyix Connect as their payment gateway interface. Additionally, we continue to execute on our pricing initiatives, moving to a model based on transaction volume, which provides a solid foundation for our business and is in line with the market. I will now turn the call over to Darren to discuss our retail performance. Darren Wilson: Thanks, Benny. Good morning. In the quarter, our retail business signed over 30 software and services customers. Our platform and payment sites increased 16% and 9%, respectively. Software ARR increased 11% and total ARR increased 4% in the quarter. Over the last 2 years, we have signed more than 15 mid-market and enterprise customers for our Voyix point-of-sale and self-checkout solutions, which will be implemented over the coming months. We continue to enhance the Voyix Commerce platform with value-added applications and direct integrations that serve both new and existing retail customers. Most recently, we significantly expanded our domestic fuel offering, signing long-term agreements for commercial fleet card acceptance with two of North America's largest providers. These agreements will enable us to serve as both a point-of-sale provider and full service payments processor for both consumer and commercial fuel transactions at over 18,000 locations. By managing the entire transaction life cycle, we are enhancing the value of our integrated payments capabilities and strengthening our overall value proposition. This also materially expands our addressable market for payments in the U.S. With nearly $600 billion in volume running through our fuel payment gateway and $800 billion in consumer card volume, we now have the ability to target approximately $1.4 trillion in U.S. payment volume. We also launched our next-generation loyalty solution, Voyix Loyalty. The delivery of this cloud-native and microservices-based application facilitated a multiyear agreement with HEB, the largest grocer in Texas and a new NCR Voyix customer. We will enable promotion execution across HEB's nearly 400 store footprint through a direct integration into HEB's in-house point-of-sale software, demonstrating the agnostic design of the VCP and its edge-enabled microservices applications. Additionally, we signed an expanded multiyear agreement with a regional grocery store alliance, encompassing nearly 300 stores across 3 brands in the Northeastern United States. Through this partnership, we will now deliver a full suite of next-generation platform solutions, including Voyix point of sale and self-checkout, loyalty and hardware maintenance across their entire state. Finally, in services, we expanded our longstanding relationship with a large multinational wholesale grocer, becoming the exclusive service integrator for over 20,000 lanes across 2,000 stores in Belgium and the Netherlands. In addition to providing hardware maintenance, we will now provide vendor management and be the sole point of contact for all the brand's technology-related services. This large-scale expansion demonstrates the strength of our services division and its ability to meet the complex needs of our global customers. With that, I will turn the call over to Brian. Brian Webb-Walsh: Thank you, Darren, and good morning. For the quarter, total revenue of $684 million declined 3% due to lower hardware sales and onetime software and services revenue. Recurring revenue increased 5% to $425 million, driven by 7% growth in restaurants and 4% growth in retail. Software ARR and total segment ARR increased 8% and 5%, respectively, platform sites increased 12% to $78,000 and payment sites increased 3% to nearly 8,500. It's important to note that the majority of our customer base consists of large enterprise brands whose entire store or restaurant footprint is converted to the platform once connected in its entirety. As such, platform site growth can fluctuate depending on the timing of a complete onboarding. Adjusted EBITDA of $125 million increased 32% as margin expanded 490 basis points to 18.3%. This was primarily driven by larger-than-anticipated hardware margins and the previously announced cost actions. Turning to our segment results, beginning with Restaurants. Total segment revenue of $210 million was flat, which reflects an increase in recurring revenue, offset by declines in onetime services revenue. Recurring revenue increased 7% to $146 million, driven by payments growth and the ramping of a new large customer agreement. Segment adjusted EBITDA increased 12% to $74 million as margin expanded nearly 400 basis points to 35.2%. This improvement was driven by revenue mix, coupled with the previously announced cost actions. Turning to Retail. Total segment revenue declined 4% to $467 million, primarily due to declines in hardware sales and onetime software and services revenue. Recurring revenue increased 4% to $276 million, driven by the ramp of a new large customer agreement and platform revenue growth. Segment adjusted EBITDA declined 17% to $90 million, driven by lower revenue and customer adjustments tied to prior year delayed software implementations now resolved, along with favorable expenses in the prior year period. Adjusted EBITDA margin decreased 290 basis points year-over-year to 19.3%, but increased 150 basis points sequentially as expected. Lastly, net corporate and other expenses improved to $39 million, which reflects the previously discussed cost initiatives. Adjusted free cash flow was $42 million for the quarter before considering $23 million of restructuring cash expenditures and $3 million of accelerated product investments. We invested $38 million in capital expenditures during the quarter. For the full year, we expect CapEx to be approximately $160 million, inclusive of accelerated product investments. Restructuring cash outflows totaled $23 million for the quarter. We have now exited all of our remaining TSAs with NCR Atleos, are winding down our TSAs with Candescent and are approaching the ODM implementation. In connection with these initiatives, we have taken incremental cost actions including headcount reductions in the third quarter. Therefore, we now expect transformation restructuring cash outflows for 2025 to be approximately $100 million. Our net leverage position was 2x at the end of the third quarter based on our net debt as of September 30 and the last 12 months adjusted EBITDA. Turning to the outlook. We now expect revenue to be between $2.65 billion and $2.67 billion. Hardware revenue is anticipated to be above prior expectations, while software and services revenue will be slightly below. The lower software and services revenue is primarily due to customer adjustments tied to prior year delayed software implementations, which have now been resolved. Adjusted EBITDA is now expected to range between $420 million and $435 million and non-GAAP diluted EPS is expected to be between $0.85 and $0.90. We expect adjusted free cash flow to be between $170 million and $175 million, excluding restructuring and transformation costs and accelerated product investments. With that, I will turn the call back over to Jim for closing remarks. James Kelly: We are encouraged by the progress across the business. Our innovation engine is accelerating, our pipeline is strengthening, and customer engagement remains constructive and aligned with our strategy. We are focused on disciplined execution and position the company for sustainable, profitable growth. I will now turn the call over to the operator to begin the question-and-answer session. Operator? Operator: Before beginning the Q&A portion, the company has an additional item to announce. James Kelly: Thank you, operator. I'd like to highlight an additional update this morning. A new 6-year exclusive agreement with Chipotle, deepening a trusted partnership that stands more than 25 years, was signed this morning. Under this agreement, Chipotle will expand their relationship with NCR Voyix and become the first to implement our Aloha next-generation point-of-sale and supporting applications across 4,000 restaurants worldwide. Built on the Voyix Commerce platform, dual-cloud edge-enabled microservices architecture, this first-of-its-kind solution in the restaurant industry reflects our multiyear investment in microservices technology. I'll add to that, that this work dates back for a number of months. We would have liked to have it at the start of the call, but we only finished it early this morning. And I would like to thank the team at Chipotle in addition to Benny, Miguel and their teams and our GC, Kelli Sterrett, and Laura and the rest. This was a big effort. And I think for the company, this is a very big event. I think it's a clear indication that there is a change at the company. I don't think there's a better way to see it than have a relationship that's 25 years renew for another 6 years with us. And it's really based on the product set that Nick has been talking about and the company has mentioned on a number of calls since I've been involved and also our ability to execute at a level that we are -- our customers are expecting. So with that, I'll turn it back over to the operator and let's go to questions. Operator? Operator: [Operator Instructions] And your first question comes from the line of Matt Summerville from D.A. Davidson. Matt Summerville: Congrats on the win, by the way. Can we talk about the price escalators you've referenced, the magnitude we should be sort of expecting, how much revenue is ultimately impacted by that and would be set a benefit from what you're doing there? And maybe more importantly, can you talk about how this maybe differs from Voyix's historical practice? And then I have a follow-up. James Kelly: Sure. Matt, I think if you go back to whether it was the the year-end call or the first quarter, I think I've mentioned this before, but the company historically had not had escalators in all of its agreements. In some areas, it did, but typically did not. And even if it did, it was unclear if they were actually billing them accordingly. So we've just gotten back to make sure the ones that were actually in the agreements are there, and we're charging accordingly. And then secondly, where they're absent as the contracts renew. So on the retail side, it tends to be every 5 years as a general rule and restaurant tends to be 3 years. I don't think we've scoped the order of magnitude. I mean these are not extreme increases. This is more cost of living plus something as opposed to some material increase. So I think what we'll see, and we've already started to see it, it's relatively small since it's just gotten started. But we are seeing increases on the revenue and earnings line as a result of this. And this is really the value that we're providing, supporting, these are very tired, old legacy applications that are continuing to operate at our customers. And for the company to be able to continue to invest in its business, keeping a 5-year contract flat over a 5-year time period just degrades its value in years 2, 3, 4 and 5 because, obviously, we experienced cost escalators as well. And that's not the primary focus. Our primary focus is to sign new customers and then ultimately to launch all the products that Nick outlined on the call, which we expect to see we will have at NRF in January for the market. Matt Summerville: And then just to talk about the payment side of the business. I would think these new relationships on fuel and convenience have to be more needle-moving in nature. Is there a way for you to somehow quantify or directionally quantify what that maybe adds to the payment side of the business, and maybe when we can expect to get a little bit more granular financial detail on the payments performance? James Kelly: Sure. I think it's a good question because a lot of what I've been outlining since I stepped into this role are the opportunities kind of the TAM for the company that it's not taken advantage of in the past. So just because -- which is your last question about the opportunities on escalating prices appropriately for contract renewals, et cetera. These are early days. I mean, this is a company that's been around for 145 years. This is not like the credit card industry, where you just decide to raise prices and you raise prices across the board, either in concert with the brands or on your own initiative. That's what this is. These are longstanding important relationships for us. We're just kind of equaling the table. But I think on the -- if you're referencing the commercial side, I think we've already given the opportunity domestically, we touched $800 billion in the U.S. alone today on our Voyix Connect platform. But what we announced right after -- during or right before and after NACS, the convenience show in Chicago a few weeks ago, was 2 very important relationships, one Corpay and the second one, WEX. That enables us -- even though we're in the business in the sense that our point of sales support commercial fuel, we have never been on the commercial fuel payment side. And as a result, it's more difficult to do the retail forecourt if you're not really providing a complete relationship for the customer. And that's what the future holds for us, is that for our large relationships on commercial fuel or just fuel in general, we're not just the point of sale any longer. We're the point of sale and we're a payments solution for both commercial and retail. So to give you an order of magnitude, and these are estimates that we -- our data -- we don't touch the payments today, but we see it flowing through, through the point of sale. It's 17 billion transactions domestically and roughly $500 billion in volume. So the U.S. combined between what's on our Voyix Connect and what's on another application called Epsilon, you're talking about $1.3-or-so trillion in the U.S. That's our TAM opportunity, to now have the ability to go to customers and say, "Hey, we're not just the point of sale. We can also provide payments and in this area on commercial, we can provide it." That, together with retail that you would see in a gas station, 18,000 gas stations, it was something that Nick and I who were at NACS in last month, this was very well received because the alternative is, our customers have asked for the point of sale. They have somebody generally as an intermediary and then they have somebody who's doing the payments. So this gives us the opportunity to provide one solution, which takes a lot of noise out of the system. Now some people say, well, they like multiple players. But the problem with multiple players is, we have to integrate to multiple players. We have to manage multiple players. And things always slip through the cracks. There's changes that are not well coordinated. So for us to provide a single solution all the way to the actual receipt of payments is, in my view, and I think what we've heard from our customers is going to be very well accepted. This is not just for our new next-generation Voyix POS, point of sale. But in terms of timing, I think was your other question, this can also get retrofitted onto our existing applications because they already do commercial fuel at the point of sale as well as just fuel more generally. Our preference is to launch this together with our next gen, and that's -- that was the push at NACS and that's also going to be what we're going to be focused on between now and January and then also at NRF. Operator: [Operator Instructions] Your next question comes from the line of Dan Perlin from RBC Capital Markets. Daniel Perlin: Congratulations on that Chipotle expansion. That's obviously very significant for you guys, and clearly a showcase win for the Aloha platform. The question I had -- yes, that's huge. The question I had is you've obviously had an opportunity to have conversations and actually implement the payment gateway strategy in terms of pricing. I'm just wondering what those conversations are like. I know you're talking about the value that you provide and now that, that's in motion. I'm just wondering what the market is kind of absorbing there. And then secondarily, it sounds like Global and Worldpay is closing now in the first quarter, so a little bit sooner than expected. I'm just wondering what that might offer you potentially in terms of potential accelerants, so to speak, with opportunities around Worldpay? James Kelly: Okay. Look, we have a really good -- obviously, I've worked at Global. We have a really good relationship as I do with Cameron and other people there. And I think the combination of the two actually works very favorably to us because Global is Global, more so than Worldpay and Worldpay has some capabilities that Global doesn't. So I think the combination will be additive for us. I didn't know that it was accelerating in terms of its close. We're at the tail end of migrating on both sides, getting off of the legacy JetPay application. I think in terms of the reaction from customers, I think they're all very positive. I actually have a large customer coming in next week. We're going to talk specifically on payments. I think they all like the conversation from what I was mentioning in my comment where my comments with Matt, having multiple intermediaries, especially in the technology world, just generally provide something that's going to break. Somebody doesn't update, it doesn't flow all the way through and it presents issues. So I haven't seen any pushback. Has everybody just dropped their existing relationship and switched to us? No. That's going to take time. I think people appreciate that. But as I said earlier, in my comments, what I've been laying out are the opportunities ahead. There's huge opportunities on payments. There's huge opportunities on our next-gen application, on services, et cetera. So that you understand where the future of the company lies, not within just our existing customers but new customers. I mean it's a big organization. It's going to take some time to turn the organization, but our attrition is still at 1%. So it's not that we're losing customers. We just have to execute on it. And again, Chipotle, I think, is a very good kind of watershed event for us where a relationship, when I first joined in February, was not nearly as strong as it is today. I've gotten to know both Scott and Curt through the process. And as our team has gotten to know them, we did some innovation work for them during their RFP process that they were very pleased with. So I think the notion of selling other services into our customers that wasn't core to us previously, like payments, it's not as though we are additive in terms of cost; if anything, we might be able to reduce cost for them and definitely reduce complexity. Because in the end, that's what the customers are looking for, they are looking for cost, savings. They're looking for efficiency, and they're looking for a solid relationship that they can rely on, which they do with us. Operator: And your next question comes from the line of Parker Lane from Stifel. J. Lane: Jim, you mentioned the ODM phasing project is going to kick off in January. Just wondering if you can give an update on how long you expect that to take place and what the phasing of that project actually looks like. James Kelly: Sure. So I think, again, on the background on this, we had earlier expectations that would go faster. There was some technology challenges on their side, and so we pulled back. Obviously, hardware remains important to us and, obviously, to our customers, but this is better. I think where we're moving as a company, this is still the right direction. The expectation, there's effectively 3 major facilities that have to switch over. So we are intending to start that the first -- not the first day, but the first week or second week of January, start moving it in pieces. I believe we'll retain our employees that would otherwise transfer across that have already been alerted to this during the roughly 90-day period. I think the expectation is 90 days. Could it extend beyond that? Anything is possible, but we're trying to do this in a way that has 0 impact to our customers and as well makes it an easy transition for our employees. During the first quarter, we'll continue to report gross revenue as we have today. But my current expectation is that by the beginning of the second quarter, that will be on a net accounting basis as we've outlined from the beginning. J. Lane: Got it. And then in your conversation and your salespeople's conversations with your customers, I was wondering if there's any insights they're sharing on the health of the consumer. And how that's informing their willingness to spend into '26? And I guess more importantly, as a backdrop, what sort of cyclicality have you historically seen around technology investments in response to consumer sentiment there? James Kelly: Okay. We want to let everybody have something to say on this call. So I'll say a little bit, and then I'll let Darren and Benny who deal with the customers on that basis probably more than I do. I mean Chipotle is an example. This is a significant investment on their side. They're looking for the technology that we have to offer that we haven't. We offered this on the retail side. The restaurant side historically has gone a different direction. It was more of a monolithic application in Aloha Cloud, which is being built out to replace the legacy application, which we refer to as Essentials version 19. So I think where you're able to add value together with lowering costs, I have not seen a reluctance to customers in terms of buying. And I can use an example. When I was at the NACS show, it was the first time I've attended, especially the trade shows in this industry, we had 3 brand-new products. We had no legacy products in group. Two of the products had only been -- only come together in 3 weeks before the show. That's how fast we're innovating. There were lines for one of them in particular, which is around our commercial fuel or fuel replacement application. And the major players in that space were very interested in what we had to show because it looked very similar to what they have today. And I think that's a key that we have. And as Nick said this in his comments, we have a library of over 50 existing applications. We know what our customers want because we're servicing it today. So we can modernize what they want. They're not having to transition to something new or reformat the way their organizations work. And in the end, it does lower the cost because we have the ability to manage the store as opposed to and you're not using third-party operating systems that provide cost, updates, et cetera. It's just easier. I'll stop talking and let Darren and Benny give you their view. Darren Wilson: Thanks, Jim, Parker, yes, the conversations with our customers through the shows are 1-on-1 around the globe continue on a very healthy nature. Many of our enterprise customers are looking at infrastructure or capability upgrades, be that on new or existing hardware solutions. But ultimately, therefore, our microservices play, and open API models are having real appeal in terms of either elongating or sweating their existing hardware assets or coming with new hardware propositions. But bolting on to that is a real appeal about enhancing the servicing or the services solutions for them as an added-value feature. So they are very healthy conversations globally on that basis. And there's a real appetite for a unified commerce-type model. And therefore, as Jim has outlined, bolting on our payments gateway and our payment solution is having universal appeal. Now these are long-term contracts with ourselves and with payments provider. So there's been a lot of questions about the timing of this. I think as Jim has alluded to previously, the typical contract duration in retail is 5 years; in restaurant, it's shorter in terms of 3. So that gives you the kind of renewal cycle of the materiality of the contract, but bolting on the additional capabilities in the interim is coming. And typically, a payments contract would normally be a 3-year cycle in both verticals. So that opens up the scale of the conversations, opportunities to switch on that unified commerce capability into our customers. In terms of health of consumer, as we see various earnings releases from many of our retailers around the globe, I think universally, it's steady. I think in some markets, grocery supermarkets are saying that they're having probably the best consumer stability or growth record for many years. I know there's a reporting kind of steady, low single-digit performance. I think we're starting to see a trend to that unified commerce model in terms of consumer behavior, looking at the multiplicity of channels into the retailers we support. And I think, again, we're well positioned for that. So I don't think there's any massive revolution coming in terms of growth potential or otherwise. But I think the steady evolution is encouraging as we speak today. So I'll pass over to Benny or Nick. Nick East: I mean I'd add to that. I speak to customers a lot. And I mentioned in my prepared remarks, I was also in -- we've taken some grocery chains live on our new stack this quarter, and I visited those customers and was in store. I can tell you they were extremely busy. I don't think I can recall a single conversation with the customer that's grounded in a lack of consumer confidence. In fact, what I would say, it's making our customers hungrier to compete for their consumer business. So the key conversation is, how do they ensure they deliver the right experience so consumers keep returning to them. And that's really the technology conversation. They want to be able to deliver faster experiences. They want to be able to make sure that those customers have a competing offer. And that's why they want to invest in technology because technology enables them to do that, technology enables them to be more loyal and also to be able to offer competing offers more quickly. That's the main conversation. It's like how can we more quickly bring better competitive experiences to our customers. And those are technology investments that they're not just willing to make and talk about it, in fact when they are making. That's really about speed, being able to accelerate the journey for their end consumers. There are specific cases where they're also investing, I would say things like loss and waste. So it's important for our customers they do have a focus on cost control amongst rising costs. So we do have offers and discussions about making sure that we reduce loss and waste for our customers in both retail and restaurants. But yes, I would say the core theme is actually looking to invest in technology in order to attract and remain loyal to their consumer base and compete over those customers. Beimnet Tadele: I agree. It's similar in restaurants, it's the same trend. I acknowledge that there is economic pressure on a lot of restaurants, logistics, food cost labor cost, labor shortage, et cetera. That has actually an opposite effect in terms of looking at technology, restaurants when we have conversations, are having more and more conversations on how can I leverage technology to create either the revenue acceleration, which Nick talked about, how can I get more consumers into the door, how do I understand on a one-to-one basis my diners so that I can provide the service required and repeat customer same-store sales growth, et cetera? But also efficiency, efficiency in terms of automation. So technology that can easily integrate so that you can manage the the journey of the consumer from online ordering, coming into the restaurant, understanding what is available in the restaurant so that you can actually offer up and make that one-to-one offer, et cetera, all the way to automation so that I can transfer some of the things that required heavy labor from employees, store managers and free them up and have less labor costs. All of those things are technology conversations. So we're having those conversations whether it's in the super RFP cycle that I referred to that we're in. We're actually seeing a lot of RFPs looking at innovations and creations like Chipotle example that Jim provided around the innovation during the RFP cycle, one of the key things is the ability to innovate, the ability to capture revenue and the ability to create automation inside the restaurant. So we're having a healthy conversation, a pretty good pipeline. I think that's what we're seeing. Operator: There are no further questions at this time. I will now hand the call back to Jim Kelly for any closing remarks. James Kelly: Thank you, operator, and thank you all for your continued interest in the company. Operator: And this concludes today's conference call. Thank you for participating. You may all disconnect.
Operator: Hello, and good morning, everyone. And welcome to the VerticalScope Holdings Inc. Q3 2025 Earnings Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I would now like to turn the call over to Diane Yu, Chief Legal Officer, to begin. Diane, please go ahead. Diane Yu: Thank you, operator. Good morning, everyone. And welcome to VerticalScope Holdings Third Quarter 2025 Earnings Call. I'm joined by Chris Goodridge, our Chief Executive Officer; and Vince Bellissimo, our Chief Financial Officer. We'll begin with commentary on the quarter before opening the floor to questions. Before we begin, I'd like to remind everyone that today's presentation contains forward-looking information that involves known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. A more complete discussion of the risks and uncertainties facing the company appears in the company's management discussion and analysis for the 3 and 9 month period ended September 30, 2025, which is available under the company's profile on SEDAR+ as well as on the company's website. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The company disclaims any intention or obligation, except to the extent required by law, to update and revise any forward-looking statements as a result of new information, future events or for any other reason. Our discussion today will include references to adjusted financial measures, including adjusted EBITDA, free cash flow, free cash flow conversion and MAU, which are non-IFRS measures. All references to currency in this presentation shall refer to USD unless otherwise specified. Now I will turn the call over to Chris Goodridge, CEO of VerticalScope. Chris? Christopher Goodridge: Thanks, Diane, and good morning, everyone. It's a fast-moving environment. And despite some short-term volatility in our monthly active user base, I'm really encouraged by how our teams are navigating this change and focusing our efforts on growth. The strategy that we articulated on our last call is our blueprint for driving organic growth and continuing to build our platform and cash flow. We're building stronger direct relationships with our users, making their experience richer and more useful with AI and turning that direct engagement into diversified revenue streams. And we'll use our free cash flow and financial capacity to pursue growth opportunities that further our strategy and positioning in a more AI-centric web. We believe that the most enduring and successful online experiences will be protected spaces with micro communities of trusted users. This has been the core of our business model for years and will continue to be the foundation of our long-term success. Turning to our results. I'll start with some observations on our MAUs and the trends we're seeing. We averaged 83 million monthly active users in Q3, which was down from the record levels we experienced last year as a result of a surge in search-based traffic. However, Q4 started on a much stronger note with MAUs surpassing 90 million in October and we saw gains across all major traffic sources and most importantly, with direct users, which were up nearly 60% over last year. With the majority of our MAU now coming from non-Google sources, we think the worst is behind us and expect to see MAU growth going forward from direct and other sources. Beyond direct and search, we're also seeing opportunities to grow our paid sources of traffic and to efficiently acquire new users who will be members of one or more of our communities for years to come. Paid channels have historically been a minor source of users for VerticalScope, but we believe this is an important channel to drive additional user growth in the years ahead as search experiences become more fragmented and people increasingly seek out authentic perspectives from real users to validate information they receive from AI. When you combine our efforts to grow direct users with paid channels, we're well positioned to grow our total user base from here. Vince will go through our financials in detail shortly, but I wanted to offer up a few observations. First, our revenue improved modestly on a sequential basis in Q3 and came in at $14.7 million. When we compare back to last year, revenue was 17% lower, essentially all as a results of programmatic ads tied to search traffic. Second, aside from programmatic, all major sources of revenue were either flat or up in Q3. Direct advertising has been very resilient and was up 3% year-over-year as we saw a nice pick up with some key auto, powersports and insurance customers in the quarter, driven in part by new immersive experiences we're making available to brands. E-commerce grew by 40%, mainly as a result of the Ritual acquisition with the rest of our subscription and transaction revenue sources remaining stable. We're still seeing plenty of opportunity to build up commerce, both in our core community experience but also with Ritual. When you combine our solid direct advertising results with e-commerce gains, ARPU pushed up 21% over last year and reaching its highest level that we've seen in 3 years, and demonstrates our ability to generate more value even with volatility in MAU. I think most impressively in the quarter, though, was adjusted EBITDA improving by 45% over Q2, margins exceeding 40% and our free cash flow conversion growing to 94%. This result clearly demonstrates the strength of our business model and the adaptability of our team. Turning to product initiatives. AI continues to open up completely new experiences for our users and is increasingly providing us with operational gains. Machine translations are introducing our communities to new audiences speaking German, Spanish, Portuguese, Dutch, Polish and French and AI summaries are making it easier for new users to find what they're looking for in threads. We're most excited about the potential of our AI community assistant, Fora Frank. We introduced Fora Frank last quarter, and we've continued to roll it out across our communities. Its main purpose initially was to encourage posting activity from our users and help them ask better questions to elicit higher quality responses. We're taking a lot of inspiration from how other platforms have successfully used conversational AI to drive engagement, including the X platform and how it's deployed Rock. Our early results suggest that thread engagement increases by over 3 times when Fora Frank is mentioned. So we're looking for more ways to grow Fora Frank's visibility and distribution within the communities while continuing to improve its capabilities. Our goal is to have AI enhance the human experience within our communities, not to replace it. There are so many interesting applications we see for the technology. For example, with our SMB subscription product, Fora Frank can help our customers post and drive more engagement with their content, adding value and improving retention. We've also built an AI prospecting tool for our sales team that identifies new potential customers and incorporates relevant community content into our outreach messaging. We see this as a game-changing capability that we believe will boost the efficiency and close rates of our sales team. Beyond the work to improve our community experience and grow direct sales with AI. We're starting to envision completely new AI-driven services powered by our rich data sets and that can leverage our distribution to millions of users. It's very early but we're excited about these opportunities, and we'll have a lot more to say in the quarters ahead. Turning to our data license efforts. I'm keenly aware that we've been discussing this opportunity for several quarters. This space is evolving very quickly and I believe our patient approach will pay off. We're at the very beginning of a major shift with how content on the web is both created and consumed and how consumer decisions will be made. We know that users like the experience of engaging with an AI chatbot and we expect that they will also start to transact more within those experiences. But for that to happen to be a great user experience, the AI must have access to the best data available. Over the past several months, we're starting to see a shift in market conditions as the lack of a real value exchange between LLMs and content owners becomes an increasing source of friction. For example, major lawsuits have been filed against the LM companies, including Reddit's recent lawsuits against Anthropic, Perplexity and a host of other data scrapers for the alleged unauthorized use of Reddit user content. In parallel, industry efforts are underway to establish standards for data licensing and compensation through the RSL Collective, a nonprofit organization that is using the music industry as a model and which is supported by a number of significant platforms, including Reddit, Internet Brands and VerticalScope. And finally, we're seeing key players powering the infrastructure of the web, taking steps to close off access by AI companies. Cloudflare, which is approximately 20% of total Internet traffic flowing through its network, has been particularly active on this front and is now blocking AI scraping by default. Base model training is obviously still relevant for LLMs but we see bigger potential opportunities with AI companies requiring access to the most up-to-date information through retrieval augmented generation. We expect this need to accelerate as more and more AI services are launched and scaled. As this happens, we believe that access to accurate, up-to-date information will be critical. Data quality will be the currency. Our communities contain the authentic, high-intent human context that AI agents need to understand what people actually want to do, and we believe this positions VerticalScope as part of the foundational data layer for this new agentic web. So where are we at with all of this? We've taken steps over the past several quarters to block all known AI scrapers at the CDN level. We have very clear terms of use that prohibit scraping outside of a licensed relationship, and we're regularly updating our robots.txt to disallow AI scraping. Another big step forward on this front is our recent partnership with TollBit. TollBit's technology integrates with our CDN to intercept AI scraper traffic and redirect it to a paywall. From there, the AI company can either pay our set rate to start scraping or contact us to license access to a richer structured data feed through our API that would come at a premium. We've been working through the process of onboarding TollBit across our network of communities over the past few weeks and are close to completion. TollBit's analytics suite gives us a detailed view of AI bot activity we can detect across our communities. And early data highlights just how aggressively AI systems are trying to access our content. To illustrate the point, TollBit data from the past week detected scrape attempts, which we're actively blocking, outnumbering real users in some cases by up to 13 times. While this reflects only the activity we can observe, it underscores the scale of AI demand for our data. We're actively monitoring this changing landscape and continue to evaluate how regulatory, legal and commercial developments may affect our strategy. At the same time, our capabilities are improving, our sense of demand and value is growing. We intend to service that value in a way that best serves our communities and shareholders for the long-term. Finally, before passing it over to Vince, I'll offer a few comments on capital allocation and M&A. We've made 4 small acquisitions so far this year and we expect to complete a couple more small ones before the year-end. We continue to see higher inbound activity, which we think is tied to how smaller companies are navigating the broader industry change. Again, we think our shareholders will be best served by a patient approach and so we expect to continue to accumulate cash and build capacity to pursue larger opportunities that will accelerate our long-term growth strategy. And with that, I'll turn it over to Vince to walk through the numbers. Vincenzo Bellissimo: Great. Thanks, Chris, and good morning, everyone. I'll walk you through our third quarter results and share how we are executing against our financial and strategic priorities. Overall, this was a solid quarter for our business, underpinned by our disciplined and hyper-focused approach to execution. We delivered improved performance sequentially, including expanded adjusted EBITDA margins and stronger free cash flow conversion while continuing to strengthen our balance sheet. Our growing cash position provides flexibility to reinvest in growth, both organically and through strategic M&A when the opportunity is right. Our focus on audience quality, ARPU growth, operational efficiency and liquidity continues to position us well in a rapidly changing environment of AI content discovery. Now turning to our results. Total revenue in the quarter increased 1% sequentially to $14.7 million, reflecting stability of our core audience but declined 17% year-over-year, primarily on a 32% decline in MAU compared to all-time highs in the prior year, led by lower value search traffic. This led to a correlated decline in digital advertising revenue, which finished the quarter at $11.7 million, down 25% year-over-year. The decrease was driven by a $4.1 million decline in programmatic advertising revenue, which contributed just over $7 million in the quarter on lower display impression volumes compared to the prior year. Despite the declines in programmatic, we saw a return to growth in both our higher-value direct and video advertising channels, supported by strong demand for custom content campaigns and ongoing optimizations with our video ad unit. Direct advertising grew 3% to $4.6 million, representing 40% of overall digital advertising revenue compared to a 29% share in the prior year. The growing share of direct revenue highlights the strength of our relationships with advertisers and brands across our core categories and a rising demand for customized high-intent campaigns that reach our enthusiast audiences. In an era of AI-driven content discovery, this audience is becoming increasingly scarce and valuable, a combination that will drive growth opportunities in the periods ahead. Turning to e-commerce. Revenue grew 40% year-over-year to $3 million, primarily from contributions from our April 2025 acquisition of Ritual, a local food pick up and ordering app that connects users with restaurants in Canada, the U.S. and Australia and stable performance across our other e-commerce offerings. Excluding Ritual, approximately 60% of our e-commerce activity continues to come from subscriptions, underscoring the stability and loyalty of our user base. We continue to view e-commerce as an important long-term growth driver, supported by ongoing product innovation and the use of AI to enhance discovery and personalization across our communities. Overall, ARPU increased 21% year-over-year, including a 10% increase in digital advertising ARPU and a 106% increase in e-commerce ARPU. ARPU remains a key metric for us and a reflection of our ability to grow and monetize a high-value direct user base, capitalize on premium advertising and commerce opportunities and unlock new monetization opportunities that are powered by data and AI. Turning to our profitability and free cash flow generation, both key highlights of the quarter. Adjusted EBITDA for the quarter increased 45% sequentially to $6.2 million, driven by cost efficiencies but declined 16% year-over-year due to lower revenue, partially offset by cost savings realized in the period, including the benefits of headcount and operational changes made in the first half of the year. The quarter also included a benefit from -- the quarter also benefited from $600,000 in tax incentives under the Canada Revenue Agency’s SRED (sic) [ SR&ED ] program, which we apply for annually as part of our ongoing investment in technology on the Fora platform, and are recognized as a reduction in wages on the P&L. Historically, these incentives have been approved and recognized in the fourth quarter but timing can vary year-to-year. Together, these factors contributed to adjusted EBITDA margin expanding 12 percentage points sequentially to 42% compared to 30% in Q2 and consistent with 42% margins in the prior year. This improvement highlights the impact of operating with smaller, more focused teams that are leveraging automation and AI tools to deliver on key growth strategies. Our profitability this quarter also demonstrates the resilience of our business model even as MAU levels remain well below last year's record highs. This reflects a more diversified revenue base and the growth of a higher-value direct audience that increasingly insulates our results from search volatility. Net loss for the quarter was $400,000 compared to net income of $1.2 million in the prior year, primarily reflecting lower revenue and partially offset by lower operating and income tax expense recognized in the period. The net loss for the period included noncash depreciation and amortization expense, primarily related to acquired intangibles of $4.8 million compared to $4.4 million in the prior year. Turning to cash flow and liquidity. We once again delivered strong cash generation in the quarter. Operating cash flow was $4.7 million and free cash flow increased 56% sequentially to $5.9 million, representing a 94% conversion from adjusted EBITDA, up from 86% in the prior year. We ended the period with $68.4 million in total liquidity, including $12.4 million in unrestricted cash and $56 million in undrawn revolver capacity. Our balance sheet remains a key strength with net leverage of 1.24x as defined by our credit agreement, providing ample flexibility to invest in growth initiatives and pursue opportunistic M&A, particularly in areas that accelerate our progress in AI and direct traffic initiatives. Maintaining a strong liquidity position remains our priority. From a capital allocation standpoint, we continue to believe that reinvesting in growth, expanding our audience, data capabilities and AI-driven monetization will create greater long-term value for our shareholders. In closing, there is no change to the full year guidance that was published in April of this year. Our third quarter results demonstrate the impact of the actions we've taken in a short period of time to streamline operations and focus on strategic priorities that drive direct audience growth and higher ARPU across our platform. The world of AI content discovery depends on high-quality human-generated content that's exactly what the Fora platform provides. Our users and the authentic content they create are our most valuable assets and we will continue to do everything possible to protect these assets and unlock opportunities that are sustainable. With a strong balance sheet, differentiated data and a disciplined approach to execution, we are well positioned to create long-term value for our shareholders and employees in this new phase of the agentic web. And with that, I'll pass it back to Chris to close things off. Christopher Goodridge: Thanks, Vince. With that, we'll open the floor to questions. Operator: [Operator Instructions] Our first question today comes from Gabriel Leung with Beacon Securities. Gabriel Leung: Just a couple of things. First, just on the cost side of the equation, Chris or Vince, how are you feeling about the current structure right now of your roughly 170 full-time equivalents? Do you feel that's the current -- the right cost structure to drive the growth you're planning on implementing over the next 12 to 24 months? Christopher Goodridge: Yes. Thanks, Gabe. Thanks for the question. So yes, for the most part, we feel pretty good about where the headcount is. There'll be -- we'll be adding selective roles here and there. What's really changed for us and something we're really trying to push within the organization is using AI tools to become more efficient, right? So we're rolling that out really across all of our teams, not as a means of reducing headcount further, but really to drive more productivity out of the team that we've got. But we do think there's opportunities to add certain skilled positions to the business over time. It won't materially change the headcount over the next, call it, year or so. But we expect headcount certainly not to go down from here. Gabriel Leung: And then just secondly, on the data licensing. I know you're, I guess, in the tail end of deploying TollBit and their tech across your community. So I'm curious beyond the initial observations, do you or TollBit, have you thought about how the revenue side of it might play out over the next 12 months or so? Or have you had early discussions with any of the -- some of the AI companies in terms of either licensing or paying a fee on the scraping? Christopher Goodridge: Yes. Thanks, Gabe. There's absolutely discussions that are ongoing with the major players. TollBit's monetization, that part of the platform is relatively nascent to be fair. And the marketplace opportunity that they see, they think is quite big, and it really doesn't apply to just the major players. It's meant to be really anyone who's built an AI service and requires access to kind of fresh data to power it. So they see that as many, many players in the space over the long-term. So I think that is more of a long-term play for us from a monetization side. Like I said, though, what it does is it really empowers us with a lot of great data that helps us articulate the value proposition of our underlying data asset. And so I think the bigger players in the space that are building models that are building kind of chat experiences where they require RAG to offer up fresh information to what the core model offers, that's where I think it's more likely that you'll see direct deals over time. With respect to financial impact, we're not at a stage where we're going to provide a forecast with respect to how that's going to play out over the next period of time. But as that unfolds, you guys will have a lot more information. Operator: At this time, we do not have any further questions registered. [Operator Instructions] We have not received any further questions, and so I will turn the call back over to Chris for closing comments. Christopher Goodridge: Well, thanks, everyone, again, for joining us today. I hope the rest of your year goes quite well, and we look forward to getting back together with everyone again in March to review our year. Thanks again, and take care. Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.
Operator: Good day, everyone, and welcome to today's AMG Q3 2025 Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Thomas Swoboda. Please go ahead, sir. Thomas Swoboda: Yes. Thank you, Jen, and good afternoon, everyone. Welcome to AMG's Third Quarter 2025 Earnings Call. Joining me on this call are Dr. Heinz Schimmelbusch, the Chairman of the Management Board and Chief Executive Officer; Mr. Jackson Dunckel, the CFO; and Mike Connor, the Chief Corporate Development Officer. We published our third quarter 2025 earnings press release yesterday, along with the presentation for investors, both of which you can find on our website. They include our disclaimers about forward-looking statements. Today's call will begin with a review of the third quarter 2025 business highlights by Dr. Schimmelbusch. Mr. Connor will comment on strategy and Mr. Dunckel will comment on AMG's financial results. At the completion of Mr. Dunckel's remarks, Dr. Schimmelbusch will comment on outlook. We will then open the line to take your questions. I now pass the floor to Dr. Schimmelbusch, AMG's Chairman of the Management Board and Chief Executive Officer. Heinz Schimmelbusch: Thank you, Thomas. Our Q3 adjusted EBITDA of $64 million represents a 58% increase versus Q3 last year, driven by continued momentum in AMG Technologies with AMG Engineering's order backlog as well as profitability in AMG Antimony. On top of that, we benefited from a $5 million compensation settlement at AMG Vanadium for an equipment failure related to our growth investment in Zanesville. We remain focused on the elements within our control, executing operationally, strengthening our balance sheet and streamlining our portfolio. The divestment of our natural graphite business represents a key step in this strategy, and we expect the transaction to close later this year. While our 2 main products, lithium and vanadium continue to face low pricing, constrained for profitability and cash generation in the near term, AMG is actively advancing expansion projects across our portfolio. These initiatives are closely aligned with governmental efforts to onshore strategic materials production and strengthen domestic supply lines in the United States. Construction of our chromium metal plant in Newcastle, Pennsylvania is progressing on schedule with a start-up targeted for Q2 '26. Upon completion, it will be the only chrome metal facility in the country reinforcing AMG's role as a key enabler of national material security. We also expand our U.S. titanium alloys capacity at the same facility to keep up with our customers' increasing demand for aerospace applications. In addition, we are evaluating the establishment of a tantalum and niobium metal plant in the U.S., leveraging our long-standing experience in both metals in Brazil and our unique backward integration into AMG Engineering processing technology. This project if executed, significantly enhances our position in the aerospace sector in North America and globally. Similarly, we are assessing the construction of an antimony trioxide production facility in the United States, the first of its kind in North America with a final investment decision expected in the first half of '26. Leveraging AMG's unique positioning and technical expertise, we are confident in our ability to execute these projects efficiently and with limited capital investment financing from ongoing operating cash flow now -- generated from our ongoing cash flow. Together, this initiative, combined with the expected recovery of the lithium and vanadium markets down the road, position AMG for sustained long-term value creation. We look forward to providing further updates as these projects progress in the coming quarters. Let me now hand over this to Mike Connor. Mike? Michael Connor: Thank you, Heinz. Good day, everyone. I will now provide an update on AMG's strategic positioning, highlighting key developments and progress made over the past quarter. In October, we signed a definitive agreement with Asbury Carbons for the sale of our graphite business. This transaction reflects our commitment to active portfolio management, and we will use the proceeds from this transaction to strengthen our balance sheet and focus on our core growth businesses. AMG is uniquely positioned across its portfolio to strengthen Western critical material supply chains as governments in the Americas, EU and Gulf states intensify efforts to secure access to strategic raw materials, our diversified platform stands out as both uniquely positioned and increasingly attractive to partners and policymakers alike. Importantly, control of critical materials today is often determined less by ownership of raw material resources and more by mastery processing infrastructure, technology know-how and the ability to scale refining capabilities. This processing know-how defines the modern geopolitical landscape of material supply. AMG's integrated approach of combining advanced processing technology with regionally distributed production directly addresses this challenge. Our multiregional, multi-material footprint not only reduces supply vulnerability, but also positions AMG as a unique enabler of critical material independence for Western economies. In October, AMG Lithium signed an MOU with Beijing Easpring for the supply and offtake of battery-grade lithium hydroxide. Both companies' investments in Europe underline the joint commitment to a localized battery supply chain. As a first step, we are collaborating closely with Easpring to ensure a successful qualification of AMG's lithium plant while negotiating a binding offtake agreement. Our partnership with Easpring underscores that the European battery value chain is rapidly materializing. This tangible progress is an encouraging indicator of the region's growing capability to build a competitive and self-sustaining energy ecosystem. And after successful commissioning our Bitterfeld lithium hydroxide refinery in May and having produced material in specification, we are making progress on the ramp-up of the plant and the qualification progress with customers as planned. We are now producing multi-ton batches from raw materials of mixed origin according to specification. This marks a significant step on our way to commercial production. Finally, in Saudi Arabia, we remain on schedule with our joint venture Supercenter project in the detailed engineering phase. The EPC contract has been awarded on a full notice-to-proceed basis, and preconstruction works are expected to begin very soon. This project exemplifies AMG's global execution capabilities and underscores how we combine deep technical expertise with alignment to local industrial policies, advancing long-term economic diversification and resource transformation. I will now pass the floor to Jackson Dunckel, AMG's CFO. Jackson? Jackson Dunckel: Thanks, Mike. I'll be referring to the third quarter 2025 investor presentation posted yesterday on the website. Page 3 shows our strategic announcements, including the sale of our graphite business. I'm pleased to report that the net cash proceeds for the sale will be approximately $55 million. Starting on Page 4 of the presentation, I'd like to emphasize Heinz's comments about the strength of AMG's portfolio. AMG's Q3 '25 adjusted EBITDA increased 58% since the same period last year despite the continued low lithium and vanadium prices. On Page 5, you can see the price and volume movements for our key products represented by arrows, which underscore our segmental results. I will cover these volume and price movements in the individual segment comments. AMG Lithium results are shown on Page 7. On the top left, you can see that Q3 '25 revenues decreased 33% versus the prior year, driven by an 8% reduction in lithium market prices, a 32% decrease in lithium concentrate sales volumes and a 64% decrease in tantalum sales volumes caused by shipping delays that will be reversed in Q4. These impacts were partially offset by higher average tantalum sales prices versus Q3 of last year. In Brazil, we are currently running at an annualized production rate of 110,000 tonnes due to the continued effect of the failure during Q2 '25 of one piece of equipment associated with our expansion project. As noted in yesterday's release, we are addressing this issue. Despite the decrease in lithium market prices and the depressed volumes, we remain profitable and low cost due to our multiproduct mining operation. AMG Vanadium results are shown on Page 8. Revenue for the quarter increased by 2% compared with Q3 '24 due largely to the increased sales prices in ferrovanadium and chrome metal, partially offset by lower volumes of ferrovanadium driven by production issues from our refinery suppliers. Q3 '25 adjusted EBITDA of $19 million for our vanadium segment was 81% higher than Q3 of last year. This increase was primarily due to the higher sales prices as well as the Zanesville compensation payment of $5 million. The results for AMG Technologies is shown on Page 9. The Q3 '25 revenue increased by $92 million or 59% versus Q3 '24. This improvement was driven primarily by higher antimony sales prices and stronger sales volumes of turbine blade coating furnaces in the current period. Adjusted EBITDA of $41 million during Q3 was more than double the same period last year. This increase was due to the higher profitability in AMG Antimony and AMG Engineering. Page 10 of the presentation shows our main income statement items. The key change on this page is regarding our tax expense, which was $7 million in the current quarter compared to $2 million during Q3 '24. The Q3 '25 expense was primarily driven by strong profitability in the quarter as well as tax expense from unabsorbed losses, partially offset by a Brazilian deferred tax benefit related to the appreciation of the Brazilian real. Page 11 of the presentation shows our cash flow metrics. Our Q3 '25 return on capital employed was 14.4% compared to 7.4% in the same period last year. Our free cash flow generation remained negative in the third quarter. The inventory buildup for our production ramp-up in Bitterfeld and adverse shipping schedules in tantalum have held back our free cash flow generation during the current quarter. We are optimistic about delivering positive free cash flow in the fourth quarter of this year. AMG ended the quarter with $544 million of net debt. And as of September 30, 2025, we had $220 million in unrestricted cash and $199 million available on our revolving credit facility. The resulting $419 million of total liquidity at the end of the quarter demonstrates our ability to fully fund all approved capital expenditure projects. Also, in July, we executed a maturity extension on our $200 million revolving credit facility to preserve our liquidity and reduce financing risk. The revolver maturity date was extended from November 26 to August 2028 with terms similar to the original agreement. Our term loan maturity date of November 2028 remains unchanged. We continue to expect capital expenditures to be $75 million to $100 million for 2025. And that concludes my remarks, Dr. Schimmelbusch. Heinz Schimmelbusch: Thank you, Jackson. Our AMG Technologies segment continues to perform particularly well, driven by a very high order backlog in AMG Engineering and high profitability in AMG Antimony. We update our estimate for the temporary tailwind from selling low-priced antimony inventories for -- of more than EUR 50 million to more than EUR 70 million for the full year of '25. We, therefore, increased our adjusted EBITDA outlook from EUR 200 million or more to EUR 220 million or more in '25. Over the last few years, we have provided you with financial guidance for the following year at the time of the Q3 results. Based on your feedback, we have decided to push forward our guidance publication for the full year results in line with our peers. We trust that this change will lead to improved guidance accuracy. Operator, we would now like to open the line for discussions. Operator: [Operator Instructions] And our first question will come from Stijn Demeester with ING. Stijn Demeester: I have 3, I will ask them one by one, if that's okay. First one is on the guidance. The low end of your EUR 220 million EBITDA guidance suggests an earnings slowdown in Q4 to a level of around EUR 28 million, roughly half the level that you achieved in Q4 -- in Q3 on an underlying basis. Is this driven by your usual conservatism? Or do you actually see elements that would justify such a slowdown such as the recent downtrend in antimony prices or other elements? That's the first question I have. Heinz Schimmelbusch: I apologize for being boring answering these questions referring to limited visibility. Now, in this particular case, we just experienced, to give you an example, the announcement of export restriction lifting by the Chinese government following the meeting with the United States on a presidential level. Then this announcement was followed by another announcement by China to point out that there will be procedures, which then will be developed to channel to use dual-use goods in a particular way. We don't know these procedures. There will be a variety of clarifications coming and then the visibility will slowly reappear of what that all means. Given those things, and in particular, the antimony example, we are living in rather volatile times. And therefore, we are sitting together as a Management Board and discussing thoroughly such statements about guidance. And they are not optimistic or conservative. They are just based on data, which has to be analyzed and then we come to that conclusion. This is a very thorough process. Stijn Demeester: Understood. Understood. Second question is on the graphite divestment. My perception was -- or other divestments, my perception was in the past that several units within technologies that are not engineering could be considered as non-core. Is this still valid for AMG Antimony or has the recently changed market dynamics changed your view on that front? Heinz Schimmelbusch: Very clearly, antimony was never a non-core business in AMG, but always a very contributive, steady and part of our portfolio. And based on technology leadership and our market position in the overall trade of antimony. And that market position and that technology leadership has enabled us to materialize opportunities as they were related to the export restrictions. We're very happy about that. It was a highly profitable period, and we continue to experience satisfactory results, which are distinctly better than what the average results were in the long past. We also want to point out that we just announced -- or I just announced in my introductory remarks that we intend to build. We intend, it's in an early stage because we are in feasibility studies, but that will be very materializing that we have a position to build an antimony trioxide plant in the United States. It would be the only material plant of that kind -- the only plant of that kind and it would be joining the other one and only plants which we have in the United States in critical materials as we build our position as partnering United States industries and government. Stijn Demeester: Understood. Then last question for now is on the cash flow. I believe the working capital further increased throughout the quarter. Can you maybe give some color on this increase? Is it structural? Or should we count on unwind in Q4? Jackson Dunckel: It should unwind in Q4. So some of it was due to shipping delays, as we said. Some of it is due to increased working capital in our lithium and vanadium businesses, but you should see unwinding in Q4. So as we often do, the fourth quarter is very strong from an operating cash flow basis. Operator: And we'll take our next question from Michael Kuhn with Deutsche Bank. Michael Kuhn: I'll also ask them one by one. Starting with your portfolio and recent discussions about raw material supplies. Obviously, rare earth is not a part of your portfolio as of now. Would that be something you would consider to add? And what would be, let's say, the time line and, let's say, the implementation steps that would be needed for such an expansion? Heinz Schimmelbusch: That's a very interesting question because it was asked -- we were asked as a broadly based really early in the market, critical materials company running a fairly vast portfolio in critical materials. We consider ourselves to be in the group of industry leaders in this. So we were asked many times, so what about rare earths? And so the question is very relevant. Now you might please take notice that we are in rare earths, not in resource -- presently resources of rare earths, but in processing technology of rare earths. In the rare earth downstream flow sheet, you need several applications, material applications, which involve metals, and, therefore, are being treated as high purity, necessary for magnetics, for example, are treated in vacuum furnaces. Since ALD is the world leader in vacuum furnaces, our AMG engineering star, we are deeply involved in the downstream industry of rare earth since a very long time. Now it is tempting -- was always tempting for us to combine our downstream know-how with a resource acquisition. As regard to resource acquisitions, we are particularly careful. We presently as regard to resources, we operate a highly successful large-scale lithium-tantalum mine in Brazil. So we are in resources. So in this screening process of opportunities to add resource capabilities to our downstream know-how, we are involved in this. And I would say this is a very thorough process. It is not academic. It's real. But I would say stay tuned would be a too aggressive statement. Michael Kuhn: Understood. But I guess, let's say, especially among the U.S. government, there is such a high interest that there could be scenarios imaginable where, let's say, some kind of support schemes could be enacted to, let's say, support such development? Heinz Schimmelbusch: Yes, of course. And we are in contact with that world. You are finding us here, this conference call is happening in Pittsburgh, Pennsylvania, which is indicating just visiting one of our expansion sites in the United States, which is our focus right now in expanding our portfolio and deepening our portfolio in line with what we see is necessary in the United States in onshoring and in improving the domestic value chains. And that includes, of course, rare earth. And you could see a business model which combines magnetics capabilities, production capabilities with a resource, which tailors the resource, adding such a thing, and have a uniquely vertically integrated operation. Michael Kuhn: Very interesting. Then one more question on portfolio consolidation. I think you were very clear in the context of antimony. Is there any other part in the portfolio that might be up for disposal, which you would regard rather as non-core? Heinz Schimmelbusch: Our portfolio is fairly elaborate and it is not really totally visible. So there are many parts which are very difficult to explain and very special. But surprisingly, there are corners here as the company develops and as our focus is increasingly pointed to products where we are clearly in the leadership group, non-core opportunities or opportunities to somehow streamline our portfolio occur. Now the last thing we want to do is to say what it is because that would be sort of in our -- when you think about negotiating strategies, that would be not optimal. I have -- Mike, do you want to add to this? Michael Connor: No, I think that's pretty clear. We constantly evaluate the portfolio. And if we identify opportunities to dispose of assets that we would consider to be integral to the key trends that we're working towards, we will dispose if we can get the right price in the right space, for sure. So we constantly work on that and maintain our portfolio as aggressively as possible. Michael Kuhn: Understood. And then last question on cash flow and, let's say, expansion projects. You mentioned you signed an EPC contract in Saudi Arabia now for this joint venture. I would be interested to know, let's say, what that would imply for the cash flow and for potential cash injections into that entity. And also regarding the potential U.S. expansions, obviously, your chrome plant, you mentioned that repeatedly will have a pretty short payback period for the other projects potentially underway, would those be similarly short? And yes, what kind of CapEx thinking should you apply, let's say, for the next 3 years generally? Jackson Dunckel: So let me start with ACMC, which is our Saudi Arabian plant. As we've said in the past, we are focused on nonrecourse project financing. We own 1/3 of that plant. And so our equity contribution would in turn be 1/3. And you would expect to see 70% of it financed by debt. So if you put all those numbers through CapEx estimates, it comes to quite a small number, which will not strain our balance sheet in any shape or form. And as we have more information, we'll share that with you. But we're in the beginnings of the project financing for that. In terms of other projects, the number that we told everybody for chrome was roughly $15 million. I will say that the incremental projects that we're considering are in that order of magnitude or less and have similar paybacks because of being located in the United States, which is chronically short of such critical materials. And therefore, we expect very strong paybacks as well. And then in terms of '26 and a longer look on capital expenditures, we'll cover that in February. But that -- hopefully, that gives you some guidance that we're not looking at big projects here or big expenditures. Operator: [Operator Instructions] And we'll take our next question from Martijn den Drijver with ABN. Martijn den Drijver: I have a couple, I'll take them one by one as well. My first question is about antimony. Have you now fully utilized the low-priced inventory that you had available? Or will there still be tailwinds in Q4 and possibly even into 2026? Jackson Dunckel: No, we would expect that to have fully been utilized. So no further inventory tailwinds in '25. Martijn den Drijver: And then my second question is on lithium. And you mentioned in the press release that the Bitterfeld plant is producing specification using raw materials of mixed origin. Can you elaborate a little bit on that mix supply? And what percentage of that raw material is off-spec material versus technical grade lithium hydroxide from China? And can this percentage of off-spec material go up? And equally important, what is the price difference of this off-spec material versus the supply from China? Just to get a better understanding of the impact. Heinz Schimmelbusch: The qualification process is not based on off-spec material, the qualification process is based on virgin material in our inventory. So later on, strategies imply that we benefit from off-spec materials as the opportunities occur and our procurement network can identify such prospective materials. Right now, this is not what we are doing. Right now, we are doing standard material, and we turn standard material in specification results. And that process is fairly advanced and as expected. Martijn den Drijver: Clear. Any additional color on when that off-spec material could become part of the supply chain? Heinz Schimmelbusch: It already is right now. We want to qualify the material. That means that the next step will be large-scale samples to be audited after audits to be given to our customers, and then we will start production, and that's then the moment where we can optimize further supply chains. Martijn den Drijver: Understood. Then moving on to vanadium and the supply issues. Could you elaborate a little bit on when you assume a normalization of that supply? And once that supply normalizes, how should we think about profitability given that the mix will also include spent catalysts from the Middle East? Jackson Dunckel: It's a very good question, Martijn. Thank you. Our refinery supply customers continue to struggle. And we don't expect to see any resolution of that through Q1/starting in Q2. The incremental purchasing that we've done in the Middle East will be available also starting in Q2. So you should see significant volume improvements starting in Q2 and improving in Q3 and Q4. Martijn den Drijver: That's clear. And then forgive me for asking, but I looked a little bit into the silicon operations and with regards to that portfolio management question before. If you add the adjustments to gross profit in the last 8 quarters, that has been almost $10 million, which means that the EBITDA losses are slightly higher. What do you intend to do with the silicon operations as it's not likely that energy prices in Europe will come down? Heinz Schimmelbusch: Our silicon metal operation is presently partly shut down. We're operating on a minimum level. And it for the last 3 years has been suffering tremendously under the -- primarily under the energy price situation in Germany. And by the way, our competition in other European countries to a much lesser extent, are also suffering under those things. And as we experience consistent problems with German energy supply, it is not likely that we will shortly reappear as a silicon metal producer. So this is an ongoing, keeping it alive, intense-care operation, and we -- our options are very limited. Jackson Dunckel: Just on the numbers, the gross profit adjustment you see is a negative, right? So we are taking profitability out of our gross profit, i.e., the silicon plant is making money, albeit not very much, but it is making money. Martijn den Drijver: Okay. Good. And then my final question is just a bookkeeping question. The $5 million from the compensation settlement, has that been received? Or is it in receivables? Heinz Schimmelbusch: It has been received. Operator: And our next question will come from Maarten Verbeek with AMG. Unknown Analyst: It's [ Marcus Baker ] of DRD. A couple of questions from my side, maybe some clarification on the previous answer you mentioned or you gave. Concerning those 3 CapEx plans you plan to execute and you mentioned for the chrome metal that was some EUR 15 million. For the other 2, was it also EUR 50 million each or combined EUR 50 million? Michael Connor: We're still in pre-feasibility stage. So we're finalizing numbers at this point. But I think what Jackson was trying to give you is a sense of scale. So we believe that they're of that size of nature, but we don't have exact figures now as we're working through that. I mean, really, what we're trying to get across is that we're looking to capitalize on our existing footprint in the United States, leveraging our processing capabilities globally to use those existing assets as a footprint for a platform for expansion into the United States into other materials using our key technologies. And we can do that very cost effectively because of our experience gained from our operations in other locations. Unknown Analyst: Okay. And concerning the Supercenter in the Middle East, I think you will be starting to construct shortly. How long will this take? Will it take 1.5 years, 2 years before completion? Michael Connor: It will be about 2 years. Unknown Analyst: Okay. And then lastly, you have sold your graphite business, and you will see $55 million in net proceeds. Obviously, you still have a liability towards Alterna because you bought 40% of them and you will pay them back in cash or in shares. When will that happen? Or can you simply hold on to that amount for the next 3 years and then pay them? Jackson Dunckel: Yes. Heinz Schimmelbusch: It will happen, but we will not be able at this moment to comment on whether we pay in cash or in shares. Michael Connor: But we have an additional 2.5 years, as you know. Operator: [Operator Instructions] And it appears there are no further questions at this time. Mr. Swoboda, I will turn the conference back to you. Thomas Swoboda: Thank you, Jen. Thank you, everyone, for this very dynamic conference call. I hope we were able to answer all your questions. We are looking forward to see some of you on our investor marketing activities in Europe in due course, and please stay in touch. Thank you so much. Operator: And this does conclude today's AMG Q3 2025 Earnings Conference Call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Viatris Q3 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Bill Szablewski, Head of Capital Markets. Please go ahead. William Szablewski: Good morning, everyone. Welcome to our Q3 2025 earnings call. With us today is our CEO, Scott Smith; CFO, Doretta Mistras; Chief R&D Officer, Philippe Martin; and Chief Commercial Officer, Corinne Le Goff. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2025 and various strategic initiatives. These statements are subject to risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures. When discussing 2025 actual or reported results, we will be making certain comparisons to 2024 actual or reported results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the proportionate results from the divestitures that closed in 2024 from the 2024 period. We may refer to those as changes on an operational basis. When comparing our 2025 actual reported results to our expectations, we're making comparisons to our 2025 financial guidance. With that, I'll hand the call over to our CEO, Scott Smith. Scott Smith: Good morning, everyone. We delivered another strong quarter by focusing on our 2025 strategic priorities, driving strong commercial execution, advancing our pipeline, returning capital to shareholders through dividends and share repurchases, pursuing in-market business development opportunities and advancing our enterprise-wide strategic review to identify opportunities to deliver meaningful net cost savings, a portion of which we anticipate reinvesting in the business to fund future growth. Our fundamentals remain solid, giving us good momentum as we head into year-end, momentum we expect to carry into 2026. Before we dive into the details of the quarter, let me provide an update on our strategic review. For context, the work we've done over the past 5 years, strengthening our balance sheet, divesting noncore assets and investing in innovation has set the stage for the strategic review as a natural next step in our evolution. We've made significant progress since we announced the initiative in February. We continue to perform a detailed analysis of the totality of our business. As part of our analysis to date, we've identified areas for potential operating efficiencies, including our commercial sales and marketing model and product mix, our R&D, medical and regulatory activities, our sourcing, manufacturing and supply chain, including inventory optimization and how our corporate functions provide support. Looking to the future, we envision a company that delivers sustained profitable growth by focusing on 3 key areas: a global generics business that will continue to evolve towards more profitable, higher-margin complex products, an established brands business that will be strengthened by continuing to add brands that leverage our global capabilities, and an innovative brands business that will be expanded by building a portfolio of late-stage or in-market growth assets sourced both internally and externally. We anticipate being able to deliver meaningful net cost savings over a multiyear period while also being able to reinvest a portion of the savings back into the business to fund future growth opportunities. We look forward to sharing more details, including quantification of the net cost savings and reinvestment opportunities at our planned investor event in the first quarter of 2026. Now let me share a few highlights from the quarter. This quarter's commercial performance was strong across our portfolio, particularly in Europe, emerging markets and the Greater China region. We delivered 1% operational revenue growth, excluding Indore, in line with our expectations, reflecting continued execution across our businesses, primarily driven by the benefit from foreign exchange and supported by our strong operational performance, we are raising our full year guidance range across certain key financial metrics, including total revenues, adjusted EBITDA and adjusted EPS. At our Indore facility, our initial remediation activities are substantially complete. We recently met with the FDA to review progress and discuss potential timing for reinspection. While timing remains at the discretion of the agency, we have built and continue to build operational redundancies by requalifying other sites and adding third-party vendors for products originally manufactured at Indore. Importantly, we continue to make progress on advancing our pipeline. Here are some of the highlights. We are excited about our fast-acting meloxicam. The acute pain market in the U.S. is significant, and we believe we can offer a differentiated alternative for patients seeking non-opioid pain relief. We expect to submit our NDA by the end of the year and are already working on our go-to-market strategy. Our low-dose estrogen weekly patch is now under FDA review following the filing of our NDA late in Q3 with a decision expected in mid-2026 and a launch soon thereafter. For sotagliflozin, we've already made filings in multiple markets around the world and expect to file in more countries by the end of the year. For selatogrel and cenerimod, Phase III enrollment for both programs is progressing well. In addition, we've initiated a Phase III program investigating cenerimod for the treatment of lupus nephritis with enrollment of our first patient anticipated by the end of the year. We continue to view both selatogrel and cenerimod as transformational treatments with blockbuster potential and are beginning to plan for commercialization. We are excited about our recent acquisition of Aculys Pharma in Japan, adding 2 innovative CNS assets, pitolisant and spydia to our portfolio. This strengthens our presence in Japan, a strategically important market for us and leverages our CNS infrastructure and expertise. Business development and M&A remain key strategic levers to accelerate growth, enhance shareholder value and create meaningful impact for patients. Through regional business development, we continue to pursue opportunities to strengthen our generics and established brands portfolios while building our presence in innovative brands that can benefit from our global scale, capabilities and infrastructure. In parallel, we are evaluating targeted strategic M&A opportunities, particularly in the U.S., focused on commercial stage accretive transactions designed to expand our business and further enhance the company's long-term growth profile. We're balancing investment in growth with return of capital to shareholders through dividends and share repurchases. Year-to-date, we've returned more than $920 million to shareholders, including $500 million in share repurchases. This puts us firmly on track to return over $1 billion in capital for the year. Overall, we're very encouraged by the progress we're making, taking bold actions that are intended to strengthen our foundation, expand our capabilities and position Viatris for long-term profitable growth. We believe we're building a company that's more agile, more innovative and better aligned with the opportunities for tomorrow. Now I'll turn it over to Philippe. Philippe Martin: Thank you, Scott. We've had another strong quarter progressing our entire R&D pipeline globally and securing product approval in key markets worldwide. Our late-stage programs are advancing at a very strong pace, beginning with our fast-acting meloxicam. Over the past 2 months, we've participated in the American Society of Anesthesiology and the PAINWeek Medical conferences, generating strong enthusiasm among the pain health care community on our Phase III data. Several important data points from our presentations and KOL discussion underscore the product's distinct clinical profile. First, its pharmacokinetic profile and the speed of onset. This is demonstrated by faster Tmax and higher Cmax compared with Mobic. Specifically, fast-acting meloxicam achieved a Tmax of approximately 45 minutes versus approximately 4 hours for Mobic. Second, its strong and sustained analgesic efficacy with statistically significant pain relief over 48 hours versus placebo, confirming durable pain control in both soft tissue and bony surgical models. In post-hoc analysis, fast-acting meloxicam showed greater overall pain relief over 48 hours and faster pain relief than its opioid comparator, tramadol, across both surgical models. And third, its opioid-sparing effect as demonstrated by a significant reduction in opioid use, and a significantly higher number of opioid-free patients compared to placebo, indicating significantly reduced reliance on opioids for pain management. Our goal, subject to FDA agreement, is to include a reduction in opioid use as part of the product label. We anticipate submitting an NDA by year-end through the 505(b)(2) pathway, bearing any unforeseen delays related to the U.S. government shutdown. Turning to MR-141 in presbyopia. We plan to submit an sNDA by year-end. For MR-142 in dim light disturbances, the second Phase III study is well on its way with full recruitment and top line results expected in the first half of 2026. Our NDA for our low-dose estrogen weekly patch for contraception was submitted in late Q3 ahead of the government shutdown. Approval is expected by mid-2026. In addition, our next-generation norelgestromin-only patch is currently in Phase III with results expected in 2027. We've also submitted additional regulatory application in recent months for sotagliflozin in Canada, Australia and New Zealand with filings in Mexico and Malaysia expected by year-end. Recent data presented at the ESC Congress further highlights sotagliflozin's early benefit in reducing heart failure-related outcomes when initiated before discharge following a hospitalization for heart failure. Compared with selective SGLT2 inhibitor trials, the benefit observed with sotagliflozin in the SOLOIST study cohort distinctly differentiates sotagliflozin with the class. Particularly when it comes to reducing cardiovascular death, worsening heart failure and all-cause mortality. Consistent with this dual SGLT1 and SGLT2 inhibition, sotagliflozin is the first SGLT inhibitor to demonstrate a significant reduction in MI and stroke. In Japan, we have several near-term opportunities as we continue to steadily and strategically build our innovative pipeline. Our JNDA for effexor for general anxiety disorder currently under review by the PMDA is progressing well with approval anticipated in the first half of 2026. The Japanese Phase III data supporting this submission was recently published in the Journal of Psychiatry and Clinical Neurosciences. The recent addition of pitolisant aligns with our strategy to acquire derisked assets supported by positive Phase III data. Pitolisant with its well-established profile has made a meaningful impact for patients in the U.S. and Europe. It is approved for treating excessive daytime sleepiness or cataplexy in adult patients with narcolepsy in the U.S. and Europe. Additionally, it is approved for excessive daytime sleepiness associated with obstructive sleep apnea in Europe. We remain on track to submit 2 JNDAs for OSAS and narcolepsy during Q4 this year. Our Phase III trial of Nefecon for the treatment of IgA nephropathy is fully enrolled with results expected early next year. IgA nephropathy represents a significant unmet medical need in Japan with limited treatment options available. Our Phase II trial of tyrvaya for dry eye disease in Japanese patients was consistent with the global Phase III results. We expect to initiate the Phase II trial in Japan in the very near future. Turning to our complex generics pipeline. We've continued to secure approval for many of our generic products globally. We expect to receive FDA approval soon for octreotide. This will mark our fourth injectable FDA approval this year, joining iron sucrose, paclitaxel and liposomal amphotericin B, underscoring our strategy to expand the generics portfolio with technically complex, high-value products. And finally, let's cover the progress we've made with selatogrel and cenerimod. Selatogrel enrollment continues to accelerate, now approaching 1,000 patients per month, keeping us on track to complete enrollment next year. At the recent ICC Great Wall of China and ESC Congresses, KOLs emphasize the risk associated with patient delay in symptom recognition and the need for early intervention, reinforcing the potential of selatogrel's novel approach in providing early, rapid self-administered treatment for suspected MI. For cenerimod in SLE, patient enrollment in OPUS-2 will close this month, followed shortly by OPUS-1. We anticipate our Phase III readout around year-end 2026. Recent insights from KOL interaction at ACR highlighted the importance of the S1P access in the pathogenesis of SLE and continue to validate cenerimod's differentiated mechanism of action, which acts on B and T cells as well as antigen-presenting cells and dampens both innate and adaptive immunity. In addition, cenerimod's mechanism of action is also highly relevant to lupus nephritis, and we've, therefore, initiated a Phase III program in this indication. Our first patient enroll is anticipated by year-end with full enrollment expected around the end of 2027. Phase III study is the most inclusive lupus nephritis study so far, inclusive of patients with active histological lupus nephritis Class III, IV and V, with eGFR down to 15 milliliter per minute and with a broad background therapy with or without antimalarial or Benlysta. In closing, we've made significant strides advancing our pipeline. We are seeing the results of focused execution and scientific discipline as well as meaningful scientific engagement across our entire R&D pipeline from generics to established brands and innovative assets. Now I'll turn the call over to Corinne. Corinne Le Goff: Thank you, Philippe. Our portfolio strategy is taking shape, fueled by the positive pipeline momentum we have seen this year. Today, I'll highlight a few of the more significant near-term commercial opportunities. As we shared last quarter, we remain excited about our fast-acting meloxicam. The moderate to severe acute pain market is substantial, and there remains a clear unmet need for fast, sustained and meaningful non-opioid pain relief. Let me share more on the broad market opportunity and how it's shaping our commercial strategy. There are approximately 80 million acute pain cases per year in the U.S. And going forward, the incidence is expected to grow at a 2% CAGR due to an aging population and an increased number of surgeries and medical procedures. These patients are predominantly seen in outpatient and ambulatory surgical centers for procedures like gallbladder removal, joint replacements, hernia surgery or bunionectomy or in procedure-focused offices for cosmetic or dental surgeries. Now switching to the evolution of the treatment landscape. Opioids currently account for roughly half of all acute pain prescriptions despite the known risk of dependence and misuse. Tramadol remains one of the most prescribed opioids for acute pain. There is, therefore, a strong demand for safer alternatives, combining strong efficacy with an established safety profile. In fact, current treatment guidelines show a strong consensus to minimize opioid use and prioritize non-opioid multimodal pain management strategies that include acetaminophen and NSAIDs. NSAIDs make up a substantial proportion of the total acute pain prescription volume because of their low addiction risk, short-term tolerability and anti-inflammatory effects. We believe fast-acting oral meloxicam is well positioned as a differentiated option among currently available NSAIDs for moderate to severe acute pain. Since receiving the data in May, our teams have been working hard to further shape our go-to-market strategy. We are progressing well with launch planning, including branding, positioning, prescriber segmentation, channel strategy and pricing and payer dynamics. We are taking a targeted approach to market segmentation, focusing on settings where fast, effective alternatives to opioids are most needed. We plan to leverage our own specialty sales team and are exploring partnerships to expand reach across key prescriber segments, which will enable us to go to market more efficiently and cost effectively. We anticipate being in a ready position to launch pending the FDA review cycle. We are also very focused on launch preparations for our low-dose estrogen contraceptive patch. This weekly patch fills an important need for women seeking a lower dose estrogen option for contraception. It also offers advanced patch technology as demonstrated by potential best-in-class patch adhesion performance observed in our Phase III study. We expect this product will be another meaningful contributor and we are planning towards a launch in the U.S. in the second half of 2026. Outside the U.S., we have made major strides in building out our innovative brand portfolio in Japan with the acquisition of Aculys. The addition of Pitolisant and Spydia further expands our portfolio of innovative CNS products, which will be complemented by Effexor for generalized anxiety disorder. These innovative assets, plus the many others in our late-stage pipeline combined with the strength of our generics and established brands portfolios position us well to positively impact patients' lives and create value for the business. Now I'll turn it over to Doretta. Theodora Mistras: Thank you, Corinne, and good morning, everyone. I am pleased to report that we had another strong quarter, underscoring the continued performance of our broad global portfolio of generics and brands. My remarks this morning will focus on key highlights of our strong financial performance, significant free cash flow generation, capital allocation activities year-to-date and the outlook for the rest of this year. Focusing on our third quarter results, total revenues were $3.76 billion, which were down approximately 1% versus the prior year. Excluding the Indore impact, we delivered operational revenue growth of approximately 1% versus the prior year. In developed markets, net sales were down 5%, primarily driven by the Indore impact. Breaking the segment down further. In Europe, our business continues to deliver consistent and durable performance, growing approximately 1% this quarter. The generics business continues to perform solidly and was up 5% year-over-year. This was primarily driven by new product revenues in key markets such as France and Italy. And within our branded business, solid growth in EpiPen, Creon and our Thrombosis portfolio helped to partially absorb the anticipated competition on Dymista. As anticipated, our North America business decreased 12% versus the prior year, primarily as a result of the Indore impact and competition on certain generic products. However, we continue to see double-digit growth in certain products such as Breyna and Yupelri as well as benefits from new product revenues, such as iron sucrose. In emerging markets, net sales increased approximately 7% versus the prior year. This was primarily driven by continued strength in our established brands across key markets, including Turkey, Mexico and Emerging Asia. And the growth in our generics business was primarily driven by stabilization of supply for certain lower-margin ARV products. In Janz, net sales decreased approximately 9%. Results were primarily driven by expected impact from government price regulations as well as a change in reimbursement policy that impacted off-patent brands in Japan. We also saw competition on certain products in Australia. Lastly, we continue to see positive momentum in Greater China, where net sales exceeded expectations and grew 9%. This was primarily driven by our diversified commercial model and increased demand for our brands that are sensitive to proactive patient choice. Net sales again benefited from the timing of customer purchasing patterns, which we expect to moderate in the fourth quarter. Moving to the remainder of the P&L. Adjusted gross margin of 56% in the quarter was in line with our expectations. As anticipated, margins were impacted versus the prior year due to the Indore impact. Operating expenses were essentially flat versus prior year. This was as a result of increased R&D spending driven by accelerated enrollment in our selatogral and cenerimod clinical trial programs, which was offset by the continued benefit in SG&A from our 2025 cost savings initiatives. We continue to generate strong and durable free cash flow. This quarter, we generated $658 million of cash, which includes the impact of transaction-related costs. Excluding this impact, free cash flow would have been $728 million. Our significant free cash flow has enabled us to execute on our capital allocation plan. Since our Q2 call in August, we have repurchased an additional $150 million of shares, which brings our year-to-date total repurchases to $500 million, achieving the low end of our full year range. Including dividends paid, we have returned more than $920 million of capital this year to our shareholders, and we remain on track to deliver on our commitment of returning over $1 billion of capital this year. With regards to business development, the Aculys transaction highlights our ability to leverage our global infrastructure to strengthen our commercial portfolio in Japan through disciplined business development. The $35 million upfront payment is expected to be expensed as IP R&D in the fourth quarter. Now a few comments on our updated outlook and phasing for the remainder of the year. We are raising and narrowing our 2025 financial guidance ranges across certain metrics, primarily driven by foreign exchange as well as share repurchases completed year-to-date. Our outlook is supported by the continued strength of our underlying business performance. With respect to anticipated phasing in the fourth quarter relative to our third quarter results, total revenues are expected to be lower across all of our segments due to normal product seasonality, resulting in our third quarter revenues being the highest quarter of the year. Gross margins are expected to be stable, and SG&A is expected to increase due to investments in our pipeline and upcoming launches to drive future growth. Lastly, free cash flow is expected to step down due to the timing of interest payments and the normal phasing of capital expenditures. As we close out the year, we expect the underlying positive fundamentals of the business to continue. As normal course, we will provide our outlook for 2026 in the first quarter of next year, along with our Q4 and full year results. However, from where we sit today, there are several dynamics to consider as we think about next year. These include timing of approvals and uptake from recently launched products, competitive dynamics in North America and potential loss of exclusivity for Amitiza in Japan. Investments supporting our pipeline and launch preparedness to drive future growth and the implementation of our enterprise-wide strategic review. In summary, we remain encouraged by the underlying fundamentals of our global business and the continued execution of our disciplined and balanced capital allocation plan. As Scott mentioned, we plan on hosting an investor event during the first quarter of next year, where we expect to provide our strategic and financial outlook, an update on our pipeline and portfolio and details on our enterprise-wide strategic review. With that, I'll hand it back to the operator to begin the Q&A. Operator: [Operator Instructions] And your first question comes from Les Sulewski with Truist. Leszek Sulewski: A couple for me. So first, perhaps maybe give us an update, if you could, on the Indore resolution situation. And then Second, if you look at through the branded portfolio across the regions, specifically 2 products that stand out in 3Q, one being the uptick in Lipitor, are you able to capture some of the share from the recent generic recall? And then second, what's driving the uptick in EpiPen given the options patients now have with the nasal spray and then also some shortages across that board. And then third, are there any key Paragraph IV challenges that you're facing into next year? Scott Smith: Les, let me -- I'll answer the Indore question and then pass it on. So I have to say, we're very pleased with where we are from a remediation perspective. We're largely remediated at this point. We recently had a productive and open meeting with the FDA relative to not only the remediation process but reinspection. Timing of the reinspection is with the FDA. It's not under our control, likely they'll show up unannounced at some point in '26 and reinspect. But I think it's really important to know that we've built redundancies by qualifying other sites and adding third-party vendors to try and decouple revenues from products on the import alert list and the Indore reinspection because the timing is out of our control. So I think the Indore remediation is going very, very well. And we just -- as I said, just recently talked to the FDA and had a very constructive meeting. I'll pass it over to Doretta. Theodora Mistras: Great. Thanks. With respect to our branded regions. Number one, on Lipitor, that's really driven by the strength of our brand outside of the U.S., in particular, in China. We've talked about the strength of our portfolio there, especially in cardiovascular and all the work that we've done in terms of the channels that we operate, the strength of our brand has really continued to drive performance on Lipitor. With respect to EpiPen, we are, to your point, seeing solid performance in this year. I would say our share has remained relatively stable. It's around 24% to 25% in the market. But to call out a couple of areas where we're seeing some strength. Number one, we relaunched EpiPen in Canada. We -- with the shift of commercial rights from Pfizer back to us. And secondly, we're seeing strong growth in Europe, and that's really led to the strength in EpiPen. Scott Smith: We're going to the next question, I just wanted to reemphasize, not only do we have a stated performance Lipitor in China, but the China affiliate in general had very strong third quarter and has a very -- had strong so far year-to-date this year. So we're very pleased with our progress in China. Operator: And your next question comes from Matt Dellatorre with Goldman Sachs. Matthew Dellatorre: Maybe on fast-acting meloxicam first, could you comment on any feedback thus far from the FDA regarding the potential for an opioid-sparing label. And how significant do you guys view that from an access and pricing perspective? And then could you comment on the partnership strategy to reach the broader market, including how do you guys think about the split in value between the channels that you will cover versus other segments that you might partner. And how much you structure a deal like that? And then maybe just quickly on capital allocation. Could you maybe speak to the key priorities next year? Scott, I know you mentioned U.S.-based BD. Just curious, would that be mostly midsized licensing deals? And how should we think about just kind of balance sheet capacity for those potential deals? Scott Smith: I'll kick it over to Philippe to talk a little bit about meloxicam and then I can finish up with not only where the partnership discussions are, but also capital allocation priorities for '26. Philippe Martin: Thanks, Scott. Thanks, Matt, for the question. So on fast-acting meloxicam, opioid-sparing specifically to your question. We've designed the Phase III study in collaboration with the FDA and designed the study in order to be able to get opioid-sparing language in the label. As you know, the data that came out of the 2 Phase III studies in both models in terms of opioid-sparing is very strong. And so we feel very encouraged with our ability to get opioid-sparing language in the label. We have a pre-NDA meeting with the agency over the next few weeks where we'll be discussing this as part of the meeting. It's one of the topics we'll be discussing. But like I said, I think from a labeling standpoint, we've done everything that can be done with very strong data to be able to get opioid-sparing in the label. Scott Smith: In terms of meloxicam partner, you're a little bit ahead of me in terms of segmentation and who covers what. We're involved with some discussions with potential partners, and we're working through that and what that would look like. Those are all sort of individual discussions and the specifics would depend on what partner we land with if we do land with the partner there. So we're actively involved in exploring discussions there. We also feel completely good to take this ourselves and commercialize ourselves. We've got the right people. We've got great data, and we've got resources behind it to make a great launch. So we would only go into a partnership if we thought it was significantly additive to the overall value. And then in terms of our capital allocation priorities going to into '26, let me just -- there's a word that I try and use all the time here, and that's balanced, right? We're going to continue to be balanced in terms of our capital allocation. As I've talked about many times over a 3-, 5-year period, we're going to try and be 50-50 returning capital to shareholders, but also trying to build a portfolio of growth assets. And so we'll be involved in business development as well. I love the deal that we did with Aculys in Japan. Japan is a key strategic priority for us. We put a couple of innovative assets in there to launch in '26. And we're going to continue to look for things for assets that we could be good owners of. I would love to be able to find some in-market accretive U.S.-based innovative products to add to the portfolio. And we're working hard on it. And again, but we're -- overall, we're going to continue to be very balanced in terms of our capital allocation between return to shareholders and also doing business development. And it depends a little bit -- every year is going to be a little bit different. This is the year so far, we've leaned into share buybacks given the uncertainty in the environment, the share price and other things. And other years, we may lean into business development a little bit more, but we want to be able to do both return and also build growth assets to sit on top of the strong base business we have to really return to long-term profitable growth for the company. Operator: And next question comes from Chris Schott with JPMorgan. Christopher Schott: Just 2 for me. Maybe just coming back to the enterprise-wide strategic review. Just any more color you can provide on the quantum of expense reduction we should be thinking about here? And when you mentioned reinvestment, is that a majority of those savings, a small portion? Just any -- just kind of directional color of just how we should think about that flow through? I know we're going to get more color next year, but just anything you can provide today. And maybe, Scott, just building on the comments you just made about the balanced approach to capital deployment. You mentioned this year is more of a capital return year. And just when you look at kind of the range of BD opportunities out there, balancing the stock price, like should we think about '26 looking more like '25, where it is more kind of capital return? Or directionally, does '26 look more like that 50-50 balance that you're targeting over time? Scott Smith: Yes. Thanks, Chris. So in terms of quantum, I don't want to get into quantum of savings at this point in time. We will be very, very clear and transparent relative to the quantum of savings that we get from the enterprise-wide review when we get into Q1, either at the call or through an investor event, but we'll be very, very clear about that. We're working hard on that. We think the quantum of savings is going to be significant. We believe we're going to be able to deliver meaningful cost savings over a multiyear period. And so we expect it to be pretty significant. Right now, we're sort of focused on commercial sales, marketing model, product mix, R&D, medical and regulatory activities, sourcing, manufacturing, supply chain, inventory optimization, corporate support functions. So it's a large project. We're looking at the whole organization, and we expect to be able to deliver meaningful cost savings, and we'll get into the exact quantum of those as we as we get into Q1. And we won't only talk about the quantum, but we'll also talk about phasing. We'll also talk about the magnitude of reinvestment, et cetera, at that event, either with the call or in the investor event. I do not see reinvestment being the majority of savings. I think it will be -- certainly, the minority will be likely putting more into savings and dropping to the bottom line than reinvestment, but there will be some significant reinvestments as well. So this is not about redistributing as much, as it's about finding the savings and then making sure we're looking after the base business and looking after our future growth as well. The last question was balance. So what's '25 going to look like from -- '26, sorry, from a capital allocation perspective, we'll have to wait and see what that year looks like, what opportunities are there, where the stock is trading at. Again, I don't look at it on a yearly basis. I look at it sort of over a longer period, a 3- to 5-year period that we want to be very balanced in returning that capital allocation. As things evolve, again, as we get into guidance for '26, we may talk a little bit more about that. But again, I want to continue to be able to do both, return to shareholders, but also build a portfolio of assets that are going to fuel our growth in the future. Operator: And your next question comes from [ Dennis Ding ] with Jefferies. Unknown Analyst: This is [ Li Wenwen ] for Dennis Ding. Our question is about meloxicam. What is your overall confidence in the self-ramp and peak sales potential? And if there's anything to be learned from competitor journavx [ slow ] launch? Scott Smith: Yes. So I think just let me comment and then maybe Philippe can talk a little bit about the data. But we're very excited about meloxicam. The combination of the data and the people we have on board, I think we can do a very significant launch here. Whether peak sales, $0.5 billion, I think that's in the right sort of range. But we'll be more clear about that again as we get into '26 and get ready for launch. We do not have a label on that yet. So part of that -- I think there's great potential here. We can be more specific what those peak sales look like once we understand what the label looks like once the full plans together. I will say we've got an excellent team on this right now. They've launched multiple blockbusters before. We feel very, very good not only about the data, but our ability to commercialize this asset. We're going to commercialize it as if it's a branded product, it's got -- we think there's significant exclusivity there. We're looking to expand that exclusivity. And we expect meloxicam to be a very meaningful contributor to our portfolio for the rest of this decade at a minimum and maybe longer than that. So we're very excited about it. Operator: And your next question comes from Umer Raffat with Evercore ISI. Unknown Analyst: Congrats on the quarter. This is JP for Umer. A couple of questions on meloxicam and the presbyopia medicine. Meloxicam, as you finalize your planning, what kind of payer guidelines engagement are you thinking? Is it going to be a multimodal pain pathways? Or how does it work versus traditional retail channels. And on presbyopia, is this going to be more of a cash pay optometry play initially? Or do you see a path to broader reimbursement and physician adoption as the category matures? Philippe Martin: Philippe. So let me start with meloxicam. I think what we've experienced both from, I think, a payer, but also from a KOL standpoint is the fact that this is the pain -- the acute pain market has moved to a multimodal approach where, generally speaking, patients are discharged with a couple of medications. And that we believe we'll be able with the data we have to leverage that trend within the market. So our data supports that positioning. And -- I'm not sure what I -- can't recall on the second question was. William Szablewski: Second question on presbyopia. Scott Smith: Prebyopia and payer channels and commercialization. So we'll hand that over to Doretta. Theodora Mistras: Yes. Thank you. And we're still working through both not only our presbyopia but also our dim light disturbance strategy as we get closer to commercialization. But taking a step back, we view this more as a portfolio approach. When you couple that with tyrvaya that's already in the market as well as ryzumvi, we have the opportunity to really create a portfolio of assets that tailor to the front of the eye. But we're ultimately still working through the commercialization strategy. Given the indication, it is natural to assume there will be a large cash pay component to it, but we'll be able to provide more details as we get closer to commercialization. Scott Smith: Yes. We're very pleased with the direction we're going with the Eye Care group. We've got some new leadership on that team. A couple of positive readouts, obviously, this year in presbyopia and dim light. And we'll see what those labels look like. But we're putting -- starting together a portfolio of assets in the eye care area and starting to get some critical mass in terms of that particular group. Operator: And your next question comes from Ash Verma with UBS. Ashwani Verma: Congrats on all the progress. So maybe one for Scott. So for the strategic review, I know you don't want to comment on the quantum of savings. But just in terms of the order of priority here, is that the right way to think about how you spend it out as in thre's more potential for savings from commercial, followed by R&D and then COGS? And then secondly, for Doretta, so as we think about like the top line for 2026 versus 2025, can you talk about the pushes and pulls? I see at this guidance of '25 midpoint, you have $350 million of FX tailwind. So that laps next year? And then in terms of the new product contribution, do you think that you can deliver the sort of the [ reference ] you've been at the $450 million to $550 million. Scott Smith: Yes. So let me take the enterprise-wide strategic review, and then we'll pass it around the table here to answer your question. So Ash, thank you very much for the question. We're not trying to -- we're trying to be as open and honest and transparent as possible with the enterprise strategic review and where we are. We're not trying to be cute with it. The reason we're not giving a quantum is because it's a big project. It's a big company. We're looking at everything. We want to be able to not only identify it, but we want to be able to trace it back and lock it down with the individual groups that we're working with there so that we come with a number that's accurate, sustainable and durable, and we can hold on to that number over a number of years. So we're trying to make sure that not only do we identify things but we understand and map out the activities needed to be able to really realize those savings. In terms of the things that we're looking at, sales and marketing, R&D, operations, corporate support. I think probably the largest quantum can come from our sourcing, manufacturing, supply chain, inventory optimization. There's a significant amount that can come from corporate support as well. And some of the commercialization and the way that we're commercialized and the way that we need to not only sort of prepare for today and be able to continue to deliver today, but we want to be able to understand the functions that we need to be able to commercialize in the future. So we want to be fit for purpose for today and for tomorrow with this. It's not just about realizing cost savings. It's also about evolving our model to be more effective going forward as well. So we really look forward to being in a place to talk exactly about the quantum of exactly where it's coming from, what the phasing is by year, with the reinvestment opportunities on things, and we're going to be able to do that in Q1. But we're not trying to -- again, to be cute here. We're trying to be accurate. We're trying to be thoughtful, and we're trying to make sure that we give numbers that we can deliver on. Theodora Mistras: With respect to your question around 2026 revenue, without getting into specific guidance, our focus this year is really finishing the year strong. We're very happy with the momentum that we're seeing in the business. We remain on track to deliver the 2% to 3% operational revenue growth for the year, excluding Indore. And we expect the underlying positive fundamentals that we're seeing in the business to continue into 2026. And as I think about the pushes and pulls to your point, number one, continued performance in our commercial business, including Europe, China and emerging markets, it's also going to depend on the timing of approvals and uptake of recently launched products as well as the competitive dynamics in North America and the potential loss of exclusivity for amitiza in Japan. But as normal course, we will provide our outlook for 2026 in the first quarter of next year. With respect to your second question around new product revenue and how that ties into 2026. We've talked about the $450 million to $550 million without getting into specifics, we will provide that next year. We are also seeing positive momentum of our new product revenues going into 2026 just based on the number of opportunities not only that have gotten approved like iron sucrose but the ones that are currently under regulatory review, including octreotide. And so we will provide more information next year when we provide our full year. Scott Smith: And I feel -- personally, I feel very good about '26 and the new product revenue. A lot of the approvals this year were back ended in the back half of the year. We've got some more approvals to come. We've got a lot of launches coming in '26 as I went through earlier, that are going to be catalysts. So I feel very, very good about where our new product number is going to be for '26. Operator: And your next question comes from David Amsellem with Piper Sandler. David Amsellem: So just some pipeline questions, brand pipeline questions. So just back to presbyopia, can you talk to how you see differentiation versus the other modalities that have come on the market. So that's number one. Number two, on cenerimod. Just wanted to get more insight into your thought process regarding running the study now in lupus nephritis. Is that informed by any additional analyses of earlier data? Or is it something of potentially a hedge to the extent SLE isn't successful? Just wanted to get your thought process there. And then lastly, on the rapid acting meloxicam, can you just remind us how you're thinking of your IP/exclusivity runway for that product? Scott Smith: So let me hand it to Philippe for presbyopia and cenerimod. Philippe Martin: Yes. So I think for presbyopia in terms of differentiation versus other mechanism of action. I think the miotics in general, do stimulate the ciliary muscle, and that leads to a number of potential issues, including risk of retinal tear or detachment, and a reduction in vision in dim and dark environment, which we certainly don't see with our drug. We actually see the reverse. So we think that from a benefit risk profile, our drug is differentiated. It is both effective and safe. So that's, I think, where we can see the most differentiation from MR-141. The second question about cenerimod. Cenerimod, if you look at the Phase II data, you'll see that cenerimod tends to work better in more severe patients, patients that tend to look like lupus nephritis patients. And so on top of it, the mechanism of action applies to both SLE and lupus nephritis. So I think it's just a natural evolution of the asset leveraging the opportunity we have with the S1P mechanism of action that is pretty broad and can be applied to a number of autoimmune disease, lupus nephritis just makes sense based on the data we have. And like I said, the mechanism of action. So it's -- we're not hedging anything at all. We're just getting -- expanding our opportunity with cenerimod. Scott Smith: I just want to reemphasize the last part that Philippe said there, we are not in any way hedging the SLE trial with a lupus nephritis. We feel very, very good about SLE. We feel good about the molecule. We see an opportunity, as Philippe said, to expand. So we're going to go ahead and start that study and start dosing patients now. So in no way is that a hedge, I think more than anything shows confidence that we have in the molecule going forward. Lastly, I think your third -- your last question was IP around meloxicam. We see right now based on -- we see exclusivity in the 4- to 5-year range right now based on what we have, but we're very actively working on expanding that IP suite to be able to extend that exclusivity very significantly. Again, I sort of look at it as being a very meaningful contributor to the portfolio for this whole decade. And hopefully, we can expand beyond that. So a very important molecule for us. We're working very hard to expand our IP network there and also obviously expand the exclusivity that we have with the molecule. Operator: And your next question comes from Jason Gerberry with Bank of America. Jason Gerberry: A couple for me. A lot of my questions have been answered. But just on the enterprise review and just why not an update today versus giving the update on 1Q '26. Is it that effectively, those efforts are still ongoing or that you need to assess maybe some of the cost of commercial buildouts that need to be offset? Or is it just wanting to have a forum next year that you could really get into the details with investors in 3Q is just not the best forum for that? So that's my first question. And then just as a follow-up on Indore next year, in a scenario where, I guess, the ban isn't lifted, do the price penalties, which I think were $100 million, did they recur in that scenario? Or are they nonrecurring? I just wanted to understand that dynamic a little bit better. Scott Smith: So I'll take the enterprise-wide review question and then kick the Indore over to Doretta to answer for us. She's very deep on Indore and what '26 looks like for that. It's not that we're holding things back. If we were ready to go with the enterprise-wide review, we would certainly give it to you guys right now, we'd be very clear. It's a big company. We're operating in 165 countries. We're looking at everything, commercial, marketing, product mix, R&D, medical, regulatory, sourcing, manufacturing, supply chain, we're looking at it all. It's a very large and complex project that we're engaged in. It's absolutely the right time for us to be doing this now, right? The work we've done over the last 5 years, strengthening the balance sheet, paying down debt, divesting noncore assets, investing in innovation. It's just the right time for us to be doing it. We initiated this project sort of, I would say, late in Q1 of this year. And by the end of the year, we'll have a very good handle on it. And again, to me, it's not just about identifying where the cost savings might be. It's mapping those back to the organizations that are going to give, putting the action plans in place, being credible in terms of living with the number that we give you, and we want to be able to talk not only about the effect of the strategic review in '26 but also '27 and '28. The reason we're doing it then, not now is about accuracy. It's about us having numbers that we can live with. It's about us being transparent and believable. It's got nothing to do with holding it back, so we have something to talk about next year. If it was available, we get it to you, but it's a big project. And we want to be clear, transparent and credible when we put those numbers out, and we want to make sure they're mapped back in the organization. So we're holding ourselves accountable to delivering on those numbers. Theodora Mistras: With respect to your question specifically around penalties, [ Chris. ] So the $100 million incorporates both penalties and supply disruptions a little over, I would say, 50% specifically relates to penalties. Those we do not expect to even independent of Indore, those will not materialize. We don't expect them to materialize again next year. However, I do also would comment that we've been working in the background, not only to remediate Indore, but also to create redundancies within our network and our third parties in order to reestablish supply outside of Indore. And we do expect, regardless of the impact to see some stabilization of that as we move into next year. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Scott Smith, CEO, for any closing remarks. Scott Smith: So first of all, thank you, everybody, on the call for your thoughtful detailed questions. Secondly, some closing remarks here, '25 has been -- is proving to be a really pivotal year for us, one where we're delivering results today while building a stronger, leaner, more innovative Viatris for tomorrow. I'd like to send a sincere thank you to the more than 30,000 employees of Viatris. A lot of good and hard work has been done to get us to this place. We're moving forward with confidence and excitement for the future. We see sustained profitable growth ahead and are actively executing on all key strategic priorities. I believe we are very well positioned to continue to deliver strong results and significant value for our shareholders. Thank you for listening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome to the MP Materials Q3 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would like to turn the call over to Martin Sheehan, Head of Investor Relations. Mr. Sheehan, you may begin. Martin Sheehan: Thank you, operator, and good afternoon, everyone. Welcome to the MP Materials Third Quarter 2025 Earnings Conference Call. With me today from MP Materials are Jim Litinsky, Founder, Chairman and Chief Executive Officer; Michael Rosenthal, Founder and Chief Operating Officer; and Ryan Corbett, Chief Financial Officer. As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings release and the appendix to today's slide presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA and tons means metric tons. Finally, the earnings release and slide presentation are available on our website. With that, I'll turn the call over to Jim. Jim? James Litinsky: Thank you, Martin, and good afternoon, everyone. As most of you know, our third quarter was a game changer, a total acceleration of MP as a vertically integrated national champion with a transformed economic platform for long-term leadership. If you are new to our story, I would encourage you to go to our investor site and listen to our July 10 webcast and announcing the DoW deal as well as our last earnings call, where we went through our DoW and Apple agreements in detail. It has been an exciting and interesting time to say the least in the rare earths industry. I have a lot of thoughts to share. Let me first cover our execution for the quarter. Ryan and Michael will then cover the financials and operations, respectively; and I will wrap up with my big picture thoughts on recent events and the outlook. So with that, let's go to Slide 5. In our Materials segment, we delivered another outstanding quarter. NdPr oxide production reached 721 metric tons, a 21% sequential increase and a 51% increase year-over-year. The 721 metric tons of production exceeded the high side of our outlook for the quarter and marks a record. Corresponding sales volumes also set records, showing strong growth in the quarter, both year-over-year and sequentially. In addition, REO and concentrate production was the second highest in our history. This marks the third quarter in the last 5 that Michael and the team have produced more than 13,000 metric tons of REO. While biannual maintenance outages can create some variability when comparing results sequentially, it is clear that we have made significant progress toward our Upstream 60K target or 60,000 metric tons of annual output. We are also ramping up the installation of the dozens of mixer-settlers required for heavy separations. Our new heavy circuit will process approximately 3,000 metric tons feedstock and produce more than 200 metric tons of dysprosium and terbium annually. We expect this capability to fully enable our planned production of 10,000 metric tons of high-performance NdFeB magnets each year. And we are on track to start commissioning this circuit in mid-2026, a major milestone in our vertical integration and a historic step toward restoring America's ability to produce magnet grade heavies at scale for the first time in decades. Our long-term purchase price agreement, or PPA, with the Department of War commenced on October 1. The agreement provides both earnings visibility and a clear and transformed economic foundation to accelerate our build-out of magnetics production. Importantly, we expect to return to profitability in Q4 of this year and beyond. Ryan will provide additional PPA accounting and economic details shortly. Moving to the Magnetics segment. Pursuant to the terms of our Apple agreement, we received the first $40 million prepayment for the production of magnets from recycled materials. Engineering and equipment purchases for the recycling circuit at Mountain Pass and the expansion of magnetics production at independents are underway. We will receive additional prepayments, $200 million in total, as we make further progress on this build-out for Apple. The Apple partnership, combined with our steady progress at Independence, reflects the acceleration of our U.S. magnetics platform. Commissioning at Independence continue to advance at a rapid pace throughout the quarter. As with Mountain Pass, starting up new equipment, integrating complex systems and optimizing material handling is a substantial undertaking. Ensuring we bring everything online safely remains our top priority. Meanwhile, production and sales of magnet precursor products continued throughout the third quarter. Michael will share more detail on that. The pace of commissioning in Independence, combined with steady improvements in metal production, gives us confidence that we remain on track to begin commercial scale magnet production by year-end. With that, let me hand it over to Ryan to discuss the quarter's financials. Ryan? Ryan Corbett: Thanks, Jim. Turning to Slide 6 and our consolidated results for the quarter. On the left of the slide, you can see the impact to revenue from the accelerated transition to separated product sales, with concentrate no longer sold externally. The absence of concentrate revenue in the quarter was mostly offset by the continued ramp in separated product sales, primarily NdPr as well as the ramp of magnetic precursor product sales, which began in Q1 of this year. Adjusted EBITDA was generally unchanged both year-over-year and sequentially. On a sequential basis, the decline in profitable concentrate sales was mostly offset by improving per unit cost of production for NdPr. On a year-over-year basis, the loss of concentrate sales was offset by the ramp in magnetic precursor sales at Independence as well as the per unit cost improvements I just mentioned. Our adjusted diluted EPS generally followed the trend of our adjusted EBITDA results, with further benefits from higher interest income in the quarter primarily from our materially higher cash balance as well as a greater income tax benefit. Moving to Slide 7 and our operational metrics in the Materials segment. Production of REO remained very strong at 13,254 metric tons, albeit down very slightly from our record-setting quarter in Q3 of last year. In the midstream business, as Jim mentioned, production volumes continued to ramp nicely, achieving approximately 50% of our targeted output. Michael will provide more details on the ramp-up shortly, but assuming our debottlenecking continues at the same pace we have seen over the last several quarters, we would expect to hit our targeted throughput towards the end of 2026. We expect our per unit production cost profile to decline in line with this ramp with the impacts on the P&L likely visible approximately 1 quarter in arrears as we work through averaging costs and inventory. Separated product sales volumes followed production closely with nearly 20% sequential growth and 30% year-over-year growth. With much of our separated product sales toll processed into metal across various partners in Southeast Asia, there continues to be a lag between production volume growth and sales as we fill the tolling channel. We expect to continue to scale up metallization to match our growing output with various partners in Southeast Asia and beyond. And with that, we expect to build a bit more inventory at these various facilities. This modest working capital build is a natural function of the growth in our oxide production, which we expect to lap once we are at our targeted output levels. Looking forward, we will begin to recognize intercompany sales from our Materials segment to the Magnetics segment in the fourth quarter, as we continue to produce precursor products for GM and get ready for commercial scale magnet production at year-end. Note that these intercompany sales, along with the related cost of goods sold, will be recorded at the Materials segment but will be eliminated at the corporate consolidated level. The value of that sale and intersegment profit will remain on the balance sheet at the Magnetics segment until it is sold, at which time it will be reflected within Magnetics segment revenue and cost of goods sold. As we ramp magnet production and then sales later in the year, there will be some lag between the intercompany sale and the eventual realization of value on a consolidated basis via a magnet sale. Lastly, on this slide, on the far right, you can see that improved market pricing over the last year flowed through to our realized pricing in the quarter. As a reminder, given the dynamics of the tolling channel I just mentioned, combined with the nature of our sales contracts, some of which use moving averages of market prices, the change in our realized pricing generally lags the trend spot prices seen in the market by a quarter or more. Based on our current view of shipment timing and contract mix, we expect next quarter's realized price, excluding the impact of the PPA, to approximate $61 per kilogram. Moving to Slide 8 and our segment financials. On the left side of the page, you can see the initial impact of eliminating concentrate sales in the quarter on both revenue and adjusted EBITDA. While we had always planned to ramp down sales of concentrate as production and sales of refined products increased, the DoW partnership has accelerated that strategy. While refining operations continue to scale, we expect to collect payments under the PPA for placing concentrate into our strategic stockpile, which I will discuss more in a moment. Moving to the Magnetics segment. The primary driver is the ramp-up of production and sales of magnet precursor products, which began in Q1 of this year, positively impacting both revenue and adjusted EBITDA. Before I discuss a handful of housekeeping items for you, I wanted to wrap up with an important reminder on Slide 9. This was the slide we pulled together post our DoW announcement, giving an illustrative example of the minimum annual EBITDA we expect to generate as we execute on our growth plan. Importantly, and I can't stress this enough, this earnings profile is underpinned by firm in-place contracts with much of the cash flow driven by our agreements with the Department of War. As long as we execute across our Materials and Magnetics businesses, we expect to generate very attractive long-term returns. And while the contracted nature of our future cash flows gives us tremendous confidence to continue investing in growing our business, we also expect material upside potential derived through upcoming initiatives, including recycling, appreciating NdPr prices, magnet syndication or other growth opportunities. As Jim mentioned, the price protection agreement with the Department of War went into effect as of October 1. I'd like to spend some time walking through the GAAP accounting for this contract given the material earnings we expect from this feature of our DoW partnership starting in Q4 with the cash impact following soon thereafter in Q1. First, from an accounting perspective, we have concluded that the top-up PPA payments will not technically be revenue per U.S. GAAP, as the payments are not directly related to the underlying sales contracts we have with our customers. The cash flow comes from a third party, in this case, the Pentagon, that is not, at least as it relates to the PPA, technically our customer. Given that, in the revenue guidelines under ASC 606, we will be recording the PPA as an operating income line item or expense in the case that market pricing exceeds $110 per kilogram. Starting in Q4, you will see PPA income or expense as the first line item below revenue in the P&L., with PPA income, therefore, forming a core part of our earnings metrics on a go-forward basis. As it relates to 2026, we expect the PPA payments to be made up of 2 primary levers: first, we expect top-up payments for NdPr oxide produced from the Materials segment and sold either to third parties or internally to our Magnetics segment; and second, we expect payments from the contained NdPr value within the concentrate we are stockpiling as we continue to ramp up our refining operations. The top-up payments related to NdPr oxide can be approximated as the difference between our average realized sales price and $110 per kilogram with a few gives and takes multiplied by the quantity of NdPr oxides sold in the period. So for example, in a quarter where realized prices are $70 per kilogram, our sold volumes multiplied by 70 would be recognized as revenue, in line with how we report today. And the $40 per kilo top-up payment up to the $110 floor price would be recognized in the PPA income line, with the full impact of both flowing through EBITDA and earnings. Regarding how to model the PPA payments for stockpiles, particularly concentrate, the per unit payment will approximate the difference between market prices for NdPr in the quarter and the $110 per kilo floor. But in the case of concentrate, the quantities are tethered to the recoverable NdPr within any concentrate we nominate to the stockpile. For each quarter in 2026, I would expect the difference between our actual NdPr production volume and our quarterly target of 1,500 tons of NdPr to be nominated into the paid stockpile and drive further PPA income. Eventually, this concentrate will be processed and sold at market NdPr prices. Realizing this is complex, we're happy to take further clarifying questions on the PPA and its impact to our financial statements offline following the call. Moving to the balance sheet. I did want to point out that several of the pieces of the DoW agreement, consisting of the PPA, the samarium loan, the preferred stock and the warrant required us to undertake an analysis of relative fair value in cash versus noncash consideration received in order to properly account for these financial instruments on the balance sheet under GAAP. Note that several of the items are therefore recorded at a value that does not match the cash or other consideration received specifically for that feature. There is significant discussion of our methodologies contained in our Form 10-Q that we intend to file with the SEC tomorrow, but the 2 most notable outcomes of this are: first, the recording of a $221 million asset called the PPA upfront asset that will be amortized on an accelerated basis over the 10-year term of the PPA; and second, the recognition of noncash interest expense in excess of our coupon rate on our samarium loan from the Department of War, given the relative fair value of that portion of the agreement resulted in a deemed debt discount. The PPA amortization will be presented in our depreciation, depletion and amortization line in the P&L. Lastly, before turning it over to Michael, I wanted to address our year-to-date CapEx and remaining 2025 expectations. Through the end of Q3, capital spending has totaled approximately $110 million on a gross basis and $86 million on a net basis Due to $24 million of progress payments received from the Department of War under our prior HREE investment agreement. As such, we expect gross CapEx for the full year to be closer to the low end of our initial $150 million to $175 million range and to perform better than the range on a net basis. We will discuss 2026 capital forecasts and projects on our Q4 call in early February. With that, I will now turn it over to Michael. Michael? Michael Rosenthal: Thanks, Ryan. Operationally, we had a strong third quarter with production that came in just above our expectations. In the upstream circuits, we achieved our second highest quarterly result for concentrate production just 4% shy of the all-time record we achieved in last year's third quarter. The gap is largely attributable to several reagents and pre-floatation trials the team executed that had a minor negative impact on stability and production. It was nonetheless one of our best quarters with very good uptime and highest ever concentrate grade exceeding 63%. Midstream production continues to increase, which led to another sequential quarter of record NdPr oxide production in line with our expectations. We are now processing more and more of our concentrate on-site while simultaneously building up a healthy concentrate stockpile. The majority of our circuits are performing well, demonstrating higher uptime and throughput capability while sustaining good product quality. As in prior quarters, a few areas experienced temporary disruptions that modestly held back NdPr production. As we address these short-term challenges, we are adding resiliency and stability to our operation that we expect to result in sustainable production increases over time. In the first half of October, we successfully completed our semi-annual maintenance turnaround, which included several minor debottlenecking efforts and tie-ins for future projects. The outage along with associated de- and re-inventorying, repairs and start-up affected production for approximately 2 weeks depending on the area. We had one area require rework in late October, and that somewhat impacted October production. As a result, we anticipate fourth quarter concentrate production to be roughly flat relative to Q4 2024 and NdPr oxide production to be flat to slightly up sequentially with strong growth resuming in Q1 2026. At Mountain Pass, we are accelerating the pace of project execution, particularly on the heavy rare earths circuit. In the third quarter, we completed most engineering and primary equipment procurement for our terbium and dysprosium production capability, which will be the first heavy rare earth products to come online. Construction and installation of equipment began towards the end of the quarter and has accelerated in October. On Slide 10, we have a picture of some of the work underway. We are pleased with this progress. Importantly, we are targeting the start of commissioning of this circuit in the middle of 2026. Regarding supply sources, we are actively engaged with a number of different and different types of potential feedstock providers to supplement our own contained HREE content. I am optimistic about having several long-term supply options. We are also advancing towards completing the restoration of the first train of the chlor-alkali plant and enhanced brine purification capability. The recommissioning of our chlor-alkali plant will add resiliency to the entire Mountain Pass operation by enabling on-site production of key chemical reagents. Pre-commissioning will begin early next year. The plant has 2 additional trains with the first one likely to be ready for service by mid-2026. We then have the flexibility to achieve our full capability in phases over a multiyear period at a pace we determine. At Independence, we continue to make meaningful progress in expanding our metal production capabilities. We are actively exploring multiple strategies to optimize costs and scale metal production to support future growth, including our 10X expansion. In August, we began an accelerated trajectory of alloy flake casts at Independence. Meanwhile, installation and pre-commissioning of powder production, pressing, sintering, passivation, machining and grain boundary diffusion, GBD, are all advancing well. In our new product introduction area, we continue to refine magnet chemistries and production processes to produce higher and higher quality magnets in an expanding range of magnet grades. Engagement with GM for commercial scale production qualification is underway, and we are encouraged by the continued collaboration between our respective teams. We remain on track to meet our goal of producing finished magnets by year-end 2025. This will kick off an accelerated qualification process with GM with magnet revenue expected to begin in the second half of 2026. In addition to supporting GM, our teams at Mountain Pass and Independence have initiated engineering and procurement to support the Apple recycling partnership and magnet production expansion. This work includes magnet chemistry development at Independence and pilot testing, design development and circuit engineering to support the addition of recycling capabilities at Mountain Pass. Overall, it was a very busy quarter, and we expect the pace of activity to continue accelerating. Through it all, our team has remained focused, executing safely, efficiently and with a strong sense of mission and urgency. I cannot say enough about the quality of the team and capabilities we have built and are building and the opportunities that lie ahead. With that, I will turn it back to Jim. James Litinsky: Thank you, Michael. Moving on to Slide 11. You can see the unmatched array of capabilities we have built entirely within MP. This is what true vertical integration looks like, something no other company in the world has achieved in rare earths and magnetics. This quarter was another solid one for MP, and that same execution discipline is now driving progress across our GM, Apple and DoW partnerships, each deepening our integration, broadening our reach and advancing our trajectory for long-term growth. Since we last spoke, we have witnessed a frenzy of attention and volatility around rare earths in recognition of the necessity that we, like most nations, must move at a warp speed to derisk from reliance on China for the supply chain. The President Trump-Xi Jinping summit in Korea has resulted in a 1-year postponement of China's October 9 rare earth export controls. But the reality is that this pause has only underscored the inextricable link between the world's most advanced semiconductors that America produces in the rare earth supply chain that China dominates, 2 sides of the same coin at the forefront of the strategic contest between our nations that will shape the global economy for decades to come. We are now locked in a new kind of cold war, a race of mutually assured economic destruction, fought not with weapons but with supply chains. Self-sufficiency, allied resilience and national industrial champions are no longer optional. They are the front lines of security. In the last cohort, America prevailed through military strength powered by economic might. In Cold War 2.0, the equation has reversed. Economic might itself expressed through control of critical materials, advanced technologies and the supply chains that sustain them has become the decisive measure of national power. Against that backdrop, it is important for investors and policymakers alike to consider with clear eyes the complexity and scale required for success in this supply chain. It is very often said that rare earths are not rare. That is true. They are literally everywhere. One could take a sizable piece of land, multiply by some amount of rare earth content percentage within, multiply that times a price basket, and then lo and behold, claim a rare earth orebody of some major value. Unfortunately, it is not that simple. What is underappreciated but far more important is that economic orebodies are extremely rare. The vast majority of projects being promoted today simply will not work at virtually any price. Even deposits labeled heavy rich still contain a vast majority of light rare earths and yttrium. And when grades sit in the hundreds of parts per million, the cost to concentrate, separate and refine becomes uneconomic. MP's overburden and tailings are quite literally more valuable by many multiples than many of those so-called projects. The structure of the existing industry tells the story. China accounts for roughly 90% of global NdPr production, yet even there, most of that output comes from just 2 hard rock mines and refineries now controlled by 2 entities. Think about that. A country with the world's largest reserves, a national industrial policy dedicated to dominance, generous subsidies and accommodative regulatory practices and still only 2 highly productive, low-cost integrated operations represent the vast majority of their industry. It is not a coincidence that outside of China, the only scaled light rare earth production also comes from 2 mines, Mountain Pass and Mount Weld and their respective refiners, MP Materials and Lynas. The lesson is clear. Great orebodies and scaled refining capability are the indispensable foundation of this industry. Everything else depends on them. In addition, certain types of mineralization such as allanite, eudialyte and even coal-based deposits have never successfully yielded refined rare earths at scale. The reason is straightforward. Their mineralogy is complex, and the concentrations are extremely low. Now perhaps there will be breakthrough someday, and based on our own experience, we would never underestimate the power of human ingenuity. But the reality is that even China does not attempt to produce rare earths from those types of deposits today. Michael has my favorite analogy on this. Controlling a eudialyte rare earth orebody today is like having billions in Bitcoin but without the private key. In theory, you can see it on the screen, but you can't unlock it. And that raises the question what is it really worth. Even with one of the very few economic rare earth feedstocks, building and operating a refinery is capital-intensive and painstaking work. Despite what some promoters might suggest, even the best producers take years to ramp and stabilize output, and economics. Lynas took roughly a decade. MP is on track to reach normalized production in about 3 years from the start of commissioning. That speed, scale and discipline speak to the strength of our people, our orebody, our access to decades of operational history and our platform. The heavy rare earth market has a somewhat different profile. Heavy elements are largely sourced from numerous small clay mines, but once again, separation is aggregated at a smaller number of scale refineries in China. We do see opportunities for deposits with a much higher proportion of heavy rare earths to support profitable upstream concentrate business. However, the shortened mine lives and complex mineralogy or environmental considerations of many of those deposits make it uneconomic to build full refining capability around them. That's what makes our scaled heavy rare earth separation circuit truly distinctive. It allows us to leverage our broader infrastructure to produce heavies on a low-cost basis feeding directly into our integrated Magnetics business. Moving downstream. Even with mined and refined feedstock in hand, the path to a finished magnet is anything but simple. To make a magnet, you must first convert NdPr oxide into metal, then alloy it with iron and boron through strip casting. Each step is technically demanding and essential to performance. Perfecting the precise recipe for automotive-grade EV magnets can take a year or more. And even with an all-out effort, like our partnership with the Department of War, building a scaled facility demands years of work and significant capital. Tonnage, while often cited as a proxy for scale, says little about capability. The true test lies in mastering the complexity of magnet grades, sizes and chemistries. In today's rush to localize supply chains, we have seen projects promoted that cannot yet perform grain boundary diffusion, the critical process that enables efficient use of heavy rare earths. Others proclaim full vertical integration while depending on phantom feedstocks or technologies that remain unproven at scale. A business plan that starts with magnets and works backward to mining may sound compelling on paper, but it defies both economic and supply chain reality for the foreseeable future. Scaled recycling is another underappreciated pillar. In magnet manufacturing, typically 20% to 50% of material ends up as swarf or kerf, magnet scrap. Capturing and reusing those elements, both light and heavy, is essential to a resilient and economic supply chain. All of this reinforces one conclusion. MP Materials with its vertically integrated assets, partnerships and execution track record is uniquely positioned to lead as the western rare earth supply chain takes shape. Finally, as the global economic realignment continues, I would encourage investors and policymakers to approach the sector's capital allocation with clear eyes. With that, let's open it up for questions. Operator? Operator: [Operator Instructions] Our first question will come from Bill Peterson with JPMorgan. William Peterson: Yes. I'm wondering, I guess, with your current stockpile, SEG+ stockpile, how long could that support your heavy production once fully ramped? And I guess you talked about engaging with other heavy feedstock suppliers. Are these foreign suppliers, domestic suppliers? I guess in the context of -- you're mentioning that there's not a lot of viable options out there in terms of orebodies. I wanted to get some more context on what type of feedstocks you may have or maybe if M&A may come into consideration. Ryan Corbett: Yes, Bill, it's Ryan. I'll start and let Michael take some of that. In terms of the SEG+ stockpile, we have several hundred tons on an REO basis of SEG stockpiled. Obviously, we are producing SEG every single day, and so from that perspective, we feel good about our inventory at this time to be available for us to commission that circuit and charge that circuit. And certainly, as we've discussed, we believe, with our own internal feedstock, we will be able to satisfy the demands of the Independence facility with that. I'll turn it over to Michael for the rest of the question. Michael Rosenthal: In terms of feedstocks, I think one thing we're very excited about is how our fully integrated site with both ore-based processing as well as light and heavy separation gives us -- and recycling gives us like very unique capability in terms of processing different types of feedstocks. So we are in touch with both domestic suppliers, suppliers of recycling material, recycled material, along with some foreign suppliers. Obviously, you see, as much as we do, all of the announcements from various players around the world where we have our opinion on some and are in discussions with many. But I guess we're confident that we will find several different options. William Peterson: Great. And then on the magnet business, I guess, how is the customer engagement going beyond Apple and GM? I guess what -- I guess there are people trying to test some of your samples. What's going on with the business for the further offtakes in Independence and then ultimately 10X? Ryan Corbett: Sure. It's Ryan again. I think, certainly, since Liberation Day the supply chain mindset across the space has changed very meaningfully. There's a tremendous amount of engagement across really every vertical that consumes magnets, automotive, aerospace and defense, consumer electronics, robotics, you name it. I think, fundamentally, we are focused on executing first for our foundational customers. And from a 10X perspective, we have the luxury of continuing to operate in the same fashion that we have for the last several years given the fact that we have 100% offtake secured for 10X. As we've talked about, our Apple agreement anchors the vast majority of the expansion that we've planned for Independence, and so it puts us in a position where we can continue to be very selective with our customers. But the engagement is quite significant and broadly very exciting. Operator: Your next question will come from Lawson Winder with Bank of America. Lawson Winder: Nice quarter and once again, a very interesting and fascinating update. May I ask about the -- a couple of things? So just on the heavy rare earths, there's the dysprosium and terbium, 200 kilotons annually. How is that roughly split? And then secondly, on the heavies, there's the samarium loan. As the name implies, there are other rare earths that the DOE would like to access. What's the time line to producing some of those other rare earth metals that are particularly of interest in the DoD. And has the DoD set any deadlines? Michael Rosenthal: This is Michael. Thanks for the question. In our orebody, the general ratio of dysprosium to terbium is about 3:1, so that would be kind of the approximate mix. Some of the other third-party feedstocks and recycled material may have slightly different mix, so ultimate production may differ from that to some extent. In terms of other heavy rare earth production, we have made a commitment to produce samarium in 2028, so samarium oxide, and we feel very comfortable with that type of time frame. We have made no sort of public commitments to produce any other heavy rare earth, although gadolinium would be a logical next one to produce probably around the same time frame. As for the others, I think we are eager and in discussions with various other parties domestically and in allied countries about offtake of our other materials for them to process into other rare earths. But to the extent there's strong demand or need, we're capable of doing further separations. Lawson Winder: Okay. That's very fascinating. And then can I ask about the Apple $200 million prepayment? I had not expected $40 million to be paid in Q3 so quickly. Can you help us understand a time line under which the remaining $160 million would be prepaid? Ryan Corbett: Sure. It's Ryan. We are thrilled to surprise you to the upside. We can't get into contract specifics, but certainly, the way this was designed was to continue to provide capital for this build-out as we hit certain operational milestones. We actually expect a next payment of relative scale coming up in Q4. And I think that, over time, as we execute on this plan, we've laid out initial magnet volumes targeting mid-'27 and recycling close behind, you'll continue to see those prepayments on that schedule. Operator: Your next question will come from Matt Summerville with D.A. Davidson. Matt, I can see I've unmuted, please go ahead. Unfortunately, we're not able to hear you, Matt. I'll just go to our next analyst, and we'll come back around to you. Our next question will come from David Deckelbaum with TD Cowen. David Deckelbaum: Jim, Ryan, and Michael, appreciate the time. Ryan, I think you probably astutely pointed out that the key risk here for MP with incentive prices now is execution. And if I heard right, it looks like -- it sounds like you're targeting the end of '26 for operating NdPr separation nameplate. Michael, I guess you alluded to some things around just NdPr separation, I guess, kinks that you're ironing out now. So I guess is it fair to say as the contract becomes live now with the Department of War at $110 a kilo, should we think about you guys ramping as quickly as possible in the '26 calendar year? Or can you provide any color around what we should expect in any ensuing quarters from incremental throughput tonnage? Ryan Corbett: David, I'll start. It's Ryan. I think the important thing to keep in mind from an economic perspective here is we've talked about our concentrate stockpile, and frankly, for a variety of reasons and now economic reasons, that actually has a lot of value to us. And so certainly, we are focused on ramping as quickly and as smartly as possible to serve the market and to prove out this capability, but it's important to remember that under the PPA, we still are paid for the NdPr content within the concentrate that we stockpile. Of course, we don't get paid twice. We get paid when we put it into the stockpile, and then once we refine that material, we'll sell it at market prices. But it's a very important value driver for us, and we can continue to look at our view of the market and nominate volumes into that stockpile as we produce them and as we see fit. So that gives us a lot of operational and economic flexibility in 2026 and beyond. David Deckelbaum: Appreciate that. And then just as a follow-up, I think, Jim, you talked about really the availability of swarfs, end-of-life magnetic products. You guys talked about third-party feed, and I know others have asked you about those questions. But I guess as you think about really addressing the supply chain going forward for your own needs and really internally in this country and for allied nations, where do you prioritize looking at your own capabilities around recycling with obviously the start-up of the Apple facility over the next few years? How do you think about focusing on swarfs and the ability to source that versus looking at third-party feed from orebodies? James Litinsky: I mean I think it's an all-of-the-above approach. Obviously, over the next couple of years, we're maniacally -- we have a number of projects, right? We are scaling Independence. We are getting 10X underway and quickly and then doing the multiple pieces of recycling in Mountain Pass. As you know, David, this management team is pretty opportunistic, so we will try to take advantage of opportunities out there. I would say that, again, over the next couple of years, it's just executing all of this, and I'd remind you that we have the feedstock to serve our entire 10,000 tons of magnet capacity currently with -- certainly with the Apple piece being part of the deal that they're helping provide feedstock. So we have the, I guess, to use Ryan's words from earlier, the luxury of being methodical about how we think about incremental feedstocks. Ryan Corbett: Yes. One important point also, David, to think about -- this is Ryan -- is as we look at sourcing third-party feedstocks, so we look at sourcing magnet material and end-of-life material, I think despite all the focus on price floors, at the end of the day, the economics of this business depend on your cost structure. And so as you see some of these other things announced out there, what you should keep in mind is we will be one of the lowest cost producers of these products, whether refined or from mined material, and that also gives us the opportunity to be thoughtful in the acquisition of third-party feedstock. And so with the platform that we've built, we think we are in pole position to be able to acquire most thoughtfully the best potential feedstocks for the business given the fact that our cost structure will be best in class. Operator: For our next question, we'll return to Matt Summerville with D.A. Davidson. Matt, I can see that you've unmuted. We're not able to hear you. You may need to select a different microphone input next to your audio button. Okay. We'll move to our next -- for our next question, we'll hear from Carlos De Alba with Morgan Stanley. Carlos de Alba: Can you hear me? Ryan Corbett: Yes. Carlos de Alba: Great. Congrats on the strong performance this quarter. Just maybe on the prior response, Jim, can you clarify -- maybe I misunderstood. But are you going to be able to supply recycled material or have capacity in the recycle line above and beyond the 2,000 tons that you have under contract with Apple? James Litinsky: Are you referring to -- actually, Michael, why don't you take that and comment? Michael Rosenthal: Carlos, if I understand the question, we are building a dedicated line for Apple to manage material and feedback that they are responsible for providing to us. We also will have the capability to process our own swarf, and we'll build that modularly to process as that market grows, which we're very optimistic about additional feedstocks as well over time. Carlos de Alba: All right. Good. Yes. Okay. And it will be a separated line from the one that you were working watching or building on for Apple, right? Michael Rosenthal: So the Apple line will be largely separate from our existing line, but the other feedstocks we will -- we are evaluating and will leverage our existing infrastructure and capability in light and heavy rare earth separation in the most thoughtful way possible depending on the nature of the feedstock and customer requirements. Carlos de Alba: All right. Okay. And then, Michael, maybe you can help us understand what is the thoughts about the ramp-up of the Dy and Tb output post-commissioning? Michael Rosenthal: Our focus initially is obviously on meeting the needs of our customers and Independence for GM. And because we have this stockpile, we'll be able to produce amounts greater than our initial ore-based material we'd supply on a yearly basis. And then we'll look at what third-party feedstocks we have and what preprocessing is required. But the volumes are obviously relatively modest, so I think the ability to ramp will depend on how quickly we feel comfortable pushing those volumes. Obviously, we have very high quality requirements and need to make sure we perform. Operator: Our next question will come from Ben Kallo with Baird. Ben Kallo: I was wondering how you think about the price floors for heavies as you advise the administration and if you've given any weight to that. I have a follow-up too. James Litinsky: Ben, you mean what do we think of them intellectually or -- I would just -- I guess when it comes to heavies, I would -- the one thing -- I think this kind of comes at your question another way. But if we reference back to kind of the overall point that I was trying to make in the prepared remarks, is that when you look at the supply chain in our space and the various areas of it, the heavies area is one where, typically, you have deposits where it makes sense that there are economics where that could be a concentrate or a -- make a concentrate or make a feedstock that can go to a refinery like ours, like we've built. But typically, at least we haven't seen those sites, the various ones around the world of varying degrees of value where it would make sense economically to build refining capability around that, and so we are really well positioned to accept those feedstocks. And so that's obviously the work that we are doing with DoW to make sure that we have the material for our business through 10X. And so obviously, there are a variety of ways that you can incentivize that upstream production and get economics to those parties to encourage that production. But I do think it is important to think of those as sort of part of a broader supply chain, and there are not necessarily independent, stand-alone economics for sites like that to be a full vertically integrated participant. Ben Kallo: So just a follow-on because you guys have, I guess, everyone's ear, so what is the advice to get the heavies to the admin? James Litinsky: Well, I'd like to -- obviously, the detailed advice that we would give to the government, I think we would try to keep that in confidence, and -- but I think I can speak in general terms, which is what I was hinting at, Ben, in my remarks is that when you -- if you look at the structure of this industry and just look at how China has formed, now obviously, a lot of that is state-driven, but a lot of it is sort of structural, is you should think of this industry as closer to a global structural oligopoly rather than just, oh, if we throw a bunch of money at dozens of sites and businesses, we can form a supply chain. Because the reality is that to have the geology -- we talk through the geology and the differences between lights and heavies and then the complexity of the magnet business. And when you add all of that up, I mean, the best analogies are if you were going into the aircraft production industry or the smartphone industry, would -- think of our great companies like Apple and Boeing right? You wouldn't necessarily say -- if, let's say, it was reversed and you were trying to create those and the Chinese have the competitor, you wouldn't necessarily say let's spread money around to 30 different things. So I think the way to think about it, though, is we view MP as America's national champion. We have structural advantage because we're fully vertically integrated. We're years and billions ahead of others. And what I would say is if you -- there's various projects out there, both public and private. If you took anything that I'm aware of -- now there may be a bunch of stuff I'm not aware of, but anything I'm aware of, if you gave whatever that was, the deal that MP had, I don't see anywhere where there is any equity value for any of them, public or private. Now that -- so I think that's a very interesting thing. Now that doesn't mean that the government shouldn't catalyze a lot because I think the government is doing an outstanding job catalyzing private capital to come in. And so to the extent that the government can make investments, whether it's loans or other forms of support and grants, if X dollars of capital can stimulate 2x or 3x in private capital, they should be doing that as much as possible. So I think we've seen some really great action out of the administration, and so my advice would be to keep going. Keep doing what you're doing. I think they're really thinking about it a thoughtful way. I would just also say that the message of today is for private investors because, obviously, we don't want people to get burned. We want people to think that this is a good space, is to just be very clear eyed about what the actual structural economics are in -- amidst all the excitement. Operator: Your next question will come from Max Yerrill with BMO Capital Markets. Max Yerrill: My question is around the ramp-up of the heavy rare earth separation facility. And I was just wondering if the ramp-up time there affects your ability to deliver certain higher-grade magnets to General Motors. And then I guess the second part is when we look at the universe of potential feedstocks for that heavy rare earth separation, are there types of concentrates that you cannot process? And which ones are the most ideal to the circuit that you envision? Ryan Corbett: Yes. Sure, Max. It's Ryan. I'll start. In terms of how we're positioned from a supply chain and inventory perspective to support our ramp-up of magnetics, I think we've discussed over the last several quarters that we had anticipated some of the restrictions that had been put in place and have built a stockpile of products to allow us to commission and ramp Independence facility. We've timed the construction and commissioning of the heavy rare earth separation circuit to come online to support further growth as we work that inventory position down. I'll let Michael take the second part. Michael Rosenthal: Just to be clear, the question was on whether types of feedstocks for the heavy rare earth circuit are preferred? Max Yerrill: Exactly. Michael Rosenthal: Certainly, to the extent we got an SEG+, that would be easier than processing a full mixed rare earth carbonate with lights and heavies. But our circuit can handle because we have all of the capabilities of either one of those. So we will look at the economics and the distribution and compare those to other alternatives. Operator: Our final question will come from Laurence Alexander with Jefferies. Laurence Alexander: I appreciate kind of the analogies you've tossed out, and I guess what I want to tease out as you talk about your opportunistic approach to creating value, is the cold war would have gone very differently if the nuclear missiles had a 10-year expiry date? And so when you think about the incentives that a 10-year support program from the DoD -- DoW gives you and also the way the capital markets might perceive that as setting you up for some severe kind of cyclical risk if there's a recession or otherwise, a glut at the end of the 10-year period and what that does to your cost of capital and how you think about your balance sheet, is the strategy here to double down on the Fortress balance sheet, vertical integration and just ride through that transition? Or do you feel either the government needs to make a decision soon about extending the support or you need to make a decision arguably sooner rather than later about adding a second plank to sort of smooth out volatility once you make the transition back into a fully unsupported entity? James Litinsky: So Laurence, I think it's actually the opposite. There's probably -- I don't know how many listeners we have today because there's another exciting call happening where there's a $1 trillion pay plan being proved because we're going to have humanoid robots whether it's Musk or Jensen talking about that. I mean if we look out, and I don't know if it's 5, 10 years, whatever it is, but there's no question that physical AI is going to just create explosive growth in rare earth magnetics. The issue is that, in the very short term, we can't be leveraged by the Chinese from a supply chain standpoint, we've got to have an industry that is here and thriving. And actually, if you take my remarks, I want to be clear that when I talk about the structural realities, it's not because that is a forever condition. I do think that there's room for a lot of other players and a lot of other supply, but I think that the point is that to get to that 5 or 10 years, you're going to need materially higher prices. So the sort of the MP deal, if you will, I just don't think that's enough. And so I think that what you're really going to see is that, in the very short term, the administration has made sure that we have a successful national champion in MP. We've got to execute, but we are going to sort of open the -- pave the path, if you will, to then figure out how there's much broader supply coming online. So obviously, 10 years is a long enough time to, not in the short term, think about kind of what that role looks like. We'll think about the next couple of years of getting things online. But I think if we don't have some development in physical AI by then, these -- the markets -- I would be least worried about MP relative to pretty much many other places in the market. So I don't lose any sleep over what demand is going to look like in 10 years and what NdPr prices and magnetics prices are going to be. I think it's going to be amazing for us. My bigger guess is that we'll have grown our business and move downstream. Just as if you think about us 5 years ago versus where we are today, I think on that roll date, it will not be as material portion of our business remotely compared to what it is today. Operator: That concludes the question-and-answer portion of today's call. I'll now hand the back -- call back for closing remarks. James Litinsky: All right. Well, thank you, everyone. We think it was a great quarter of execution. We are going to get back to work, and I look forward to talking to you all next quarter.
Operator: Good day, and welcome to the Veritone Inc. 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 Cate Goldsmith, Investor Relations. Please go ahead. Cate Goldsmith: Thank you, and good afternoon. After the market closed today, Veritone issued a press release announcing results for the third quarter 2025 ended September 30, 2025. The press release and other supplemental information are available on the Investor Relations section of Veritone's website. Joining us for today's call are Veritone's President and Chief Executive Officer, Ryan Steelberg; and Chief Financial Officer, Mike Zemetra, who will provide prepared remarks and then open the call up for a live question-and-answer session. Please note that certain information discussed on the call today, including certain answers to your questions, will include forward-looking statements. This includes, without limitation, statements about our business strategy and future financial and operating performance. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause the actual results to differ materially from those stated. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K. These forward-looking statements are based on assumptions as of today, November 6, 2025, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures we will be discussing include non-GAAP measures. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. Finally, I would like to remind everyone that the call today is being recorded and will be made available for replay via a link on the Investor Relations section of Veritone's website at www.veritone.com. Now I would like to turn the call over to our President and Chief Executive Officer, Ryan Steelberg. Ryan Steelberg: Thank you, Cate, and thank you, everyone, for joining us today. As the iconic line from one of my favorite childhood shows, the A-team goes, I love it when a plan comes together, simple yet profound and never more fitting than it is for Veritone today. I look forward to sharing the details of our exceptional quarter and the strategic momentum now propelling Veritone forward. But before we dive in, I want to take a moment to highlight the substantial progress we've made over the past 24 months, progress that has fundamentally strengthened our company and position us for sustained growth and success. In early 2023, we set a bold and deliberate course to realign Veritone with its aiWARE first mission, fortify our financial position and ignite durable strategic growth. We've executed with precision and purpose every step of the way, transforming vision into measurable achievement. Today, I'm proud to declare success across these core initiatives. Veritone has not only regained its footing, but stands stronger, more focused and more strategically positioned than ever before. First, let's start with the balance sheet, where we have completely flipped the script. A few years ago, at their peak, we carried nearly $80 million in high-cost term debt and roughly $200 million in convertible debt. Today, I'm proud to announce that we've completed an agreement to retire the entirety of our term debt and repurchase approximately 50% of our outstanding convertible debt while maintaining material net cash on the balance sheet to fully fund operations through 2026 and achieve our profitability goal in the later half of next year. As a result, our annual debt service burden has now dropped from over $14 million a year to approximately $800,000 a year, a transformative shift that fundamentally strengthens our financial foundation and future trajectory. Our balance sheet, historically an anchor relating with debt now provides renewed flexibility and stability, enabling us to fully capitalize on this hypergrowth market opportunity. Second, after years of disciplined financial execution and strategic reorganization, efforts that have generated tens of millions of dollars in savings, our operating model today is now tightly aligned with both our scale and our strategic focus on our high-growth AI Software Products & Services. With this foundation in place, our confidence in achieving operating profitability in late 2026 has never been stronger. Third, we have refocused Veritone squarely on our AI routes, our unmatched expertise and unstructured data and our market-leading intelligent AI applications. Today, Veritone stands on a trajectory of strong, strategic and profitable growth, powered by our proprietary AI operating system, aiWARE, which fuels the global data economy by generating trillions of tokens every quarter. As the AI economy accelerates, the data economy is expanding right alongside it, and Veritone's strategic positioning and market timing could not be more perfect. Veritone has emerged as a leading semantic token factory for video and audio, a service we call the Veritone Data Refinery or VDR, built entirely on our own proprietary aiWARE platform. Our tokenization engine not only powers our own AI workflows and customer applications, but now serves as the foundation for a powerful new monetization framework. Our VDR product offering is leading the way as the first of several major monetization initiatives, which we plan to roll out beginning in the first quarter of next year. For more than a decade, Veritone has been tokenizing video and audio, the fastest-growing segment of unstructured data at massive scale. More importantly, we're doing so in a transactional utility-driven format that delivers immediate value and measurable ROI for our customers and ultimately for our investors through our expanding suite of innovative AI products, services and applications. Our tokenization and monetization strategy is designed to exist and operate both on chain in the context of blockchain and independently as it has done profitably and efficiently for more than a decade. The data as a currency era has arrived, and Veritone is uniquely positioned to capitalize, executing from a position of strength, expertise and leadership in a rapidly expanding multibillion-dollar market. In fact, according to Mordor Intelligence, the global tokenized asset market is projected to reach $13.5 trillion by 2030. It is going to be a very exciting next few years for Veritone and our customers. Now turning to our strong quarterly results. Veritone delivered revenue of over $29 million. This performance underscores the accelerating demand for our market-leading aiWARE solutions, data products and intelligent applications, representing a 32% year-over-year increase in revenue for the overall business. Looking specifically at Software Products & Services, which includes VDR, revenue grew by an impressive 55% during the quarter. Excluding Veritone Hire, our Software Products & Services revenue surged by more than 200%. As global investment in AI infrastructure intensifies, demand for high-quality training data and for our AI applications continues to rise in parallel. This powerful combination is driving sustained high-margin expansion across our Software Products & Services business. And as Mike will outline shortly, our bottom line performance this quarter was equally strong, delivering more than a 50% year-over-year improvement. Now turning to the partnerships, contract wins and products that underpinned our strong results. This quarter, our Veritone Data Refinery, VDR business, continued to deliver exceptional performance. VDR transforms raw unstructured audio, video images and text in high-quality tokenized data sets that power and fine-tune the world's most advanced AI models. We have established ourselves as a premier data and model training partner. And during the quarter, we secured several significant new VDR customers, including contracts with multiple major hyperscalers, further solidifying VDR's position as a critical enabler in the unstructured AI training data ecosystem. VDR's accelerating momentum underscores not only the surging buy-side demand for clean model-ready training data, but also the expanding monetization potential of premium video and audio assets themselves. Our qualified VDR pipeline and bookings now exceed $40 million, reflecting 100% growth quarter-over-quarter. Importantly, that figure represents only current bookings and near-term opportunities. Our total VDR pipeline now spans multiple sectors, regions and time horizons, positioning Veritone for sustained growth as AI developers increasingly move beyond open web data in favor of proprietary multimodality data sets, precisely the domain VDR was built to serve. Looking forward, we are confident that by the end of 2025, Veritone will hold active contracts or projects with every major hyperscaler in the market. Our VDR solutions are indeed growing quickly and provide great strategic leverage for future growth, but we are equally excited about our AI applications business, again, built and deployed on the same aiWARE platform. For Veritone and our customers, our AI applications are the delivery vehicles for data-centric, high-value use cases, driving efficiency gains and ROI. In the quarter, we achieved significant progress across our commercial enterprise applications business. We signed 27 commercial agreements, including partnerships with ESPN, the NCAA and Newsmax. And just last week, we announced an expansion of our long-standing relationship with CBS, now encompassing many of CBS Media Ventures flagship programs, including Entertainment Tonight and Inside Edition, which are now available for licensing through Veritone. These partnerships exemplify how Veritone empowers the world's leading media organizations to unlock and monetize their vast content and data archives. Furthermore, through VDR, we are transforming these assets into clean, searchable, model-ready data sets, creating high-value training material for AI models and in turn, generating meaningful recurring revenue streams for both Veritone and our partners. As content libraries expand and data volumes surge, Veritone is uniquely positioned to unlock maximum value for commercial enterprises and IP owners. Our technology enables partners to fully monetize their content archives, transforming dormant assets into active revenue-generating resources while simultaneously producing high-quality model-ready data that fuels the next generation of AI innovation. Turning to the Public Sector. In Q3, we closed 82 contracts from new and existing customers across federal, state and local agencies. We also added 30 new agencies during the quarter, including iDEMS win at a top 5 law enforcement agency and an annual iDEMS renewal with a Department of War agency deployed in their private cloud. Despite the federal government shutdown, we continue to be actively engaged with our customers and prospects in the Department of War and DHS as we expand the footprint of Veritone solutions. Our Public Sector pipeline now approaches $218 million in qualified opportunities, up from $110 million earlier this year, a testament to both our accelerating demand for AI-driven solutions and Veritone's reputation as a trusted technology partner to law enforcement, defense and Fed Civ agencies. We also saw encouraging momentum internationally, including closing a partner-led transaction for a national police agency in the EU and advancing multiple opportunities in the U.K. for Veritone Redact, Veritone iDEMS and a new workflow solution on aiWARE. Our international pipeline now exceeds $28 million and continues to grow rapidly, reflecting rising product market fit and strong demand among agencies engaged in government initiatives in key global markets, all supported by our secure and GDPR-compliant infrastructure. Our awardable status on the Department of Wars P1 marketplace positions Veritone to capitalize on the expanding wave of government AI investment. This designation enables us to engage directly with DoD and civilian agencies, shorten procurement cycles and deliver mission-critical AI solutions faster, helping government partners tackle their most pressing operational and analytical challenges. Subsequent to the end of the quarter, we introduced a suite of new advanced capabilities within Veritone Redact, our aiWARE powered SaaS application that automates the redaction of sensitive information in audio, video and text. The latest features include AI-powered voice masking, inverse blur and multi-language transcription in 64 languages, all designed to enhance privacy, compliance and efficiency. These advancements are already driving expansion within existing customers and creating new opportunities for agency and enterprise partnerships. Before turning things over to Mike, I want to reflect again on how far we've come and where we're headed. I could not be more excited about Veritone's future, and I remain deeply grateful to our investors, partners and employees who have supported us through this remarkable transformation. I have never been more confident in the future of Veritone, our business, our people and the market opportunity before us. We are leading the tokenization and monetization of valuable unstructured data and have firmly established ourselves as a key enterprise leader in both the AI and data economies. With a strengthened balance sheet supported by high-quality equity raises completed in the past few months and the material debt reductions announced today, Veritone is entering a new phase of execution, one defined by rapid profitable growth. With our exceptional talent, dynamic AI platform, market-leading applications and a robust expanding pipeline, Veritone's future has never been brighter. Over to you, Mike. Michael Zemetra: Thank you, Ryan. We started the second half of 2025 with one of our strongest quarters to date with Q3 revenue surpassing our recent guidance, led by our Software Products & Services growth of over 55% year-over-year and 48% year-over-year improvements in our bottom line of non-GAAP net loss. In addition to this momentum in our results, we secured over $100 million in equity capital in September and October 2025, substantially improving our longer-term liquidity position. As I will explain in more detail, I am thrilled to announce today that we will be paying off 100% of our term loan and paying down 50% of our convertible debt, further improving our liquidity position. The results we achieved this quarter are the culmination of years of hard work and strategy coming to fruition. During my prepared remarks, I will discuss Q3 year-over-year performance and KPIs, which exclude the results of our media agency, which are presented as discontinued operations in the corresponding historical financial periods, balance sheet and liquidity position, including the recent capital raises and paydown of our debt and Q4 and fiscal 2025 guidance. Starting with Q3 2025 performance. Q3 revenue was $29.1 million, up $7.1 million or 32% from Q3 2024, driven by an $8.1 million increase from our Software Products & Services, offset by a $1 million decline in our Managed Services. The $8.1 million revenue growth in Software Products & Services was driven by Commercial Enterprise, which improved $7.8 million year-over-year and Public Sector, which grew over 25% year-over-year. The growth in Commercial Enterprise was led by Veritone Data Refinery or VDR. VDR, which launched in Q4 2024, is one area where we continue to see very strong growth and today has a near-term sales pipeline and bookings of over $40 million, up over 100% from our guidance in Q2 2025. Overall, Veritone Hire remained relatively flat year-over-year, driven largely by the hiring softness in the macro economy. Excluding Veritone Hire, our Software Products & Services grew more than 200% year-over-year. The growth in the Public Sector was driven by the rollout of larger deals executed in the first half of 2025, including the Department of Defense and larger public safety agencies. We expect these larger public sector deals, coupled with our expanding public sector pipeline to generate substantial growth beyond 2025, which I will explain in more detail later. The $1 million decrease in Q3 Managed Services revenue was principally due to a decline in representation services by a decrease in our VeriAds Services, offset by a slight improvement in content licensing. As we previously discussed, we expect this negative trend in representation services to continue through 2025 or until the macro economy shows demonstrated improvements over 2024. Turning to key performance metrics across our Software Products & Services in Q3 2025. ARR of $68.8 million, up 9% from Q2 2024 of $63.4 million and 12% sequentially from Q2 2025 from increased consumption-based revenue, largely driven by VDR and stable recurring SaaS-based revenue. Overall, ARR from consumption-based customers increased 26% year-over-year and 74% sequentially from Q2 2025. Recurring subscription-based SaaS customers were up slightly by 3% year-over-year. As of Q3 2025, 73% of our ARR was from subscription versus consumption-based customers as compared to 76% at Q3 2024. Total new bookings of $21.5 million, up $5 million or 30% year-over-year, primarily due to larger VDR bookings across our software customer base. Gross revenue retention continued to be above the 90th percentile. Total Software Products & Services customers of 3,021, which was down 9% year-over-year, predominantly from our Commercial Enterprise sector, which includes lower consumption-based customers across Veritone Hire and the continuing impact of sunsetting legacy Career Builder customers post the June 2023 acquisition of Broadbean and smaller customers as we focus on larger ARR opportunities, offset by an increase across public sector, largely from the growth in public safety customers. Q3 GAAP gross profit was $18.7 million compared to $14.7 million in Q3 2024, an improvement of $4 million, largely driven by growth in Software Products & Services, including VDR, with GAAP gross margins of 63.3% as compared to 66.6% in Q3 2024. Excluding noncash depreciation and amortization expense, Q3 2025 non-GAAP gross margin was 70.6% as compared to 71.2% in Q3 2024, a decline of 60 basis points. Note that included in Q3 2025 is certain onetime software revenue that has very high gross margins, while VDR gross margins remain close to approximately 40%. As I will discuss later, we do not expect the same level of onetime software revenue to recur in Q4 2025, and as a result, are forecasting Q4 2025 non-GAAP gross margins to be closer to 60%. Q3 operating loss of $15.8 million improved by $6.7 million or 29% year-over-year, primarily driven by the increase in gross profit, offset by lower operating expenses. Net loss from continuing operations was $26.9 million, an increase of $4.4 million or 20% compared to Q3 2024. The year-over-year increase was principally driven by an $8 million noncash charge in the estimated fair value of the earn-out expected from the divestiture of Veritone One recorded in Q3 2025 and a $2.2 million change in our Q3 tax provision, offset by the $6.7 million improvement in operating loss. Non-GAAP net loss from continuing operations was $5.8 million as compared to $11.1 million in Q3 2024, a $5.3 million or 48% improvement. The improvement was principally due to the year-over-year growth in non-GAAP gross profit, coupled with lower operating losses driven by increased discipline on cost management. As I will explain further, these reductions will provide us with a more efficient cost structure as we manage towards our planned growth throughout the remainder of 2025 and targeted profitability in the latter part of 2026 and beyond. Turning to our balance sheet. As of September 30, 2025, we held cash and restricted cash of $36.5 million as compared to $16.9 million at December 31, 2024. The net change in cash reflects net cash outflows from operations of $41.2 million, principally driven by our non-GAAP net loss of $25.6 million, deferred purchase consideration of $1.2 million and interest paid on debt of approximately $5.8 million, coupled with the timing of working capital in the quarter, driven largely by the increase in AR due to the growth in revenue in the period, offset by net cash inflows from investing in financing activities of $64.9 million, driven by net cash inflows of $70.9 million from equity offerings through Q3 2025, partially offset by $5.8 million in debt principal payments and $3.6 million in capital expenditures. Turning to liquidity today. In September 2025, we completed an underwritten equity offering, selling 9.5 million shares of common stock priced at $2.63 per share and an overallotment of 1.4 million shares granted to the underwriter, which was exercised in full for total gross proceeds of $28.8 million. In October 2025, we completed a registered direct offering, selling 12.9 million shares of common stock priced at $5.83 per share for total gross proceeds of $75 million. Immediately following the October offering, we held cash and cash equivalents in excess of $100 million. At September 30, 2025, our consolidated debt is down from a peak of $201 million in December 2021 to approximately $126.7 million. Subsequent to September 30, we paid down $3.6 million of our term debt through deferred purchase consideration received in October 2025, bringing our debt to $123.1 million, comprised of $31.8 million of term debt and $91.3 million of convertible debt. Today, we announced that we have agreed in principle with certain debt holders to pay off 100% of our senior secured term debt and buy back 50% of our convertible notes for a total of approximately $77.5 million of consolidated debt principal in exchange for approximately $77.5 million of cash and 625,000 shares of our common stock valued at today's closing price. Immediately following this debt payoff, our unencumbered consolidated cash is approximately $34 million, which is sufficient to fund our operations over the next 12 months at a minimum. Post this paydown, our remaining debt will be approximately $45 million, comprised solely of our 1.75% convertible notes due November 2026. By completing this transaction, we free up an estimated $13 million of annualized debt carry costs and substantially improve our liquidity position and future cash flow outlook. I want to underscore what an impressive and important step reducing our debt is. The improved flexibility and stability we now have as a result of our strengthened balance sheet will allow us to focus on reaching our growth potential to meet the hypergrowth market opportunity we face. That said, we will continue to be opportunistic with continued focus on further improving our current liquidity position and balance sheet. At September 30, 2025, we had 70.9 million shares issued in outstanding and 2.5 million warrants outstanding to our debt holders. Now turning to updated fiscal Q4 2025 and full year 2025 guidance. Our Software Products & Services revenue pipeline and long-term outlook continue to be at all-time highs. More specifically, we continue to see strong demand across the approximate $10 billion global digital evidence management market. Our public sector and VDR pipelines continue to grow. Collectively, our backlog and sales pipeline across our core AR platform is in excess of $200 million today. And as Veritone remains uniquely positioned to capture even more opportunity in the data as a currency market, we expect that pipeline and our potential to monetize our trove of tokenized audio and video to further increase. More specifically, in Q4 2025, revenue is expected to be between $33.4 million and $39.4 million as compared to $22.4 million in Q4 2024, a 63% increase at the midpoint and 25% sequentially from Q3 2025. In Q4, we expect our Software Products & Services to increase more than 75% year-over-year, led by the growth in Public Sector and Commercial Enterprise. Specifically, we expect our Public Sector revenue to grow close to 50% year-over-year and our Commercial Enterprise revenue led by VDR to grow more than 75%. Our Veritone Hire Products & Services are included in this growth, and we expect Veritone Hire to be slightly down year-over-year given the current macroeconomic environment. Consistent with Q3 2025, our Managed Services is expected to be down year-over-year, principally due to the representation side of our business, which is experiencing some slowness as a result of the more challenging macroeconomic environment. We expect Q4 non-GAAP gross margins to be approximately 61% to 60%, driven by the forecasted higher mix of VDR revenue in the period. Q4 non-GAAP net loss is projected to be between $1.5 million to $5 million as compared to $9.7 million in Q4 2024, representing a 66% improvement at the midpoint and a 44% improvement sequentially from Q3 2025. Turning to fiscal 2025 outlook. We are updating our prior guidance for fiscal 2025, which we are expecting revenue to be between $109 million to $115 million, which at the midpoint represents a 22% increase year-over-year and non-GAAP net loss to be between $31.6 million to $26 million, representing a 29% improvement year-over-year at the midpoint. The change is reflected of the timing shifts in revenue, coupled with the compression in gross margins on VDR in 2025, which we expect to improve upon in fiscal 2026. Before closing the call, I'd like to remind everyone listening that Veritone will be attending Needham's Virtual 6th Annual Tech Week, November 20 through the 24 and UBS' Global Technology and AI Conference, December 1 through the 4 in Scottsdale, Arizona. That concludes my prepared remarks. Operator, we would now like to open up the call for questions. Operator: [Operator Instructions] And your first question comes from Joshua Reilly with Needham. Joshua Reilly: All right. Nice job on the quarter here. Maybe just starting off on the Q4 revenue guidance. There's a $6 million range, obviously, there between the high and the low end. Maybe we could just review what are the puts and takes that would get your expectations in the business to the high end of the revenue guidance for the quarter? And then maybe what would drive it to the lower end of the guidance for the quarter? Ryan Steelberg: Yes. I think it's just timing and velocity on some of the larger VDR deals. Again, as I sit here today, obviously, I was very bullish in both the words that I chose and sort of my tone and disposition. So obviously, we're going to push to get to the highest. But again, relative to the size and magnitude of some of these VDR deals and some of the commercial deals and some of the, I would say, to a lesser third degree, the timing on some of the public sector Fed deals, that's really going to be sort of the inputs to the ranges. But as I sit here today, very, very optimistic, very excited and most importantly, we have, I'll say, a very mature pipeline to substantiate that range and give us the opportunity to hit the higher end of the range. Joshua Reilly: Got it. And then on the 100% quarter-over-quarter increase in the VDR pipeline, can you just help us understand what is -- what are you doing from a go-to-market perspective to kind of drive that pipeline growth? And then as we look forward into 2026, are you expanding the go-to-market efforts there to further expand the VDR pipeline? Or do you kind of have the people in place to manage the upside opportunity there? Maybe kind of help us understand the dynamics there? Ryan Steelberg: So this is a really exciting one. And I want to be clear. I mean, a lot of our growth, obviously, this conversation today was dominated by VDR. But there's the other side of VDR, which is the supply side. And that's the side that, frankly, before we even introduced the concept of we've been servicing and selling AI-based software to a lot of media and entertainment and content groups for years. So again, where we see the great opportunity and what makes us very, very unique as compared to really anybody who's in the AI training data ecosystem is that we -- to be clear, we represent and generate revenue from both sides, right? Again, both from the buy side, those are the hyperscalers and the model developers we're selling to, but also the representation side, those are the media and entertainment and other data suppliers that we represent, but also have been selling software to. So again, to your question specifically, as I stated in my prepared remarks, we do believe that we will be engaged in doing the active projects and business with nearly all, if not 100% of the major buyers today in the space, but the space is growing quickly. And so what we're very focused on is to make sure that not only are we continuing to take care of the larger transactions with the bigger AI model development shops, but also we do believe because of the cost basis for compute, storage, et cetera, continues to come down, we do believe that there's going to be more entities, different companies to sell to, to sell these training data sets to. So we do believe that we want to continue to strategically expand our sales force. We are building a pretty reputable brand as it relates in the AI training data market. But to be clear, we want to make sure we don't simply focus on the buy side. We continue to want -- and what we have seen, we really didn't touch upon it that much in my prepared remarks, but we are also seeing an increased velocity of the data providers coming to Veritone. We signed a multitude of different -- we obviously mentioned a couple of the bigger brands on my call, but we saw a multitude of different customers now coming to us not only for the VDR solutions, but for our AI software side of the equation. So again, I want to -- just to summarize that, we are unique in the sense that we sit and represent and sell to both sides of the equation, the sell side and the buy side. And yes, we will be investing strategically more into the go-to-market to increase velocity to make sure, again, that that's not a limiting function going into next year. Joshua Reilly: Got it. That's very helpful explanation there. And then maybe on the Q4 guidance for the public sector, I believe you said it was going to be up 50% year-over-year. How much of the -- what are you factoring in on the federal side with the government shutdown obviously still in place here, to kind of hit that number? And are you making any assumptions that some federal -- U.S. federal deals will close and kind of hit that number, which would require the government to reopen? Or just kind of how are you kind of calibrating those assumptions? Ryan Steelberg: I think we've taken that into the handicap for that guide. Obviously, as a percentage of the overall revenue base, it's not that large. And so meaning to sway us to have to take a more pessimistic view of hitting that guide. To be clear, we still are generating growth. We still are closing new businesses and revenue in the federal space. But have we seen potentially some delays in some of the revenues that would have contributed in this quarter? We have. Thankfully, the other sides of the business have grown, just sort of outperformed. And so that's, we're extremely bullish overall. But again, the short answer is, like everybody, we hope this government shutdown ends sooner than later. And just what -- if all these things start hitting on all cylinders. So again, overall, we're very excited. And I think that a lot of investors need to -- when they're thinking about some of our market peers in the market, we're not a one-trick pony in a certain vertical, right? We have the exact same powerful technology stack aiWARE that's being sold effectively into both Commercial and Public Sector. And I think investors should take note of that. So again, this is another great example of having a focused yet diversified business, it can be very, very attractive. Operator: And your next question comes from Glenn Mattson with Ladenburg Thalmann. Glenn Mattson: I just want -- I know VDR is a bigger story, of course, but I want to just drill down on that Public Sector stuff for a minute. What I'm curious is, is it that the federal shutdown is causing a bit of a slowdown? And in particular, is it related to that Air Force contract only because I want to understand if it's -- as I think about my forecast for next year, if there's like a snapback or is it a temporary thing or if it's maybe that something else going on? Just if you could elaborate. Ryan Steelberg: No, I think this is a short-term blip. Again, in terms of at least my perspective for your modeling. this was weeks, if not a couple of months delay. But again, it's not binary, to be very clear. So it will have a negligible overreaching effect on -- for your modeling for next year. And we say snapback, again, a lot of the projects are active. But again, there are people that we were working with, not the majority, but definitely individuals who were furloughed and put off, which I would say may have contributed to some of the slowdown. But again, I'm not -- so I would say, no, that should not impact, in my mind, what you are -- in terms of your modeling or our excitement for overreaching public sector. But again, like many others, we did see some hit over the last several weeks. Glenn Mattson: And then as I think also kind of a model question, I don't know if you want to handle it or Mike. But when I think about next year, I mean, historically, the front half of the year for Software and Services was kind of a bit lighter in a stronger second half, if I have that right. And so that might be being overwhelmed by the VDR growth. How should we just think about seasonality next year? I know you're not necessarily guiding for next year, but just kind of the trend, the timing... Michael Zemetra: Yes, I'll take it. We haven't given any guide for next year. But to your point, a lot of the growth was in the back half of this year, and that should continue in the first half relative to year-over-year comparisons, if that's to kind of give you some direction. Operator: [Operator Instructions] Your next question comes from Stephen Banta with Banta Asset Management. Stephen Banta: Great quarter and it looks like you guys are executing well against what you stated back in '23. I'm just curious if you can provide maybe a little bit of color around your strategy with Veritone Hire. It seems like the business in general is firing on all cylinders and is looking to be optimistic in the future. But when it comes to Hire, how are you guys looking at that? Do you have a strategy with regard to that business? Ryan Steelberg: It is a very stable business. Obviously, as we've stated in the market -- on the calls, relative to the other, I'd say, more hyper growth areas of the business, it's more or less flat or slightly down. But it is a very stable business. It is a meaningful contributor to the business in terms of cash flow. And so we'll keep all of our options on the table. Again, I think most importantly, on a relative basis to its peers in the marketplace in an industry where a lot of players in the space have been down anywhere from 10% to 20% for a business that's been flat, slightly down, we're outperforming. So as of all things, it is an important part of the overall Veritone portfolio and revenue base. But like all things, we're going to keep an open mind about the future. But right now, we're pleased with the overreaching. I think the most important thing we want investors to look at is overreaching, the improvement across the board at an aggregate basis of what we've been able to do both top and bottom line. And as of today, the Veritone Hire piece is an important part of that equation. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to CEO and Chairman, Ryan Steelberg, for any closing remarks. Ryan Steelberg: Well, thank you, everybody, for the call today. Obviously, we're looking -- as a company, we sort of fit in -- we are an AI company, but ironically, relative to what I think we've done is massive improvements on some of the legacy overhangs. We have been kind of operating, I feel, historically with 1, almost 2 arms tied behind my back. And I think us as a collective company with our product portfolio being in this market, both, I'll call the data and AI economy, we should all be very, very optimistic, excited and bullish about our prospects. Again, hopefully, we can continue to prove -- improve our multiple as a company relative to our peer group. But there was a lot of things that we needed historically to clean up. And as I stated clearly, I believe that we have cleared those up. And I think we're in a phenomenal situation. Also I want to double tap and before I sign off, on that very unique situation we are where we sit in the middle of providing great utility value, both from data suppliers and for data acquirers, very unique. And I want -- we're going to continue to talk about that and continue to press on that. It just provides tremendous growth and revenue diversity for the business. So thanks, everybody, for their time, and we'll speak to you soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Blend Labs, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to turn the call over to Meg Nunnally. You may begin. Unknown Executive: Good afternoon, and welcome to Blend's Financial Results Conference Call for the Third Quarter 2025. I'm Meg Nunnally, Blend's Head of Investor Relations. Joining me today is Nima Ghamsari, our Co-Founder and Head of Blend; and Jason Ream, our Head of Finance and Administration. Before we start today's call, I'd like to note that we also refer to certain non-GAAP measures, which are reconciled to GAAP measures in today's earnings release and in the appendix to our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial results we'll discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the fourth quarter of 2025, commentary regarding 2026 and expectations about our markets, our strategic investments, product development plans and operational targets may be considered forward-looking statements under federal securities law. The company cautions you that forward-looking statements involve substantial risks and uncertainties and a number of factors, many of which are beyond the company's control, can cause actual results, events or circumstances to differ materially from those described in these statements. Please see the risk factors we have identified in our most recent 10-K, 10-Q and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. All comparisons made in the course of this call are against continuing operations for the same period in the prior year, unless otherwise stated. Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call, and an audio replay will also be available soon after the call. I'll now turn the call over to Nima. Nima Ghamsari: Thank you, Meg, and welcome, everyone. Our third quarter results demonstrate our team's strong execution and the increasing resilience of our business model. We delivered total revenue just above the midpoint of guidance and more importantly, non-GAAP operating income that exceeded the high end of our guidance. This marks our fifth consecutive quarter of non-GAAP operating profitability, a trend we expect to continue into the fourth quarter. For all of this, I want to personally thank the entire Blend team. This 5-quarter streak of profitability is not an accident. It's a direct result of their focus, their discipline and their deep commitment to our customer success. Their execution is what gives us the stability to invest in our future from a position of strength. This profitability is a result of deliberate work to right-size the business over the past few years and build a foundation for sustainable long-term growth. While our overall top line was steady, it reflects a tale of 2 dynamics. We saw continued strength and growth in our Consumer Banking Suite, which was offset by some headwinds to revenue in our mortgage business, but this was not a surprise to us. It reflects the intentional strategic transitions that we are navigating, specifically moving from lower-margin services businesses to higher-margin partnerships and managing the final roll-off of legacy customers that we've discussed in prior quarters. We expected and are managing these headwinds, and they are clearing the way for a healthier, more profitable future. I want to spend our time today on 3 topics. First, the quality of our new customer wins and the strength of our future pipeline. Second, the incredible energy and pull-through we're seeing from our customers around our Rapid Suite and AI; and finally, our key strategic priorities as we drive towards 2026. To start out, in the third quarter, we signed 14 new deals and expansions in line with the prior year. But the quality of these deals is what's most important. Our largest deal was a 7-figure expansion with a top 20 U.S. bank for solar home equity lending. This is a prime example of our platform strategy at work, using our core technology to rapidly deploy and configure complex, high-value solutions with our largest clients. This is precisely what we mean by our platform. Customers can launch new high-margin products in weeks, not years, leveraging the technology they already have. We also had another major renewal and expansion with a consumer banking customer across 6 product lines. This same customer is now evaluating our mortgage solution, which is a fundamental shift. Our flagship mortgage product used to be the only door in the blend. Today, we have a multi-product platform that allows our customers to land and expand. This is the flywheel we have been building for years, and it is now actively turning. Our consumer banking products create deep daily engagement with customers, which in turn builds trust and provides a natural data-driven pathway to a mortgage. And our mortgage platform creates a high-value data-rich event that our customers can use to offer those consumers deposits, cards and home equity loans over time. Each side of our business now feeds the other. And this platform momentum is why the small handful of churn notices we saw this quarter are not a strategic concern. The 4 small customers who left were outside the core market and represented about $200,000 in aggregate annual revenue. We are successfully trading low-value non-core churn for high-value strategic platform expansion. The only noteworthy churn on the horizon is the expected roll-off for Mr. Cooper, which Jason will detail further. So in all, the real story for me is not the legacy share that we're shedding, but the future share that we are building. Our pipeline activity is strong, building sequentially from Q2 and is up approximately 60% year-over-year. This pipeline is our future, and it's robust. We are actively pursuing multiple 7-figure consumer banking deals, sizable top 10 banks in mortgage and several cross-sell opportunities for our Rapid and Close products. This is the high-quality platform-based business that we are building. And this energy was on full display at our Blend Customer Forum in September. This was our largest forum yet with 120 executives, and the tone was completely different from last year. Last year, AI felt like a science project. This year, we're at an inflection point. The question from customers is no longer what is AI? How can it help me? But how fast can you get it into our hands? The reason for this urgency is clear. The cost to originate a mortgage loan is still stubbornly high, nearly $11,000 and roughly 90% of that is human labor. The industry is realizing that bolting on more point solutions only adds complexity and costs. What we demonstrated at Forum is the only real path forward, Blend Intelligent Origination. This isn't another tool. It's an entirely new operating model for lending. By embedding agentic AI directly into our core Blend workflow, we can autonomously orchestrate and execute end-to-end processes. And because it's embedded natively into our platform, it's not just another tool for employees to learn or another chatbot for people to talk to. It's a system that works with the rest of the Blend platform and learns for them. This is a fundamental architectural advantage that point solutions simply cannot replicate. Our customers see this as the definitive answer on the path to the industry's $11,000 problem. They are excited, and we are, too, because this is the future and we are building it with them. We also saw tremendous buzz around our Rapid Home Equity product, which is a very important product for consumers in this day and age. And this was the first forum where early adopters could share their results with peers. The value of this product is its seamless data connectivity and personalized offers in real time, which drive higher conversion by radically reducing the time to an approval. The momentum here is palpable. This momentum and the energy from our customers at Forum is what gives me such great optimism about Blend where I stand today. It is a great way for us to lean into 2026 on offense, where we are laser-focused on 3 key areas. The first area is our take rate with our customers in the Mortgage Suite. A primary measure of this in our Mortgage Suite is economic value per funded loan, or evPFL. While evPFL has come down in recent quarters, this pressure is a direct and intentional result of our platform strategy, specifically transitioning to higher-margin partnership models and navigating one renewal in this tough market. While this impacts the near-term metric, it is the right decision for our long-term margin structure and profitability and customer base. Our focus is not on this near-term pressure, but instead on the long-term prize. And for 2026, our priority is driving the adoption of the products that create exponential value for our customers in the mortgage case, Rapid Refi and Blend Close. These products are the powerful levers we have to grow our take rate and deliver on the full long-term potential that we see ahead of us. Our second focus is the continued expansion of our Consumer Banking suite. This business is already a strategic powerhouse for us. It now represents 39% of our total revenue, up from just 29% 1 year ago. Our customers are using to solve their most pressing problems, driving high-margin non-interest income and capturing sticky deposits in a highly competitive market. And our engine provides a powerful less cyclical revenue stream that enhances the stability and resilience of our entire company. For 2026, the goal is clear: expand adoption with large accounts and accelerate our speed to market by standardizing more of our out-of-the-box solutions for the rest of our customer base. This is how we scale our business effectively. Our third and final focus is on building the next horizon of growth. As I talked about earlier, we are making targeted disciplined investments in AI and our suite of Rapid products to solve our customers' biggest problems. The great news for us is that these are not massive speculative bets. We are building these world-class solutions with nimble, focused teams. And this innovation is what will keep us and our customers well ahead of the curve. To summarize, when I look at the macro environment broadly, and I see it finally showing signs of life, particularly the potential for us when rates come down, and then I combine that with the specific momentum we are generating for ourselves, I have never been more excited about our business. To be clear, our entire 2026 plan is built to succeed in the current environment and win in the current environment. But the disciplined, profitable and simpler cost structure we have built over the last 5 quarters gives us incredible operating leverage in a recovery. When the mortgage market turns, we are in prime position to have that recovery flow to our bottom line, all on top of the organic platform growth that we are already driving with our rapid solutions, our closed solution, new customer growth and over time, AI solutions as well. The team has done the hard work to build a resilient, profitable and scalable platform. We are no longer just ready for what's next. We are building what's next. With that, I'll turn the call over to Jason. Jason Ream: Thank you, Nima, and to everyone on the call today, thank you for joining us. As this is my first earnings call with Blend, I'd like to reflect on my first 3 months here before I talk about our results. First, the team that I've been lucky enough to join is one of the best I've ever worked with, and they are passionate about making Blend successful. Second, we have a strong portfolio of products that will continue to improve under the leadership of product-focused executives like Nima and Srini. And lastly, the best word I can use to sum up our relationship with customers is partnership. I had the great fortune to be able to attend our annual customer forum only 1 month into my time at Blend and to talk to a number of our customers. While our customers, of course, have lots of requests and suggestions for our products, everyone I talk to believe that Blend is the best option in the market and that they are on a journey with us. That gives me great confidence in the foundation of this business and our right to win long term. I'm sure I'll talk more with many of you about that over the coming weeks and months. But for now, let's dive into our third quarter financial results and an update on market share trends. Total revenue in the third quarter of 2025 was $32.9 million, ahead of the midpoint of our guidance and down 1% year-over-year. Digging below those headline numbers, Mortgage Suite revenue was down 18% year-over-year, driven by the strategic transition to lower revenue but higher-margin partnership models for some of our products by some churn and by the effect of the large renewal with lower pricing that we talked about last quarter. On a side note, our work with that customer continues to be very positive, and we continue to believe that the customer can provide meaningful upside to 2026 and beyond. Mortgage Suite revenue was down approximately 1% from Q2 to Q3, driven by the ongoing ramp down of several customers that gave churn notices last year, the continued effect of our strategic transition to partnerships and by some seasonality. Consumer Banking Suite revenue was up 11% quarter-over-quarter based on go-live deployments on some large customer wins as well as ramping usage at some of our larger customers. The increase came across both core consumer banking products and home equity lending products, which are included in our Consumer Banking Suite. Shifting back to consolidated results. Our total gross profit was $24.5 million. After excluding stock-based compensation and the amortization of software development expense, our non-GAAP gross profit was $25.6 million, and our non-GAAP gross margin was 78%, up from 76% last quarter. Non-GAAP operating expenses were $21 million, up 9% quarter-over-quarter, almost entirely driven by a Q3 specific sales and marketing expense related to Blend Forum and by higher non-GAAP R&D expense due to a lower capitalization rate of software development expense. Non-GAAP operating income was $4.6 million, above the high end of our guidance and representing a non-GAAP operating margin of 14%. Free cash flow for the quarter was negative $5 million, bringing our year-to-date total free cash flow to positive $1.5 million. Our balance sheet remains strong, thanks to the work Blend did in 2024 to eliminate debt and realign the cost structure of the business for sustainable growth. As of September 30, 2025, we had approximately $82.3 million of cash, cash equivalents and marketable securities, inclusive of restricted cash. In the third quarter, we repurchased 1.6 million shares worth more than $5 million, bringing the year-to-date total to $9.2 million and leaving $15.8 million remaining under our repurchase authorization as of quarter end. Our evPFL for Q3 was $86, in line with our guidance. We do see some near-term headwinds. And as we look to Q4, we expect evPFL to be approximately $83 to $84. We are not providing specific guidance beyond Q4, but believe that most of the recent issues negatively impacting evPFL will be largely behind us as we enter 2026. It is important to remember that evPFL, while a useful metric, is somewhat incomplete as it does not capture home equity loans, an area where we see significant momentum in our business and which are included in our Consumer Banking Suite. Next, I wanted to provide an update on our market share. We've included a slide in our supplemental deck that provides additional numbers and context, including Blend's annual funded loan volumes. As a reminder, we use Home Mortgage Disclosure Act, or HMDA data as our benchmark for total market size and the market share we report is measured by dividing Blend funded loans by total market volume per HMDA. As anticipated, our 2024 HMDA market share is down from the high watermark of 21.7% in 2023 and landed at 18.6% in 2024. The decline is primarily driven by churn notices that we received from customers in 2023 and 2024 when cyclical pressures in the mortgage industry were at their peak. Since customer roll-off is often a long process, we've continued to see some of the impacts of volume from those customers into 2025. We anticipate further market share headwinds in 2026 of approximately 100 basis points, primarily due to lower volume from Mr. Cooper. As we have said before, we signed a contract with Mr. Cooper shortly before their acquisition by Rocket was announced. That contract runs through June 2028 and protects a significant portion of our revenue from them through that time period. As we look to 2026 and beyond, the trajectory from here is encouraging, given the stabilization of churn trends and the new customer wins and expansions that we've been talking about. For the first 9 months of 2025, we've only had a few smaller customers indicate their intention to churn, which in aggregate represent less than 10 basis points of 2024 HMDA share. We believe we've created a solid base for long-term share growth. We're not providing any formal macro outlook or company-specific guidance for 2026 at this time, though we will have more to say in February. Still, it's fair to note that we generally agree with the current consensus expectation that lower mortgage rates in 2026 will drive industry growth, which should more than offset the market share headwinds in mortgage. In consumer banking, we have a solid deployment pipeline heading into 2026, though we expect that consumer banking will face some headwinds from the expected churn of Mr. Cooper's home equity business. Please also keep in mind that consumer banking revenue has a tough prior year comparison due to a large customer that went live late in 2024, contributing about $5 million to growth in 2025 and which is now at steady state. Now, turning to our expectations for the fourth quarter. We expect total revenue for the fourth quarter 2025 to be between $31.0 million and $32.5 million, with the midpoint representing a slight decrease from the third quarter. Within total revenue, we expect Mortgage Suite revenue to be flat to slightly down quarter-over-quarter, driven by some one-time revenue in Q3 that we do not expect to repeat in Q4 and partially offset by flat to slightly up mortgage volume. We expect consumer banking to be down mid-single digit percentages quarter-over-quarter, largely driven by the impact of Mr. Cooper that we mentioned earlier and by typical Q4 seasonality, and partially offset by increased revenue with several large customers that went live in Q3 and which will have a full quarter of revenue in Q4. Lastly, we expect fourth quarter total non-GAAP operating income to be between $2.5 million and $3.5 million. In August, we shared our Q4 2025 market size expectation of 1.13 million to 1.23 million units and we think this is still a reasonable range. For Q1 2026, we expect a sequential volume decline, in line with normal seasonal patterns. Our current expectation for the first quarter of 2026 is for mortgage volume to be between 1.07 million to 1.17 million units. And now let's take your questions. Operator: [Operator Instructions] Your first question comes from the line of Aaron Kimson with Citizens. Aaron Kimson: Nima, you talked on the 1Q '25 call about the inflection in pipeline after the Rocket-Cooper deal was initially announced. I appreciate the commentary about Forum in September and pipeline up about 60% year-over-year at the end of Q3. But since the Rocket-Cooper deal closed on October 1, has there been any change in the tone of conversations with FIs that want to keep their largest consumer lending relationships that know they need to upgrade their tech stack to remain competitive? Nima Ghamsari: Yes, good question. Yes, definitely, I think the Cooper-Rocket acquisition has been -- I'd say, what one thing that I've seen happen there is big mortgage servicers are starting to think through their strategies, and it's an area where we're very strong. We work with most of the top 10 servicer -- mortgage servicers in the country. We're the ones who are primed to be able to take advantage of both the current situation with cash-out refis and home equity loans. And then if the rates -- if the mortgage rates get into the mid- to low 5s, there's a huge volume of customers between 6% and 7% who need to be able to take advantage of lower rates, especially if the economy gets worse. And so I've definitely seen companies react. And I've also seen some of the very largest lenders who are our customers say, we got to do something really important with AI. And so they were the ones calling on me on the AI front saying, we want to not just remain competitive, but we're going to use this time when potentially some companies might be busy integrating or distracted with other things, and we're going to put our best foot forward and to come out of this next 6 to 9 months with a much more automated, much higher quality operation than we used to. Aaron Kimson: That's really helpful. And then switching over to Jason, it's great to have you with us. Given that you were a senior MD at Haveli in April '24 when Haveli made its investment in Blend and with Haveli owning about 20% of the company today, can you talk a little bit about your history with Blend dating back to Haveli? How involved you were in that investment process? And then how you came to be the Head of Finance and Administration at Blend? Was it through prior relationships or third-party recruiters or something else? Jason Ream: Yes. So I -- Haveli is not a huge firm. So, I obviously had visibility into what was happening. I wasn't part of the investment team that made the investment in Blend, but I did have some contact with the company. And primarily as an operating partner, I was here as a resource for all of the -- sorry, I was there as a resource for all of the port cos that Haveli had. But the switch that I made was really wanting to get back into an operating role. Given the fact that Amir was -- had made the decision to leave Blend, I was looking for a good opportunity -- everyone at Haveli had a really high view and estimation of the team at Blend. And I had gotten to know Nima and the team a little bit as well, but that's a really great opportunity. They need a CFO that has experience with public markets, and I was looking to get back into the operating role. And so essentially, the stars aligned. Operator: Your next question comes from the line of Ryan Tomasello with KBW. Ryan Tomasello: On Mr. Cooper, can you just help us synthesize the moving pieces you called out there in terms of sizing the revenue impact in 2026, just juggling the handful of commentary that you gave between both the mortgage and the consumer banking segment? And then beyond 2026, you're mentioning a part of the revenue still being protected through the expiration of that contract. So, just help us understand exactly what that looks like and what that cumulative impact might look like post-2028? Jason Ream: Yes, Ryan. This is Jason. So the specific commentary we gave on the call is that there will be a share headwind, and that is essentially because we do expect the volume of transactions coming through our system from Mr. Cooper to come down now that the transaction has closed. We didn't really give specific revenue numbers around that. But what I will say is that the majority of the revenue that we've had in the past is protected for some period of time. So, there will be some revenue headwind. We didn't call out a specific number, but the majority is protected through the second quarter of 2028. I'm sorry, the second part of your question, I think we missed that. Ryan Tomasello: No, I think you covered it, but I mean, I have a related follow-up. I think last quarter, you called out a mortgage pipeline consisting of roughly 400 bps of market share. Can you provide an update on where that stands today? And then it sounds like net of Mr. Cooper, we should still be expecting market share growth next year, but correct me if I'm misunderstanding it. Nima Ghamsari: Yes. Sorry, go ahead. Jason Ream: Yes. Again, we haven't provided guidance for next year on market share, and we'll give you more color on the call, the Q4 call at the beginning of the year. But yes, look, we still have a very strong pipeline for mortgage. Our strategy here is a combination of factors. As Nima talked about on the call, we've got the flywheel effect now going where the mortgage side feeds the consumer banking side, the consumer banking side feeds the mortgage side. And so we're looking for growth on both sides of that. And obviously, share growth in the mortgage industry is something we're driving towards, but we're also driving towards growing consumer banking. And as you'll recall, home equity, which is a big potential upside for us, feels a lot like mortgage. It is lending, but it is -- we reported in the consumer banking side. So, I think you should look to see big growth on both sides. Nima Ghamsari: And we didn't -- I talked about this in my prepared remarks. We talked about we have some top 10 lenders, banks in our pipeline right now. We're actively pursuing -- we believe, and I think the market sees that we have the best product in the market for someone like them. I got to spend a lot of time at the Mortgage Bankers Association Conference with these prospects. And we've weathered these headwinds, and we've kept our reputation good and we've continued to innovate. And so it just puts us in the pole position to be the right partner for some of these big guys and especially as we continue to build capabilities that makes us a true platform for them, building AI into the platform, building the rapid products on top of the platform. It just allows them to get a lot out of us. And so that's why we've seen the pipeline stay strong and why we're excited about even just in our existing customer base, the growth of the existing customer base is where I spend most of my time because those existing customers are the ones that can move faster with us and want to do more with us. Operator: Your next question comes from the line of Joseph Vafi with Canaccord Genuity. Joseph Vafi: Just wanted to maybe just drill down on the big renewal a little bit. Just kind of what was maybe going on there in a little more detail, if possible? Do you see more renewal risk in the pipeline? And it feels like you provide a pretty high-value product to customers. So kind of just wondering why there needs to kind of be a pricing discussion when you're already adding so much value for customers? And I have a quick follow-up. Nima Ghamsari: Yes. Really good question, Joe. And just to put the timing of when that that initial discussion around renewal started happening, it was in either late Q1 or early Q2 of 2024. So, we're talking 18-plus months ago and before Jason's time here. And it was a different time for Blend. I mean it was before our Haveli investment, before we had taken a new capital, people were worried about our debt in the market. They're worried that we weren't going to necessarily be around. And so to answer your question, pretty candidly, no, I don't see renewal risk in the rest of our pipeline. In fact, most of our renewals -- if you sort of normalize -- we took an internal look at this, this week. If you normalize for the contribution that our customers are giving us per loan outside of this one renewal, the value per loan is up actually year-over-year from Q3 to Q3. We looked at this as a one-time view for ourselves because I know there's a lot of moving pieces. There's this one renewal. There's the partnership model transition, which I'm super bullish on, and we think is going to drive more upside for us next year. And so, yes, we did have this one moment with one very large customer in 2024 that we're feeling some impact for. But interestingly, they were the ones who were on stage with us at Forum doing a demo of the AI functionality that they're adopting with us. They were the ones on stage with us talking about Rapid home equity and talking to us about what they can do with us more on that front. And so I view these things as maybe short-term headwinds where we built -- we use that moment together in the trenches to build long-term partnership. And this customer is so big and has been such a good partner for us. There are so many things we're talking to about them. And I'm very happy we did the renewal. I do that renewal even at the same rates today, if I could, because there's just so much more upside. We're talking about this $11,000 problem in the industry, and we're $80-something into that $11,000. So while we had to spend a couple of years cleaning things up internally, getting debt off our balance sheet, getting the company in a good profitable state, we're there. We're on offense. We're building really cool things, and I'm looking forward. Operator: Your next question comes from the line of Michael Turrin with Wells Fargo. Michael Turrin: There were just a few different mentions throughout the call I wanted to unpack a bit if we could. So it sounded like some of the market share impacts you're seeing likely continue into next year, but there are also some comments from Nima around macro showing signs of life and pipeline growth building back a bit. So, just any more context you can give us to help square those 2 factors? And big picture, just the factors within Blend's control and driving better growth into next year is helpful. Nima Ghamsari: Yes. I think, Michael, thanks for the question. There are 2 dynamics you're referring to. One is our share and the other is sort of the market itself, the macro. I think as we mentioned on the prepared remarks, the general consensus expectation out there is that there will be lower rates in 2026, and that will drive higher mortgage activity, higher refi activity and that will lift the market overall. We haven't guided to that yet, but we do see that that's our belief as well falling in line with what the sort of general consensus expectation is out there in the market. On the share piece, we do have -- we called out one specific headwind, which is Mr. Cooper, right? And as I mentioned on one of the earlier questions, a significant portion of our revenue with them is protected under contract. But regardless of the revenue, if they move their volume elsewhere, we're not going to count that in the share. right? And so that is a likely headwind to our share in 2026. That doesn't mean that the share has to stay with just that -- that's not the only impact to share, right? Obviously, we can win new customers, we can get new customers live, et cetera, and that can drive additional share for us. We haven't guided to 2026 yet. But just calling out, we highlighted one headwind, but that's not an indication of where we see the overall going yet. Michael Turrin: Okay. That's actually -- that's useful supporting color. And just, Jason, on margin, you're delivering above the high end of the prior operating income guide with revenues within the range. So just where the efficiencies are coming from and how you think about different investment levels for the business and various growth scenarios as some of what you just framed potentially plays through? Jason Ream: Yes. Look, in terms of where efficiencies are coming from, it's hard to call out one specific area. Obviously, we are growing our presence outside of the U.S. And in some cases, those are lower-cost geographies, and we're able to get talent that's as good, but at lower costs. That's one specific area of efficiency. But I would say more broadly, there's just a focus on doing things in a lean way and trying to use small teams, trying to focus on output as opposed to just creating an org structure to deliver something. It's really more of a mindset than it is on specific efficiencies. And as we look forward, I think 2 things. One, sort of as a foundation, we want to think about -- obviously, look, this industry is cyclical on the mortgage side at least and to some extent, perhaps on the home equity part of consumer banking. We're not going to allow our investment decisions to just follow the macro market. In other words, just because revenue increases, if rates were to drop really far, we're not going to say, "Oh, great, let's spend a ton of operating expense just because revenues are high right now." We're sort of building a business that's resilient regardless of macro. The second comment I would make about investment philosophy going forward is that we have some amazing opportunities in front of us. And today, we think that we're well positioned to address those opportunities within the envelope that we've built for the business today. To the extent that we continue to get traction with those and we see the top line materially shifting independent of macro, we may pour more fuel on the fire in certain areas where those new initiatives might require it. But we're really being judicious about the ROI essentially of the investments that we make and making sure we have places where we have a very clear line of sight to getting a return on additional expense put in the business. Operator: [Operator Instructions] The next question comes from the line of Michael Ng with Goldman Sachs. Michael Ng: I just have 2. Just a big picture one. Just on the economic value per funded loan, is there a way to think about where that could be in the long term? I appreciate that you're guiding to $83 to $84 for next quarter. But like where do you see that going in the next 2 to 3 years? And then secondly, we've seen some good revenue growth in Consumer Banking Suite revenue. Just as you think about the business more strategically, what's the right mix to think about now between consumer banking and Mortgage Suite? Like where are you focused on and where do you see the biggest opportunities? Nima Ghamsari: Yes. Thanks, Michael. I kind of like to work backwards from what the opportunity size is. And we talked about Rapid Home Equity and Rapid Refi in our prepared remarks and in the last few quarters. And those products themselves as a standalone are a multiple of our core mortgage and core home equity rates. And so I think we're just scratching the surface. Now to answer your question on where we'll be in 2 to 3 years, I don't want to necessarily -- we haven't guided that yet, but we are aggressively going after deploying those products to our customers. In fact, I would say that's kind of the top priority for us, given that there is a big market need right now for Rapid Home Equity and then people are looking forward to -- there's a lot of participants in the market that want to help consumers take advantage of their equity, and we want to help them help their consumers. And so that's very important to us. And that has a very high price per unit, although that's in our consumer banking segment. And then on top of that, on the Rapid Refi side, a lot of these companies are seeing mortgage rates coming down. I don't know if you all saw the jobs numbers today or the job cuts numbers today. But they want to be in a position where for the people who are able to get the benefits of lower rates once the rates get into the mid- to low 5s, that will be kind of an inflection point, I think, for the industry in terms of number of consumers that are eligible, but they need to be able to do that extremely effectively and in a very automated fashion. And our Rapid Refi solution is the best way to do that. And so we're -- we've got good interest in that. We have some customers that have deployed it and that are scaling it up. And we're excited about it and our customers are excited about it. And so while I don't -- we don't want to guide exactly where we'll be in 2 or 3 years, maybe in a future Investor Day, we can spend more time on that given the traction we're seeing. I think the opportunity is really large. And that's not even withstanding the -- what the AI brings to the table in this case, which is there's a significant amount of operational effort internally of manually reviewing the loan file and going back and forth with the consumer for days or weeks, and it's something that AI was really built for. And we're happy to be part of that journey with our customers. And so I don't have a specific guidance on the 2- to 3-year medium term, but I can tell you in the long term, I'm very bullish. I think there's a lot of upside for us and our customers in particular. And I think a decent amount of that will be -- will come in the form of just continuing to grow our evPFL with our existing customers, first and foremost. And what was it -- was there a second question, Michael? I think I might have missed it. Michael Turrin: No, it was just about the long term -- kind of like the long-term trajectory of evPFL and then the right mix of consumer banking versus mortgage, but I think you've covered it. Nima Ghamsari: Makes sense. Yes. I mean, you've seen our consumer banking segment grow because we've made some really big customer wins. And actually, one of our biggest deals this quarter was -- this past quarter was a consumer banking win. Now, also 39% is where we are as a percentage of our total revenue in consumer banking. That happens to be in mortgages cyclically low. I think both sides of this business can be much larger than they are today if we continue to execute with our customers and our customers continue to win in the market. And so we're not -- I wouldn't say we're sort of prioritizing one or the other. We're serving both. And it's sort of -- I'd say our focus is our existing customers to start with and growing them first and foremost. Operator: [Operator Instructions] The next question comes from the line of Faith Brunner with William Blair. Faith Brunner: Can you maybe double-click on the adoption cadence you're seeing across the different Rapid products within your existing customer base and maybe how that's driving durability into the different product suites? And then just a quick one on top of that about AI and as you get early feedback back from the Intelligent Origination and some of these other solutions, how that can maybe unlock another long-term monetization opportunity for you guys? Nima Ghamsari: Yes. Great questions. The flavor of the day from our customers and where we're focused on the Rapid Suite, although we haven't -- I think it's over 10 Rapid deals in deployment right now with our customers. I'd have to double check that exact number. But the majority of our big customers' focus is being able to serve a consumer a home equity line of credit or loan in 10-ish days. I mean that's -- there's a lot of consumers who have debt that they're revolving on, that's higher interest debt. And so our customers are interested in offering them something we can take advantage of the equity in the consumers' homes. And the process today for getting a home equity line of credit is at a bank or credit union that a typical bank or credit union might be 30, 45, 60 days. But the technology is there now, and we have it with Rapid Home Equity to do that much faster and a much higher conversion. So, that is the focus for our customer base, I'd say, for our largest customers. But we're seeing kind of interest across the board on that and Rapid Refi, with just trying to get ahead of the rates that might come down next year. And then shifting gears to AI. I mean, AI is one of those things. It's like almost like water for us at this point. It was such a breadth of fresh air because it allowed us -- we had this initiative a couple of years ago that we shared with you all around efficiency, and it helps us with our own internal abilities to do things faster and better. And so I think that was part of it. And then it also unlocked -- I mean, there was this part of the industry that always stumped me, which I referred to on the call as this $11,000 problem is that the $11,000 problem is that there's so many different -- there's hundreds or thousands of different scenarios of consumers' finances and there's hundreds or thousands of different rules you have to apply to those scenarios. And so when you multiply those things together, it's like an intractable rules engine problem in the sense that you can't code all of those things effectively because they change all the time. And so it was sort of impossible to imagine a world where someone could build an engine that was so complex and so magical that it could work across all of those things. And then all of a sudden, out of nowhere, this AI boom came and it's actually capable of handling those hundreds of thousands of different permutations that might happen on any given loan or line of credit or whatever. And we were demoing this. I was on site with a fairly large client of ours, and we were demoing this. And I can tell you, it was like the consumer is just going through their normal workflow in our platform, the same thing that everyone uses today and we were showing them what happens behind the scenes and the AI just ticks it up and it's just doing all the background work, just like a human would, prepping the file for them internally. And they were seeing that. And it's almost like -- it does almost feel like black magic because it's so hard to understand how it's even doing all that. And I don't think I even understand how it can even do all those things as somebody who's very deep in AI and goes to sleep thinking about AI and wakes up thinking about AI, but it is capable of doing those things. And then I asked them how much they spend fulfilling each of their files manually? And it was not a small amount of money. And so yes, to answer your question, that wasn't -- that isn't really built into our financial models. It's not built into our -- and actually, one other thing I want to reiterate that Jason said is that the other thing that AI has allowed us to do in the spirit of efficiency is somebody who loves working with small teams is build these amazing solutions with small teams. And now getting the word out to customers and helping customers understand it and adopt it and buy it from us is a different conversation. But the actual building in these capabilities is best done with small teams where there's little communication gap. Everybody is working on a very similar tight cadence together. And I work with one of the small teams that's building out this, what we call Blend Intelligent origination. And it's just so refreshing. There's so much energy around it. Our customers love it, and they're so excited about it. And so while we still have some work to do, I would say I've put that in the very early stages category, and it's not baked into our financial model and certainly not baked into our cost model in terms of us budgeting a huge amount of spend for that area. It is an area that I view as even more upside beyond some of the things we shared at our last Investor Day with you all about long-term upsides for the business. Operator: Thank you so much. There are no further questions at this time. So on behalf of Blend Labs, Inc., thank you for joining. That concludes today's conference call. You may now disconnect.
Operator: Excuse me, everyone, we now have Sean Reilly and Jay Johnson in conference. [Operator Instructions] In the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals, plans and objectives, including with respect to the amount and timing of any distributions to stockholders and the impacts and effects of general economic conditions, including inflationary pressures on the company's business, financial condition and results of operations. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's third quarter 2025 earnings release and its most recent annual report on Form 10-K. Lamar refers you to those documents. Lamar's third quarter 2025 earnings release, which contains information [ regarding ] Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on a Form 8-K this morning and is available on the Investors section of Lamar's website, www.lamar.com. I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin. Sean Reilly: Thank you, Katie. Good morning, all, and welcome to Lamar's Q3 2025 Earnings Call. For the third quarter, we delivered solid operating results with consolidated revenue growth improving to 2.9% on an acquisition-adjusted basis, led by national/programmatic, which had its strongest period of growth since Q2 of 2022. On the local level, a cautious vibe still prevails. And as a result, Q3 looked a lot like the rest of 2025 has with year-over-year growth in the low single digits. As we noted in the release, we are pacing to reach our previously provided guidance for full year AFFO per share. That is despite difficult political comps in October, which we knew would be a headwind. Our pacings for November and December are encouraging as are our conversations thus far with customers about 2026, which for a variety of reasons, we believe sets up to be a good year. So far, our pacings bear that optimism out. Back to Q3. Categories of strength included services, health care and financial, while beverages and real estate were weaker as was our government/nonprofit category, which has been hampered by some of the uncertainty emanating from Washington, D.C. National and programmatic led the way with growth of 5.5%, while local was plus 1.6%. Insurance was very strong, and we benefited from our largest ever pharmaceutical buy, which launched towards the back end of Q3 and extends through most of Q4 and includes both analog and digital inventory. Our experience with that campaign has provided valuable insights into the data that we need to deliver to help pharma customers make their buying decisions, and we are hopeful that pharma will continue to be a growth vertical for us. As we have discussed before, national can be a bit lumpy, and we had a lot of political that came our way through national channels in Q4 of 2024. As a result, national is likely to be flattish in Q4 2025. Ex political, however, national should be up nicely in Q4, and we do like what we're hearing about 2026 from national buyers. Our digital platform continues to be very popular with both local and national advertisers. For the quarter, digital billing grew 5%, including 3.4% on a same-store basis and represents today about 31% of our billboard billing. We now have more than 5,400 digital billboard faces across 155 Lamar markets. On the M&A front, the integration of the Verde assets, which we acquired in an UPREIT transaction in early July, the first ever in the out-of-home space, is going very well. We closed another 18 purchases for nearly $47 million in Q3, bringing the year-to-date cash spend to nearly $134 million at the end of September. For the full year acquisition spend, excluding Verde, it's likely to be north of $175 million. Including Verde, we'll end the year spending plus or minus $300 million on accretive transactions. Overall, I'm pleased with how resilient the business is proving to be in a period of fairly significant macroeconomic uncertainty, and I am confident that we will finish 2025 successfully and carry momentum into 2026. With that, I will turn it over to Jay to walk you through more numbers, including our successful capital market transactions at the end of Q3. Jay? Jay Johnson: Thanks, Sean. Good morning, everyone, and thank you for joining us. We continue to experience positive momentum in our portfolio during the third quarter. Acquisition-adjusted revenue increased 2.9% from the same period last year, accelerating 100 basis points over the second quarter. Our billboard regions all grew in the low single-digit range, led by the Atlantic and Northeast, which improved 3.8% and 3.3%, respectively. Our airport and logos divisions also outpaced the broader portfolio with airport growing 5.8%, followed by logos, which increased 5.2%. Acquisition-adjusted operating expenses increased 3.7% in the third quarter, including onetime severance costs associated with termination of our Vancouver transit contract on July 31 as well as increased costs from Phase 2 of our technology implementation. These items accounted for approximately 125 basis points of expense growth over the comparable period in 2024 and were both included in our revised guidance in August. We still anticipate full year acquisition-adjusted operating expense growth in the 2.5% to 2.75% range. Adjusted EBITDA for the quarter was $280.8 million compared to $271.2 million in 2024, which was an increase of 3.5%. On an acquisition-adjusted basis, adjusted EBITDA increased 2%. Despite the growth in operating expenses, adjusted EBITDA margin for the quarter remained strong at 48%, essentially flat year-over-year. Adjusted funds from operations totaled $226.5 million in the third quarter compared to $220.7 million last year, an increase of 2.6%. Diluted AFFO per share increased 2.3% to $2.20 versus $2.15 in the third quarter of 2024. Local and regional sales accounted for approximately 78% of billboard revenue in Q3, growing for the 18th consecutive quarter. Q1 of 2021, a COVID-impacted quarter, was the last in which we saw a year-over-year decline in local and regional sales. This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group. On the capital expenditure front, total spend for the quarter was approximately $50 million, including $13.9 million of maintenance CapEx. Through the first 3 quarters of the year, CapEx totaled $118 million, $37 million of which was maintenance. And for the full year, we anticipate total CapEx of $180 million with maintenance comprising $60 million. We ended the quarter with total leverage of 3x net debt to EBITDA as defined under our credit facility, which remains amongst the lowest level ever for the company. Our secured debt leverage improved to 0.65x, and we are comfortably in compliance with both our total debt incurrence and secured debt maintenance test against covenants of 7x and 4.5x, respectively. For the full year, we expect total leverage to remain at 3x with secured leverage consistent as well below 1x net debt to EBITDA. Lamar continues to enjoy access to both the debt and equity capital markets. During the quarter, we took significant steps to further improve our industry-leading balance sheet, raising a total of $1.1 billion. With the positive market backdrop, we opportunistically refinanced the company's $600 million Term Loan B due February 2027, which was our nearest term maturity. The offering was well received and given the demand, we upsized the transaction to $700 million. In addition, we were able to maintain a spread of 150 basis points over SOFR, which remains the lowest priced Term Loan B in the market. Following the successful launch of the term loan, we accessed the high-yield bond market with a new $400 million senior notes offering. The bond deal was oversubscribed, allowing us to achieve the lowest ever spread to treasuries for an 8-year in the high-yield market with a coupon of [ 5 3/8% ]. We are extremely pleased with both capital markets transactions, which extend our maturity profile and significantly enhance liquidity. Excess proceeds were used to repay outstandings under the company's revolving credit facility and AR securitization. As of September 30, we had $834 million in total liquidity comprised of approximately $22 million of cash on hand, $742 million available under our revolving credit facility and $70 million available on the AR securitization. At quarter end, there were no borrowings outstanding on the revolver and $180 million outstanding under the AR securitization program. We had approximately $3.4 billion in total consolidated debt and our weighted average interest rate was 4.6% with a weighted average debt maturity of approximately 5 years. As a result of the focus on our balance sheet, the company is well positioned with an investment capacity well over $1 billion. In addition, we have the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt to EBITDA. This morning, we affirmed our full year guidance and expect AFFO to finish the year between $8.10 and $8.20 per diluted share. Cash interest in our guidance totaled $152 million and assumes SOFR remains flat for the balance of the year. As I touched on earlier, maintenance CapEx is budgeted for $60 million and cash taxes are projected to come in around $10 million, which excludes any taxes related to disposition of our interest in Vistar Media. And finally, our dividend. We paid a cash dividend of $1.55 per share in each of the first 3 quarters this year. Management's recommendation will be to declare a regular cash dividend of $1.55 per share for the fourth quarter as well. This recommendation is subject to Board approval, and we will communicate the Board's decision next month. The company's dividend policy remains to distribute 100% of our taxable income. And for the full year, we expect to distribute a regular dividend of $6.20 per share, excluding any required distribution resulting from the Vistar sale. Again, we are pleased with our financial position and strong balance sheet, which we view as an asset and competitive advantage in the out-of-home industry. I will now turn the call back over to Sean. Sean Reilly: Thanks, Jay. I will cover some familiar key performance metrics, and then we'll open it up for questions. On the billboard side, our static inventory grew quarter-over-quarter approximately 2%, while as I mentioned, digital grew a tad over 5%. As for political, Q3 this year was $2.7 million versus $6.1 million for last year's Q3. Full year-to-date political this year has been $7.4 million compared to $29.2 million year-to-date in 2024. By the way, 2024, as I mentioned, $29.2 million, that was over $7.5 million for 2023, indicating that we certainly will have political as a tailwind in 2026 as opposed to a headwind that it represented this year. A quick word on October and political. Last year, we did over $11 million in political in the month of October. We replaced all but about $3.5 million of that ex political, October grew 2.9% quarter -- year-over-year, month-over-month. As we mentioned for several quarters now, our pro forma increases are being driven primarily by rate. Also, in terms of digital units in the [ air ], we ended Q3 with 5,442 digital units in operation, an increase of approximately 450 year-to-date over last year-to-date. This includes acquired units. Also, as I mentioned, same board digital revenue grew 3.4% Q-over-Q. Local-national split, approximately 78% was local and 22% national in Q3. Growth for local was 1.6% and growth for national was 5.5%. Programmatic grew a little over 13% in Q3. I don't usually tick off individual customers, but I do believe that an impressive list of accounts really are indicative of how we're feeling about national year-over-year and going into 2026. The top 5 accounts in terms of increases in their spend with us in Q3 are as follows: GEICO, Progressive Insurance, JPMorganChase, Coca-Cola and Johnson & Johnson. Again, that list of blue-chip customers, I believe, points to our optimism going into 2026. With that, Katie, let's open it up for questions. Operator: [Operator Instructions] Our first question will come from Cameron McVeigh with Morgan Stanley. Cameron McVeigh: I was curious, as you look ahead into 2026, how you're thinking about the growth opportunity and what you see for your business as the primary growth drivers next year? And then secondly, also curious how you're thinking about the M&A environment and if we should expect another acquisitive year ahead. Sean Reilly: Yes, Cameron. Regarding the acquisition activity, yes, we do feel good. We feel like this has been a great year. When we look into 2026 and the momentum from the approximately $300 million we spent this year, that's certainly a growth driver for AFFO per share, right? Other growth drivers are -- just our pacings are stronger, markedly stronger as we peer into 2026, this day and 2025. Last year, on the same day, as we were looking into 2025, pacings were good, but not near the strength that we're seeing going into next year. And then, of course, as I mentioned, we'll have political as a tailwind, and that makes a difference. So for all those reasons, 2026, the setup is real good. Cameron McVeigh: Great. And then I also just wanted to ask about potential AI company-related advertising exposure. Is that -- has that been an influence on the national growth we saw at all this quarter? And is that something maybe an opportunity going forward? Sean Reilly: So as Jay mentioned and we've talked about for several quarters now, we are going through a pretty extensive enterprise conversion. And that is setting us up to realize the benefits of AI in 2027. We'll finish the conversion about halfway through next year. And of course, that's going to have a lot of benefits. It's going to have some efficiency benefits. It's also going to -- once all the consultants leave the building, we won't have that additional OpEx and CapEx spend that we've had the last several quarters. In terms of AI driving our business, without speculating too much, I can say with some confidence that AI is certainly good at 2 things. Number one is words and number two is pictures. And when you think about what we do in the out-of-home space, that's what it is. It's words and pictures. So it can't help but help us. Operator: Our next question will come from Jason Bazinet with Citi. Jason Bazinet: I also had, I think, a simple question on 2026. Other than the political tailwinds that you called out, am I right that the benefit you'll get next year from the Verde acquisition is about the same size as the headwind you'll see from the Vancouver exit, like those 2 offset each other, so it's just a clean year other than the political tailwinds? Sean Reilly: That's a good observation, Jason, and you're directionally correct. Now when we report same-store growth, we will adjust for the loss of Vancouver and the addition of Verde. So your pro forma numbers are going to be clean. But you're right in terms of absolute revenue expectations for 2026. It's a pretty decent offset. Jay Johnson: The only thing I would add there, Jason, you're correct on the top line. But if you recall, the Vancouver contract, while high revenue had relatively low EBITDA contribution, I think it was below 10%. So should see better flow-through from the Verde transaction than you would from Vancouver. Sean Reilly: Yes, significantly better flow-through. Operator: Our next question will come from David Karnovsky with JPMorgan. David Karnovsky: Sean, with the auto insurance, your comments are consistent [indiscernible] from this morning, and I wanted to see if you could expand on what's going on with the vertical and whether you think the strength here is sustainable, just given the category has been choppy over the past few years? And then can you just remind us how to think about political specifically during a midterm cycle and how that might compare to your prior presidential results? Sean Reilly: Yes. Let me hit the political first because I think it is instructive on what an off-presidential does. Okay. So in 2022 -- over 2021, in 2022, we did approximately [ $21 million ] in political. And that's year-to-date, right? So that doesn't include Q4 of those years. And in 2021, we did [ $7.9 million ]. So that's sort of your order of magnitude and should give you a little bit of feel for it. Look, on insurance, here's what's most gratifying from my point of view. Several quarters back, the auto category and insurance, they were having trouble with their own actuarial results. And so they pulled back. And what's gratifying when you see a large customer pull back for whatever reason it is, it's gratifying to see them come back in because that means it's not the medium that they were concerned about. It was sort of their own internal calculations around their own business and how they're feeling about their business. So that's number one. And I would say that also the programmatic channel has become very for both of those customers. They buy across both static and digital. However, a lot of their spend is coming through the programmatic channel. Operator: Our next question comes from Jonnathan Navarrete with TD Cowen. Jonnathan Navarrete: I'm curious to see how you guys are thinking about demand for the World Cup in 2026. I know that JCDecaux experienced some good bumps there when they had the Euro 2024. So just wondering how you guys are thinking about that. Sean Reilly: We're feeling very good about it actually. I didn't make it a talking point. But when you add political to that mix of the World Cup, that gives us a lot of optimism around how 2026 is going to shape up for sure. Jonnathan Navarrete: Great. So I guess the second and third quarters also see a nice bump there. And just the last question, can you remind us what is the potential distribution for the Vistar sale? Could we expect it to be all cash if there is distribution in stock? Like how can we see Vistar coming back to shareholders? Jay Johnson: Sure. It will be all cash as we've done in previous years where we've issued a special cash distribution at the end of the year. And we'll do that in Q4 on December 31, alongside our regular cash dividend. And right now, we anticipate that's going to be around $0.25, give or take $0.01 depending on how the performance comes in, in November and December. Operator: [Operator Instructions] Our next question will come from Daniel Osley with Wells Fargo. Daniel Osley: Sean, you noted an impressive list of national customers increasing their spend with Lamar. Can you further unpack the inflection you're seeing on national and your confidence that national -- that the national turnaround is sustainable? Sean Reilly: So in addition to what we're hearing from those large national accounts that I rattled off, conversations around 2026 and plans for 2026 from national accounts in general feels better. Good momentum ex political in the back half of this year is going to carry in, we believe, carry over into 2026. And the vibe feels better going into next year -- at this time this year than it felt this time last year coming into 2025. Daniel Osley: That's helpful. And as a quick follow-up. Your transit segment continues to perform nicely. Just given the strength of airports' advertising across the industry, do you expect to bid on any additional RFPs on the airport side? Sean Reilly: Great question. As I've said several times, when you think about Lamar and transit and airports, think about a large portfolio of small and middle market transit and airport contracts. So yes, we will continue to pursue airports in the sort of middle market arena sort of outside the top 20 DMAs. Clear Channel is dominant in that top 20 DMA space for airports. They do a great job. And we kind of specialize in the smaller middle market airport space. And it has been a good strong growth for us, a growth vehicle for us. Operator: At this time, this concludes our Q&A session. I'll now turn the meeting back over to Sean Reilly for any final or closing remarks. Sean Reilly: Well, thank you all for your interest in Lamar, and we certainly look forward to visiting in February 2026. That's it, Katie. Thanks. Operator: Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect, and thank you.
Operator: Welcome to Natera's 2025 Third Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, November 6, 2025. I'd now like to turn the conference call over to Michael Brophy, Chief Financial Officer. Please go ahead. Mike Brophy: Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our third quarter of 2025. On the line, I'm joined by Steve Chapman, our CEO; Solomon Moshkevich, President of Clinical Diagnostics; and Alex Aleshin, General Manager of Oncology and our Chief Medical Officer. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.natera.com. A replay of the call will also be posted to our IR site as soon as it's available. Starting on Slide 2. During the course of this conference call, we will make forward-looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for the outlook, market size, partnerships, clinical studies and expected results, opportunities and strategies and expectations for various current and future products, including product capabilities, expected release dates, reimbursement coverage and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including our most recent Form 10-K or 10-Q and the Form 8-K filed with today's press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those are contained in or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today, November 6, 2025. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Natera disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. We will quote a number of numeric or growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-on-year comparison. And now I'd like to turn the call over to Steve. Steve? Steve Chapman: Thanks, Mike. Let's get to the highlights on the next slide. We had a fantastic quarter. We generated $592 million in revenue, which is up about 35% over Q3 of last year. We had an excellent volume quarter as well, which included strong growth across the product portfolio and another record for Signatera growth. We processed 202,000 clinical MRD tests in the quarter, which represents more than 21,500 units of growth compared to the second quarter. You'll recall that we had a record of 20,000 Signatera growth units in Q2, so we're very pleased to beat that record again in Q3. Gross margin took a big step up in Q3, coming in at 64.9%, which is almost 1.5 percentage points higher than we were just last quarter. Ex true-ups, gross margins grew over a full percentage point versus Q2 and almost 3 percentage points over Q3 of last year. Given all that momentum, we are in a position to significantly increase the 2025 financial guide. We are raising the revenue guidance by $160 million at the midpoint and now expect revenues in the range of $2.18 billion to $2.26 billion, which is a full reset of the prior revenue range. We are raising the gross margin guide to 62% to 64% in recognition of the gross margin performance we saw in the first 3 quarters and ASP and COGS momentum continuing in the business. We are also modestly bumping OpEx guidance, which is largely from the onetime expenses that have accumulated over the course of the year that now total around $60 million. In addition to those onetime expenses, there's a small increase in R&D to support MolDx coverage for the remaining Signatera indications. Based on this effort, I'm excited to announce we are now in a position to submit 7 new MolDx submissions before the end of the year this year, which we said can be worth around $250 million to $300 million of gross profit based on our run rate. We've also invested to expand the market by increasing the number of definitive MRD trials and to support the FDA-enabling FIND study for early cancer detection. It's important to note that our SG&A was flat to down between Q2 and Q3, which is aligned with what we said about pre-spending to build the commercial team in the first half of the year. We aren't planning any big commercial expansions anytime soon, and we'll talk a little bit more about that later in the call. Finally, on guidance, we are substantially raising our guide for free cash flow generation for the year, where we are now formally expecting to generate roughly $100 million in cash for the full year. Of course, we were thrilled to see the Signatera data readout from the IMvigor011 trial in bladder cancer, and we appreciate Dr. Tom Powles for joining us on the special call we held a few weeks ago to review the results. We think the IMvigor trial results represent a fundamental new paradigm in cancer care enabled by Signatera, and that data has been published now in the New England Journal of Medicine. Finally, we touched on our last call that we were very excited to launch Fetal Focus, a new single-gene NIPT for inherited conditions that leverages our proprietary SNP-based method. We recently announced an expansion of the Fetal Focus product to cover over 20 genes planned for this quarter. The initial feedback from our August launch is positive, and we think this is a compelling expansion of the panel. Okay. Let's get into some of the business trends on the next slide. The first slide shows our Q3 volume progression versus prior years. We had solid sequential quarterly growth in women's health, driven in part by interest in Fetal Focus that spurred a lot of new commercial activity for our team. Organ health was also very strong with both greenfield and competitive wins, and we will continue to keep our foot on the gas as we have several clinical trials ongoing that further demonstrate how much utility and cost savings these tests are delivering. Of course, Signatera posted another record quarter, which we'll get into on the next slide. Overall, the volume momentum in Q3 was very strong across the products and that has continued into Q4 thus far. The next slide shows our clinical MRD unit growth over time. We had another record growth of 21,500 additional units, which includes more than 21,000 Signatera growth units and a few hundred Latitude growth units. As a reminder, we offer Latitude as a reflex to Signatera when Signatera can't be performed. This unit growth represents 56% year-on-year growth versus Q3 of last year, and this is the fastest year-on-year growth rate we've had in all of 2025. The drivers here are really the same as we covered on prior calls, groundbreaking clinical data combined with excellent customer experience. New patient starts were again strong as physicians continue to use the test for ongoing monitoring. We see adoption being fueled by the excellent data released earlier this year, including at ASCO, ASCO GI and ESMO. We haven't had time yet to see the effect of the recent ESMO data for the publication in the New England Journal of Medicine, but clearly, those are both very positive factors. We'll talk more about the implication of these results later in the call. The mix of tumor types we are seeing continues to be broad-based as physicians really start to generalize the use of Signatera in their clinics. That broad adoption drives volume growth but also creates a large revenue opportunity as we broaden the range of tumor types that we can get reimbursed. The next slide shows revenue, which was another area of significant outperformance this quarter. We grew revenues 35% over last year, which is actually faster than Q2 despite the tough comparable. This was from strong volume performance combined with excellent progress on ASPs. Each of our major products had a sequential improvement in ASP in Q3 compared to Q2. Women's health and organ health each had another standout quarter and Signatera ASPs are now at roughly $1,200. We had about $55 million in true-ups this quarter as cash collections continue to accelerate, and we posted another record for DSOs at 49 days compared to 57 days just in Q2. That trend has continued in Q4 as October was a clear new record for cash collections. All of this bodes well for future ASP growth, as Mike will describe later in the call. The next slide shows our gross margin traction over time, and we posted another strong gross margin quarter in Q3. Top line gross margins were a record as we got very close to that 65% level. Stripping out the revenue true-ups, we grew gross margins a full percentage point to 61.3% just compared to Q2. We drove that with a combination of better ASPs as well as COGS, which were also very lean in the quarter across the board. In addition to COGS efficiencies, we spent some time on our last call talking about the other key margin expansion vectors we're pursuing. Investing in revenue cycle operations has been a huge win for us over the last 2 years, and we are now at a level where we think we can hold that dollar spending steady as we continue to grow ASPs, which gives us leverage on the prior investments. I also mentioned the coverage expansion opportunity that was really across the board, but particularly in Signatera. In addition to getting more tumor types covered by Medicare, we are starting to see some green shoots in biomarker state reimbursement for commercial volumes. We estimate the growth in Signatera ASP this quarter was driven primarily by the success we had in the spring and fall working with health plans in these states to cover Signatera for their patients. I think it's going to be a pretty steady linear process for us over the next 2 years or so. Finally, all of the above can be accelerated with the deployment of AI. In addition to driving innovation, for example, with our foundation models, AI is already helping us scale these operations as volumes grow without forcing a commensurate increase in headcount. Okay. That's a good segue to the next slide on OpEx. We went into some detail on the last call describing the investments we are making this year in both R&D and commercial operations to extend our leadership in MRD. Looking at Q3, this R&D increase reflects the investments we made to support multiple new product launches as well as the expansion of our clinical trial and data generation efforts for both Signatera and early cancer detection. This year, we've launched Signatera Genome, Latitude tissue-free MRD, Fetal Focus single-gene NIPT, and we're about to launch this expanded version of Fetal Focus. All of these things put us in a position to keep doing well in the market and to continue helping millions of patients per year. In clinical trials, as I mentioned, we're doubling down on evidence generation and that investment we've been making has really paid off. We are now in a position to submit 7 new MolDx submissions by the end of the year. And as I mentioned earlier in the call, reimbursement for all the remaining indications could be worth around $250 million to $300 million of gross profit based on our run rate. So this is well worth the investment. In addition, we are launching many interventional trials to continue advancing the field towards incorporating personalized MRD into the standard of care. In addition to Signatera, the advanced adenoma data we now have in hand gives us a lot of confidence to push as fast as we can to get a high-quality result in the FDA-enabling FIND trial, which is already enrolling. This is a big investment, but we think it's worth it given the very attractive opportunity in ECD that includes a large market size, high gross margins and a very strong performance for our technology. We'll get into more detail on that effort a little bit later today. Finally, as you can see here on the slide, our SG&A is slightly down sequentially from Q2 to Q3. That largely reflects the fact that we are now in a very good spot with the commercial team and with our revenue cycle operations, which were big areas of SG&A investment in the past. We're now in a position to drive significant scale from these prior investments. As we start to look out to next year, we expect there will be limited OpEx growth of roughly 10%, while revenues grow much faster, and margins continue to improve. The OpEx investment will be focused on executing definitive Signatera clinical trials to expand the market and completing the FDA-enabling [ FIND-ECD ] study, where we will be enrolling patients in 2026. As we said before, we think these are both very smart investments. Okay. With that, let me turn it over to Solomon to discuss more details. Solomon? Solomon Moshkevich: Thanks, Steve. Getting into some of our new data and announcements, I want to start with the expansion of our Fetal Focus test. We originally launched Fetal Focus in August with the panel covering 5 of the most common inherited conditions: CF, SMA, Fragile X, alpha-thalassemia and beta-hemoglobinopathies, including sickle cell anemia. The goal of the test is to offer a solution for pregnant mothers who are carriers of one of those inherited gene, but where the father is unavailable for screening to see if the baby might be at increased risk. In these cases, with a simple blood draw, our Fetal Focus test can directly assess the fetal DNA circulating in the mother's blood to detect potential fetal inheritance from both mother and father. This can be done with high sensitivity and specificity, and we believe it is the next best thing when Dad is not available for screening. So the news from last week is that we are expanding the panel to cover 20 of the most common genes and launching that before the end of this year. The validation of this expanded panel, like the original 5-gene panel, leverages prospectively collected samples from the EXPAND trial, which has enrolled over 1,700 high-risk pregnancies from a diverse multi-ethnic population. Where those pregnancies include those with dual inheritance from both parents, partial inheritance from one of the parents or 0 inheritance and confirmed fetal outcomes in all cases based on prenatal or postnatal diagnosis. Testing and confirming all negatives in particular, is critical for a robust estimate of test sensitivity. We use our proprietary LinkedSNP technology to improve detection of challenging homozygous cases, which is where both parents are carrying the exact same mutation in a given gene. This happens with regularity in certain conditions like the classic Delta F508 mutation, which causes cystic fibrosis, if inherited from both parents. LinkedSNP uses information about neighboring DNA loci to work out likely inheritance patterns. We are pleased with the response from the medical community after our initial launch in August, and we know folks are looking forward to this panel expansion so that our Horizon customers can interrogate the cell-free DNA for a broader set of potential inherited conditions. Turning now to oncology, where we had a strong quarter of clinical adoption and new evidence generation. At the ESMO conference, we had 14 abstracts, including 6 orals with a blockbuster readout in muscle invasive bladder cancer across 2 different studies, IMvigor011 and CheckMate 274, both of which also had concurrent publications in the New England Journal of Medicine and Annals of Oncology, respectively. Many of you tuned in after the conference for our special call with Professor Tom Powles, Director of the Barts Cancer Center in London and Chief Principal Investigator of the IMvigor011 trial, who reviewed the significance and the novelty of this data. For those who could not join that call, the link is on our Investor Relations page. But the summary is that we have generated Level 1A evidence to support the role of Signatera in directing treatment after radical cystectomy. As the discussant said during the Congress, this is the strongest evidence to date for intervening with adjuvant systemic therapy on the basis of detecting plasma ctDNA. There are 3 more things to note. Number one, the IMvigor011 protocol called for Signatera monitoring every 6 weeks after surgery. This is a serial surveillance protocol, not simply a onetime test. Number two, patients who tested positive with Signatera at any time in that first year after surgery, derived significant benefit from immunotherapy, improving overall survival by 41%, while patients who remain negative derived no treatment benefit and had excellent outcomes with no treatment at all, achieving 97% overall survival at 24 months. Number three, the result was consistent across cohorts, IMvigor011 with atezolizumab and CheckMate 274 with nivolumab. And Signatera is expected to have a role in postsurgical care regardless of the neoadjuvant treatment regimen. As perioperative care is expected to grow in popularity, which is treatment both before and after surgery, questions will always remain about which patients benefit the most from additional systemic therapy after surgery, which can often be hard for patients to tolerate. As a reminder, the median age of diagnosis in the U.S. for muscle invasive bladder cancer is 73 years old. Ultimately, each doctor and patient will have to make their own informed decisions, and now they can look to Signatera MRD status for additional guidance. We expect this data to fuel adoption of Signatera among GU oncologists and to have a positive halo effect on the overall field and further to differentiate Signatera. Among the other readouts at ESMO, the colorectal data was also notable. Data from the INTERCEPT study and the NICHE study were presented. Both showed that Signatera dynamics and particularly MRD clearance during or after therapy were reliable markers of therapy response. In the INTERCEPT study, they followed ctDNA patterns from over 1,300 colorectal cancer patients, showing the rates of clearance after adjuvant therapy and what it meant. In this cohort, adjuvant therapy achieved MRD clearance in approximately 1/4 of the patients who had tested positive after surgery. And it was very rare for a clearance to occur spontaneously without treatment only 2% to 4% of the time. This makes Signatera extremely reliable for evaluating response to adjuvant therapy. In the NICHE study published concurrently in the journal Nature, the investigators conducted an in-depth analysis of response to neoadjuvant immunotherapy in patients with MMR proficient colon cancer. While they identified novel predictive signatures based on TP53 status, immune cell proliferation and whole genome duplication, the study also showed the power of Signatera dynamics to predict response. Out of the 6 patients who achieved response based on pathologist review of their resected tumor, 5 out of 6 had cleared their ctDNA prior to surgery. And out of the 20 patients who failed to achieve pathological response, 19 out of 20 were still ctDNA positive prior to surgery. This all points towards the clinical utility of using Signatera in the neoadjuvant setting to inform the surgical and adjuvant treatment plan. Both of these studies together with similar evidence in other cancer types, all tell a growing story of Signatera supporting a new type of surrogate endpoint to hopefully accelerate future drug approvals as well. While Signatera had a successful showing at ESMO, there were other ctDNA-guided trials using other assays that did not hit their endpoints, for example, in colorectal cancer and lung cancer. We believe this underscores the differences between ctDNA assays and technologies as well as differences in trial designs. As several presenters noted explicitly during the ESMO conference, study results are not necessarily transferable between ctDNA assays. The field is coming to appreciate that there can be significant differences in performance between different technologies. It is not enough to measure simply analytical assay performance using controlled mixture experiments in a research lab. It is critical that assays be rigorously evaluated in well-designed prospective clinical studies, especially when they're going to inform life and death treatment decisions. As a reminder, Signatera is unique in that we use a patented multiplex PCR amplification technique followed by next-gen sequencing, which identifies a targeted set of clonal mutations with the lowest background error rates and sequencing the plasma at extreme depths with over 100,000 reads per target. By contrast, other labs may use hybrid capture techniques that are broad and shallow, tracking hundreds or even thousands of mutations, but sequencing them at shallow depth. Test performance is based on more than the number of targets. We see this over and over again. It depends on the chemistry, the variant selection and the calling algorithms. All of this helps solidify Signatera's role in cancer care. It will also give rise to a new wave of clinical trials, treating patients only on molecular recurrence and using Signatera dynamics to evaluate treatment response. With that, I want to turn it over to Alex to discuss our exciting road map in early cancer detection. Alex? Alexey Aleshin: Thanks, Solomon. Colorectal cancer is both common and highly preventable when detected early before or right as the cancer develops. Traditional screening works, but participation is uneven. That's why there's intense interest in accurate, convenient blood-based screening options. We have leveraged our experience at over 250,000 early-stage tumor sequence to date to drive deep discovery in order to find a proprietary set of markers that differentiate colorectal cancer and precancerous advanced adenoma lesions from healthy controls. We estimate that the vast majority of these markers are currently not discoverable if only publicly available data sets are utilized. Furthermore, we have embraced an advanced adenoma first approach, focusing our discovery and algorithm development in order to prioritize performance in the difficult-to-detect advanced adenoma lesions. Lastly, we have invested considerable resources to optimize our methylation technology platform to maximize molecular recovery and prevent signal degradation. Taken together, this allows us to detect signals significantly below 0.01% VAF, a range that is required to improve advanced adenoma sensitivity. PROCEED-CRC is a U.S. prospective study of approximately 5,000 average-risk asymptomatic screening participants who provided blood pre-colonoscopy. In the most recent analysis focused on advanced adenomas that was derived from 1,400 sequential participants with clinical outcomes, we reported a 22.5% sensitivity and a 91.5% specificity. Furthermore, when adjusting performance for histological subtype prevalence in recent FDA-enabling trials, sensitivity remained in the approximate 22% to 24% range. This is a step-up from earlier 2025 pilot data readout, which showed an 18% sensitivity at a 91% specificity after technological and algorithm refinements. We have heard some questions about if this sample set is representative of the FDA-enabling study. We want to reiterate that these samples were collected in the same fashion and from the same funnel as the FDA-enabling FIND study. Furthermore, we know that sample processing occurred in a blinded fashion and the size distribution was potentially more challenging than what we expect in a larger cohort. Before we dive into the data, it's important to understand the types of advanced adenomas that are precursors to colorectal cancer and why their detection is clinically challenging. Advanced adenomas are precancerous polyps that can vary significantly in size, structure and cellular composition. These include 4 main subtypes: number one, the rated adenomas, which are flat and often more difficult to detect visually. Number two, tubular adenomas, the most common but typically smaller and less aggressive subtype. Number three, villous or tubulovillous adenomas, which have a high malignant potential due to greater percentage of villous architecture. And lastly, number four, advanced adenomas with high-grade dysplasia, which represent the highest risk of transformation to colorectal cancer. When looking at adenoma subtype, 78% of lesions in our cohort were serrated or tubular, consistent with the 74% to 78% range observed in other large studies. This alignment indicates that our cohort is representative of real-world advanced adenoma biology, further validating that our results are representative and not driven by an unusually favorable distribution. In addition to histological subtype, detection rates can also vary by lesion size as smaller or flatter lesions are notably more challenging for blood-based screening methods to detect. In our PROCEED-CRC study, the mean AA size was 13.7 millimeters, notably smaller than the greater than 15-millimeter average reported size in other FDA-enabling studies. Despite the smaller lesion size, which is typically associated with lower detection rates, our results demonstrate promising sensitivity. In summary, the PROCEED readout underscores Natera's commitment to advancing early detection through a data-driven approach, [ a showing ] promising detection rates even under very stringent clinical conditions, laying the groundwork for improved colorectal cancer prevention outcomes. To move from promising readouts to potential screening tests, Natera has launched FIND-CRC, an FDA-grade validation study targeting approximately 25,000 average-risk adults who provide blood before colonoscopy, targeting approximately 70 screen-detected CRC cases. Primary aims are CRC sensitivity and specificity in people without advanced precancerous lesions. Secondary aims include performance for advanced precancerous lesions for advanced adenoma. The study is designed to generate regulatory-grade evidence that complements and builds upon PROCEED-CRC development data set. The study has enrolled its first patient in May 2025, and we expect enrollment targets to be met over a cumulative 18-month time frame. With that, let me turn it over to Mike to review the financials. Mike? Mike Brophy: Great. Thanks, Alex. The next page is just a summary of the financials compared to last year. We've clearly ramped volumes and revenues while also continuing to transform the gross margin profile of the business. We said a few years ago that long-term gross margins can exceed 70%. And I think the progress we've made this year should give you confidence that we can get there, particularly as oncology overtakes women's health as the largest part of the business over the next few years. We've also clearly ramped OpEx, but very little of the OpEx increase translates to revenue in the same calendar year. These are not Super Bowl ads meant to drive short-term volume growth. These are primarily investments that are designed to deliver growth in 2026 and beyond, along with the roughly $60 million in accruals that don't repeat every quarter, as Steve described. As a result, we are really pleased to be showing leverage in the business with respect to free cash flow generation, and we are significantly bumping up our expectations for cash flow generation for the full year. The balance sheet remains pristine with no permanent debt on the books and the cash flows from operations pushing our cash balance above $1 billion currently. Okay. Let's get to the guide update on the next slide. For the third time this year, we are completely resetting the revenue guide, now ranging from $2.18 billion to $2.26 billion on the strength of the revenues and the volumes we've seen so far this year. The gross margin guide, we are once again bumping up the bottom end of the range 100 basis points to account for the good results we've generated so far this year. To keep modeling simple, we've forecasted Q4 without true-ups in the revenue or the gross margins as has been our previous practice, although the record cash collections in October position us well for more true-ups when we close the books in Q4. Looking into next year, I think a preliminary way to think about volume growth for women's health and organ health is to post a similar number of growth units as we delivered this year, given the teams are relatively stable in size. And for Signatera units, we continue to think about the last 4 quarters rolling average as a good goal for unit growth over the course of the year. So of course, there may be some variation quarter-to-quarter. That implies some very healthy quarters for Signatera next year, but we think that's justified given the strength of the team we now have in place and the drumbeat of prospective outcomes data we've continued to deliver. On ASPs, I think a reasonable initial forecast would be to hold women's health and organ health ASPs stable with some modest growth built in for Signatera and perhaps the $50 range through the course of the year. Our internal teams are, of course, focused on much better results than that across the board. But even this approach yields some big revenue numbers when paired with the volume scale we are expecting. On both the SG&A and R&D lines, we are making the bumps that Steve described in his section. Steve pointed out that SG&A was flat to down sequentially in Q3 compared to Q2 and R&D was up on all the additional launch efforts and clinical trial work we took on. We'll remain opportunistic on additional OpEx investments, particularly in R&D and clinical trials, but we think the commercial operations are well scaled now to support continued rapid growth in the coming years. Accordingly, I'd expect OpEx growth to grow something more like in the 10% range next year with a bias toward the R&D line. We are in the midst of our budgeting process now, and we'll plan to give another update on 2026 when available early next year. I mentioned cash flow generation as a huge bright spot in our results this year, and we expect to sustainably generate cash again next year as we continue to get scale with top line growth and improving margins. Okay. With that, let me open it up to questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Tycho Peterson with Jefferies. Noah Kava: This is Noah on for Tycho. I wanted to start by asking on prenatal. So you guys announced a new Fetal Focus test last week. I guess why is now the right time? What were you hearing feedback-wise on the 5-gene panel? And then looking at the 20-gene panel, how are you thinking about reimbursement there? Steve Chapman: Yes. Thanks. It's a good question. So of course, we launched the 5-gene panel earlier this summer, I think August, something in that time frame. That's gone really well. We've gotten great feedback from customers. And now R&D has gotten to the point where we're in a position where we can launch the broader panel, which was always part of our plan. So we're excited about that. We're also excited about the EXPAND clinical trial. This is something that we started several years ago, if you go back and you take a look. This type of trial is really the gold standard where we're prospectively collecting blood tubes and then collecting diagnostic outcomes on both positive and negative samples effectively on all the pregnant patients that enroll into the study. And that's really the gold standard way to run these types of trials. So we're excited for that to read out over time as well. We think that will really be the defining trial in the space. Noah Kava: Got it. And then for my follow-up, switching to MRD here coming out of ESMO and the IMvigor readout. How are you thinking about the path to NCC guidelines with some of the clinical utility data you put out and then subsequently, the broader commercial payer adoption? Steve Chapman: Yes. So obviously, we're really excited about the data from ESMO, particularly around IMvigor that's been received very well. Alex, do you want to comment on guidelines for a moment and maybe Solomon, if you want to comment as well? Alexey Aleshin: Yes. Thanks, Steve. So we do want to know that the IMvigor011 data is what we call Level 1A clinical data and has been obviously submitted for FDA approval, both for the compound as well as for Signatera as well. If you look at past precedents, typically, if something does go through the FDA process, it is included into the NCCN guidelines. So while we can't really speculate on how [ CTA ] will be described NCCN guidelines, we do expect that Signatera and atezo kind of guided by Signatera in this setting will eventually make it into the NCCN guidelines. Solomon Moshkevich: Yes. This is Solomon. I would add, given that the New England Journal paper has already come out, assuming that all the FDA processes are on track, we would expect to see a guideline update at some point mid or late next year. Steve Chapman: Yes. And just on the final point on this on commercial payers, which I think you also asked on. We're definitely starting to see some traction, as Mike mentioned, from commercial payers because of the biomarker bills. But obviously, generating this level of evidence and just the quantity of data that we're generating, we think, puts us in a good spot longer term to have coverage from commercial payers. Operator: Our next question comes from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: I'm going to keep it to one topic, early cancer detection. First thing is regarding the PROCEED-CRC, advanced adenoma sensitivity, specificity performance, I'm just wondering how important that was to shaping your willingness to invest more in this program? And kind of related to that, generally speaking, are you using the same standards you applied in advancing your NIPT and then MRD programs, 2 areas where you clearly made the right call to move forward. So that's the first part. Second, how much would you expect to invest in 2026? I'm guessing something like $50 million incremental in that program. And then lastly, I'm curious if you'd be willing to share minimum performance -- minimum viable performance you would consider to move forward with this product from a commercial viability standpoint. Steve Chapman: Yes. Thanks, Doug. Yes, all good questions. So I would certainly say the performance that we've achieved definitely shaped our willingness to invest into the program coming out of the JPMorgan conference in the beginning of '25 and then with our initial pilot readout on advanced adenoma. Just -- based on that, we made the decision to initiate the initial stages of the FIND study because we were feeling very positive about the road map of improvements that Alex mentioned on advanced adenoma. But we didn't fully pull the trigger until we saw this most recent readout from the PROCEED study, which was, I think, a big milestone that we're waiting for. And now based off this and our own internal views of the performance and all the, I think, things that Alex outlined just a few moments ago, we're really full steam ahead on the FIND study. And we're excited about it. We've set everything up the right way. We've gotten a jump start by running the PROCEED study and then having all the ducks in a row to start collecting patients. And we think we can enroll the trial in 2026 and hopefully be one of the major players in this early cancer detection space, which we think is a really good opportunity. I think from an investment standpoint, I think you're kind of directionally right, just kind of building off what we spent this year I think that kind of makes sense. And from a minimal viable standpoint, we've always said we think we have to have really strong performance to make it worthwhile. And that's what we're seeing right now, very strong performance. We know where our competitors are. And I think that's something we're, of course, keeping in mind. But again, it's a huge market. We've done well in very competitive environments. So we're going to keep our eye on just where we need to be and be pushing as hard as we can to make sure we're setting up for success. Operator: Our next question comes from the line of Daniel Brennan with TD Cowen. Daniel Brennan: Great. Maybe just on Signatera. You've kind of taken up the guide for giving us some color on next year in terms of kind of an 18,000 plus or minus trend line. Maybe can you just unpack a little bit, nice little bump up again this quarter above what you guys were expecting. Just any color? I know you gave some drivers in the prepared remarks, but just can you dig in a little bit specifically, anything unique really stand out? And if you do hit that kind of 18,000 sequential run rate, which would be a step-up from the prior guide, it is still a decel from what we've seen in the last 2 quarters. So is there anything in the last 2 quarters that was unusual that would cause the deceleration? Or is it just general conservatism? Steve Chapman: Yes, good question. I mean, look, I think the growth at this point is really just coming across the board. I mean, we're seeing a lot of new customers coming on using Signatera for the first time. We're seeing existing accounts and doctors extend their usage. We're seeing new histologies come on. And I think what's really remarkable is just, I think, the very low penetration that we're in right now. I think despite all of our success, I mean, we're still kind of in these very low single digits when you look at overall penetration, including recurrence monitoring. So there's a long way to go. And as long as we keep putting out high-quality data, I think we're going to be in a great position. In the last couple of quarters, we've seen really strong numbers on new patients coming in, which I think has been, I think, significantly more than what we've seen historically. And any time you see like a very sharp uptick, it's something that you always have to kind of think, okay, well, that may normalize over time. But I'll tell you just as we started Q4, I mean, obviously, Mike mentioned this as well in the prepared remarks, I mean, we're seeing that same strong trend on new patients continue. So there seems to be a lot of interest but just having been -- having all been in the space for a long time, we know it's not always a straight line up. And I think kind of the way that Mike put the framework in place is the right framework to think about, but we hope to exceed that as we have been doing thus far. Daniel Brennan: That was super helpful. And maybe just kind of staying on Signatera, if you don't mind. Just you talked about the biomarker bills as Mike gave the $50 kind of price increase over the course of the year through the end of '26 is like a decent starting point. And you talked about early progress and you guys have been signaling that for a little bit. Can you just spend a little more time on it? I guess our thinking was when and if biomarker bills begin to have an impact, it could be a bit of a domino effect. Would be tough for a payer to cover something in Texas and not in the adjacent states. So just any more color on specifically what you're seeing? And is that still a potential in '26? Or do you think it's going to take longer for biomarker bills to really kick in? Steve Chapman: Yes. Mike, do you want to take that? Mike Brophy: I think that there's going to be -- look, I think that you'll have a continued drumbeat from biomarker state reimbursement over the course of '26. I mean I mentioned in my prepared remarks that we've seen the growth that we -- that I'd hope to see in the ASPs from -- for the biomarker states, and that was really based on wins that we had kind of in the spring and in the summer. There is something to the idea that, hey, like when you have like these big national plans and they've got to get it set up to cover Signatera in one area, but then not the other and the clinical utility and the cost savings is so obviously there, does that add to the incentive structure for them just to cover the test more broadly. When we end up kind of getting to steady state and we are kind of broadly covered in a pan-cancer setting, which I think is inevitable, I think we'll look back and see this as one of the drivers, but it's -- you won't be able to tease that out versus all of the excellent prospective outcomes data that we've been publishing and that we're going to have in the future. But yes, I think it's a factor. Operator: Our next question comes from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Solomon, your prepared remarks described the advanced adenoma samples in PROCEED trial. Help us understand why you believe the study is designed in a way to be more predictive as we head into the FIND study readout. That said, what I'm still missing or not understanding is why is your assay different and better able to address what has been an issue for others, low signal abundance and really just the biological limits in ctDNA. What is so unique about your assay? Steve Chapman: Yes. Good question. Alex, why don't you take that? Alexey Aleshin: Yes. Thank you for the question. I think it's a multitude of factors and also just the dedication of our research team. This has been a multiyear process, and we've really approached this, I would say, from first principles. First of all, it's finding the best biomarkers, prioritizing advanced adenoma as something that we really focused on and not necessarily just CRC by itself. I think the technology has also advanced in the last few years that has allowed for increased molecular recovery, lower sample loss and also techniques that help differentiate methylated regions that otherwise might have been difficult to pick up. And then I think lastly, it's using the right samples. I think we've benefited tremendously from having access to one of the largest repository of early-stage colon cancer cases with known VAFs from Signatera. So when we're training and designing our assay, we're able to really focus on the cancers that matter and that are traditionally difficult to detect. And I think that's what's given us a lot of confidence now over multiple readouts that we are on the right track. And I think this study in itself furthermore kind of underscores that, collected in exactly the same fashion, prospective asymptomatic patients, distribution of the advanced adenomas is representative, if not a little bit tougher than you would expect in a much larger study. And we're seeing performance that gives us strong confidence that this is likely to hold up in a larger prospective FDA-enabling study. Subhalaxmi Nambi: Very helpful. Quick unrelated follow-up. When should we expect the VEGA trial to read out, the deescalation arm of the GALAXY study? Steve Chapman: Alex, why don't you jump on that one, too? Alexey Aleshin: Yes. So it's difficult for us to predict exactly when the study is going to read out. It is an event-based readout. I will say that all patients on the VEGA study have been randomized. So we're just waiting for enough events. I think it is safe to say that the readout is likely to occur in 2027. But as we get closer to that, we'll refine that guidance. Operator: Your next question comes from the line of Casey Woodring from JPMorgan. Casey Woodring: I have a couple of quick ones on Signatera. I was hoping that you guys could split out contribution from new patient starts in the quarter and whether that increased from last quarter? I know you called out strength there last quarter as well. And then today, you've noted an acceleration across multiple tumor types in Signatera. Just curious if you can clarify which tumor types, you're seeing the most strength and if you're seeing any early traction from new data readouts like IMvigor? Steve Chapman: Yes, it's a great question. So yes, I mean, we had -- I think in Q2, we had sort of said that the growth in new patients was an all-time record, and I think it was something like maybe 2x greater than anything we've ever seen before. And what's incredible is in Q3, we basically saw something similar where we kind of had almost to those same levels of new patients coming in -- new patient starts coming in. Of course, it was I mean -- we had more new patients coming in, but the growth quarter-over-quarter was almost to this record level of growth that we had seen previously. Sorry, I just had to clarify. But yes, so I do think we're seeing a lot of continued interest with new patients coming in. With regards to where we're seeing interest, it's really broad across the board. Where we generate a lot of data, there's a lot of interest. And of course, coming out of the IMvigor announcement, there's been just a ton of interest in bladder. We're getting a lot of inbounds, both interest from pharma companies as well as physicians that are now looking at how they can implement this in either trials or in their practice. Casey Woodring: Got it. That's helpful. And then just my quick follow-up here. I appreciate the top line and OpEx color on '26, but can you just talk about gross margins? How should we think about those, especially as Signatera becomes a larger part of the mix? Would you expect those to step up at a similar rate as they did here in '25? Would that be a good benchmark? Steve Chapman: Yes. Mike, do you want to take that? Mike Brophy: Yes. I think on the gross margins, I think, first, as I mentioned in the prepared remarks, I think it's just -- it's easier to model if you strip out the true-ups and so you start with kind of the pre-true-up number and anchor to that. And then I think that we can have a reasonably meaningful kind of sequential improvement over the course of next year in gross margin as we continue to grind higher. Obviously, it's hard to repeat the same exact rate that we had this year. I think we're up some 4 percentage points or something like that year-on-year. It's a pretty meaningful change. But I do think that the target remains clear to us. I mean I think we can be in that 70% range over time. And I think even inclusive of the true-ups, I think that 64.9% number that we put up this quarter, that gives you a glimpse of what we're capable of. So I'm feeling very encouraged on gross margins. I do expect improvement next year. Operator: Our next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Congrats on a strong print here. First question is more on the Signatera side. Just trying to understand what the ASP increase or -- is that the assumptions for next year, is that just on biomarker bills? Or are you baking in additional indications that you talked about? So can you -- maybe could you clarify on that point? And then on the clinical side, it would be great if Alex could provide more on -- when we look at the PEGASUS and DYNAMIC-III trials out there, given what we've seen with some of the struggle around the escalation, how do you -- how are you thinking about VEGA there? And then I have a follow-up. Steve Chapman: Mike, do you want to take ASP call? Mike Brophy: Yes. So on the ASPs, I mean, honestly, on Signatera if we get -- if we do the things that we think internally we can do on both biomarker states and given all the MolDX submissions that we have in flight, I think we can do better than the $50 I mentioned in the prepared remarks. One thing to note is that again, we will have another kind of reset on ADLT, which would be a modest headwind for us going into next year. So I just want you to be factoring that in. So the $50 represents what I hope will end up being kind of a conservative cast of achieving some fraction of all these opportunities we have ahead of us. Steve kind of talked about this, but we've all been in the space and been together for a long time. And unfortunately, it doesn't always go up into the right. You don't always get 100% of these opportunities to flow in at the time that you want them. But if you break down MolDX submissions, we have a long track record of being successful with those and then driving ASP improvements off of those. I think the biomarker state is a driver that we started to really show some traction there as well. And then, yes, there's some other opportunities related to potential guideline inclusion with bladder and beyond that could be very exciting as upside. But I think just as an initial kind of preliminary kind of glimpse into '26, I think that's the right starting point. Alexey Aleshin: Great. And Puneet, thanks for the question regarding VEGA. It's hard for us to comment on other readouts. But I will say that, obviously, assay performance is important, study design is important. I think when VEGA was designed, a lot of thought went into the right approach. I will flag that in VEGA, there was serial testing patients could cross over and get delayed treatment as part of the ALTAIR study. So that's one factor to consider. I think the other thing I want to point out is we do benefit a little bit from the fact that GALAXY actually was the basis for enrolling patients into VEGA, and we have been able to see now over a period of multiple years, how the assay has performed in the non-randomized GALAXY patients, which does increase our confidence. And I think lastly, it is a larger study, close to 1,000, if not more patients were randomized. And it's hard for me to obviously predict exactly the outcome, but we remain confident and excited to see the data when it's unblinded in 2027. Puneet Souda: Okay. That's helpful. And then just a follow-up. On the women's health side, we've seen growth from a competitor in the market, mother-only assay that has gained traction. So obviously, you have Fetal Focus product now. Could you talk about the positioning of the product if the sales force is fully trained on it? How can you sort of go into market and capture share. You obviously have a strong commercial position here. So maybe talk about what -- how should we think about that piece of the market and your positioning and growth there? Steve Chapman: Yes, it's a good question. So yes, I mean, we've been doing carrier screening for a long time, right? I think we made one of the largest providers of next-gen sequencing-based carrier screening in the U.S. And when you screen the mother, if the mother is positive, then the standard of care is to go screen the father. Now one of the challenges is that the father is not always available to get tested or maybe not willing to get tested. And so there's -- in those cases, there's a clinical need to be able to directly assess the genetic status of the fetus. And what's great with Fetal Focus now is that we can do that. We launched the 5-gene panel in, I think, August that was received very well. Now we're sort of expanding to the 20-gene offering. And of course, this is something we can roll out through our entire customer base. We can roll this out broadly through our existing sales team. And then there's a lot of, I think, competitors that maybe don't have this capability where this gives us another advantage where we have something unique compared to them. And then for the groups that do have it, we think we're positioned very well, both with our technology and with the clinical trials that we've been doing. So as I said, there's kind of always been competitors in the space, and we've done really well. We're very pleased with our growth in the women's health space. I mean, we can kind of see sort of where others are growing and how we're growing, and we think we're doing very well there. And we think this can actually increase that as we move forward. Operator: Next question comes from the line of Catherine Schulte with Baird. Catherine Ramsey: I'll just go ahead and ask both my questions now. First on early detection, we've seen some players start in lung cancer and then move on to multi-cancer applications, and you've expressed interest there as well. Obviously, you want to figure out CRC first, but any updates on your long-term strategy in screening and maybe when we could hear updates on the multi-cancer side? And then second, on Signatera 2026 volume growth, just to confirm, was your comment to look at the rolling average of the last 4 quarters in terms of sequential unit volume growth, so 18,000 or so? And does that level hold up for the fourth quarter as well? Steve Chapman: Yes. Thanks. So I'll just comment on the first one. I mean, I think the -- our focus right now has been getting the CRC product completed through the clinical trial process and approved on the market. But of course, in the background, we've got a lot of activity going on. And we have an excellent team. And so [ MSA ] is something that, of course, we think we would be in a good position to do and to perform well on. So just kind of stay tuned there. But in the near term, we think there's a big opportunity in CRC, and we think we're going to be one of the major players in this space, and it's an attractive opportunity when you look at ASPs, gross margins and just the clinical need and the total market size. Mike, do you want to take the second? Mike Brophy: Yes. Steve Chapman: Do you want to take the second question on just kind of what we're thinking from a forecast standpoint on Signatera? Mike Brophy: Yes. Catherine, the way you said that, I think, is right. I mean what I had in mind there is kind of the rolling for the growth -- rolling 4 quarters average for the growth units. And I just stress it's not -- every quarter is not -- it cannot always be up into the right. You don't always exceed that rolling 4 every quarter, even though we have up to this point. But I think it's -- you got to have some kind of benchmark, I think, for modeling. And I think that's a very healthy one that requires very good execution from our team. And I think if you're able to look at it over the year, like looking back on it, I think we'll be able to hit that bar. Operator: Okay. Ladies and gentlemen, that is all the time we have for questions. This concludes the question-and-answer session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day, everyone.
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