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Operator: Welcome to BioNTech's Third Quarter 2025 Earnings Call. I will now hand the call over to Doug Maffei, Vice President, Strategy and Investor Relations. Please go ahead. Douglas Maffei: Thank you, operator. Good morning and good afternoon, everybody, and thank you for joining BioNTech's Third Quarter 2025 Earnings Call. As a reminder, the slides we'll use during the call and the corresponding press release can be found in the Investors section of our website. On the next slide, you will see our forward-looking statement disclaimer. Additional information about these statements and other risks are described in our filings with the U.S. Securities and Exchange Commission, or SEC. Forward-looking statements on this call are subject to significant risks and uncertainties and speak only as of the date of this conference call. We undertake no obligation to update or revise any of these statements. On Slide 3, you can find the agenda for today's call. I'm joined by the following members of BioNTech's management team: Ugur Sahin, Chief Executive Officer and Co-Founder; Ozlem Tureci, Chief Medical Officer and Co-Founder; and Ramon Zapata, Chief Financial Officer. With this, I'll hand the call over to Ugur. Ugur Sahin: Thank you, Doug, and warm welcome to you all as you join us today. As BioNTech has grown, our vision has remained constant, namely translating science into survival. We are building a global immunotherapy powerhouse, a fully integrated biopharmaceutical company with the science, scale, capabilities and the aim to deliver multiple approved therapies and reach patients in need. Cancer remains a systems problem, heterogeneous across patients and variable within individual tumors. We believe the future lies in rationally designed combinations, pairing potent and precise mechanism of action that create biological synergies. To this aim, we have purpose built a diversified clinical pipeline spanning mRNA immunotherapies, next-generation immunomodulators, ADCs and other targeted agents that enable development of potent, personalized precision medicines and novel-novel combinations across solid tumors. Our goal is to address the full continuum of cancer from resected high-risk tumors in the adjuvant setting to advanced and metastatic disease to treatment-resistant and refractory cancer. Our strategy concentrates capital on 2 priority pan-tumor programs that are designed to anchor various combinations. One is Pumitamig, formerly BNT327, a PD-L1 VEGF-A bispecific that unites checkpoint inhibition with vascular normalization in 1 molecule. We believe Pumitamig is particularly suited as a next-generation IO backbone to combine with chemo ADC and other immunomodulators. The other is mRNA cancer immunotherapy that is designed to activate and educate the immune system with precision. Our mRNA cancer immunotherapies have advanced in randomized late-stage trials with focus on the adjuvant setting. Both approaches have disruptive potential and align with our vision. We believe these programs could establish new standards of care and improve survival outcomes. Together, these programs provide breadth, optionality and scalable registrational path across solid tumors. We are investing deliberately scaling clinical development, building manufacturing that ranges from personalized to large-scale production and preparing for commercialization in key markets to reach patients in need. Now turning to how our achievements in the quarter relate to our vision and strategy. We see Pumitamig as a potential standard of care across diverse tumor types, spanning settings already treated with checkpoint inhibitors and those where checkpoint inhibitors have not demonstrated benefit. With our partner, BMS, we are executing a broad registrational program. This quarter, we made significant progress in advancing Pumitamig, taking concrete steps towards our registrational plan. In Q3, we progressed enrollment in 2 global registrational trials in lung cancer and remain on track to initiate the TNBC Phase III this year. This keeps us aligned with our target of first potential launches before the end of the decade. Across the portfolio, more than a dozen signal-seeking studies progressed. Either with chemo backbones to expand into additional indications or at novel-novel combinations with BioNTech proprietory assets. Importantly, we advanced clinical mono agent profiling of potential combination partners, helping to derisk dose, schedule and safety assumptions for future registrational design. These steps, including Phase III recruitment momentum, initiation of new combination cohorts and deeper combination partner characterization are all about informing the next wave of our registrational trials planned with BMS from now onwards. Turning to our mRNA cancer immunotherapy platform. In October, we presented Phase II trial updates for BNT111, our fixed candidate in anti-PD-1 resistant refractory melanoma and for Autogene cevumeran, our fully personalized mRNA cancer immunotherapy in first-line treatment of metastatic melanoma. Our data reinforces our view that adjuvant settings, where tumor burden is low and immune control is most effective represents, where mRNA immunotherapy can deliver the most significant benefit to patients. Ozlem will share details on how this readout sharpening our development focus. This quarter, we hosted our second AI Day. It underscores that we are not only pioneers in new pharmaceutical technologies, but a fully integrated AI-tech bio company with AI tools that enable discovery and development of innovative medicines. We showcased AI-based approaches designed to convert complex dimensions of data diversity into personalized therapy development. We demonstrated 2 distinct strengths of our AI capabilities, addressing inter-patient heterogeneity and intra-tumor variability and driving precision and potency in our treatment approaches. With regard to our COVID-19 vaccine franchise, which is partnered with Pfizer, we successfully launched our variant adapted vaccine for the current season following regulatory approval. With these launches in major markets and with a strong balance sheet, over EUR 16 billion in total cash, equivalents and securities, we have the resources and the flexibility to fund the oncology transition, while maintaining a disciplined P&L. Simply put, we are transforming scientific advances into late-stage programs in our priority oncology program across indications. In parallel, we are building the capabilities and the financial strength to translate positive data rapidly into market opportunities and most importantly, into patient benefit. With that, I will hand over to Ozlem to discuss our clinical execution and near-term data readouts. Özlem Türeci: Thank you, Ugur. I'm glad to be speaking with everyone today. I'll start with a top line status of the programs that are heading our pipeline before moving to specifics. Firstly, with our PD-L1 VEGF-A bispecific antibody Pumitamig, we are executing a broad registrational program in partnership with Bristol-Myers Squibb. Second, for our mRNA cancer immunotherapies, we have recently provided 2 Phase II updates that support and inform our current development strategy. And third, for Trastuzumab-Pamirtecan or TPAM, our HER2-targeted ADC known previously as BNT323 that we developed with our partner, Duality, we continue to progress towards first BLA submission now planned for 2026, subject to regulatory feedback. We are evaluating TPAM as a monotherapy into a randomized Phase III trials, 1 in metastatic endometrial cancer and 1 in breast cancer. For both studies, we expect data in 2026. We have also initiated a signal-seeking trial evaluating the novel combination of TPAM with Pumitamig. For Pumitamig, let me recap the clinical development framework, our refined 3 wave plan that we are pursuing with our partner, BMS. Wave 1 aims to establish Pumitamig in 3 foundational first-line indications, small cell lung cancer, non-small cell lung cancer and triple-negative breast cancer through global registrational Phase III trials. Wave 2 and 3 aim to expand the opportunity of Pumetamic by amplifying its differentiation, and we do this in 2 dimensions: first, through signal-seeking studies in combination with standard of care across tumors that inform our indication strategy and prioritization; and second, through novel-novel combinations, notably with our ADCs that enhance efficacy. We have delivered tangible progress on all these 3 waves in Q3. Regarding Wave 1, in small cell lung cancer, the global Phase III is recruiting and the Phase III dose is locked based on the dose optimization data set with a safety profile consistent with known PD-L1 VEGF chemo experience. In non-small cell lung cancer, the Phase II part of the seamless Phase II/III trial achieved full enrollment and the Phase III portion is recruiting. In TNBC, we remain on track to initiate the global Phase III this year, targeting the PD-L1 low segment, where unmet need is highest. This slide shows additional studies. These are supportive studies for dose finding, setting refinement and regional programs that contribute to the body of evidence supporting our 3 foundational global Phase IIIs. Wave 2 serves as our expansion engine. We now have more than a dozen chemo-based signal-seeking studies across tumor types and lines of therapy. In Q3, we opened new cohorts and continue to mature data sets that will feed into our pivotal planning. This helps to ensure that the next registrational wave is evidence-led and prioritized by benefit risk profiles, patient population size, well-informed study design and commercial opportunity alongside other key factors in our decision matrix. Spearheading this next round of pivotal trials, we are initiating 2 trials in partnership with BMS with registrational intent for Pumitamig in combination with chemotherapy in first-line microsatellite stable colorectal cancer and first-line gastric cancer. Wave 3 elevates the potential of Pumitamig through novel-novel combinations to maximize its clinical impact, reinforce class differentiation and set up a multiyear pathway to sustain the value and the longevity of the drug into the new decade. Here, several combo cohorts of Pumitamig with our ADCs or other novel compounds are already enrolling and have gained momentum in Q3. Initial data over the next year will inform decision-making for our first pivotal combinational regimen. In parallel, we are continuing mono-agent profiling of potential combination partners to set clear baseline for dose safety and sequence. Taken together, Q3 was a quarter of strong clinical execution that strengthened our registrational core, widened our expansion engine and advanced the novel-novel combination rationale that we believe will further distinguish and elevate Pumitamig over time. Let me now highlight 2 Q3 focal points. First, our first-line small-cell lung cancer registrational program and why the recent updates are catalytic. And second, our advances in mono agent profiling for refining our combination strategy. Small cell lung cancer remains a challenging immunologically cold disease in which responses to immune checkpoint therapy tend to be short-lived, resulting in modest gains over chemotherapy alone and low long-term survival. Over the last 18 months, we have built a cohesive evidence base across multiple Phase II studies in first- and second-line small cell lung cancer initially in China and now globally, showing encouraging activity and a manageable safety profile. This quarter, at WCLC, we reported the first global data from our Phase II dose optimization study in untreated extensive-stage small cell lung cancer, evaluating 2 dose levels of Pumitamig plus chemotherapy. All patients irrespective of dose had disease control at 20 mg per kg we observed a confirmed objective response rate of 85% and a median progression-free survival of 6.3 months. 30 mg per kg yielded a confirmed objective response rate of 66% and a median PFS of 7 months. Median overall survival data were not yet mature. Safety remained consistent and manageable with low discontinuation and no new signals beyond those typically seen with chemo and PD-L1 VEGF agents. 2 points are worth emphasizing. First, dose clarity, which is a critical derisking step for any registrational program. The global dose optimization readout allowed us to lock the Phase III regimen at 20 mg per kg every 3 weeks. Second, consistent performance across regions. Earlier China data sets in first-line extensive stage small cell lung cancer showed robust activity and manageable safety. The global Q3 data are consistent with those findings, which further strengthens our confidence in Pumitamig's benefit across patient populations and practice patterns. Together, these results support our ongoing global Phase III ROSETTA LUNG-01 trial, which compares Pumitamig plus chemotherapy against atezolizumab plus chemotherapy in untreated small cell lung cancer. In parallel, in China, we continue with second-line randomized Phase III trial of Pumetamic plus chemo versus chemo alone. This quarter, we expanded our Pumetamic small cell lung cancer program to include novel-novel testing, and we launched signal-seeking studies of Pumetamic plus our B7H3 ADC, BNT324 in both first- and second-line small cell lung cancer. As Phase III readouts and Phase I/II ADC combination data sets mature, we will be increasingly well positioned to select and advance additional regimens designed to establish long-standing presence in small cell lung cancer. This brings me to our strategy for advancing combinations of Pumetamic with other novel agents, one of our key differentiation approaches. The cornerstone is establishing mono agent evidence of activity, durability and safety before we decide to pair with Pumetamic. For our B7H3 ADC, BNT324, our mono agent database has expanded significantly over the last 12 months. B7-H3's broad expression profile aligns well with Pumitamig's expand tumor opportunity. In small cell lung cancer, BNT324 as monotherapy achieved an objective response rate of 56% with deep tumor shrinkage across the waterfall, an unusually strong single-agent signal in this setting. In non-small cell lung cancer, activity was observed in both squamous and non-squamous disease, including an EGFR mutant subset with an objective response rate of 21%. In heavily pretreated metastatic castration-resistant prostate cancer, we observed meaningful tumor shrinkage with BNT324 and a durable radiographic progression-free survival with a manageable safety profile. Recently at ESMO, we reported data for our TROP2 ADC, BNT325 in second-line plus TNBC with an objective response rate around 35%, disease control rate of roughly 81% and median progression-free survival of about 5.5 months. Also in Q3 for our HER2 ADC T-PAM, we saw a substantial expansion of the monotherapy data base by the DYNASTY-Breast02 Phase III trial, our partner DualityBio conducts in China that met its primary endpoint of PFS improvement versus trastuzumab emtansine in pretreated patients with HER2-positive un-resectable or metastatic breast cancer. T-PAM is another promising combination partner with the potential to expand Pumitamig's therapeutic reach into the HER2-expressing tumor spectrum. Taken together, these data provide a clear monotherapy baseline and help us set the bar for add-on benefit from Pumitamig plus ADC combinations. Across these programs, the mechanistic rationale is consistent. VEGF-A blockade can normalize vasculature to improve ADC delivery, while PD-L1 inhibition can convert ADC-mediated cytotoxicity and antigen release into a broader durable immune response, aiming for deeper debulking plus immune control. These represent complementary mechanisms that single agents cannot engage simultaneously. So operationally, we made 2 key advances in Q3, continued mono-agent profiling to refine dose and sequence and codification of our add-on benefit threshold and expansion of Pumitamig plus ADC cohorts across prioritized settings. Of note, our go/no-go decision-making process is driven by a holistic evaluation that goes beyond efficacy signals and safety profiles. We strategically assess market opportunity, unmet needs, competitive dynamics and weigh other key factors to ensure every decision aligns with our mission to deliver transformative benefit for patients. Moving now to our second oncology cornerstone, mRNA cancer immunotherapy. iNeST is individually manufactured per patient to target personal neoantigens. The biology and our clinical experience point to greatest relevance in earlier disease settings, where lower tumor burden allow the immune system to consolidate control. Our ongoing randomized Phase II trials are designed to test that premise in a rigorous way. Off-the-shelf FixVac that includes BNT111 for melanoma, BNT113 for HPV16 positive head and neck cancer and BNT116 for non-small cell lung cancer targets shared antigens and is intended to pair with checkpoint inhibitors and increasingly our next-gen backbones. We continue to advance execution and evidence generation across multiple tumor settings, while keeping optionality around where and how FixVac is best positioned longer term. This quarter at WCLC, we presented results for BNT116 plus cemiplimab as consolidation treatment in unresectable Stage III non-small cell lung cancer. We also presented data at ESMO from 2 randomized Phase II trials in melanoma, 1 with BNT111 FixVac and the other for Autogene cevumeran iNeST. I will briefly walk you through the melanoma readouts and their implications. Starting with BNT111 FixVac in the high medical need population of patients who had relapsed or not responded to PD-1 treatment. The Phase II study evaluated BNT111 plus cemiplimab against a historical control objective response rate of 10% reported for anti-PD-1 treatment in this setting. The study included 2 calibrator monotherapy cohorts to characterize the safety of each agent and its activity on objective response rate. The objective of this design was signal characterization, not cross-arm efficacy claims. In the monotherapy cohorts on progression addition of the second agent was permitted. More than half of the patients in each arm opted for this addition, after a median duration of [ IVA ] monotherapy treatment of around 4 months. The study met its prespecified primary endpoint by rejecting the null hypothesis of an ORR of 10% with statistical significance. The ORR of the combination was 18%, including deep and durable responses. Notably, 2/3 of the responses were complete responses, supporting the depth of activity. Follow-up showed a positive impact on long-term survival. 37% of patients were still alive after 24 months, 21% were free of tumor progression. Safety was manageable, driven largely by expected mostly grade 1, 2 cytokine-related events consistent with the mRNA platform. BNT111 monotherapy also demonstrated objective responses and a consistent safety profile. Taken together, these results support that BNT111 is active in this difficult post-IO setting and provide us useful footing to guide setting selection and optimal combinations going forward. Turning to iNeST. The data presented at ESMO come from our randomized Phase II trial evaluating Autogene cevumeran in combination with pembrolizumab versus pembrolizumab alone in first-line metastatic advanced melanoma. As previously disclosed, the trial did not meet the primary endpoint of a statistically significant improvement in progression-free survival. That said, we observed a numerical trend favoring the combination and overall survival. In the combination arm, 12 months overall survival was 88% and 24 months overall survival was 74% compared to 71% and 63% in the pembrolizumab arm, respectively. Of note, crossover was allowed and patients randomized to pembrolizumab received the combination at progression. For the overall survival analysis, those patients remain in their originally assigned arm, which can dilute the observed treatment effect over time. We observed robust neoantigen-specific T-cell responses in the majority of evaluable patients with multi-epitope breadth and persistence of T-cell clones well beyond induction, indicating that the mRNA therapy is mediating the intended biological activity that we want to achieve. The translational readouts give us 3 actionable insights. First, T cell response breadth correlates with activity. Within the combination arm, patients who mounted a broader neoantigen-specific T-cell response experienced longer progression-free survival, supporting our ongoing efforts to maximize antigen breadth and to target early and low tumor burden disease with still proficient immune cell priming capacity. Second, immune cell PD-L1 matters. We saw a trend of improved overall survival for the combination in tumors, where immune cell PD-L1 was high, while tumor cell PD-L1 did not discriminate overall survival in this data set, supporting that low tumor cell PD-L1 should not exclude tumor types from vaccine PD-1 strategies. Third, signal in IO-insensitive biology. There was a trend of improved overall survival with the combination in tumor mutational burden low patients. Precisely the population that typically gains less from IO. This is consistent with the concept that the vaccine can supply immunogenic targets, when endogenous mutation load is limited and further encourages development in settings such as pancreatic cancer and MSS colorectal cancer with low tumor mutational burden and unresponsiveness to IO. Altogether, these mechanistic insights support our ongoing randomized Phase II trials, both the specific indications we have chosen, which is colorectal, pancreatic and bladder cancer as well as our focus on the adjuvant setting, where tumor burden and heterogeneity is lowest and T-cell proficiency is still high. Now looking ahead, what comes next? We will continue to generate and present new clinical data across our oncology pipeline, data that directly steer late-stage decisions. For Pumitamig, we will share early data from our TNBC program in December, including from our dose optimization cohorts, which are central to defining the Phase III regimen. From our ADC platform, we expect additional monotherapy updates from BNT324 in cervical cancer and platinum-resistant ovarian cancer, from BNT325 in TNBC and from BNT326 in HER2-null and low hormone receptor positive breast cancer. These studies explore indications defined dose and sequence guardrails and set the add-on benefit bar for Pumitamig's novel-novel combinations. For the randomized Phase II trial evaluating Autogene Cevumeran monotherapy treatment versus watchful waiting in adjuvant ctDNA-positive Stage II high-risk or Stage III colorectal cancer, we expect an interim update in early 2026. The efficacy evaluation of the primary endpoint of disease-free survival is projected for the end of 2026, when the data set will have reached the intended maturity. Then later this year, we plan to present data together with our partner, Onco C4 from the nonregistrational first part of the ongoing global Phase III trial evaluating our anti-CTLA-4 antibody, Gotisrobart versus chemotherapy as a second-line treatment for squamous non-small cell lung cancer. Overall, these upcoming data points advance the same theme. Evidence-led prioritization by establishing dose finding and mono ADC baselines to further refine Pumitamig registrational path and leverage randomized setting-specific readouts to position our mRNA immune therapies where they are most likely to succeed. With that, I will now turn the presentation over to our CFO, Ramon Zapata, for the financial update. Ramón Zapata-Gomez: Thank you, Ozlem, and a warm welcome to everyone who has joined today's call. I will begin by reviewing our financial results for the 3 months ended September 30, 2025. Note that all figures are in euros unless otherwise specified. The total revenues reported for the period were EUR 1.519 billion, an increase from the same quarter in 2024, which was EUR 1.245 billion. This increase was mainly driven by the recognition of USD 700 million as part of the BMS collaboration in the third quarter of 2025. For context, in total, we expect to receive USD 3.5 billion in upfront and noncontingent cash payments from BMS between 2025 and 2028. We expect to recognize this as revenue in increments annually over the development phase of Pumitamig. For the third quarter 2025, we reflected USD 700 million in our revenues. Moving to cost of sales. This amounted to approximately EUR 148 million for the third quarter of 2025 compared to approximately EUR 179 million for the same period last year, driven by lower inventory write-downs. Research and development expenses were approximately EUR 565 million for the third quarter of 2025, compared to approximately EUR 550 million for the same period last year. R&D expenses were mainly driven by the initiation of late-stage trials for our immunomodulators and ADC programs and partly offset by cost savings resulting from active portfolio management towards our priority programs. SG&A expenses amounted to approximately EUR 148 million in the third quarter of 2025 compared to EUR 150 million for the same period last year. The decrease was mainly driven by lower external costs, partially compensated by our ongoing commercial build-out. Our other operating results amounted to approximately negative EUR 705 million in the third quarter of 2025 compared to approximately negative EUR 355 million for the same period last year. Our other operating results for the third quarter of 2025 was primarily influenced by the settlement of a contractual dispute. For the third quarter of 2025, we reported a net loss of EUR 29 million compared to a net income of EUR 198 million for the comparative prior-year period. This was mainly driven by the effect of settlement disputes. Our basic and diluted loss per share for the third quarter of 2025 was EUR 0.12 compared to basic earnings per share of EUR 0.82 and diluted earnings per share of EUR 0.81 for the comparative prior-year period. At the end of the third quarter of 2025, our cash, cash equivalents and security investments totaled EUR 16.7 billion, including the USD 1.5 billion upfront payment received from BMS. Our strong financial position empowers continued investments in our late-stage priority programs and preparations for commercialization of our diversified oncology portfolio. Turning to the next slide. We are updating the company's financial guidance for the 2025 financial year. Our previously issued revenue guidance range for 2025 was $1.7 billion to $2.2 billion. And today, we are increasing it to $2.6 billion to $2.8 billion. This is mainly driven by the recognition of USD 700 million from our BMS collaboration. Further guidance considerations, such as those related to our COVID-19 vaccine business, including inventory write-downs from COVID-19 vaccine sales in Pfizer's territories as well as expected revenues from the pandemic preparedness contract with the German government and revenues from our service businesses remain unchanged. Turning to expenses. We are lowering our prior 2025 financial year R&D expense guidance by EUR 600 million to a new range of EUR 2 billion to EUR 2.2 billion. This updated guidance reflects our active portfolio management that has enabled significant R&D efficiencies. As part of that, we follow a rigorous go/no-go decision-making across all development stages as part of the prioritization efforts. This allows us to focus on the programs in our portfolio, which we believe represents the largest opportunities. Consistent with our commitment to disciplined and sustainable growth, we are also improving our full-year guidance for SG&A and capital expenditure for operating activities. We are reducing our full year SG&A expense guidance by $100 million to a range of $550 million to $650 million as a result of ongoing cost optimization initiatives. We are also reducing our full-year guidance for capital expenditures for operating activities to a range of $200 million to $250 million to better reflect our targeted investment in manufacturing. Aligned with our disclosures earlier in the year, we expect to report a loss for the 2025 financial year as we continue to invest in our transition to become a fully integrated commercial oncology company. As Ugur outlined, we continue to focus on executing our strategy around 2 pan-tumor product opportunities, Pumitamig and our mRNA cancer immunotherapies. We currently have multiple ongoing Phase II and III trials across these programs, reflecting our strategy to bring novel combinations to patients. We expect to generate additional meaningful data for these programs in the months ahead. As we advance, we will continue to maintain rigorous financial discipline and remain focused on achieving long-term sustainable growth. Before concluding, I would like to invite you to watch our annual Innovation Series R&D Day event on November 11. During the R&D Day, we plan to provide a deeper dive into our oncology strategy, including plans for Pumitamig and our mRNA immunotherapy candidate. Thank you for your ongoing support and interest as we continue to create value for cancer patients, society and shareholders. With that, we would like to open the floor for questions. Operator: [Operator Instructions] We will now take our first question. From the line of Tazeen Ahmad from Bank of America Securities. Tazeen Ahmad: I wanted to get a sense about how you're thinking about the market opportunity for MSS CRC and first-line gastric cancer. Can you just talk about how your product can be particularly differentiated from what's currently used? Douglas Maffei: Tazeen, thank you for the question. We lost your audio there a little bit. Could you just -- sorry, could you just repeat that question? I just want to make sure we get it correct. Tazeen Ahmad: I wanted to ask a question about the market opportunity for MSS CRC and for first-line gastric. I wanted to get a sense of how you think about the opportunity relative to the competition? Douglas Maffei: Thank you, Tazeen. We got it this time. So that was a question about how we think about the CRC first-line opportunity in gastric and how it compares to the competitive field. So Ozlem, would you like to take that question? Özlem Türeci: Yes, I can take that question. Both indications as CRC and gastric first-line are still high medical need indications. And we think that the combination of VEGF-A and PD-L1 blocking from a biology point of view, has a rationale for development and has the potential of improving the clinical benefit for these patient populations. Operator: We will now take the next question from the line of Terence Flynn from Morgan Stanley. Terence Flynn: I had 1 question and then 1 just clarification. So for BNT323, was just wondering, if you can share any more color on the delay in the BLA filing in terms of the gating factor here? And then on the new R&D guidance, just want to clarify that, that reflects the assumption of some of the BNT327 expenses by Bristol-Myers and that, that was the driver of the change here, if there's other prioritizations that fed into this? Douglas Maffei: Yes. Okay. Thank you, Terence. So 2 clarifications in there. So maybe if we do the R&D guidance first, and I'll direct that one to Ramon. And then Ozlem, I'll direct the BNT323 BLA progress question to you after that. Ramón Zapata-Gomez: Thank you for the question, Terence. I would say that the lower guidance on R&D is not about reducing spending on BNT327. We are updating this guidance to reflect the lower R&D expenses for the year. The reduction is mainly driven by the phasing of certain programs and a deliberate focus on our key strategic priorities, meaning BNT327 as you rightly mentioned. We demonstrate disciplined portfolio management, but I would say it's too early to say whether this represents a structural shift. Depending on the pace of our late-stage programs, including the expanded efforts on Pumitamig, R&D spending will remain at similar levels or increase again next year. I think what really matters is that we continue to allocate resources with focus and flexibility to maximize long-term value and support our key strategic priorities and programs. Douglas Maffei: And Ozlem, would you now like to take BNT323? Özlem Türeci: I can take the second question, Terence. The reason why we -- originally, we guided towards end of '25 for BNT323 BLA submission. This moves now into '26 because we have continued discussions and conversations with the FDA to further understand additional data needs and are generating this information. The plan is still to submit in '26. And in '26, we will also get for this program data from our ongoing breast cancer study. Operator: We will now take the next question from the line of Daina Graybosch from Leerink Partners. Daina Graybosch: Thank you for the question. I have a question on the overall strategy with Pumitamig of Establish and Elevate as 2 steps. And why you're taking that approach versus in some indications doing them simultaneously let's say, in multi-arm Phase III studies with ADC combos and Pumitamig on top of traditional standard-of-care chemo to leapfrog, particularly where you have some early data with the ADC in an indication and the competition is fierce. Douglas Maffei: Thank you, Daina, for that question. So that's a question about our strategy for Pumitamig and the various stages, the various steps to our strategy with Establish and Elevate. So I'll direct that question to Ozlem. Özlem Türeci: You are actually right. We have this 3-wave strategy, Establish, Expand, Elevate. And even though we call it 3 waves these are activities, which are going on in parallel. We have a certain focus on the chemo combination or combinations with standard-of-care because these studies can be simply started much faster, and we have a focus on speed to be really first to market in certain indications. However, there is data generation in combination studies ongoing in these indications with our ADCs, for example, and will come very soon also following this established waves. Operator: We will now take the next question from the line of Asad Haider from Goldman Sachs. Nick Jennings: This is Nick Jennings on for Asad and the Goldman team. Given that the BNT327 Phase III trial in triple-negative breast cancer is initiating this year, could you provide any insight as to what we can expect to see in the Phase II details coming up at SABCS. And is there any new information we can expect that provides additional confidence in the Phase III success? Douglas Maffei: Thank you, Nick, for that question. It's a good one. So just to recap that from Pumitamig the Phase III triple-negative breast cancer, which is initiating and Ozlem, the specific question is whether we can provide any additional details on the Phase II results that we'll be presenting SABCS. Özlem Türeci: So we will present some more efficacy data, safety data and also dose data. Operator: We will now take the next question from the line of Akash Tewari from Jefferies. Manoj Eradath: This is Manoj for Akash. Just 1 question. So we recently saw HARMONi-3 trial in first line and the CLC making some changes to look at primary PFS and OS statistical analysis separately for squamous and non-squamous populations. So considering these changes, do you still think ROSETTA-02 trial in BNT327 plus chemo is sufficiently powered for PFS and OS endpoints in the Phase III portion. Will there be any trial change, any trial-design changes based on these new information? Douglas Maffei: So it's a little hard to hear some of the details on that, but I heard you talking about HARMONi-3 and whether that may have any read-through or effect on the way that we're conducting our trials for Pumitamig. So I'll direct that question to Ozlem. Özlem Türeci: Yes, we are constantly with upcoming new data, reevaluating our statistical analysis plans for ongoing trials, and we'll also look into this specific trial. Operator: We will now take the next question from the line of Yaron Werber from TD Cowen. Yaron Werber: Great. And I had a quick follow-up for Ozlem on BNT323. Just that the need to generate more data to support filing, can you be -- maybe a little bit more explicit? Do you need to generate -- it sounds like you're going to have more data, as you noted, in breast cancer next year. And so is the thought to then file for breast cancer next year. And what was the feedback for endometrial cancer? And do you still plan to file for that? Or maybe just give us better clarity. Özlem Türeci: Yes, maybe I was misleading for the endometrial cancer discussions with FDA, have nothing to do with the ongoing breast cancer study. It's not about generating new data. It's about follow-up data and further analysis. So that pushes the time line a bit into '26, but does not change our submission strategy and our plans for BNT323 overall. Yaron Werber: Okay. And that's for breast cancer. And then what about endometrial cancer? What's the plan there? Özlem Türeci: No, no, no. Endometrial cancer is our first submission. This is what we said all along. Originally, it was planned for '25. We -- this is pushed out to '26 because, as I said, we are in discussions with -- it's in pre-BLA discussions with the FDA and providing further data breast cancer, the breast cancer study, Phase III study is ongoing, will readout later in 2026. Operator: We will now take the next question from the line of Mohit Bansal from Wells Fargo. Mohit Bansal: So again, a question on VEGF PD-1. One key comment we get from KOLs or experts is that with these bispecifics, it does look like that they are better VEGF inhibitors, but it doesn't look like that the PD-1 is -- the component is better. So I mean, how do you think about that? And in the context of these -- this bispecific showing an OS benefit in lung cancer trials, how important it is for PD-1 to be better at this point, given that -- we are seeing good PFS benefit, but OS is kind of on border line. So I would like to get your thoughts on that. Douglas Maffei: Thank you, Mohit. So a question generally around how much confidence we or others have in the bispecific class. And you mentioned that VEGF binding is maybe better, but PD-1, you're saying maybe not as good in bispecifics. And specifically, that OS benefit in lung. So direct that question to -- Ozlem? Ugur Sahin: I can start and Ozlem can take the second part. Is it okay, Ozlem. Özlem Türeci: Yes, sure, please. Go ahead. Ugur Sahin: Yes. Let's start with our confidence. Our confidence is increasing into this drug class. And the confidence is not based on better VEGF better PD-L1s, but what the antibody really does as a bispecific molecule and we are seeing now that this is getting more and more clinical data that this is not only called on PFS, but also have an impact in OS. And maybe, Ozlem, if you would like to add mechanistic understanding how that could also be helpful. Özlem Türeci: Yes. Mechanistically, in principle, our preclinical data, and that was also part of develop of -- preclinical development and selection process for this antibody shows that blocking of PD-1, PD-L1 pathway, as well as the VEGF-A blocking in the respective preclinical settings is robust and it's not inferior to what you would see with the individual antibodies. Having said that, we also think that the fact that we have a PD-L1, not a PD-1 arm here as an additional elements to the mode of action, namely targeting of this molecule into the tumor micro environment. And this, again, is a very good condition to amplify both on the PD-1, PD-L1 side, but also on the VEGF receptor signaling side all the effects on economical and non-economical effects of these 2 targets. So this is the preclinical piece and mode of action piece, but the clinical data has to -- to tell the truth from the data we have across tumor indications. This is not yet Phase III data. We are very confident that the activity has PFS effect in certain important indications and also duration of progression-free survival starts to look good. Operator: We will now take the next question from the line of [indiscernible] from BMO. Malcolm Hoffman: This is actually Malcolm Hoffman for Evan from BMO. Thinking about the guidance range for this quarter, could you quantify how much of this reflects the relatively stronger quarter for COVID versus just general updates for the BMS collaboration and U.K. government agreements. I know you mentioned most of this was tied to the collaboration, but I was curious, if there were any minor changes on the COVID front would be helpful to think about the relative contributions there. I appreciate it. Ramón Zapata-Gomez: Thank you, Malcolm. So let us talk a little bit about the revenues. And I will refer to your COVID-19 question, but I also think it would be helpful for the audience to understand that bit of the BMS revenue. So on COVID-19. So for COVID-19, we continue to see a stable position with a strong market share and stable pricing. U.S. vaccination rates are roughly 20%, which is in line with what we had anticipated. We have always assumed lower volumes versus last year. So overall, the business is performing within our expectations for the year. While the broader market remains uncertain, we continue to lean on our strengths like strong brand recognition, reliable supply and rapid variant adaptation, and we do expect to close the year in line with our outlook. Now if we talk about the BMS revenues, the updated revenue guidance mainly reflects the collaboration with BMS, as you rightly point out. And under this agreement, we will receive a total of USD 3.5 billion in upfront and on continuing cash payments between 2025 and 2028. While the timing of cash inflows and revenue recognition deferred revenues will be recognized in broadly equal amounts over the next 3 years, with the remaining balance recognized together with a final payment in 2028. This will provide a clear and predictable contribution over the next several years. Operator: We will now take the next question from the line of Joshua Chazaro from Evercore ISI. Mario Joshua Chazaro Cortes: This is Josh on for Cory Kasimov. On your and your partner's decision to push Pumitamig into gastric cancer, did you see compelling clinical data, not sure if this is presented or not? Or is this push into this new indication based off your understanding of the mechanism of action? Douglas Maffei: Thanks, Josh, for that question. So it was a question about Pumitamig and our announced decision to move into gastric cancer, what was that based on? Have we seen any data that we can speak to that support that decision. So Ugur, would you like to take that question? Ugur Sahin: Yes. We have emerging data for Pumitamig in gastric cancer and as an indication, which -- for which checkpoint blockade is approved. It's an indication that we have seen responses in combination with chemotherapy and an indication where we see based on the data that we've got in other GI indications. A clear room for improving over standard of care. Özlem Türeci: And also the mechanistic rationale that anti-angiogenic and PD-1 targeting approaches are validated approaches in gastric. Operator: We will now take the final question from the line of Jay Olson from Oppenheimer. Jay Olson: We're curious about your collaboration with Bristol-Myers Squibb. And can you talk about the governance structure and which party makes the decisions for new trials and who leads the new clinical trials when you initiate them? Douglas Maffei: Yes. Okay. Thank you, Jay. Thanks for that question. It's an interesting one about how our collaboration with BMS works mechanically. I can't say that word. So Ozlem, I'll pass that over to you, who makes decisions for [ Auriga ], who makes decisions on clinical development. Özlem Türeci: But it's a classical approach with multiple collaborative arms. We have a JSC in which we discussed all the indications so far or indicate all decisions that are made are based from interest of both partners, but both partners have the opportunity to do combination trials with their products. Yes, regardless whether the other partner is interested to join directly or not. So we have a lot of flexibility in this collaboration aiming really to do all kind of studies and to exploit the pipeline of the other partner as exhausted as possible. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to the Liquidia Corporation Third Quarter 2025 Financial Results and Corporate Update Conference Call. My name is Carmen, and I will be your operator today [Operator Instructions] Please note that today's call is being recorded. I now turn the call over to Jason Adair, Chief Business Officer. Jason Adair: Thank you, Carmen, and good morning, everyone. It's my pleasure to welcome you to Liquidia's Third Quarter 2025 Financial Results and Corporate Update Conference Call. Joining me today are Dr. Roger Jeffs, Chief Executive Officer; Michael Kaseta, Chief Operating Officer and Chief Financial Officer; Dr. Rajeev Saggar, Chief Medical Officer; Scott Moomaw, Chief Commercial Officer; and Rusty Schundler, General Counsel. Before we begin, please note that today's discussion will include forward-looking statements, including statements regarding future results, product performance and ongoing clinical or commercial activities. These statements are subject to risks and uncertainties that may cause actual results to differ materially. For further information, please refer to our filings with the SEC available on our website. Please note that our earnings release, our commentary and our slide deck accompanying this call include non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release and the slide deck accompanying this call. With that, I'll turn the call over to Roger Jeffs, our Chief Executive Officer. Roger? Roger Jeffs: Thanks, Jason, and good morning, everyone. This morning, I want to begin by expressing just how proud we are in what Liquidia has accomplished in a remarkably short period of time. Over the last 5 months, we've not only brought a new and meaningful medicine in YUTREPIA to patients living with PAH and PH-ILD, but we've also begun to influence the way physicians consider how to best introduce a prostacyclin into various treatment regimens. Every day, we hear stories from physicians and patients who are thankful to now have an inhaled prostacyclin that fits their lives, one that's simple and well tolerated. For too long, patients face limited and difficult choices. YUTREPIA is offering them an attractive alternative. The results speak for themselves. In the third quarter, YUTREPIA continued to exceed expectations on every front. As of October 30, we've received more than 2,000 unique prescriptions, initiated therapy for over 1,500 patients and have over 600 health care practitioners who have prescribed YUTREPIA across the U.S. In fact, October is our highest month yet for referrals. Through the third quarter, the vast majority of prescriptions are converting to active patient starts with the referral-to-start ratio hovering around 85%, an incredible figure for a new-to-market therapy and a true testament to the strength of our commercial and market access infrastructure. We've seen broad application of YUTREPIA and I'd like to share some details on usage patterns. PAH has accounted for a majority of total prescriptions with the use in PH-ILD growing steadily. Approximately 3 out of 4 patients starting YUTREPIA are new to treprostinil, while about 1 in 4 are transitioning from other prostacyclin therapies typically inhaled. Switches from Tyvaso products are similar for both indications at roughly 25% of prescriptions. Notably, around 10% of PAH prescriptions represent switches from oral therapies, a meaningful indicator that physicians may be starting to view YUTREPIA as a viable option to improve exposure and tolerability for patients who are struggling with systemic side effects from their oral prostacyclin therapy. This balance of naive and transition patients demonstrates the flexibility of YUTREPIA across real-world settings in specialized centers and community practices. The feedback we're hearing has been consistent. Many physicians find YUTREPIA easy to initiate, faster to titrate and better tolerated than other available options while patients appreciate the convenience and confidence that come with a palm-sized low-effort device. YUTREPIA isn't just gaining traction. It's redefining expectations for inhaled delivery of treprostinil where exposure drives efficacy, tolerability drives durability and convenience drives compliance. We intend to translate this early commercial success into long-term sustainable growth. As Mike will explain, Liquidia achieved profitability in its first full quarter following launch, and we are well positioned to reinvest in innovation without compromising our financial discipline. Our clinical strategy in the near term intends to broaden YUTREPIA's clinical utility. We are actively planning niche open-label studies to further strengthen the product profile. For example, to help inform what we are already seeing in the field, we will initiate a study in PAH patients transitioning from oral prostacyclins to YUTREPIA. And considering the recent interest in ILD indications, we are evaluating the feasibility of proof-of-concept studies with YUTREPIA in IPF and PPF. We will also explore how YUTREPIA may be used to treat other diseases where patients have unmet needs and smart trial design can expand the value of well-tolerated inhaled treprostinil with opportunities in PH-COPD and Raynaud's phenomenon as examples. And as you heard during our R&D Day, we will further optimize inhaled treprostinil with L606, our sustained release formulation that is rapidly delivered twice daily with a palm-sized nebulizer. We believe that the week 48 data from our U.S. clinical study already demonstrates that L606 may be the most tolerable inhaled treprostinil developed with clear signals of efficacy in PAH and PH-ILD patients, whether transitioning from Tyvaso or naive to prostacyclin. Our global pivotal study called RESPIRE will initiate later this year and planned enrollment to start in the first half of '26. Now let me hand the call over to Mike to explain how we can maintain our trajectory for increasing the overall value of the company. Mike? Michael Kaseta: Thank you, Roger, and good morning, everyone. The third quarter of 2025 was truly a breakthrough quarter for Liquidia, both operationally and financially. During the quarter, our first full quarter of launch, we delivered $51.7 million in net product sales of YUTREPIA. We accomplished this while total R&D and SG&A expenses remained relatively flat compared to second quarter 2025. For the quarter, the company recorded a net loss of $3.6 million. However, when viewed on a non-GAAP basis, we generated positive adjusted EBITDA of $10.1 million in the first full quarter of YUTREPIA sales, much sooner than our previous guidance of profitability within 3 to 4 quarters post launch. Cash on hand at the end of the quarter totaled $157.5 million. Of particular note, I'm especially pleased to say that September marked our first month of positive net cash flow, a major operational milestone that highlights both our rapid success and disciplined approach to cash management. During September, we added $5 million in net cash, and we've continued to build on that momentum with additional gains in October. Looking ahead, we expect this positive trend to extend into 2026 as we stay focused on driving profitability while reinvesting in R&D to support sustained long-term growth. Roger, back over to you. Roger Jeffs: Thanks, Mike. And as we close out this quarter, I want to emphasize the 3 key foundational elements that are truly defining the success of Liquidia both now and into the future. One, we have a product in YUTREPIA that is rapidly influencing the standard of care. Two, we have quickly established strong profitable operating foundation; and three, we have a disciplined growth strategy focused on expanding indications and value for YUTREPIA while also advancing our next-generation product, L606. These pillars, innovation, execution and reinvestment are what will guide us as we end this year and enter 2026. Above all, I want to thank our team, our clinical partners and the patients who trust us. They are the reason we continue to deliver with both passion and precision. With that, operator, please open the line for questions. Operator: [Operator Instructions] Comes from the line of Amy Li with Jefferies. Amy Li: Congrats on the incredible launch. Based on our back-of-the-envelope math, we're getting to around 1,000 patient adds this quarter, which is doubling what Tyvaso, Tyvaso DPI reported in their 500 quarter-over-quarter adds earlier in their launch. Can you give us a sense of what's driving this uptake? And in particular, the breakdown between PAH and PH-ILD? And then finally, how are you thinking about the trajectory of patient adds going forward? Roger Jeffs: Amy, thanks for the question. So again, we won't really comment more specifically than what we already have in the earnings release on numbers. But I think what you're seeing is very strong demand in the first 5 months of launch, completely driven by the product profile of YUTREPIA, which is unique and certainly is well on its way to becoming the established prostacyclin of first choice not only in the inhaled market, but as we alluded to, we're starting to see oral transition so we can offset some of the GI toxicities with the oral. And then what we're also seeing somewhat is in the patients that have added sotatercept and maybe "normalizing" as they deescalate the parenteral therapy, they're replacing that with YUTREPIA so that they can keep the prostacyclin pathway addressed. So there's a lot of, I would say, growing opportunity. I think if you look at the first 5 months, we've obviously seen very strong demand based on the profile. October, as we said, has had a slight uptick versus the previous month. So we're still on an attractive runway. And while we can't predict growth in the future, and certainly, there will be some seasonality and I think some ordering choppiness at the early phase of launch, I think we'll continue to execute well, and we feel very good about our future prospects. Maybe, Scott, if I could ask you to maybe highlight some of the things that you think as Chief Commercial Officer that have highlighted the quarter and address more specifically some of Amy's questions. Scott Moomaw: Yes. I think that the things that we're focused on right now is, one is we're continuing to increase breadth. So we're still in launch phase. We're still out there getting awareness and trial. We feel like we have an amazing opportunity still to drive to new prescribers. At the same time, we're still looking at depth from the current prescribers. We have -- each day, we have new prescribers that are over the 5 prescription mark, which shows, I think, an amazing amount of investment at those centers. So we think there's a lot of opportunity left out there. I think, Amy, I think you asked about the PAH, PH-ILD split. One thing we will comment on there is we have seen that PAH is a majority of the prescriptions. However, PH-ILD is definitely growing steadily, which is kind of what you would expect. I think PAH was probably a little bit more the, if you will, the lower-hanging fruit and PH-ILD is a growing market, as we all know, and the sky is the limit as far as that goes. Operator: One moment for our next question that comes from Cory Jubinville with LifeSci Capital. Cory Jubinville: Congrats on this really exciting update. I guess, can you just speak to what percentage of revenues might be associated with contracted versus noncontracted reimbursement? I mean, at this point, are you on the formularies for the 3 major PBMs? I'd say the script volume and the prescriber count is strong, of course. But I think the revenues being recognized to this magnitude this early definitely far exceeds expectations. So just trying to get a sense of what some of those key drivers were in order for you to convert volume to revenues this quickly. Roger Jeffs: Great question. And we've certainly spent a lot of effort and energy on the market access initiatives. Mike, if I could ask you to comment on the specific question. Michael Kaseta: Yes. Thanks, Roger, and thanks for your question, Cory. Specifically around payers, I think it is also a testament of where we are right now on our pull-through. And as we said, we've pulled through approximately 85% of referrals have converted into a script. And that's a testament to the -- what we had talked about the launch of building these patient support services that will enable that smooth transition, and we're very proud of what we've done there. Now as it relates to payers, as we've previously stated, we signed contracts with the 3 major commercial payers. We are -- the new-to-market blocks that we referred to previously have or will be removed here in the coming weeks. So as it relates to what is contracted and what is not contracted, to date, as you know, there is no contracting in Medicare Part D. So we are even footing there. In commercial, we are -- have started -- have contracted and started to receive -- start to pay rebates there. But as we move forward, as we've always said, we wanted to make sure that patients had an ability to make a choice, and we feel that we have achieved that now and look forward to the future where if a patient wants to choose YUTREPIA that they will not be blocked by virtue of a contracting issue. Operator: Our next question is from Julian Harrison with BTIG. Julian Harrison: Congrats on the quarter. Of the 1,500 patients on YUTREPIA at end of last week, are you able to say how many were in the 28-day voucher period at that time? And also average time from prescription written to YUTREPIA being shipped to a patient, what is that currently looking like? Roger Jeffs: Yes. Julian, it was good to see you last week at the R&D Day. Mike, if you could answer the question, please? Michael Kaseta: Yes. So thanks, Julian. In terms of average time from time prescription is written to when it's filled, what we're seeing is it's usually within a few weeks, which is pretty customary for SPs. We have a cross-functional focus on pulling through every prescription from market access to field reimbursement managers with the SPs, which is in constant coordination with the HCP office. Now as it relates to our voucher program, again, the voucher program that we offer patients to give them an opportunity to try YUTREPIA with a free 28-day first shipment. That has ticked up a bit. We are now a bit over 50% of our new patients are using the voucher program, which was slightly higher from where we were when we had our call in August. But we feel it's a great opportunity for patients and doctors to trial YUTREPIA. And if it works for them, then that they can continue on their journey. But for now, the expectation and where we are is slightly over 50% are using the voucher program. Julian Harrison: Excellent. And just to clarify, 50% have utilized the voucher program or were using it as of the end of last week. Michael Kaseta: So from launch to date, we were slightly over 50% Yes. Operator: [Operator Instructions] Our next question is from Ryan Deschner with Raymond James. Ryan Deschner: Congrats on the quarter. In second quarter, you reported an elevated level of channel loading and I just wanted to ask how this metric is trending in third quarter and into October. And then I may have missed it at the beginning, if you could comment again on naive versus treprostinil experienced patients. Roger Jeffs: Yes. Ryan, so I'm not sure specifically what you're asking about channel loading because I don't think we commented on that specifically in the prior quarter. In terms of naive versus transition patients, it's been about 75% have been new to prostacyclin therapies and 25% have been transitions typically from inhaled, although you can see in PAH, where the orals are only approved and not in PH-ILD, we are seeing 10% transitions there. I think one thing that question is related is kind of are we growing the market versus just taking share. And I think the correct answer is, yes, we are -- I think the market is growing now with a second company in there driving awareness. And I think -- but when you look at things sequentially, I'd say, quarter -- second quarter to third quarter, I think we're capturing the lion's share of this new opportunity. For example, I think it was reported last week that Tyvaso increased in aggregate across the nebulized and Tyvaso DPI franchise, $14.8 million, whereas we're now from Q2 to Q3, we've grown by $45.2 million. So that represents the revenue growth. And of that revenue growth, we've captured 75% of that, which we're very, very pleased about. So a lot of opportunity here to grow the market. And I think with the product profile, the commercial acumen and the ability that we've had to drive immediate awareness around the value of YUTREPIA, you're seeing that the uptake is leaning in a one-sided manner towards YUTREPIA. So again, I don't think we've commented on channel loading, but we can get back to you on that later, if that's helpful. Operator: Our next question is from Serge Belanger with Needham. Serge Belanger: Congrats on the first quarter of launch. First question regarding payer coverage. Can you kind of give us an update on now on when you expect to be at a steady state of coverage? And I believe your competitor had entered some contracts with some commercial plans. Just curious if that has led to some headwinds for coverage of YUTREPIA. And then lastly, maybe just expand a little bit on your plans to explore YUTREPIA usage in IPF and PPF. Roger Jeffs: Great. Mike handles payer access question. you'll handle the first question. And then, Rajeev, if you wouldn't mind speaking to our explorations in IPF. Michael Kaseta: Yes, Serge, great to hear from you, and thanks for the question. As it relates to payers, and you referenced United's comments that they had contracted in the commercial space, which we've spoken previously about that they contracted at a parity level. As I said earlier, we have signed commercial contracts with the 3 largest payers. New-to-market blocks have been removed or in the process of being removed. So as a result of that, we feel that we will be on equal footing with United as it relates to that. So we feel very confident in our strategy, very confident in where we sit right now that will enable us to have future growth. One other point I just want to go back to is around the channel loading. Obviously, at launch, the channel loading prior to launch, SPs are making an assumption of what's needed. What I would say is we have settled into where I believe is a normal level of inventory. If you want to say that SPs hold somewhere between 3 and 4 weeks of inventory. We have leveled off there. We have great relationships with the SPs to understand where ordering patterns are. So we're very confident in -- as we move forward that can be managed appropriately and feel that we are in line with what our expectations would be. Roger Jeffs: Great. Rajeev, if you'll speak to the clinical question. Rajeev Saggar: Yes. Thanks, Serge, for the question. So I think there's a few lessons coming out of TETON-2 that highlight that inhaled treprostinil appears to slow the progression of forced vital capacity in patients with -- specifically with IPF over a course of 52 weeks. I think the other thing that continues to be something that we, as a company and with YUTREPIA are in full agreement is that dose matters. And once again, that will [ be on ] hold, it strongly suggests in TETON-2 that if you can dose the patient as high as up to 12 breaths, these patients did much better than if you cannot -- the patient cannot get to at least a minimum of 9 breaths. I think, obviously, our ASCENT study strongly suggests that if we can even dose even higher to that, we actually and earlier, we potentially can even improve overall patients in regards to exercise capacity at least in PH-ILD. So if you take the entirety of that situation, and of course, the PPF study is not read out yet, but this suggests that I think YUTREPIA has a very strong product profile that may have some significant advantages over nebulized Tyvaso in regards to potentially ease of use, dosing and titratability and overall tolerability effect. So I think as an organization, we're extremely interested in evaluating and considering this pathway as we move forward. Roger Jeffs: Thank you, Rajeev. As you stated, this is a real period of renaissance for inhaled treprostinil. And I think the value that YUTREPIA brings and the market opportunity expansion is immense. And that with L606, we have a next-generation opportunity to really complete this paradigm shift over time. Operator: Our next question is from Andrew Fan with H.C. Wainwright. Andrew Fein: Congratulations. I guess, the strong sales are always a great thing and patient demand is always a great thing. Maybe you can speak to the heightened importance of it in the context of the ongoing litigation with United Therapeutics and the read-through of the strength of sales and strength of patient demand and clear perceived differentiation in the products as we think... Roger Jeffs: Yes, Andrew, it was a little bit difficult to hear the question specifically. I could hear that you were asking about the litigation and how that's... Andrew Fein: Read to the robust commercial environment to the [ litigation ]. Roger Jeffs: Yes. I think the simple answer to that is physicians and prescribers in general don't -- aren't that aware of the litigation. And their only concern is patient benefit. So I think when our goal has been to expose the centers to the value of YUTREPIA, get them to try it, particularly within the centers of excellence and then drive further demand. I think that's their concern. What happens in a court of law is outside of their jurisdiction, so they don't technically pay any attention to it. So to me, there's not a lot of read-through in terms of how that litigation has impacted the uptake. And as you can see, we have been robust... Andrew Fein: How does it impact the landscape of thought processes Judge Young might go through in deciding is outcome of the litigation. So more of the commercial impact that Judge Young... Roger Jeffs: Yes. Yes. Understood. Okay. Maybe, Rusty, you can count on the sort of balance of equities and harm. Russell Schundler: Yes. So we don't -- again, it's hard to predict how a judge is going to consider or even whether he consider commercial results, if that's the question. I think the judge is going to be thorough in thinking through the evidence that was presented to him and evaluate and come up with a decision. So again, I don't think he's going to be taking into account what's happening in the marketplace sort of post trial and coming up with his decision. That was the question. Roger Jeffs: Yes. I would maybe just take this opportunity to just remind listeners today that the value of the opportunity in PAH alone. I think the oral therapies are doing around $2 billion currently. The inhaled -- if you just split the Tyvaso revenue in half, you'd say it's close to $1 billion and then orals are around -- I mean, parenterals is around $500 million. So you can easily get to a $3.5 billion current day revenue opportunity with -- in PAH alone. And as you can see, we think the attractiveness that YUTREPIA offers can lead to a leading position across all 3 of those segments, the oral inhaled and the steel of parenteral share. So again, I know there's some concern around what may or may not happen with 327, but I think even if you took it in isolation, this is a tremendous opportunity that we have in front of us. Operator: Our question is from Ben Burnett with Wells Fargo. Benjamin Burnett: Congrats on the quarter. I just want to follow up on that last question. I guess I think we were maybe anticipating an update from a legal update. I'm just curious if the timing from what you're hearing on your end is any change? And I guess maybe could you also just remind us as to what exactly we'll get? Like should we get an understanding of any sort of ramifications? Or is this just purely a decision around this patent that you mentioned? Roger Jeffs: Yes. Thanks, Ben. Rusty? Russell Schundler: Yes. Thanks, Ben. So I mean, as far as timing goes, let me address that first. Obviously, there's no deadline for judges to rule in cases. I think the judge -- the case load in Delaware is pretty high. I think the judge is going to be thorough in his opinion, but we don't have visibility as to when that decision will come. I think if you look at the time it took him to render a decision in the first Hatch-Waxman case a few years ago, I'd say we're in the window of when we'd expect an opinion, but the window is a pretty wide window. I think any time between now and sometime in the first quarter even wouldn't be unexpected. Then as far as sort of what we would hear from the judge, I think, again, if you look at the last case as a proxy, I think what we expect here first is just a decision essentially as to who won. And then typically, there's then a second step where the parties then put in front of the judge what they propose the consequence of that decision is one way or the other. And then if there's a disagreement between the parties, there's potentially additional hearings or whatever the judge wants to do to work through that. So at least as far as the initial step is, our expectation is just going to be an opinion as to who won, who lost. Operator: Our last question comes from the line of Jason Gerberry with Bank of America. Jason Gerberry: One litigation follow-up. Do you have a sense whether a royalty is a possible remedy depending on outcomes of the case as opposed to -- I think there's a lot of, I guess, thought that perhaps like an outcome if there was patent infringement would just be removing ILD from the label. So I just kind of would love to get your perspective on that. And then as we look to 2026, why wouldn't it be reasonable to assume there's at least 2,000 patients on paid drug next year, just given the trends and what we're seeing? Just love to get your perspective on that. Roger Jeffs: Yes. Rusty, you'll answer the litigation question, please. Russell Schundler: Yes. Jason, thanks for the question. I think there's a wide range of possible remedies here. It just is very dependent on exactly what the judge rules. I think the decides to put in arguments the consequence ranges from YUTREPIA being removed from the market to a royalty and those are all in sort of the downside scenarios. So again, it's just highly dependent on exactly how the judge rules. I think depending on which claims he finds are infringed the basis for the infringement, the consequences could be different. So I think it's hard to comment on that now. I mean, obviously, once we have the opinion, we'll have a more informed take on what we think the likely outcomes are. But at this point, I think as we've said consistently in our 10-Qs and other releases, I think we have a wide range of potential outcomes. We're just waiting to see what the judge says. Roger Jeffs: Great. And on the last question, obviously, we're not going to forecast patient numbers. I think what we have highlighted is that we've driven brand awareness very quickly. There's been significant uptake of YUTREPIA in our early launch phase and that our pull-through rate is very, very high at 85%. And we don't see any further impediments to that. So we're going to continue to try to position YUTREPIA as the best-in-class and first in choice prostacyclin and do what we need to do to benefit every patient that we can possibly benefit. So with that, I think we'll end the call. I'd like to thank everyone for joining us today. We're really proud of the progress we've made in just a few short months and even more excited about what lies ahead. I hope everyone has a great day. Thank you. Operator: Thank you for participating in today's conference. You may now disconnect.
Operator: Good morning, and welcome to the IDEXX Laboratories Third Quarter 2025 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer; Andrew Emerson, Chief Financial Officer; and John Ravis, Vice President, Investor Relations. IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that our discussion during the call will include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today. Additional information regarding these risks and uncertainties is available under the forward-looking statements notice in our press release issued this morning as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the Investor Relations section of our website, idexx.com. During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the Investor Relations section of our website. In reviewing our third quarter 2025 results and updated 2025 guidance, please note all references to growth, organic growth and comparable growth refer to growth compared to the equivalent prior year period unless otherwise noted. [Operator Instructions] Today's prepared remarks will be posted to the Investor Relations section of our website after the earnings conference call concludes. I would now like to turn the call over to Andrew Emerson. Andrew Emerson: Good morning. I'm pleased to take you through our third quarter results and provide an updated outlook for our full year 2025 financial expectations. In terms of highlights in the quarter, IDEXX delivered strong financial results supported by outstanding commercial execution in our Companion Animal business with benefits from recently launched IDEXX innovations. Revenue increased 13% as reported and 12% organically, supported by over 10% organic growth in CAG Diagnostics recurring revenues, reflecting over 8% gains in the U.S. and double-digit growth in international regions. We achieved another quarter of strong premium instrument placements, including over 1,750 IDEXX InVue Dx analyzers, resulting in 71% organic growth of CAG instrument revenues. CAG Diagnostics recurring revenue growth in Q3 was negatively impacted by declines in U.S. same-store clinical visits of 1.2%, driven by ongoing macro and sector pressures. IDEXX' operating performance was excellent in the quarter with comparable operating margin gains of 120 basis points, supported by gross margin expansion which benefited from strong recurring revenue growth. High operating profit gains enabled earnings per share of $3.40 in the quarter resulting in EPS growth of 15% on a comparable basis. We're increasing our full year revenue outlook by $43 million at midpoint, with an updated range of $4.270 billion to $4.300 billion, an outlook for overall reported revenue growth of 9.6% to 10.3%. Our updated full year overall organic revenue growth outlook is for 8.8% to 9.5%, with organic CAG Diagnostics recurring revenue growth of 7.5% to 8.2%. These organic growth ranges represent approximately a 1% increase at midpoint to our previous guidance, supported by strong global execution in our CAG business. We're increasing our full year EPS outlook to $12.81 to $13.01 per share, up $0.33 per share at midpoint, reflecting 12% to 14% comparable EPS growth. We'll discuss our updated 2025 financial expectations later in my comments. Let's begin with a review of the third quarter results. Third quarter organic revenue growth of 12% was driven by 12% CAG revenue gains, 7% growth in our Water business and 14% gains in LPD. Strong CAG results were supported by CAG Diagnostics recurring revenue growth of 10% organically, including average global net price improvement of 4% to 4.5%, and benefits from CAG Diagnostic instrument revenues increasing 71% organically, aided by global placements of InVue Dx. U.S. organic CAG Diagnostics recurring revenues grew 8% in Q3, supported by solid volume gains and 4% benefit from net price realization. U.S. same-store clinical visits declined 1.2% in the quarter, reflecting an IDEXX U.S. CAG Diagnostics recurring revenue growth premium to U.S. clinical visits of approximately 950 basis points, highlighting outstanding performance by the IDEXX teams. Q3 benefited from aging pets with non-wellness visits declining only 30 basis points year-over-year while wellness visits declined 2.5%. Health services continued to expand in the quarter, including increased diagnostic frequency and utilization per clinical visit for both well and non-wellness visits as customers expand the use of diagnostics in their care protocols. International CAG Diagnostics recurring revenue grew 14% organically in Q3, including approximately a 1% benefit related to equivalent days. Revenue performance was driven by volume gains, including benefits of net new customers and same-store sales utilization. International regions have sustained strong growth on a days adjusted basis for the past 10 quarters, highlighting the significant global opportunity as we invest in global commercial capabilities and expansions. IDEXX innovation and commercial execution also delivered strong organic revenue gains across testing modalities globally in the third quarter. IDEXX VetLab consumable revenues increased 16% on an organic basis in the third quarter, reflecting double-digit growth in both the U.S. and international regions. Consumable revenue growth was supported by expansion of our premium instrument installed base and expanded testing utilization including benefits from recent product launches. InVue Dx utilization is tracking well to our reoccurring revenue estimates previously provided of $3,500 to $5,500 per analyzer, and we're excited for the upcoming launch of FNA starting with mast cell tumor detection. CAG instrument placements increased significantly in Q3 compared to prior year levels. Total premium placements reached 5,665 units, an increase of 37% year-over-year. The quality of placements remains excellent, reflected in 1,203 global new and competitive Catalyst placements, including 347 in North America. Globally, we placed 1,753 IDEXX InVue Dx instruments as we continue to meet customer demand for this highly innovative analyzer. Ongoing progress of placing instruments combined with high customer retention levels supported the 10% year-over-year growth in our premium instrument installed base in the quarter. IDEXX Global Reference Lab revenues increased 9% organically in Q3, up approximately 4% growth from the second quarter driven by solid volume growth across regions, including expanded same-store volume benefits and net new customer gains. IDEXX Cancer Dx continues to gain further traction in North America reaching nearly 5,000 customers through October. Global rapid assay revenues declined 5% organically in Q3. Rapid assay results continue to be impacted by customers shifting pancreatic lipase testing to our Catalyst instrument platform, which we estimate to be a 6% headwind in Q3 revenue growth. Veterinary software and diagnostic imaging organic revenues increased 11%, driven by recurring revenues which grew 10% during the quarter. Solid growth in veterinary software was supported by a strong double-digit growth of cloud-based PIMS installations and adoption of related reoccurring services. We also saw continued strong double-digit year-over-year growth of diagnostic imaging system placements in the quarter. Water revenues increased 7% organically in Q3 with strong growth in international regions and solid mid-single-digit growth in the U.S. Livestock, Poultry and Dairy revenues increased 14% organically in the quarter with double-digit gains across most regions. Turning to the P&L, strong revenue growth enabled 16% comparable operating profit gains. Gross profit increased 15% in the quarter as reported and 13% on a comparable basis. Gross margins were 61.8%, up approximately 80 basis points on a comparable basis. These gains reflect benefits from strong reoccurring revenue growth and IDEXX VetLab consumables and Reference Lab volumes along with operational productivity and pricing benefits, which offset inflationary cost pressures. Reported gross margin gains were moderated by 10 basis points of foreign exchange impacts net of hedge positions. On a reported basis, operating expenses increased 12% year-over-year as we advance investments in our global commercial and innovation capabilities. Q3 earnings per share was $3.40 per share, including benefit of $14 million or $0.17 per share related to share-based compensation activity. Income tax includes a $0.09 negative impact related to accelerating tax deductions for previously incurred research expenses allowed under the new U.S. tax legislation, which benefits cash taxes while increasing our effective tax rate in the period. Foreign exchange added $1.9 million to operating profit and $0.02 to EPS in Q3, net of hedge effects, reflecting a comparable EPS increase of 15%. Free cash flow was $371 million in Q3 and $964 million on a trailing 12-month basis with a net income to free cash flow conversion rate of 94%. For the full year, we're updating our outlook for free cash flow conversion to 95% to 100% of net income. This increase includes a 10% cash tax benefit primarily related to $105 million of acceleration of tax deductions for previously incurred research expenses allowed under recent U.S. tax legislation and a refined outlook for our full year capital spending of approximately $140 million. Our balance sheet remains in a strong position. We finished the period with leverage ratios of 0.7x gross and 0.5x net of cash. We continue to deploy capital towards share repurchases, allocating $242 million during the third quarter and contributing to $985 million on a year-to-date basis, supporting a 2.7% year-over-year reduction in diluted shares outstanding through Q3. Turning to our full year 2025. As noted, we're increasing our outlook for overall revenue to $4.270 billion to $4.300 billion. At midpoint, this reflects approximately $43 million of operational improvement, building on strong third quarter performance, including CAG Diagnostics' recurring revenue expansion and increased InVue Dx revenue expectations. Our updated revenue growth outlook is for 9.6% to 10.3% growth as reported, including a 0.8% full year growth benefit and 2% growth benefit in Q4 from foreign exchange at the rates outlined in our press release. As a sensitivity, a 1% strengthening of the U.S. dollar would reduce revenue by approximately $4 million and EPS by $0.01 for the remainder of the year. The updated overall organic revenue growth outlook of 8.8% to 9.5% reflects an estimated organic growth range of 7.5% to 8.2% for CAG Diagnostics recurring revenue, including a consistent 4% to 4.5% benefit from global net price realization. At midpoint, during Q4, we're assuming U.S. clinical visits continue to decline at levels moderately better than the year-to-date average. We are again increasing our expectations for our InVue Dx placements, which we now expect to be approximately 6,000 during 2025, with instrument revenues of over $65 million as we continue to see strong demand from this exciting new platform. In terms of key financial metrics, we're increasing our reported operating margin outlook to 31.6% to 31.8% in 2025, reflecting an increased expectation for 80 to 100 basis points of full year comparable operating margin improvement net of 180 basis point operating margin benefit related to the discrete litigation expense impacts and updated foreign exchange effects. As noted previously, IDEXX remains well positioned to navigate the ongoing changes in the trade landscape with a largely U.S.-based manufacturing footprint. We remain focused on continuous supply to customers while actively managing cost impacts, which will continue to play out into 2026. Our updated full year earnings per share outlook is $12.81 to $13.01 per share, an increase of $0.33 per share at midpoint. Our EPS outlook incorporates increased projections for operational improvement of $0.22 at midpoint compared to our prior guide. We've also incorporated lower effective tax rate benefits, including $0.09 of share-based compensation activity compared to the prior outlook, partially offset by other tax impacts including the noted acceleration of research expense deductions under the new U.S. tax legislation. Updated estimates for interest expense, average share count reduction and foreign exchange impacts have also been incorporated, with additional details available in the tables in our press release and earnings snapshot. That concludes our financial review. I'll now turn the call over to Jay for his comments. Jay Mazelsky: Thank you, Andrew, and good morning. IDEXX delivered very strong financial performance in the third quarter while advancing our strategic priorities globally. Our proven model of high-touch commercial engagement, combined with differentiated testing and workflow innovations continue to drive adoption of IDEXX's world-class diagnostic and software solutions. These capabilities directly support our customers' mission to deliver the highest standards of care enabled through greater diagnostic frequency and utilization in everyday practice. Diagnostics remains the fastest-growing revenue stream within veterinary clinics, a durable trend reflecting the central role testing plays in determining patient health status and guiding treatment decisions. Our financial results in the quarter were underpinned by accelerating gains in CAG Diagnostics recurring revenues across major regions. Growth in recurring revenues reflects multiple execution drivers, including double-digit growth of our premium installed base, instrument installed base, sustained strong new customer gains, solid net price realization and continued momentum in cloud-based software adoption. Importantly, these results were supported by continued momentum in our innovation playbook, highlighted by strong placements of InVue Dx, growing adoption of Cancer Dx, and benefits from the expanding Catalyst menu, including early uptake of Catalyst Cortisol. IDEXX solutions anchored by our integrated software-enabled multi-modality approach are well positioned to help clinics enhance efficiency, expand diagnostics reach, and deliver exceptional patient care. Building on the groundbreaking innovations we launched in 2025, and as highlighted at our August Investor Day, we will further expand our Cancer Dx franchise in 2026 with the addition of mast cell tumor and another high-impact cancer biomarker to the panel. We also plan to bring Cancer Dx panel to international markets starting in Q1 2026, extending its reach and accelerating our global leadership in veterinary cancer diagnostics. Our commercial organization again delivered outstanding performance in Q3. Across geographies, our teams drove very strong instrument placements with a high quality of placements supporting outstanding year-on-year growth of economic value placements, a key measure of future recurring revenue gains. Retention of our CAG Diagnostics recurring revenue remained in the high 90s, reflecting the enduring loyalty and trust that veterinarians place in IDEXX. This loyalty is not simply the result of world-class products. It reflects the strength of our customer engagement and support model where IDEXX representatives serve as true partners in helping practices improve medical outcomes and business performance. In the U.S., growth was fueled by strong volume gains, including benefits from adoption of new innovations alongside sustained strong new and competitive Catalyst placements. Our teams are effectively engaging practices, whether start-ups outfitting their practice for the first time or established clinics seeking to upgrade and expand capabilities. Accelerated growth in the important diagnostics frequency metric as well as utilization per clinical visit is a critical driver of success, enhancing patient care while creating durable growth for both clinics and IDEXX. We are also benefiting from corporate account relationship extensions and expansions. These relationships represent significant multiyear growth opportunities as practices transition volume into IDEXX's ecosystem of diagnostic software and services. Importantly, these partnerships are increasingly structured to elevate care at the practice level, to greater diagnostics frequency, utilization, workflow optimization and expanded menu adoption. Internationally, we delivered double-digit installed base growth for the 11th consecutive quarter with the step-up in the growth of CAG Diagnostics recurring revenue growth across major regions. Our commercial strategies are globally tailored to regional dynamics supported by strong Reference Laboratory networks and backed by an innovation approach that ensures high product market fit, such as with ProCyte One and SNAP Leishmania. Expanding diagnostic frequency in international regions continues to be a key growth lever, elevating the standard of care and expanding the sector opportunity. We remain committed to investing in our commercial footprint where the customer readiness and growth potential are strongest. We are on track with plans to expand in 3 international countries by the start of 2026, while also enhancing our U.S. commercial footprint. These are high-return investments, reducing the number of customers per account manager, supporting more frequent engagement, strengthening loyalty and driving adoption of IDEXX solutions. The commercial organization's ability to consistently deliver growth across varied geographies and macroeconomic conditions demonstrates the durability of our model. Practices continue to prioritize diagnostics and software because they are foundational to their mission, and IDEXX is their partner of choice. Turning to our innovation update, let me begin with Catalyst Cortisol, the newest addition to our Catalyst platform. Launched in North America in late July and at the end of the third quarter internationally, Catalyst Cortisol is already seeing strong momentum with over 1/4 of Catalyst customers in North America adopting test within the first 3 months of launch. This is among the fastest adoptions for Catalyst menu expansion, underscoring both the clinical need and the level of customer anticipation. Catalyst Cortisol enables veterinarians to rapidly measure cortisol levels at the point of care, supporting diagnosis and monitoring of adrenal conditions such as Cushing's syndrome and Addison's disease. These conditions are often complex and require real-time insights to guide treatment decisions. With Catalyst Cortisol, veterinarians can deliver highly accurate results during the patient visit, avoiding delays, reducing callbacks and increasing confidence in treatment planning. The addition of Cortisol was the most frequently requested Catalyst menu expansion from customers, a clear signal of its importance to clinical practice. The rapid uptake we've seen validates the power of listening closely to our customers, and then delivering innovation that directly addresses their highest priority needs from both a testing accuracy standpoint in workflow friendly way. This is also a great example of our Technology for Life strategy. By continually expanding the Catalyst menu, we increase both the medical and economic value of the installed base. With nearly 77,000 Catalyst instruments and practices globally, each new menu expansion represents a lever for increased utilization, improved care and long-term recurring revenue. Alongside Catalyst Pancreatic Lipase, which has already achieved adoption across over 50% of the available installed base and Catalyst SmartQC, which is simplifying quality control workflows, Catalyst Cortisol is strengthening Catalyst position as the most versatile, value-creating chemistry, immunoassay and electrolyte platform in veterinary medicine. Moving to InVue Dx. By the end of Q3, we have placed over 4,400 InVue Dx analyzers globally year-to-date, exceeding our expectations in reinforcing the momentum that began with preorders last year. This represents one of the most successful product rollouts in IDEXX' history. This strong start gives us confidence to once again raise our full year outlook to approximately 6,000 placements. Customer feedback has been overwhelmingly positive, with veterinarians consistently highlighting workflow transformation, diagnostic confidence and powerful clinical insight as the most meaningful benefits. The slide-free cytology workflow reduces technicians' time improves consistency and delivers results while the patients are still under practice. At the same time, AI models, now trained on more than 60 million cellular images, provide reliable, high-quality insights that elevate standards of care. Frequent software updates, as often as every other week, continuously expand these capabilities, enhancing accuracy and ensuring clinicians always benefit from the latest advancements. A great example of this is a recent update that reduced time to result of an ear cytology to approximately 8 minutes. Utilization for ear cytology or blood morphology has been robust and well-aligned with our expectations. Both of these broad-use categories have great use cases in everyday practice, serving as high-frequency diagnostics to support patient care across a wide range of conditions. Their adoption underscores the value of InVue Dx in addressing routine, repeatable testing needs to drive workflow efficiency and strengthen clinical confidence. Importantly, success in these initial categories provide a strong foundation for the platform, creating natural momentum as we expand the menu into additional high-value areas, such as oncology with the addition of fine needle aspirate, which remains on track for rollout later this year. Importantly, InVue Dx not only driving placements in consumables, but also strengthening customer loyalty and long-term contractual relationships. Many practices adopting InVue are expanding their broader IDEXX commitments with some extending agreements ahead of schedule to secure access to this transformative platform. Turning to Cancer Dx. Momentum remains strong with nearly 5,000 practices to date adopting these tests within just a few quarters of launch. Utilization is tracking well with expectations and we continue to be encouraged by competitive customer adoption, now over 17% of customers. This reflects growing awareness and underscores Cancer Dx' importance as a new standard in veterinary oncology. While the majority of samples are still being used to aid in the diagnosis of canine lymphoma, the number of practices incorporating the test into wellness protocols is nearing parity, enabling early detection and improved patient outcomes. The clinical need for oncology screening is clear. Cancer remains one of the leading causes of death among dogs, and early detection is critical to improving outcomes. Cancer Dx provides veterinarians with a cost-effective, highly sensitive tool that integrates seamlessly into a standard wellness visit. Looking ahead, our Cancer Dx road map is ambitious as we expand internationally and have mast cell tumor detection in one additional cancer next year. With canine lymphoma and mast cell tumor detection, the Cancer Dx platform will address over 1/3 of all canine cancer cases. Mast cell tumors are top of mind with pet parents because they can often feel the lumps and bumps while petting or cuddling with their dog, and early detection can significantly improve the clinical outcome for an affected dog. The upcoming availability of FNA for lumps and bumps on InVue Dx will allow for cytology results during the patient visit, helping to provide clarity to a concern to pet parent. We have a couple of important highlights in our software business, specifically related to the broad-based adoption of our cloud-based products, reflecting the strength of IDEXX's vertical SaaS model purpose built for animal health. Veterinarians across all stages of their careers recognize the workflow efficiencies and ease of use that our solutions provide, enabling them to spend more time delivering care and less time on administrative tasks. Our cloud-native PIMS platforms delivered double-digit installed base growth again this quarter, surpassing a milestone, now with over 10,000 locations, and strong adoption among both independent practices and enterprise customers with multi-location groups. Customers are choosing IDEXX for our growing vertical SaaS platform where integrated modules create seamless workflows for clinicians and connectivity with diagnostics and increasingly for pet parents to Vello. Vello our client engagement platform continued to expand in Q3, with active clinics growing over 20% sequentially and over half of PIMS bookings in the quarter included a Vello subscription. Clinics using Vello report higher appointment adherence, increased diagnostics compliance and greater client satisfaction, all of which translated to higher visit volumes and revenue growth. The integration of Vello with our diagnostics and PIMS ecosystem further amplifies its value, making it an increasingly important part of IDEXX's long-term growth engine. As we conclude, I want to extend my deep gratitude to our 11,000 IDEXX employees worldwide. Your commitment to innovation, customer partnership and operational excellence is what enables us to deliver results like these. Q3 was another quarter where innovation and commercial execution came together to drive strong financial performance and advanced veterinary care. As diagnostics sit at the center of the veterinary system of care, IDEXX will remain at the forefront of advancing standards, unlocking practice productivity and driving sustainable growth. Now please open the line for Q&A. Operator: [Operator Instructions] Our first question comes from Erin Wright with Morgan Stanley. Erin Wilson Wright: Great. I want to unpack a little bit the strength of consumables in the quarter and what's sustainable -- what's sustainable here. For instance, how much of the strength is actually InVue consumables, lipase or just the new contracting terms when you do place an InVue? For instance, you used to give us this metric back when you launched Catalyst Dx, that you used to say, with every Dx upgrade, it translated into a considerable amount of consumables uplift. I guess, do you have that metric when you're placing kind of InVue's, you're establishing and recontracting with new IDEXX 360 relationships? And presumably, this is an all InVue consumables contribution? I just want to unpack that. Jay Mazelsky: Erin, yes, the growth in the VetLab consumables piece is very broad-based. So there's obviously the large installed base growth of 10%, and you can go back many quarters, and we continue to grow that very aggressively. And the quality of these placements is very high. We track economic value across the board; what we're seeing is high-quality placements competitive and greenfield is something we disclose both for chemistry and hematology, so you get a sense of that. Also the Technology for Life, the specialty tests, we've now had 3 within a period of a year. Those are -- those contribute. There's Pancreatic Lipase and SmartQC and now Cortisol. So these are tests that veterinarians prefer to do at the point of care, and that's clearly benefiting us. And I'd say -- by the way, it's, at an enterprise level, we're doing more testing in those areas. So this isn't a case of substituting from the reference lab to point of care. With respect to the InVue, I'd say that it's early stages. Obviously, it's all drop-through because it didn't exist before at the point of care and it's proceeding well to plan. And so that's an add, and as our installed base grows, we expect that, that will contribute greater amounts on a go-forward basis. But just to summarize, it's very broad-based growth across our point-of-care business. Erin Wilson Wright: Okay. And then are we still on track with FNA and the launch? And what are you seeing from some of the pilot programs with FNA so far? And do you think there's this backlog of customers kind of waiting for FNA that should support another leg of growth here for InVue? Jay Mazelsky: Yes, we are on track. What InVue customers tell us is that they -- there's very few customers that are just looking at one of the testing use cases, ear cytology or blood morphology or FNA testing for mast cell. They really are looking at as a broad portfolio tests that they would use. And obviously different mixes depending upon the practice and their preferences. So we expect that most of the customers, I can't say 100%, but the vast, vast majority of customers who purchase InVue for ear cytology and blood morphology will also use it for FNA testing. So we're very excited by that. Operator: The next question is from Michael Ryskin with Bank of America. [Operator Instructions] Michael Ryskin: Can you guys hear me? Jay Mazelsky: Yes. Michael Ryskin: Yes. I want to follow up on some of your comments on end market business trending a little better. You guys continue to put up really impressive numbers. Can you hear me? Jay Mazelsky: Yes. Got you, Mike. Michael Ryskin: Okay. Sorry. Just had some audio problems. You've put up really good numbers despite the end market weakness. I was just wondering if you could parse out a little bit, you talked a lot about InVue and the strength of that rollout there, whether you're seeing sort of the ability to leverage that for the rest of the business, the uplift you're seeing in consumables that will add consumables in the Reference Lab. Just sort of -- I don't know if I would call it a cross-selling opportunity, but just the ability to bring that into the vet clinic office, if that's leading to a stronger IDEXX premium and just ability to really drive the performance despite the continued softer macro? And I've got a follow-up. Andrew Emerson: Thanks, Mike. This is Andrew. Maybe I'll just touch on your initial question on the sector, and then Jay may have a point of view on the portfolio side here. But ultimately, I think what we did see was the non-wellness visits were closer to flat in Q3. We did see some benefits from the pet population that was 5 years and older related to the clinical visits themselves. And then, as we've been highlighting, I think, with those adult dogs and cats transitioning to more seniors, we also see higher quality of the visits where we see expanded diagnostic frequency and utilization benefits with that as well. So that was one of the key drivers. What I would say is on the wellness side, we continue to see pressures from a macro perspective. We know there's still challenges out there just related to the consumers and the macro trends. Wellness visits did continue to decline, more about 2.5% overall within the quarter. So fairly consistent pressure on the more elective and wellness characteristics of that. We'll continue to monitor this sector. But to your point, I do think that as we think about the broader portfolio, there's really an opportunity to continue to play that out. We see Reference Labs tend to be a little bit more weighted to wellness visits, same with rapid assay. And so we do see a bit of a benefit in the IDEXX VetLab consumables, but I think there's an opportunity for us to continue to see benefits from the aging patients over time. Jay Mazelsky: Yes, Mike, with respect to your question around InVue and its broader impact, we've always had, when we come out with a new instrument, it's a big deal. There are a direct economic benefits and there are indirect benefits. Obviously, the direct, you're placing an instrument that that's capital revenue and over time you build an installed base and the flywheel for recurring revenue. But most of these instruments get placed in some sort of marketing program, like IDEXX 360. And so the customer can satisfy volume commitments and is very often inspired to do more of their overall testing volume, including Reference Labs and rapid assay and our SaaS software solutions through us. And so those are the indirect benefits. And most of our -- about 2/3 of the InVue placements to date have come out of North America, 1/3 internationally. So we're excited. It does have some leverage impact, and we'll see more direct benefits, as I indicated earlier from just the recurring revenue stream of InVue. Michael Ryskin: Okay. And if I could squeeze in a follow-up, you talked about investments a couple of times in the prepared remarks. Could you expand on that a little bit, between incremental R&D on future platforms and maybe to continue to work on Multi-Q Dx, I don't know how much you'll be able to talk about that, or the commercial sales force. Just wondering the strength that you've had in the top line this year, how you're flowing that through the model and just sort of what are your relative priorities for investment from that strength? Jay Mazelsky: Yes. I'll cover the investment piece and if Andrew would like to cover how we're thinking about the mix within the P&L., I'll hand it to him. From an investment standpoint, the way we think about it, there's commercial opportunity and sector development. We know that takes investments in reach and frequency of our sales organization. And so we're on track for the first of the year. They have 3 international and a modest increment in the U.S. We know these are good investments. These tend to be more of a short-return type of thing with a high confidence level because we have a playbook and a template in terms of how we think about it, and they fit well into our territories. And within 3 or 4 quarters, are trained and onboarded and very productive sales professionals. The ongoing R&D investments, these tend to be multiyear in horizon across the board. There's biomarker investment, obviously, that can be leveraged both reference labs and point of care, new instruments, InVue and Multi-Q Dx, those are ongoing and tend to be 4, 5 years. And then, obviously, the software piece is a critical part of our strategy, and we're investing heavily both in cloud-based PIM systems and Vello and the other software applications. Andrew Emerson: Yes. Maybe just, Mike, in Q3 in particular, we highlighted 12% year-over-year growth in our operating expenses. So one of the things that we do always look at is how we're performing from an overall company perspective and making the right investments to continue to drive future growth. Again, if I take a step back and think about our longer-term growth algorithm, we constantly want to reinvest back into the business while still continuing to deliver solid operating margin gains over time here. And I think Q3 was a good example of our ability to do that. With higher top line growth, we were able to both contribute an operating margin gain benefit, but also invest heavily back into the business. And I think it's a really disciplined resource allocation approach to think about that mix across innovation and commercial and other support areas that Jay was highlighting that we want to make sure we get right. Operator: The next question is from Jon Block with Stifel. Jonathan Block: Maybe I'll just also start with InVue. The '25 placement guidance, I think I've got my math right, implies roughly 1,500 systems for 4Q '25. So still solid, and I know you raised the full year, but that would be down sequentially. You flipped from an order number to a placement number. So I guess the question here is, are you caught up with the orders when we think about where you are with InVue? And then just even any high-level thoughts on, I believe I've got it right, the initial 20,000 over 5 years. You're running well ahead in year 1 in totality. Any thoughts on the longer-term goals that you guys had put out? And then I'll ask a follow-up. Andrew Emerson: Thanks, Jon, this is Andrew. So from an InVue perspective on the longer-term goal, we certainly are still focused on the 20,000 over 5 years. We haven't updated that. We're off to a strong start here and we're targeting 6,000 placements by the end of 2025, which is really our first year of launch ultimately. So we feel good about that 6,000 placement trajectory here, and that's well above our initial guide of 4,500 where we started the year. We've seen really strong demand for the platform itself. And I think we're going to continue to build on the impact that can have with FNA, starting with mast cell tumor detection as a great example of the extensibility of the platform overall. So nothing I would call out specifically. To your point, I think the math or the implied placement math that suggests 1,500 to 1,600 placements in Q4, and that's certainly still a very solid trajectory here, and we feel good about the trajectory that we're on for the platform overall. Jonathan Block: Fair enough. And maybe I'll go to a different topic. I actually thought one of the most impressive metrics for the quarter was the international CAG Diagnostic recurring revenue growth of almost 14%. I think it's the highest growth rate since coming out of or emerging out of COVID. And arguably, it doesn't really reflect much of InVue, no Cancer Dx. I think it's before the additional sales reps really take hold in the field. So it's always more limited visibility in the international markets. I know you've spoken to the increased double-digit in the installed base for 11 consecutive quarters. But there's got to be more than that even as traction. So any color you can provide there? And is this sort of the right run rate in the international markets, especially because you'll have those incoming tailwinds of innovation and sales reps going forward? Jay Mazelsky: Yes. So we're -- there's a couple of dimensions, I think, to think about from just an international opportunity standpoint. One is it's just more embryonic in terms of the use of diagnostics. And we have a tried and true approach from the standpoint of just developing the sector. And what we have found is it's very translatable to the international market. So obviously, the quantity of your sales professionals has a quality all its own. So being able to increase the sales organization. So it's important, and we've been doing that now for 4 or 5 years. But the other thing that I would just point out is the maturity of working within the system takes some time. So it's not just about the account manager or the VDC, it's about the full commercial ecosystem of the professional service and the field service representative and the inside sales then and all those working in a synchronized fashion. The other pieces that we've invested in internationally is the Reference Lab network and really building out a network that enables next-day performance. We've invested in software localizations like VetConnect PLUS, all of those pieces come together. In terms -- we just think there's an outstanding opportunity in the international geographies. We guided from a -- at Investor Day that the international opportunity is a couple of hundred basis points, I think, faster than the U.S. We feel good about that. We think that offers a pretty long-term horizon opportunity year-on-year that we can develop. Andrew Emerson: Really great results in Q3. I would highlight that we did call out there's about 100 basis points of benefit related to equivalent days on the international business. So very significant results overall regardless, but we did see some modest days benefit in the quarter. Operator: [Operator Instructions] The next question is from Chris Schott with JPMorgan. Christopher Schott: Just a couple for me. Maybe just coming back on the aging pet commentary. It sounds like you're starting to see this supporting visits in the U.S. I guess is it fair to think about this point this now being a tailwind for the business as we look out to 2026 and beyond and start thinking about [ positive ] at least clinical visit growth or could this remain kind of bumpy in the near term? And just my follow-up was just on the international business and the discussion. Can you also elaborate on visit trends there? I guess we see a similar dynamic to the U.S. where the clinical visits are starting to pick up and wellness is still under some pressure, or is it more balanced in the international markets? Jay Mazelsky: Yes. I'll cover your second question first. We don't have as good visibility into clinical visits internationally just because we don't have the installed base of PIM systems, which allows us to access what is otherwise a very fragmented installed base of software. Our perspective, our market research suggests that it's largely stabilized from some of the choppiness we've seen over the last couple of years. So I think it's a stable environment, and we're clearly being able to execute against an environment that we think over time will improve. From the standpoint of the aging pets, the non-wellness visit essentially flat, we did see that adult dogs coming for more non-wellness visits. Some of that is likely pandemic dogs, designer breeds that are more heavily medicalized, larger breeds, larger dogs that get sicker earlier in their life spans, in terms of how that sustains quarter-to-quarter remains to be same. This is just a data point. I think what we could say with a good degree of confidence is that these pets, as they age from the pandemic and the large step-up that we've seen, will come into the practice more for sick care and that, from a clinical visit trend standpoint, it will be very positive. Operator: The next question is from Daniel Clark with Leerink Partners. Daniel Christopher Clark: I also wanted to ask on international, maybe in a little bit of a different way. On a days adjusted basis, CAG recurring grew at least 13% in the quarter. As you mentioned on the call, your kind of growth potential is 13% to 16%. So like what gets us up to the 15%, 16% range? Is it just continued sales rollout? Or what else should we be thinking about here? Jay Mazelsky: Yes. It's really all the pieces that I mentioned. We're going to continue to invest in sales force expansions over time. That's really a function of time and distance and maturity of the sales organization. We're very disciplined about that. We want to make sure the market is ready. There's a product market fit dimension that we evaluate expansions and growth. For example, ProCyte One, that was -- the hematology analyzer, really designed at the inception for our international hematology first markets in terms of cost and footprint. It's super important just to Reference Lab network. So we continue to build out our Reference Labs on a global basis, both from a European geography, but also within various markets in Asia Pacific, we know that, that's super important, and then making sure that the customer support or customer experience proceeds is ahead of the investment in commercial. We want to make sure that customers who may not know IDEXX and the first exposure to IDEXX, they get not just solutions that perform at a very high level, but the support organization is there in-country, supporting them when they have all challenges. We think all those things combined give us a lot of confidence that the 13% to 16% growth rate is achievable. Daniel Christopher Clark: Just had a quick follow-up on visits. Last third quarter, you talked about 1% to 1.5% growth benefit to visits from launch of a different company's pain medicine. Was there any impact on headline visit numbers in the quarter as you've lapped that launch? Andrew Emerson: Yes, Dan, I think just in terms of the metric that you're quoting, I think that was from the prior year. We had highlighted that we have seen some effect on clinical visits and the inverse impact on diagnostic frequency. Really what we're just trying to call out is the change in the metrics themselves and not necessarily an impact on our IDEXX business directly. And so there's nothing I'd call out or highlight as part of the change or impact that we saw here in Q3 related to that at this point. And again, I think we're in at least a clean view from both the sector metrics and what we've highlighted for the interim performance that we've had in IDEXX. Operator: The next question is from Brandon Vazquez with William Blair. Brandon Vazquez: Congrats on a nice quarter. I'll just ask 1 here because we're coming up on time. But you highlighted the ability to get into some competitive accounts with Cancer Dx. Just curious, given on the Reference Lab side, given there's a lot of contracts there, what's your ability to maybe use that as a foot in the door and start taking share, even more share, within that market? So just talk a little bit about what that commercial process can look like and how long that might take given you're kind of opening new doors there? Jay Mazelsky: Yes. Brandon, our reference portfolio is very broad and differentiated. Clearly, that's a point that Cancer Dx test is a point of differentiation and having approximately 17% of test submissions coming from competitive Reference Lab customers, I think, is something that is gratifying both from these pets getting a better standard of care. And also that gives us an opportunity to put our best foot forward and reintroduce, in some cases, the IDEXX and the IDEXX Reference Lab to these customers. So it's an important piece, but I think it's just a piece. Operator: The next question is from Andrea Alfonso with UBS. Andrea Zayco Narvaez Alfonso: I just have a question on Cancer Dx. You noted the 5,000 ordering practice. I guess just with respect to adoption in terms of the screening panel, are you able to frame at all sort of how that sort of thinking in terms of just general cutoff points as far as age and frequency, where there's sort of agreeing on a sweet spot? And obviously, wellness visits, you continue to lag, so how is the company engaging that as far as initiating those talking points? Jay Mazelsky: Sure. There's 2 separate use cases for Cancer Dx. One is an aid in diagnosis. So these are typically dogs that come in, they have clinical symptoms consistent with lymphoma, and veterinarians are using this as a test. At this point, they represent the majority, but just bare majority of tests. And then the screening test that is more wellness screening, and that we think it makes sense for dogs that are 7 years or older, as well as breeds that may have a higher incidence of cancer. So we believe that over time, what we're going to see is we're going to see the test used it will flip. It will be more as a screening test, but also aid in diagnosis for sick patients, but that will be the minority of cases. The other thing that I would point out is, as the panel expands, so if you think about lymphoma, plus mast cell tumor detection, that represents over 1/3 of cancer cases in dogs. It becomes a much more compelling value proposition as part of a wellness screening. And we've also indicated that there will be a third cancer screen in 2026. So at that point, we think this -- it's sufficient in terms of menu comprehensiveness to really be seen by customers as an attractive screening test. Operator: The next question is from Keith Devas with Jefferies. Keith Devas: Maybe just higher level, just thinking about the thoughts on the pace of innovation you guys have done a lot, obviously, in the last year. There's more coming next year. How do you guys know you're not doing too much too soon or too much that the market can or can't absorb it, macro environment is only slightly improving maybe from your standpoint? And maybe the second follow-up is, do you think the planned reinvestment plans that you have from this year and into next year is enough? And how you might course correct if things are a little bit better than anticipated? Jay Mazelsky: Yes. We're -- we think the innovation agenda portfolio is aggressive, but aggressive from an intentional standpoint, that it represents a set of portfolio solutions, whether it's assays or new instruments or software that our customers are hungry for. Clearly, our commercial organization has a very large footprint, and they're subject matter experts and they're able to digest these testing solutions and bring them to customers in ways that allow testing growth. So the opportunities abound. Ours is a sector development business model, and innovation is a key driver behind being able to develop the sector. And so with that, we'll now conclude the Q&A portion of the call. Thank you for your participation and engagement this morning. It's once again my pleasure to share IDEXX executed against our organic growth strategy while delivering strong financial results in the third quarter. And so with that, we'll conclude the call. Thank you. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: Welcome to Knorr-Bremse's conference call for the Financial Results of the Third Quarter 2025. [Operator Instructions] Let me now turn the floor over to your host, Andreas Spitzauer, Head of Investor Relations. Andreas Spitzauer: Thank you, operator. Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzauer, Head of Investor Relations. I want to welcome you to Knorr-Bremse's presentation for the third quarter results of 2025. Today, Marc Llistosella, our CEO; and Frank Weber, our CFO, will present the results of Knorr-Bremse, followed by a Q&A session. Once again, the conference call will be recorded and is available on our homepage, www.knorr-bremse.com in the Investor Relations section. It is now my pleasure to hand over to Marc Llistosella. Please go ahead. Marc Llistosella Y Bischoff: Thank you, Andreas. Ladies and gentlemen, welcome to our Capital Market call for the third quarter '25. Let's start with the key takeaways for today on Page 2. We are reporting a strong quarter today. In uncertain times, we continue to focus on our earnings by using our financial flexibility, keeping strict cost control, plus staying close to customers and driving our service business. Knorr-Bremse benefits from dominant market position in both divisions, a diversified revenue generation and ongoing stringent execution. RVS is in strong shape. It posted strong organic growth and continuously increased its profitability quarter-over-quarter by the implementation of BOOST. In addition, RVS performance underlines the great potential of the rail industry in total. As a consequence, we are expanding this successful division with the acquisition of duagon. Coming to CVS, one thing is clear. The development of profitability is the most important indicator of our success and our truck colleagues delivered. Despite an extremely challenging North American truck market, CVS managed a slight margin expansion, an extraordinary achievement, which is based on the benefits of our cost and efficiency measures, well supported by a more resilient aftermarket business. The BOOST program overall remains the centerpiece of our strategy and is fully on track. Regarding our BROWNFIELD measures, we are well on track of the sale of the last assets we have in the SELL-IT program. These assets within rail generates roughly EUR 300 million in revenues and is clearly dilutive. Looking at Greenfield, our clear path of additional growth and accretive business expansion for Knorr-Bremse. In the field of subscription-based and data-driven services, we recently acquired Travis Road Services. Together with Cojali’s highly attractive services, we want to strengthen the less cyclical activities in the Truck segment, striving for a leading position in Europe and later beyond. Last but least, we confirm our operating guidance for 2025. Let's now have a closer look at our Duagon acquisition on Chart 3. Duagon itself, a Swiss-based company, is a leading supplier of electronics and software solutions for safety-related applications in rail being active in Europe, North America, China and India. We are convinced that Duagon is an excellent strategic fit for Knorr-Bremse's existing portfolio. Beyond strengthening the RVS segment, the acquisition also unlocks substantial synergies in electronics. For example, in braking and door systems where we are already global experts. Furthermore, the products will enhance the global operations of 2 key KB business units, Selectron and KB Signaling. As trains and rail world networks become increasingly digitalized, the acquisition enables both the Railway Electronics and Signaling technology units to fully capitalize on the rapidly growing market. For KB Signaling, which is expanding its North American business globally, Duagon offers additional opportunities for international growth. The accretive transaction reinforces KB2's Boost strategy and marks another milestone on its transformation journey. By integrating Duagon, Knorr-Bremse strengthened its position in high-growth digital markets and increases the revenue share of the RVS segment overall currently from 55% to even beyond, driving sustainable value creation. The acquisition fulfills all of the M&A guardrails, which were given by ourselves, which we set more than 2 years ago and follow for the time being. We welcome all new colleagues to the team and look forward to a successful future. Let's now have a look at the market situation for trail and rail and truck. Overall, the demand in rail is our least problem within the KB Group. Underlying demand remains robust across all regions as evidenced by a strong order intake and record order books for RVS and its customers. We expect this momentum to continue in the coming quarters, resulting in a full year book-to-bill ratio well above 1. The only exception in this is the freight market, which continues to face some challenges. Also here, we see a low concentration on the North American market. The market development in China itself remains pleasing on a high level this year, which is quite supportive for our profitability as well. Truck markets show a mixed picture. As you're all aware of and as you have already heard from our customers and peers, truck production rate in Europe moved higher in the past quarter, but currently, we are observing a slight softening in market momentum, including some postponement into next year, which also corresponds to the perceptions of our truck OEMs. The North American market is in a very challenging time. Truck production rates declined significantly in the third quarter and a near time recovery appears unlikely. Therefore, we lowered our expectations regarding truck production rate for the second half of this year as the usual autumn recovery has also been significantly weaker this year compared to the previous years. Our North American customers are still taking single days off and slowing down production lines in their factories so far. They are acting rationally and only adjusting their workforce as they know that markets can catch up quickly, especially in North America once a recovery starts. As a result, we have reduced our North American workforce by around 15-plus percent in the recent months, help yourself, then helps you got. At the same time, we are using the current situation to consistently implement our structural measures. The better than originally expected development in Europe cannot compensate fully the weaker-than-expected development in North America. Nevertheless, every crisis presents opportunities. We should benefit via operating leverage from a lower fixed cost base when the crisis in North America comes to an end, which it will happen. With that, I will hand over to Frank, who will give you -- walk through the financials in detail. Frank Weber: Yes. Thanks, Mark, and hello, everybody. Thanks for joining us today. Please turn to Slide 5, and let's have a look at the good financials of the third quarter. Order intake achieved a strong result at almost EUR 2 billion. The market-driven decline in truck was overcompensated by the strong rail order intake and led to a more than 5% organic growth. Knorr-Bremse generated revenues of EUR 1.9 billion organically with nearly 3%, a slightly higher figure year-over-year. Our operating EBIT margin was positively impacted by both divisions, driven in particular by our portfolio adjustment, the strong aftermarket performance, our operating leverage and the respective cost measures and of course, by KB Signaling. As a result, the operating EBIT margin improved by 100 basis points year-over-year. With a 13.3% operating EBIT margin, we delivered the best profitability within the last 16 quarters for Knorr-Bremse. Our free cash flow in quarter 3 amounted to EUR 159 million and converted once again into more than 100%. We are proud of our global teams maneuvering KB so successfully through a rather challenging '25. Let's move to Slide 6. CapEx amounted to EUR 78 million, which represents in relation to revenues 4.2%. Spending in absolute numbers decreased by EUR 2 million. This development is fully in line with our strategy to optimize CapEx spending following our lowered target range of CapEx to revenues of 4% to 5%. We expect some higher CapEx spending in the running quarter as usual. A pleasing development saw once again our net working capital, which decreased significantly year-over-year, respectively, by 7 days versus prior year. Including KB Signaling, we are at the level of EUR 1.6 billion and 72 days of efficiency. The continuous improvement in net working capital is based on the ongoing success of our Collect program, including improvement basically in all major net working capital ingredients, especially the lower level of inventory supported the improvement of working capital by more than EUR 160 million year-over-year. Free cash flow amounted to EUR 159 million. This is only a slightly lower figure compared to the prior year, driven by the unfavorable development of FX. On a 9-month view, free cash flow even increased by more than EUR 70 million. Quarter 4 will be the strongest quarter, as always, following our usual seasonal pattern. Cash conversion rate in the third quarter amounted to a strong 104%. Despite the acquisition-driven higher capital employed, our ROCE nicely increased from 18.6% to 21%, which is an increase of 240 basis points. ROCE remains a high key priority for us, and we expect to further grow it in the future, primarily driven by a higher profitability. Let's take a closer look at the RVS performance on Slide 7. RVS once again delivered a very strong quarter in terms of order intake, reaching nearly EUR 1.2 billion. This corresponds to an organic growth of 6%, driven by solid operations and contributions from KB Signaling. Global Rain demand overall remains strong. For the current quarter, we expect that RVS should be able to post an order intake between EUR 1 billion to EUR 1.1 billion. Our book-to-bill ratio stood at 1.12, which means RVS book-to-bill ratio at or above 1 for 16 quarters in a row. As a consequence, order backlog increased by around 8% and 12% even organically, reaching again a new record level with almost EUR 5.7 billion. The high order backlog and the good quality of it provides a strong basis for the rest of the year as well as beyond. Let's move to Slide 8. Revenues in quarter 3 amounted to EUR 1.05 billion, an increase of almost 6% year-over-year following a bit of a weaker organic growth in quarter 1 and quarter 2 and even despite significant FX headwinds. Our aftermarket business developed also very nicely in Europe, North America and APAC. From a regional point of view, revenue growth was fueled by Europe and North America. In Europe, both OE and aftermarket business grew nicely. In North America, it increased aftermarket and OE business despite FX headwinds. The APAC region saw a very stable aftermarket development, while OE slightly declined. China only slightly decreased year-over-year in both OE and aftermarket. We are pleased about that stable development in China, especially in high-speed local business and the aftermarket. There are still no signs of a better metro market. We improved our operating EBIT margin by 100 basis points to 17.0%, which is already beyond our midterm guidance for next year. This superb improvement is driven by the positive aftermarket development, operating leverage, our BOOST measures as well as the positive contribution of the Signaling business. In the current quarter, we expect a book-to-bill ratio of around 1. The EBIT margin of RVS should be flat quarter-over-quarter. On a full year level, the operating margin is expected to be at around 16.5%. Let's continue with the Truck division on Chart 9. Order intake in CVS amounted to EUR 783 million below our initial expectations at the beginning of the quarter due to the missing pickup in the North American truck market after the summer break. On the other side, organically, orders increased by 4%. On a year-over-year organic level, this growth was driven by Europe and the APAC region, which recorded slight organic growth, while North America was significantly down, hit by the sharp downturn in the U.S. market. Order intake in the current quarter should be rather flat quarter-over-quarter, supported by Europe and the APAC region. The North American market remains very difficult to fully assess at this point in time, but we expect no improvement of the market dynamics until year-end. Book-to-bill reached 0.94 in the past quarter. Our order book of more than EUR 1.7 billion at the end of September is 7% below the previous year's level, but at the same time, it is only 2% organically lower. Let's move on to our CVS division on Chart 10. Revenues declined to EUR 833 million, which represents minus 9% year-over-year. This development is solely driven by the divestments of GT and Sheppard as well as the negative translationary FX impact from the U.S. dollar and the renminbi, especially. In organic terms, the development was stable, which represents a solid performance in such a challenging environment. OE business in CVS decreased as expected in North America and South America, predominantly driven by lower truck production rates and FX. Europe recorded good and the APAC region even significant growth. Our aftermarket business performed much better than OE in the past quarter. The OE business grew in Europe and China, but the strong market decrease in North America could not be compensated by aftermarket growth. In addition to the sale of Sheppard and the strong euro exchange rate compared to the U.S. dollar, the low truck production rate had a particular negative impact on our performance, especially in the U.S. In the current quarter, we expect that CVS total revenues should be flat to very slightly increasing compared to the third quarter. Coming to the bottom line. Operating EBIT of CVS amounted to EUR 87 million in the past quarter, down around 4% year-over-year. Given the massive market headwinds and unfavorable FX, a very resilient number. The profitability was impacted by lower OE volumes and an unfavorable regional mix, which could be more than compensated by benefits from our Boost measures, a higher aftermarket revenue share, solid contributions from our portfolio adjustments as well as a recovery from tariff burdens. As a result, we were able to increase our operating EBIT margin by 50 basis points year-over-year to 10.5% in such a tough environment. For quarter 4, profitability should slightly improve quarter-over-quarter, well supported by cost measures and a good aftermarket development with a foundation of stable markets in Europe and North America. Overall, we are confident to further fight ongoing market challenges with our long-term BOOST program as well as our short-term measures in North America, our robust pricing and our resilient aftermarket business. On a full year basis, CVS should be able to reach an operating EBIT margin around the same level as last year. With that, I hand over to Marc again. Marc Llistosella Y Bischoff: Thank you, Frank. So let's have a look on our guidance for 2025 on Slide 11. To make it very short and crisp, basically confirm all KPIs of our guidance shown on the chart, just another 3 months to go. Please bear in mind, however, that due to the stronger euro and the weaker truck market in North America, the lower end of our revenue guidance is more likely to be achieved. Our countermeasures are having a positive effect on the other side on the EBIT margin outlook, meaning that the midpoint represents a very, very realistic expectation. Free cash flow is also being affected by the stronger euro, but we are also comfortable to reach the midpoint at least of the guidance. Having said so, we are ready for the next year to go. We had a very, very busy year 2025. And we are very confident that with our self-healing activities, which had impact -- an impact of a reduction of workforce, for example, only in trucks from 15,000 over the last 18 months to now 12,000 people, we are ready for the lift of next year. And the 10% to 10.5%, which we are aiming for the year 2025 compared to the results of the years in '23 and '24 have a much higher value because we are ready to go for the next year based on a much better fixed cost base. Thank you very much. Operator: [Operator Instructions] And the first question comes from Sven Weier, UBS. Sven Weier: It's Sven from UBS. The first question is around -- in the past couple of years, you've always given kind of indications for the year ahead. You didn't do this time. Is the reason because you feel quite happy with where consensus sits? Or do you refer that simply to lack of visibility that you have, especially on the truck side? That's the first question. Frank Weber: Thank you very much, Sven. So in the past years, there have been mixed feedbacks to us giving an outlook already in October for the next year. Some were saying, why are they doing this? And others have been highly appreciating it. So this time around, we decided not to do it. Why? Because as you rightfully said, we are totally fine with where the consensus currently sits for next year, I would say. This is it. And of course, markets are also a bit of less predictable these days, especially when it comes to the truck market, I would say, and especially the region of North America. But that's the answer to it, Sven. Sven Weier: Yes. And it's fair to say that when I look at current consensus, probably the risk is more on the downside on truck, but maybe on the upside on rail. So that could be a bit of a wash from today's point of view at least Andreas Spitzauer: Yes. Nothing to add, Sven. Sven Weier: The follow-up, if I may, is just on truck margins, right? I mean you will be around 10.5%. And I guess it's probably fair to say that reaching the 13.5% next year is really tough to say the least, but we know that, of course. I just wonder, I mean, how prepared and how far are you ready to go to reach that target within the foreseeable future, let's say, in terms of additional measures that you take? I mean, you talked about this in the past, right, where I think there are still some very obvious areas such as R&D, but still seems extremely high for the truck business and the way it performs at the moment. But at the same time, it also seems a bit of a no-go zone for me. So are there any sacred cows in terms of your willingness to achieve the target? Frank Weber: Yeah, thanks, Sven. Let me put this a bit into a broader perspective. When we gave the midterm guidance some 3 years ago, obviously the market assumptions, even though we were not at all anyhow aggressive looking at the market, because we always wanted to make it kind of a self-help story at all, were significantly different, especially when it comes to the U.S., but also when it comes to Europe. The market expectations back then were based on 22 levels. And so that was the starting point to it. We feel totally fine with a long-term view on truck that the margin of 13.5% is definitely not out of reach and is a targeted number that we have on the plate if the market turns out to be more favorable than it is today. Given the current situation, look at the quarter 3 alone, U.S. is minus 28% in truck production rate. We only declined 13% in revenues. I think a great sign of resilience. And with all those measures that also Marc mentioned With our adjustment of the current fixed cost structure that we are doing under BOOST plus the footprint reallocation going into the strategic future, where we are also touching quite a lot of global footprint facilities, we are right on track, I think, with a weaker market to achieve around 12% of return. So as a first step, I would see us moving up from this 10.5% levels with a disastrous market, with better fixed cost structure into a world of the 12-ish, and then strategically into above 13% return level. I also mentioned to you many times, Sven, that maybe the 15% that we had in the all-time high, one or two years at CVS is maybe not achievable anymore, but the 13.5% is strategically a perfect fit for the profitability target of this company. And R&D, let me remind us all, is not a no-touch area for us. We had a certain range of products that hit the market recently and are still going to hit the market, so we have a certain time where we have high R&D spendings, but we have also told you that going into the future we see our 6% to 7% range of R&D for the group, rather to go down to the lower end of that range towards the 6-ish number over time. So we're heavily working on prioritizing our R&D, but we will not be penny-wise pound-foolish, and spoil our future by cutting some of the R&D costs in innovation and customization for our customers. Sven Weier: And did I understand this correctly, Frank, that with the measures that you have put in place now and even without the market really recovering, you could go from 10.5% to 12% and then the rest will come from a market recovery? That's the fair summary? Frank Weber: This is, in a nutshell, a fair summary. Operator: The next question is from Akash Gupta, JPMorgan. Akash Gupta: Thanks for your time. I have a couple of questions on M&A that you announced in the last couple of quarters. The first one is on this Travis Road Services, which is quite an exciting area to expand into. The question I have is that can you talk about the synergies with the rest of the portfolio, and can this allow you to accelerate your aftermarket spare parts revenue or directionally to acquire this company was purely based on an ecosystem that you have within you with expertise that may help growing this business? So that's the first one. Marc Llistosella Y Bischoff: Going into the services in a stagnating market, as the truck industry is, is also following the digitalization of the industry. And the more we are setting up now a platform, which is now fulfilling most of the end customers' requirements, is for us a massive access point to future and current profit sources. This market is completely different in their business ecologic and also in the logic. Here, managing mobility as a service is more and more in the up run to do. So the insurance of making assets working and the truck is an asset nothing more, nothing less. That is something where we are more investigating in the future. With our first step in 2022 with Cojali, we stepped into this business. Why did we do that? It was one part of that was, of course, to ensure that our parts will be then delivered to the customer. But this is a multi-brand. In fact, the brand is not relevant. It's a service to end customers. And that makes us a much, much wider scope and gives us a wider access to profit sources, which currently were not reachable. So to make it very short, whether this is going to break path from Knorr-Bremse or not, for this kind of businesses and services, it's not that relevant. It's a side effect. The more effect is, as you know, in platforms, the more you can cover with a platform, especially if it is directed to the customer, the more you have a control, the more you have access to profit sources, which so far were not reachable for us. What I mean with that, we are now currently having, with this acquisition, a real decisive part in our chain of pearls. The chain of pearls is 12 to 14 buckets. And now we are covering, with this acquisition, 12 of the 14 buckets. There's one more to come, and that's exactly what we are now targeting in the next 2 months to come. And then we would be the only one in the market who is covering it from A to Z, from number #1 to number #14, which is extremely exciting because that gives us a completely different picture on the Truck business. Akash Gupta: And my follow-up is on acquisition of Duagon's electronics business. I think one thing which caught my eye was that you are giving 2026 revenues and margin. Normally, either we get this year's expectation or previous year reported. So maybe if you can talk about what sort of growth we are expecting in this business, and if the business doesn't reach to EUR 175 million revenues next year, would there be an implication on selling prices? And the background of this question is that in Knorr, we have seen in the past that the company bought assets with some projection that didn't materialize. So just what sort of safety net do you have this time around? Marc Llistosella Y Bischoff: I would ask you for one thing in terms of fairness, Mr. Gupta. You take the acquisitions before 2022 and you take the acquisitions after 2022. So when you give me any evidence of failing on our predictions in any form of acquisition which we have done after 2022, I'm very happy to discuss it with you. For the acquisitions before 2022, I cannot take any form of responsibility. Of course, I can explain to you endlessly that a lot of these investments were not leading anywhere but to, I would say, dilutive business. In Cojali, we bought a company which is completely exceeding. We bought it to a company value of roughly EUR 400 million. Now we have an estimate of over EUR 1 billion. That is a fact, and then we can give you the numbers for that. The next acquisition, which we did one KB Signaling in the rail business, and this business was coming out so far extremely positive. It came out extremely positive in EBIT margin, and it came out also extremely positive in terms of revenue. So all our predictions were even overrun. Now the last acquisition was Duagon and also the Travis. And in the Duagon, we are very, very comfortable that we are not -- we are targeting the 16% because this business is also very, how you say, taking into place what we are already having with Selectron and also KB Signaling, it's a perfect fit. It's additional. It's not a new adventure. In fact, it's like a mosaic that we are parting now putting the -- all the pieces together to a one picture. So having said so, we are very, very absolutely convinced that with Duagon, we have another asset in the class of KB signaling, what we did last year. And we are very confident that the numbers which we have foreseen are absolutely realistic. I would even say they are conservative. You can see the business is already generating a very, very reasonable, very healthy profit line. And then coming to your question, which was a little bit provocative, when you compare it with all the acquisitions done before 2022, none of these businesses had a real profitability proven in the past. In Duagon, we have a profitability record, and we have also a return record, which is proven. Now it is on us to make it and to lift it. And a growth record... Frank Weber: And they also have a growth record, which we expect to be close to double digit. Marc Llistosella Y Bischoff: I think for Akash, it's more important the profitability than only the growth. Growth without profit is meaning this. And that, I think, is the main difference. The past was very, very much driven by growth, growth, growth. And the question of profitability was like it will come. This is completely different to 2022. We are first ensuring that every form of acquisition has to be accretive, either immediately like KB signaling or very short-term minded. That means within 12 to 24 months. Anything else is not touched. Operator: And the next question is from Vivek Midha of Citi. Vivek Midha: Hope you can hear me well. My first question is on CVS. It's in a similar vein to Sven's question, but just looking to better understand the mechanics. You mentioned 15% reduction in the North American CVS workforce and also broadly lowering the fixed cost base in that division. So should we think about these layoffs as permanent layoffs? I'm interested in understanding how much impact there's been from structural cost savings versus more temporary measures such as furloughs. In order to understand how the margins can improve when the volumes come back. Frank Weber: Yes. Of course, there's always a flexibility that we keep in the plants, looking at the normal market times of around, I would say, around 10% in some countries, even more kind of flex workers, temp workers, what have you, basically in the field of blue collar, not so much on the white collar side, but on the blue collar side, of course, in order to breathe through certain market conditions, that's clear. So the 15% that also Marc mentioned does include, to some extent, also the blue collars, of course, directly affected and indirect workers in the plant areas. But the thing is that also on the white collar side, we did more than 10% of cost reductions, and that's directly impacting the fixed cost, and that's why this is sustainable and is lowering the breakeven point quite significantly for that business going into the future. So it's a mixture of both, but it has a sustainable effect because the white collar had -- white collar reduction had a similar dimension like the blue collar reductions. Marc Llistosella Y Bischoff: I would like to add to Frank's comments. The company is always quoted to have 32,500 people employed. This is not the case. We have currently 30,520 people employed. The target is very clear. Whatever happens to the revenues, whatever happens to anything else, this number has to go down because what -- for the last 22 years, the revenue per employee was not moving up. I have never seen this in my life, and this is exactly why we're addressing it. It has to move up in terms of truck above EUR 300,000, and it has to move up to EUR 250,000 to EUR 260,000 for RVS. There is a difference in the structure. This is explaining why there is a difference. So far, we are below these numbers. And that means as long as we have not reached these numbers, there will be no longer substantial buildup of workforce, whatever the revenue is bringing or not. So we have a very clear target and very clear line. We want to reduce, number one, the breakeven. This is very clear. This is not for discussion, whether the market is up or down, the breakeven has to be target, number one. In the last years, we had a breakeven in derailment, I would say, for the last 24 months, we are really pressurizing down this kind of breakeven. What is the most part of this breakeven by 60% to 70% is the personnel expenses. The personnel expenses were highest in 2024. Even the numbers were fine, but this was not even noticed by others. We have noticed it. So we have to bring down the personnel expenses significantly in truck. We had reached a number which was close to 22%. Now by the last month, we're in the reach of 19%. And the target is to be below 20%. In terms of RVS, we have reached a number of exceeding 27.5% personnel expenses cost, and that has to be brought down to 25%. With that, we will improve significantly our breakeven. And with that, we will be more and more independent from the ups and downs of the market. And as you rightly described it, the self-healing has to be done and has to be proceeded. So to your question, do we have to then expect when the market is going up to see significant upscaling of workforce? The answer is a clear no way. Number two on this is we are now starting an AI campaign and initiative where exactly the white collars are addressed yes, and we want to do repetitive work more and more by digital AI agents. And that's exactly what we started with our initiative where we have now settled the first start in Chennai, where we are focusing AI experts to bring us substantial and also long-term lasting solutions to make sure that for repetitive work, we are not hiring people. So in short words, no, we are not estimating to have higher people. Second, we are breaking down absolutely our breakeven, and we have very clear targets and very clear KPIs how to lead that. Vivek Midha: Fully understood. My second question is a bit of a mid to long-term question around RVS. So you've done a 17% margin in the third quarter and guiding for a similar margin in the fourth quarter. That's above your midterm target for the division. So my question very broad is where next do you see for the division over the midterm and long term? I appreciate you maybe want to give a fuller answer to this at some point in the future, but interested in some early thoughts. Frank Weber: Yes. Thanks, Vivek. I mean I refer a bit, of course, to the question or the answer to the question of Sven. We are totally fine with the consensus as it stands for next year. There, the margin is on that level or even slightly above the 17%. This is, I think, a number that's totally fine for the Rail division. This is, as we also said quite a few times, not the end. We have plenty of measures in place, some already started to implement with also strategic, as I said before, footprint reorganizations so that margin beyond the 17% -- 17%, 18% is reachable for the Rail division, we are aiming strategically to go towards 19%. Somehow, this is the idea of the business, and that should post a very great profitable growth for this business. Now it's out. You also said so before, I think, last year. Operator: The next question comes from William Mackie from Kepler Cheuvreux. William Mackie: So my first question, Marc, to you really is to go back to the M&A that you've undertaken around service and the efforts to expand specifically in CVS. I just wonder if you can talk a little to how the development of competitive tension evolves as you push into the aftermarket in the heavy truck industry, that's somewhere, I guess, many of the OEMs, as you well know from your past lives, are also looking to expand and capture value. So how does that balance evolve in your mind between the existing installed base, supporting it, capturing the data and leveraging that for your benefit rather than -- and avoiding too much competition with your OEMs? And then the more simple question is that you have an exceptionally strong balance sheet and great cash performance. Looking forward, you've talked to capital allocation and guardrails, but just a little bit more flavor on how you see the pipeline evolving and where you can enhance your string of pearls to strengthen the business? Marc Llistosella Y Bischoff: Okay. I'll come with number 2 first. because it's not limited to CVS when I speak about potential acquisition candidates in the near future. As you can imagine, we started with Brownfields, yes, Boost was mainly Brownfield, help yourself, then you will be helped. That's what we have done. We are on our way. By the way, Boost is not finished by next year. Boost is a continuous improvement process and program now, which will last for years to come. And this is why I made so much emphasize on the breakeven on the personnel expenses on the ratios. This has to go through now with everybody. So coming to the Pearls, the platform business itself has one very important criteria. It has to be brand independent. The more you are captive, the more you limit your brand, you limit also your platform and your reach. And what we do now together with Cojali and Travis and also with the other things to come, by the way, all of them will not exceed the range what you have seen so far. So there will be midsized to small size cap, but there it is more to capture and to occupy the place than to say, "Oh, I have already the biggest in this area. And here, the problem or the competition for the captives like our customers, they are very, very centered about and around their brand. For them, it is nearly impossible to have a multi-brand approach. The multi-brand approach makes us independent. And this is why I said it's not important only to sell our pets and our brake disks via this channel. For us, it's more important to see the movement of everything what is going in this domain. And here, we have an access now where we are, especially for the second life cycle of trucks. After 3 years, the warranty is over. And then 70% to 75% of our customers are leaving the captive service facilities. And this is not only in Europe, this is also in America. So they are going to independent dealerships. And these independent dealerships have one big strength. Their strength is they are flexible, they are agile and especially they're not brand dependent. And this is where we are stepping in. So we are not really going into competition with our customers and clients in the first 3 years, we are going more for the last 7 years, which the trucks normally last in Europe or in America, it's 8 years more. So together, it's between 11 and 12 years before it will be getting to markets which eventually are a little bit different. So this kind of span we are then addressing -- this kind of span we are addressing. And there we know by ourselves that the use take, the take quota for original parts, spare parts is getting significantly lower than in the first 3 years. And this market is highly interesting, highly competitive. But what we're aiming here is to be like a spider in the net. Whatever you move, we notice and hopefully, we will participate. And I must say it's a very good -- I'm very proud of the team because they came up with that over the last 2.5 years, and they have now formed something like ally a platform strategy, which could make us very, very, very profitable in this regard because in this kind of services and platform, you have completely different propositions on profitability. William Mackie: My follow-up relates to the CVS business. Congratulations on the continual evidence of the strong muscle memory and cutting costs at Knorr-Bremse in CVS in the face of weaker markets. I noticed the gross margins were relatively flat year-on-year actually. My question goes to the general pricing environment for CVS, perhaps specifically in North America. In a market where you've seen falling volumes, how effective have the teams been in passing through prices to mitigate cost-related headwinds from tariffs or other factors or just to be able to maintain the underlying gross profitability? Marc Llistosella Y Bischoff: So the American team is very close to the market. The American team is, by the way, even more agile when it comes to swing so to lay off people is much, much faster. It's much more efficient than we see it in Europe, especially in Germany. They are closer to the customer, much closer. And in America, we have a customer which is also very, very much involved into aftersales business and that is in this regard specifically per car. So what we see is that we are very close in cooperation with our customers here. They understand when we have to increase the prices, and they understand also the pressure we are running through and going through. One thing is for sure, the American, North American truck market is by far the most profitable market in the world. Yes. The American market is a protected market that has to be very clearly mentioned. You don't see there a lot of Asians really coming in. And the market itself is very settled, saturated and also allocated. So you have players, you don't have new players. So here, it's very clear that it is a very mature market with extremely interesting margins. The European market is more competitive with much lower margins to have, yes. The margins here are roughly in average below 400 basis points below, not only for the OES, but also for the OEMs. The truck market in Asia is completely different, highly competitive, very low margin and very difficult to have a leading position to be defended because there's always a new player who is attacking you. So our focus in terms of profitability is very, very clear in the North American market. It's very, very clear also the European market. And for expansion in terms of growth and also in technology and trying out, that is the Asian market itself. You know it also by the content per vehicle, which is a fraction in China to North America, it's a fraction. So everything what in America and Europe is coming up with digitalization and any form of redundant systems, safety systems, that is the market where we are in. So it is playing in our favor because here, we can't be replaced quite easily. Here, we are not just a commodity. Here, we are a differentiating factor. So that is what plays in our cards in these 2 markets and which makes us very, very learning in the Asian market. So long story short, the team is very ready to go with that. They're very qualified. We are very technical, instrumented and technical-based salespeople. So that means they're not just salespeople on the commercial side, but mainly also on the technical side. We have a good differentiation to our competitors, and we are seen also as a leading force here when it comes to marketable market innovations. Operator: And the next question is from Ben Uglow of Oxcap. Benedict Uglow: I had a couple. First of all, on the RVS margin improvement, the 1 percentage point. I mean, historically, that is a very big number, a big gain. And I guess my question is, Frank, maybe could you give us a bit more detail of what's in that 1 percentage point? How much of this is simply just due to OE and aftermarket type mix? And is there any significant regional variation in there, i.e., have we seen one region doing better? And the reason, obviously, why I mentioned this is in the past, your China margins were higher, et cetera. So I just wanted to understand the basis of that improvement. Frank Weber: Good to hear you again, Ben. Thank you. I missed the beginning, maybe 100 basis points you talk about rail, right? The quality of... Benedict Uglow: Yes. Frank Weber: Clear, I mean, I would say regional difference is China is stable as expected, rather a bit of operating leverage, so to say, with a bit of headwinds on the FX side. So it's not China driving it. Europe has gained growth and operating leverage and North America supported by signaling. So this is from a regional view it. So all that in Europe and North America basically being a bit of a weakness on the rail freight side in North America, which goes hand-in-hand with what we see in the truck market in North America. So that's it, I would -- how I see it from a regional point of view. Of course, aftermarket share, which is the big when it comes to the sales channel mix has supported us in that improvement of profitability. We are now running at a level of around 55% of aftermarket share globally, which is an improvement compared to last year. So that is a good driver. And the third element is the continuous boost measures that we are implementing more and more. Those 3 drivers are basically the bit of positive America, Europe, aftermarket and the cost measures. Benedict Uglow: Understood. That's helpful. And then -- and I guess a question for Marc. Trying to sort of understand what's going on in the North American truck market at the moment is extremely difficult. And a lot of companies are making all kinds of different statements, I would say. In terms of your customer conversations, in terms of your kind of day-to-day dialogue with truck OEMs, how would you characterize those conversations over the last sort of couple of months? Is it just getting better -- sorry, is it just getting worse? Or are things even changing at the margin? The reason why I ask this is different companies are talking about a better line of sight on tariffs. Some companies even talking about EPA 2027. So I wanted to know from your point of view, how are those conversations? Marc Llistosella Y Bischoff: What we see is a normalization. Most of our customers are very conservative, as you can imagine. They supported the current government massively. Some of them even paid. And there -- then after the enthusiastic in the first 4 months of this year, there came a certain form of irritation for another 4 months till August. And now we are in a phase of frustration and frustration in the sense of standby. Nobody wants to move, nobody wants to make a mistake. For example, this morning, we have been informed that Mr. Xi Jinping and Mr. Trump came to conclusion when it comes to rare earth. This came for all of us a little bit by surprise. The markets developed already this week based on that. On Saturday, we had the first signals that they come. Exactly 10 days before, we had in the press and also the Capital Markets was predicting a massive friction between the superpowers. And this kind of erratic or nonpredictable movements lead in truck industry to stand by. They won't cut, they won't increase. They will just wait. The consumer confidence will be for them eventually more important. The container traffic will be -- freight movement will be more important. Currently, we see not only the trucks hammered by that, but also the freight trains. We see that it is -- this is an impact on both industries, not only on the one industry. And we would say the worst is behind us because uncertainty is even worse than bad news. You know this better than me. The uncertainty is now, I would say, the fork is clearing up. And with that, we could imagine, but we are not paying on that. Don't get me wrong. We are prepared for it, but we're not paying on that, that we can eventually see in the next quarters to come a massive release and a massive improvement on the sentiment. And we are very confident to see this message because someone wants to be in the midterms. We know the midterms next year in November, and we know it's -- the economy is stupid, and we know this has to run and everybody will do everything to make it run in America. And now we are a little bit more confident than we have been eventually in August. Frank Weber: Just a minor addition from my side, Ben, also looking at the interest rates, I think the light signals currently being set, talking to the fleet customers directly, our sales guys, of course, on a daily basis. They are also saying, okay, whatever the kind of fleet age might be, and whatever the right theoretical point towards a new buy of a truck would be, if I don't have the money, it's too costly for me to borrow money. And I think this is also the right signals that the Fed is maybe currently sending towards any recovery. Operator: The next question is from Gael de-Bray, Deutsche Bank. Gael de-Bray: I have two questions, please, two of them relating to RVS. The first one is on the share of aftermarket, which apparently dropped in Q3 pretty substantially compared to H1, 50% or so in Q3 versus 57% in the first half. So it appears that there's been a big sequential decrease in aftermarket revenues for RVS in Q3. So I guess my question is what's been driving this? And then the second question is around the growth dynamics in broader terms for RVS. I mean RVS has enjoyed very strong commercial dynamics with orders continuously surprising on the upside over the past few quarters, even over the past couple of years now. However, at the same time, RVS revenue growth has come a bit short of expectations this year with Q3 -- I mean, this was again the case this quarter. So could you elaborate on the lead times and whether one could expect to see finally some acceleration in organic revenue growth next year? Frank Weber: Yes, you're welcome. So first, let me start with the aftermarket. I mean the bigger chunk was there in the first and second quarter, driven by also some signaling replacements and aftermarket growth momentum that we have seen. And if I'm not mistaken, it was you, Gael, who asked me the questions at the quarter 2 call, why the signaling business is so strong in profitability. So it was rather a bit of exceptionally high in quarter 1 and quarter 2, that aftermarket share driven by the signaling business and where I said already in July, it will come down quite naturally, not sustainably, but naturally come down in the second half of the year '25. That is the reason. So number one question, KB Signaling, major driver to it with exceptional situation quarter 1, quarter 2. Second question, rail demand going forward, as Marc also said right in the beginning, is the least issue that we are currently seeing. We have in plenty of jurisdictions support programs out there, fueling the demand quite sustainably. EUR 1 trillion package in the U.S. the bipartisan infrastructure law. We have the German stimulus program. We have Brazil investing EUR 15 billion; Italy, EUR 25 billion over the years to come, Egypt, Turkey, what have you. So all these, so to say, programs leading to a fueling of the market growth that we kind of see between 2% to 3% as a basis should be going up with all those programs above those numbers. And we are totally fine, so to say, to reach our 5% to 7%, let me put it this way, CAGR of organic growth for the rail business over the years to come. And by the way, this is not a different number from what we said some 3 years ago as the situation in rail is noncyclical. We said back then it's 6% to 7% over several years. One year, it's 10%. The next, it's maybe 4%, then it's 7%. So something around that is what we see the lead time. Second element of your second question is very different. I mean, it depends on the product itself that we are selling ultimately a brake system, you would have at least when the design phase is finalized, you have a lead time of 12 to 18 months for more sophisticated product like a brake system, brake control unit. When it comes to a door system, it's after the design phase kind of 6 to 9, maybe 12 months, 6 to 12, let's put it this way. And towards a more simple product, HVAC system, it's 3 to 6 months. So it takes always the design phase of the train, then add these additional lead times, this is what we are looking at on a regular basis. Sometimes you have also project pushouts from one of the other customers. This is then a bit of irregularity in the market. But in a normal market, I would say those are the lead times. And with that order book that we are having, we're so pleased, so to say that we couldn't even afford much more order intake in order to get them all, so to say, produced within the next 12 months. We are, I would say, fully booked basically. Operator: And the last question is from Tore Fangmann from Bank of America. Tore Fangmann: Just one last from my side. When we look into the truck market, I think a few of the OEMs have now opened the books for '26 from September onwards. Could you just give us any indication on how your discussions with the truck OEMs are going right now? And any first idea of how this could mean into like the start of Q1 and the Q2 of '26? Frank Weber: Thanks, Tore. Nothing spectacular, I would say, sometimes it's what I recall since quite some time that after summer break, internal news in big corporations flow a bit hesitant at first and then towards October, November, basically, the sales guys come up with a good or with a rather bad news, so to say, towards their supervisors. This is what we usually say. That's why we also said a bit, we see a bit of a softening in Europe because some orders in the EDI system, then you just -- if you only have 2 more months to go, you rather shift into the new year into January and February, you realize you can't get them done in December anymore. So Christmas is coming like a surprise kind of and then you shift a bit orders into January, February, but that's the usual thing that happens basically each and every year. We don't see anything special this time around. I think we have to, in North America, see what -- how many days around Thanksgiving, the plants on the customer side will be closed down and what they do with the Christmas break. But as we also said, we expect a rather flattish market quarter 4 compared to quarter 3, maybe tiny little bit less truck production rate there. But nothing spectacular in the discussions with our customers. And what we see is what Paccar and Volvo announced, I think, is pretty straightforward. Nothing more to add on our side. Marc Llistosella Y Bischoff: Yes. Just to add from my -- for the Capital Markets, relevant whether we perform or not. And we are performing exactly to what we predicted. We performed in '24 to our predictions and announcements. We perform now to our predictions and announcement in '25. And now give me a reason why should you not believe that we are performing exactly as we planned it for 2026 with 14-plus percent EBIT margin. I wouldn't see it because the pattern certainly gives my words more gravity than anything else. So I don't see the doubt. Whether the truck is with currently 44% of revenue share, whether this is now coming up or not, as I said at the beginning, I don't believe independence of market. I believe in your own abilities to play with the market. So that it's more important whether your costs are under control than whether the market is going up by 2% or going down by 3%. It is our absolute obligation that for next year, the 14% has to be achieved. And we are doing everything on the cost situation and our -- what we can address. What we can't address, we can't address, we can hope. For markets, you can only hope. For costs, you can do. And what we do is we do what we do. And for the last, whatever it was, 16 months, we did it and we did it as predicted. We did it as announced and now you can say, yes, what makes us think that in the next 11 quarters or 12 quarters, you will do what you announced. Sorry to say, I can only offer you the past. For the last 12 quarters, we did always and overfulfilled what we announced. And I can give you absolutely our understanding and our obligation is to do the same in the next year and the same is in the fourth quarter. Whether the market is bad or good, sorry to say, with this, we will not have an excuse, then we have to overcompensate. If left is going wrong and right is going right, we have to overcompensate it because overall, the result is 13% we wanted to reach in 2025. This is what to go for, 14% plus. That is the target for '26. That's what to go for. Whether the market is good or bad, no excuse, we have to reach it. Thank you. Andreas Spitzauer: Okay. Thank you very much for your time. If you have further questions, please reach out. And yes, we wish you a great afternoon. Thanks a lot. Marc Llistosella Y Bischoff: Thank you colleagues.
Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2025 Hess Midstream Conference Call. My name is Gigi, and I'll be your operator for today. [Operator Instructions]. Please be advised that today's conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Please proceed. Jennifer Gordon: Thank you, Gigi. Good morning, everyone, and thank you for participating in our third quarter earnings conference call. Our earnings release was issued this morning and appears on our website, hessmidstream.com. Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include those set forth in the Risk Factors section of Hess Midstream's filings with the SEC. Also on today's conference call, we may discuss certain GAAP financial measures. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the earnings release. With me today are Jonathan Stein, Chief Executive Officer; and Mike Chadwick, Chief Financial Officer. I'll now turn the call over to Jonathan Stein. Jonathan Stein: Thanks, Jennifer. Welcome, everyone, to our third quarter 2025 earnings call. Today, I have some brief opening comments and will review our operations, and then I'll hand the call over to Mike to review our financials. In the third quarter, we continued to execute our operational priorities and deliver our financial strategy that prioritizes return of capital to shareholders. We delivered strong operational performance, with gas throughputs increasing from the second quarter despite the impact of localized flooding in August. Third quarter results benefited from an increase in third-party volumes as our customers navigated Northern Border pipeline maintenance towards the end of the quarter. This provides upside to our results and is a good reminder of the strategic nature of our midstream assets in the Bakken, we also executed a $100 million share and unit repurchase in the third quarter and increased our distribution by 2.4% and or approximately 10% on an annualized basis for Class A share. That included our targeted 5% annual increase for Class A share and a distribution level increase following repurchase that we obtained our total distributed cash on a lower share and unit count. During the quarter, throughput volumes averaged 462 million cubic feet per day of gas processing, 130,000 barrels of oil per day for crude terminaling and 137,000 barrels of water per day for water gathering. Throughput increased approximately 3% in gas gathering and processing compared with the second quarter. We expect fourth quarter volumes to be relatively flat with the third quarter on lower expected third-party volumes as announced in our September guidance update into law for winter weather contingency and planned maintenance at the Little Missouri 4 gas plant. Turning to Hess Midstream's capital program. In the third quarter, we safely completed and brought online the first of 2 new compressor stations for the year and expect completion of the second compressor station in the fourth quarter. As announced in September, we have suspended activities on the Capa gas plant and we move the projects from our forward plans. As a result, full year 2025 capital expenditures are now expected to total approximately $270 million. We remain committed to our ongoing strategy, which prioritizes ongoing return of capital to our shareholders, but both excess free cash flow after distribution and leverage capacity relative to our long-term leverage target of 3x adjusted EBITDA. As we noted in our recent guidance update with the removal of the Capa gas plant from our forward plan, we expect significantly lower capital going forward providing additional free cash flow to support our return on capital framework. Looking forward, we will release guidance for 2026 and our 2028 MVCs after our budget process concludes in December. With that, I'll hand the call over to Mike to review our financial performance for the third quarter and guidance for the fourth quarter. Michael Chadwick: Thanks, Jonathan, and good morning, everyone. Today, I'm going to review our results for the third quarter and our financial guidance, and then we will open the call for questions. For the third quarter of 2025, net income was $176 million compared to $180 million for the second quarter. Adjusted EBITDA for the third quarter of 2025 was $321 million compared to $316 million for the second quarter. The increase in adjusted EBITDA relative to the second quarter was primarily attributable to the following: Total revenues, excluding pass-through revenues, increased by approximately $7 million, driven by higher third-party gas gathering and processing throughput volumes, resulting in segment revenue changes as follows: Gathering revenues increased by approximately $4 million; processing revenues increased by approximately $3 million; total cost and expenses, excluding depreciation and amortization; pass-through costs and net of our proportional share of Little Missouri 4 earnings increased by approximately $2 million, primarily from higher seasonal maintenance and employee costs. That resulted in adjusted EBITDA for the third quarter of 2025 of $321 million. Our gross adjusted EBITDA margin for the third quarter was maintained at approximately 80%, above our 75% target highlighting our continued strong operating leverage. Third quarter capital expenditures were approximately $80 million and net interest, excluding amortization of deferred finance costs, was approximately $54 million, resulting in adjusted free cash flow of approximately $187 million. We had a drawn balance of $356 million on our revolving credit facility at quarter end. In January, we announced we are targeting annual distribution per Class A share growth of at least 5% through 2027, which is supported by our existing MVCs. Last week, we announced our third quarter distribution that included our targeted 5% annual growth per Class A share and an additional increase utilizing the excess adjusted free cash flow available for distributions following the $100 million share repurchase completed in the third quarter. Turning to guidance. For the fourth quarter of we expect net income to be approximately $170 million to $180 million and adjusted EBITDA to be approximately $315 million to $325 million, reflecting scheduled maintenance and lower third-party volumes as discussed in our September guidance release. We are narrowing our full year guidance for net income to $685 million to $695 million and for adjusted EBITDA to $1.245 billion to $1.255 billion, implying EBITDA growth of approximately 10% year-on-year at the midpoint of the guidance range. Consistent with the suspension of the Kappa gas plants and the removal of the project from our forward plans, we now expect capital expenditures of approximately $270 million and adjusted free cash flow of approximately $760 million to $770 million. With distributions per Class A share targeted to grow at least 5% annually from the higher distribution level, we now expect excess adjusted free cash flow of approximately $140 million after fully funding our targeted growing distributions. We expect continued adjusted free cash flow growth through 2027 to support our targeted annual distribution per Class A share growth of at least 5% through 2027. And financial flexibility for incremental return of capital, including potential share repurchases. As Jonathan mentioned, we will release guidance for 2026 and our 2028 MVCs after completing our budget process in December. We remain committed to our ongoing strategy, which prioritizes return of capital to shareholders. This concludes my remarks. We will be happy to answer any questions. I'll now turn the call over to the operator. Operator: [Operator Instructions]. Our first question comes from the line of Jeremy Tonet from JPMorgan Securities LLC. Jeremy Tonet: Hi. Good morning. Just wanted to dive in a little bit more on, I guess, Bakken trends here. And just wondering if you could talk a bit on how GORs are trending over time and how you think that projects going forward at this point impacting your business? Jonathan Stein: Okay, sure. As you know, in historically, has not had increasing GORs because they've had a very active program Chevron now operating 3 rigs, certainly, as an active program that tends to keep lower than in the program where you have less rigs and less activity. But in general, as we've talked about, our expectation is based on the new guidance that we gave out 3 rigs that Chevron is running, we expect to maintain oil to plateau and then gas to increase over time, and that basically is driven by GORs. Because at this point, we're really at almost full gas capture. So really the trend in gas is really going to be GR driven. So with that, that will really continue to drive growth for Hess Midstream over the long term as gas represents 75% of our revenues. Jeremy Tonet: Got it. That's helpful. And then given that backdrop and not to get too far ahead of ourselves here, I was just wondering if you could provide any thoughts into 2020 beyond how MVCs might be shaping up expectations there, given Chevron moving to 3 rigs as you described there. Jonathan Stein: Yes. I'd say, look, we're going to finish our development planning here with Chevron, will approve our budget in December, and then we'll give our guidance, including 2026 guidance, but also our 2020 MVC. So we'll just wait until then, it's not too far away. Jeremy Tonet: Got it. Just the last one for me. We've seen some volatility in the share price here. Just wondering if you could provide any thoughts, I guess, on the cadence or approach to buybacks in the future? Michael Chadwick: Yes, I can talk to that one. And I think as we can see at the moment, our leverage is at 3x. And we guided in September that we would have flat EBITDA in 2026 and then we'd return to growth in 2027. However, we would have significantly lower CapEx, as Jonathan mentioned, that will be an assist to our free cash flow. And then we'll also be able to have our 5% growth on distributions continue. And so we feel very comfortable that we'll have the financial flexibility through 2027 and to continue with our capital repurchase or capital returns policy and any share -- potential share repurchases. Operator: Our next question comes from the line of Doug Irwin from Citi. Douglas Irwin: Maybe to start on the CapEx outlook. You've talked about kind of expecting significantly lower CapEx over the next couple of years, and I know we're about to get guidance in a month or I think in the past, you've put out $125 million is kind of what you view as more of a base level they'll connect to run rate going forward. Is that kind of the right way to think about the starting point for '26? Or are there maybe still some additional discrete growth projects in the backlog that we should be looking at next year as well. Jonathan Stein: Sure. Let me start, and then I'll hand over to Mike. I mean, I think in general, as we said, historically, $125 million is our expected ongoing capital. That includes well connects, as you mentioned as well as maintaining third parties at about 10% of our volumes. I think certainly, we said we're going to be significantly lower than the original guidance we had of $250 million to $300 million for '26 and '27. I think we do have some small growth projects, so it might be slightly above that 125, but somewhere between that $125 million and significantly below the $250 million to $300 million, again, we'll give guidance coming up here. once we complete the business plan, but that gives you at least some kind of a range to think about. Let me turn it over to Mike. Just anything you want to add there? Michael Chadwick: Yes. Thanks, Jonathan. And just like I said, just now, I'd just say that the lower capital expenditure that we're expecting that will drive continued growth in our free cash flow will support financial flexibility for incremental return of capital and that includes any potential buybacks. Jonathan Stein: And just to underline that, that already starts next year, right? So we had expected, as I said, $250 million to $300 million previously in 2026. So next year already, we'll already see the benefit of that lower capital. And so while we had talked about EBITDA being flat, relatively flat next year, and again, we'll give more details in the upcoming guidance but do you expect next year to see growth in free cash flow, and that will provide the flexibility for return on capital as early as next year. Douglas Irwin: Got it. That's helpful. And then maybe just a higher level one, given some of the changes that the sponsor here. And I realize you can't speak to Chevron, but just wondering if you could comment on how that relationship has evolved now that you've had a few quarters under your belt working with them as your sponsor. And more specifically, just any updated thoughts on how Hess Midstream kind of fits with them their broader strategy here moving forward and how that maybe feeds into your growth outlook and capital allocation from here. Jonathan Stein: Sure. I'll leave the last part to Chevron. But in terms of how is it going, we're working our way through now integration and it's gone very well. The board -- new board with the new Chevron Board Directors has met obviously several times, and we've approved 2 distribution increases. I think both our base targeted 5% annual increase as well as 2 distribution level increases, 1 this week following repurchase we also approved the share repurchase that we did there in the third quarter. So going really well, really at the Board level, continuing to execute on plan. We're focused on running Hess safely and efficiently focused on capital discipline and continue to execute our capital framework for our shareholders. So also I would say that as we announced the May were underway for the search for a fourth independent Board member. So going very well, working very well with Chevron. It's a natural fit for us and looking forward to continuing. Operator: One moment for our next question. Our next question comes from the line of Praneeth Satish from Wells Fargo. Praneeth Satish: Maybe just first, starting on 2026. So you kind of mentioned that it's going to be flat with 2026 EBITDA is going to be flat with 2025. So I guess the first question is, why would it be flat if we're seeing rising gas volumes? Is there something there kind of offsetting that. And then as a follow-up to that, Chevron is reducing the rig count, but I think potentially moving towards longer laterals than what Hess did. So is that kind of baked into that outlook for '26 and '27 kind of moving to longer laterals? Or would you consider that upside? Jonathan Stein: Sure. I can -- I'll kind of answer both those together. Really early guidance that we gave out recently was really designed to provide a shape for our guidance based on our current expectations after we complete the business plan process in December, we'll provide more detailed guidance for 2026, and that's going to include, of course, a range for volumes as well as EBITDA and other financial metrics as we always do. Of course, that final EBITDA range is going to be a combination of oil and gas volumes rates, including our inflation escalator, OpEx expectations. And of course, the business plan -- development plan that we get from Chevron will incorporate their expectations in terms of increased efficiencies and productivities, including things like longer laterals, as you said. I think critically, I think I just want to reemphasize what I just said earlier there that we expect continued growth in free cash flow as a capital plan reduces with the removal of the gas plant. So still under any scenario, expecting that continued growth in free cash flow. And again, we'll give more details in a range of outcomes when we give out our EBITDA guidance and our annual guidance after the budget is completed and we finished Board approval in December. Mike, anything you want to add on to that? Michael Chadwick: No, I think you summarized it well, Jonathan. And I think we will obviously provide the updated guidance after the finalization of the plan in December. But I think, no, we've got a good runway with financial flexibility towards 2027 at the very least, and we'll update when we get the 2028 MVCs. Praneeth Satish: Got you. No, that's helpful. And then I guess based on your discussions, recent discussions here with Chevron, they move to a 3-rig program. Are there any indications that they might further reduce the rig activity and go to 2-rigs? Is that kind of in some of the conversations you're having? And then just conceptually, if that were to happen, should we roughly think about oil maybe declining a bit and gas volumes to be flat with rising GORs? I understand maybe that's not your base case, but just trying to frame downside risk. Jonathan Stein: Sure. I mean I think let's just start with the base case. As you said, currently, shares running 4 rigs as they said they expect to release the rig in the fourth quarter. As we've said, 3 rigs, again, oil plateau in 2026 and gas will continue to grow at least 2027 and then we'll give again more update when we give out our guidance for 2016 and then through I think it's important to note, Chevron, just last week, you announced and said in the call that their goal is to maintain a plateau at 200,000 barrels of oil equivalent per day for the foreseeable future. That model works really well for the Hess Midstream model where we're focused on long-term execution. And at that level, 200,000 barrels oil per day that provides ongoing free cash flow generation and ongoing financial flexibility. Also would highlight, of course, as we've always said, the 5% dividend growth can be delivered even at MVC levels. So in terms of our return of capital program, that's always kind of at the base and that's well protected. And above and beyond that, we at 200,000 barrels of oil equivalent per day, we expect ongoing free cash flow that can generate incremental financial flexibility on that. So I don't want to speculate beyond that. And -- but again, we'll give more details on our current plan and expectations when we finish our budget and development plan here in December. Operator: One moment for our next question. Our next question comes from the line of John McKay from Goldman Sachs. John Mackay: I want to pick up on that last question a little bit. Can you just -- I know you guys go through this every year, but can you just remind us how the 2028 MVCs will be set again effectively what kind of plan does Chevron kind of need to walk you through and it's just interesting because it's going to be our first time doing it with them. Just curious if that's going to differ at all from the Hess process before. Jonathan Stein: Yes. There's no change to the process. The process is really baked into the commercial agreements that we have now with Chevron. And the process is essentially they deliver to us their development plan through the end of the term of the contract. We develop a system plan, which is really the infrastructure required to develop that plan. And then essentially, the MVC is set at 80% of the third year of that development plan. So that's really no change. It's a very mechanical type process. Obviously, we work together to put together that development plan and system plan together with the goal of optimizing the Bakken, that's a win-win and in everyone's best interest. But in terms of the process of the mechanics of a MVC, that's really the process that's defined in the commercial agreements, and that hasn't changed at all. John Mackay: That's helpful. And then maybe just one clarification. I think if we go through what you guys have been talking about before, you guys are pretty comfortable, I think, arguing that the 200 a day run rate that Chevron wants to flow. That can be hit on the 3-rig program. So the 4 would have put you, I guess, decently about that. Is that the implication? Jonathan Stein: Yes. I think what I would say is, and you could see that in our previous guidance before we updated it. That was based on a 4-rig program, and we had growth in both oil and gas and the gas being a function of the oil growth and obviously associated gas you're going to have growth in gas plus then just GOR is increasing as well. So then now under the current plan, you're really seeing oil plateau and gas continue to grow. So yes, the implication there is that previously in 4 rigs because of the efficiencies and productivities that has now, Chevron has been able to achieve, they were able to achieve what they're able to get historically at 4-rigs, they were able to now get a 3-rig and continuing to run at 4-rigs would have really taken you above that goal of plateauing a 200,000 BOE per day. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day and thank you for joining us. Welcome to ECARX's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to your host for today's call, Rene Du, Head of Investor Relations at ECARX. Please proceed, Rene. Rene Du: Good morning and welcome to ECARX Third Quarter 2025 Earnings Conference Call. With me today from ECARX are our Chairman and Chief Executive Officer, Ziyu Shen; Chief Operating Officer, Peter Cirino; and Chief Financial Officer, Phil Zhou. Following their prepared remarks, they will all be available to answer your questions. Before we start, I would like to refer you to our forward-looking statements at the bottom of our earnings press release, which will also apply to this call. Further information on specific risk factors that could cause actual results to differ materially can be found in our filings with the SEC. In addition, this call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the GAAP financial measures can also be found at the bottom of our earnings release. With that, I'd like to hand the call over to Ziyu. Please go ahead. Ziyu Shen: Thank you, Rene. Hello, everyone, and thank you for joining us today. Building on the strong momentum from the first half of year, quarter 3 delivered several significant milestones that demonstrate the continued progress we are making in laying a sustainable foundation for future growth. We successfully achieved EBITDA breakeven per our guidance in quarter 2 and recorded EBITDA of USD 8.3 million. Even more notably, we became net profitable for the first time achieving breakeven with net profit of USD 0.9 million. Our move to profitability was supported by a recovery in gross margin, enhanced R&D efficiency and ongoing optimization of operating expenses. This all reflected the strength and the effectiveness of our lean operating strategy. Revenue grew by 11% year-over-year and 41% quarter-over-quarter nudging USD 219.9 million. Gross profit was USD 47.6 million, up 39% year-over-year, lifting gross margin to 22%. This growth was fueled by the successful launch of multiple vehicle models incorporating our solutions and a recovery in average selling prices and by strong demand across our portfolio. Our Pikes computing platform built on the Qualcomm 8295 Snapdragon chipset is our latest solution to begin mass production and was a key contributor to our strong performance during the quarter as we began scaling up production. With a growing global project pipeline and expanding partnerships, we are on the trajectory to drive this strong momentum into next quarter and 2026 where we will maintain profitability in quarter 4 and achieve double-digit revenue growth in 2025 and beyond. Shipments reached in quarter 3 to approximately 667,000 units, up 51% year-over-year and 26% quarter-to-quarter and shipments of our Antora series reached a record high of 196,000 units. The increased deliveries of Antora series is a key driver of our success in achieving profitability in our future growth. We expect our vertical integration capabilities will further improve profitability as shipments of Antora family account for a larger percentage of total shipments. By the end of September, approximately 10 million vehicles on the road globally incorporated ECARX technology, a testament to our delivery at scale and the trust we have earned from automakers worldwide. The breadth of our global partnerships with automakers continues to amplify the unique value proposition we offer as a core technology provider. More vehicles integrated with our solutions are hitting the road and driving strong sales growth such as Geely's best selling models: the Xinyuan, Xinyao 8 and flagship [ Gas MI ]. We also continue to unlock new growth opportunities from existing partnerships. Building on the momentum from our initial project win last quarter with one of Chinese Top 5 automakers, we secured a second project. We will work with a local partner to integrate our solution into a new model expected to launch next year. Additionally, we secured a new project win with another Chinese automaker for its upcoming MPV model. Most importantly, we continue to make meaningful breakthroughs globally, securing a second project recently with a leading European automaker that will add another USD 400 million in lifetime revenue to our pipeline. This brings total contracted lifetime revenue from global automakers across Europe and Americas to over USD 2.5 billion. This win reflects growing trust in our solutions and is paving the way for deeper strategic collaboration going forward. Our technological leadership is in software-defined vehicle with the full stack capabilities of Cloudpeak and the integration of Google Automotive Service into Antora platforms provide significant value to global automakers allowing them to cut gas certification time by over 50% to just 8 months. These wins demonstrate the rapid capability and scalability of our core technologies across diversified platforms and geographies, allowing us to follow stronger partnerships and drive significant commercial value. This underscores how our flexible software-defined solutions and platform strategy effectively address the evolving needs of leading automakers worldwide. Furthermore, our capabilities to rapidly integrate Google Automotive Service combined with our intelligent manufacturing infrastructure provide us a powerful competitive advantage. These strengths enable us to both accelerate time to market and efficiently scale up on a global level. Our quarter 3 results clearly demonstrate the strength and momentum we are building through operational discipline, a robust project pipeline, a strengthened global presence and continued investments in technology and infrastructure. We have delivered on our commitment to achieving EBITDA breakeven and becoming profitable. Moreover, the raising up to USD 150 million in convertible notes last week reflects the strong confidence investors have in our strategy and execution as we enter new phase of growth. The offering involves a 0 coupon amortized installment structure and an initial conversion price set at a 15% premium to the reference share price at issuance. This additional capital will provide ample liquidity to fuel our international expansion, drive forward new product innovation and explore potential M&A opportunity globally. With this support and the solid foundation led with a profitable quarter 3, we are confident this momentum will carry into the fourth quarter. We are now focused on finishing the year strong and driving growth in 2026 and beyond. I will now pass the call over to Peter, who will go through the operating results of the quarter in more detail. Peter W. Cirino: Thank you, Ziyu. Good morning, everyone. In Q3 we made strong progress executing our strategic priorities by expanding our global footprint, deepening key partnerships, advancing technology leadership and mass producing new solutions. This disciplined execution is strengthening our foundation and positioning us for sustainable growth. During Q3, we shipped approximately 667,000 units bringing the cumulative number of vehicles equipped with ECARX technologies to approximately 10 million units, a significant milestone highlighting the growing size of our installed base and a direct reflection of the reliability of our solutions. To date, we proudly serve 18 OEMs across 28 brands worldwide. Our global expansion remains a core focus and in Q3 we engaged extensively with automakers around the world. We are increasingly receiving positive feedback and broader interest in our solutions from both new and existing partners. Following last quarter's first project win with a Top 5 Chinese automaker, we secured a second project for their next model. We will codevelop this with a local partner with an expected launch in early 2026. We also secured a project with another Chinese automaker for its upcoming MPV model. Internationally, we've also won a second project with a leading European automaker highlighting the growing trust in our intelligent cockpit solutions globally. Overall, with our deepening focus on global automakers, we have a growing pipeline of programs identified in Europe and the Americas, representing more than $2.5 billion in total lifetime revenue spanning almost all major carmakers in Europe and the Americas. We are excited about the future program wins, which will come from this substantial pipeline. As a core technology partner, our brand's market presence and ability to redefine in-vehicle user experience were validated by several vehicle launches this quarter. Following the successful global launch of the Volvo EX30 across more than 100 countries in 2023, Volvo has integrated the Antora 1000 Pro computing platform and Cloudpeak cross-domain software stack into their XC70 hybrid midsized luxury SUV, which launched in August. The Volvo XC70 is the first model to feature Volvo's SMA super hybrid architecture. We collaborate closely with them on every aspect of its design and development, including hardware, system architecture, operating systems, HMI, application ecosystem, functional safety, information security and quality control. Our Pikes computing platform and Cloudpeak cross-domain software stack are having a significant impact on the market. The next generation AI cockpit experience they deliver transforms cockpits from feature-centric to intelligent-centric environments. The Lincoln Code 10 EMP launch early in the quarter was the first model to integrate this advanced solution and set new industry benchmarks for AI-powered intelligent cockpits. Building on this, the platform was rapidly replicated in Lincoln Codes 07 and 08 EMP models further demonstrating its strong scalability and versatility. The Geely Galaxy M9 global launch further highlights how these integrated solutions are driving sales for our partners with orders exceeding 40,000 units within 24 hours of presales openings. Together, these pivotal vehicle launches exemplify how our solutions can accelerate time to market for automakers and redefine the intelligent cockpit experience. These platforms are fully compatible with Flyme Auto and Google Automotive Services ecosystems, highlighting our commitment to driving innovation and adaptability across multiple vehicle segments and markets worldwide. We continued to strengthen our technology leadership in Q3 as we executed on our R&D road map. The Antora 1000 Pro received Automotive SPICE 4.0 capability Level 3 certification, the highest rating under the standard, a testament to our relentless focus on R&D, quality control and process maturity. Certifications of this kind are prerequisites for collaborations with leading automakers and our growing portfolio validates the strength of our global R&D system and establishes a platform for us to support large-scale global mandates such as the ongoing project with Volkswagen Group providing solutions for their vehicles around the world. This certification platform will be pivotal in driving the next phase of our global expansion and meeting the increasingly strict compliance requirements of global automakers. We are making significant progress using our Cloudpeak software stack to deliver intelligent cockpit and in-vehicle AI at scale. This innovative software stack integrates AI agents, generative UIs and an AI operating system. These unique solutions offer drivers an intuitive and adaptive in-vehicle experience. Paired with Flyme Auto 2, they connect AI models to cross-domain vehicle functions transforming cockpits from feature-centric to intelligence-centric experience. This unique value proposition our software stack offers is driving interest and creating opportunities with European automakers. As we continue to advance our R&D road map, our IP portfolio is growing as well with 730 registered patents and 835 patent pending applications worldwide as of September 30. This expanding IP foundation reflects our commitment to fostering innovation, protecting our technology assets and maintaining a competitive edge across key technology domains. In summary, the operational and technological milestones achieved in Q3 highlight the disciplined execution and innovation leadership that underpin our growth trajectory. Through ongoing investments in R&D, expanding market presence and strategic partnerships; we are well positioned to capitalize on accelerating industry trends. Importantly, as Ziyu mentioned, this quarter marks a significant step forward in our journey towards sustainable profitability and we are confident this momentum will carry into Q4. With that, I will now turn the call over to Phil, who will review our financial results. Phil Zhou: Thank you, Peter, and hello, everyone. Through disciplined execution of our strategic initiatives, we achieved a remarkable financial progress this quarter reaching operating income and net profit breakeven for the very first time. This milestone marks a major step forward on our path towards long-term profitability. Total revenue for the quarter landed at USD 220 million, up 11% year-over-year. Sales of goods revenue was USD 182 million, an 11% year-over-year increase. The growth was primarily driven by a double-digit increase of customer demand partially offset by strategic price adjustments aligned with our product portfolio strategy. Our in-house development strategy continued to generate strong results. Antora, Venado and the Skyland platforms contributed 56% of total sales of goods revenue with combined revenue doubling from 2024 quarter 3. Meanwhile, our newest computing platform, Pikes, successfully entered mass production and accounted for 9% of total sales of goods revenue. Fueled by these solutions, quarter 3 average selling price improved by 9% compared to the previous quarter. Software license revenue decreased 92% year-over-year to USD 0.9 million. This decline resulted from reduced per vehicle software license revenue and lower intellectual property license revenue. In the same period last year, intellectual property license brought in USD 5.5 million revenue. Service revenue reached USD 37 million, up 68% year-over-year mainly driven by higher number and value of design and development service contracts as well as growth in overseas connectivity service revenue. Gross profit was USD 48 million, up 39% year-over-year with a gross margin percentage of 22%, representing a 4% improvement from the prior year period and 11% improvement from the previous quarter. The strong recovery reflected higher hardware margin from our product transformation and increased service revenue mix. Our commitment to OpEx optimization continued to deliver strong results. Operating expenses decreased by 42% year-over-year to USD 44 million driven by enhanced operational efficiency and a sharper focus on strategic R&D investments. As a result, operating income turned positive at USD 3 million and net profit at USD 0.9 million. Adjusted EBITDA reached USD 8 million, a significant improvement from loss of USD 32 million in the same period last year. This was primarily attributable to higher gross profit and a lower level of operating expenses. Moving on to our balance sheet. As of quarter end, we had USD 50 million cash and restricted cash. To further enhance our liquidity position, we remain focused on strengthening working capital management and improving profitability. In summary, our third quarter financial results mark a pivotal turning point for the company reflecting strong strategy execution, disciplined operations and a firm commitment to sustainable growth. As we move into the fourth quarter, we will continue this strong momentum and maintain solid execution to drive scalable and profitable growth on a consistent basis. That concludes our remarks today. Operator: [Operator Instructions] Our first question comes from the line of Wei Huang from Deutsche Bank. Huang Wei: Congratulations on a very strong 3Q results. My first question is regarding your guidance for 4Q. You have previously guided second half volume to around 1.4 million to 1.5 million units. Is that still the same? Phil Zhou: This is Phil. I'm happy to address your question. So your question is regarding our fourth quarter volume. Okay. So in quarter 3, as we just reported, we delivered 670,000 hardware units, a 51% year-over-year growth. This is phenomenal and we will keep strong momentum in Q4 for sure. And everybody knows that Q4 is the peak season and we see both volume and revenue will reach historical highs. We will execute to maintain penetration rate in our key customers and keep a strong growth rate. So this is the answer to your question regarding the volume. Huang Wei: Okay. My second question is looking ahead into 2026, there are concerns that the overall industry is going to be weaker due to weakening government policy support and some pull forward demand into the fourth quarter. Do you expect a much weaker first quarter next year? Do you have a guidance for us for volume, revenue and profitability for 2026? Phil Zhou: Yes. Q1 is normally the traditional low season within a year because the industry has a pattern. However, our disciplined execution of our product strategy like the rapid growth from our Antora families and the newly launched platform Pikes will carry on and will offset the low seasonality impact. And in quarter 3 and even in quarter 4, we will keep building enough backlog as much as possible and we will get ready for early delivery in Q1 to mitigate the so-called low seasonality. And we are also in 2026 financial planning season and according to our latest outlook projection, our customers' pipeline maybe also will further [indiscernible] growth in 2026. So what we need to do is just maintain our discipline, maintain our shares in those customers and focus on execution. Then we should be able to deliver relatively okay outlook in 2026 Q1. And meanwhile, as Peter just mentioned, we are expanding our global progress aggressively and we have lots of pipeline in our hands and we're also expanding our partnership with the global players. And now we are on track to realize the accelerated growth from those overseas business as well and software is one of the key, right? The software collaboration with the global customers, global OEMs is also one of our key growth drivers. So we will maintain the profitability momentum not only in Q4 this year, but kind of it will repeat in '26 and beyond. Huang Wei: And my last question is regarding the overseas OEM business win that you just brought up. So I think during the last quarter call, you talked about you have 4 overseas project wins that totaled $1 billion in lifetime value and in 3Q, this has jumped to $2.5 billion. Can you maybe give us an update on how many new projects that you have won during the third quarter? Peter W. Cirino: Yes. Mr. Huang, this is Peter Cirino. Maybe I'll take that question. I think as we reflect on our business, I think our fundamental belief as we look to grow ECARX into the European and the global marketplace was that we would be able to provide advanced technology solutions in the China market and then be in a unique position to scale those globally and work with all the European OEMs and bring that same industry-leading technology into the global marketplace. And I think we definitely see that fundamental belief coming to reality now. We've opened up a significant number of projects, as we mentioned, given the size of our pipeline with a number of different carmakers globally. Many of these carmakers in their high volume segments are starting to feel a lot of pressure as Chinese OEMs come to their domestic market and they're seeking new solutions that are industry-leading and very cost competitive. And I think ECARX is in a fantastic position to deliver those great solutions to those customers. So we mentioned another high volume win with a large European automaker that we secured this quarter. We have a very solid pipeline of both software and hardware -- software and full solution opportunities with both hardware and software in them. So I think our pipeline is definitely growing substantially and we'll be able to demonstrate I think significant wins as we go through 2026. Operator: Our next question comes from the line of Danlin Ren from CICC. Danlin Ren: This is Danlin Ren from CICC auto team speaking. Congratulations on your great results. And I have some follow-up questions for you. My first question is we are glad to see that we have won multiple orders from Geely Galaxy with sales ramping up quickly. Could you please elaborate on your production capacity planning and corresponding CapEx road map to support this growth? Peter W. Cirino: Danlin, thank you for the question. We are continuing to scale our smart factory in the Fuyang, Hangzhou area to support all of our business in China. We've established that facility and continue to ramp it up as we've progressed throughout this year and we expect that to continue to ramp next year. So our capacity is at about 1 million units, which has more than doubled since last year and we will continue to grow our China facility for our China business. Globally, we're working with a number of manufacturing partners to expand in South Asia, in South America and in Europe to continue to support our supply chain needs in the global market and we expect to continue to scale those businesses as our global business expands as well. Danlin Ren: My second question is regarding your product lines based on several platforms. Could you provide updates on your ASP and gross margin levels, respectively, for your number one, your Qualcomm platforms? Phil Zhou: Danlin, this is Phil. I'm happy to address your question regarding the ASP. Actually we launched several computing platform covering from entry level mainstream to high end market segment and the different solutions are addressing different market segment demand and we also manage the product mix selling according to customer demand. So basically the average selling price covers from RMB 2,000 to even RMB 4,000. That is RMB 2,000 to RMB 4,000 so that's the range. And from a hardware margin perspective, we are able to maintain something like a double digit 10% to 15%. That is our execution level. And I'd like to offer you more information like we always like to launch new platforms to the market to support customer demand. For example in quarter 3, we successfully launched our Pikes solution, which is Qualcomm 8295, and that is to support Galaxy M9 and Galaxy M10. And that also contributed to our ASP uplift in quarter 3 and that is a 9% improvement sequentially, as I mentioned earlier, and this momentum will continue and we have full confidence in our hardware margin mechanism. Danlin Ren: Very clear. And my last question is as the trend of integrating cockpit large models into vehicles continues to strengthen, could you share the company's strategic layout of R&D progress in this space? Peter W. Cirino: Yes, sure. Danlin, thank you for the question. So for sure, ECARX has a full stack solution to support AI integration into vehicles. We're continuing to deploy solutions in China for China such as our DeepSeek integration to support an AI experience inside the vehicle. Additionally, we are building out our ECARX AutoGPT as a framework to provide end-to-end solutions for LLMs inside of vehicles and that's been launched in the Geely M9 and other vehicles this quarter like the Lincoln Code vehicles I mentioned earlier. Additionally, we are continuing to work with our global partners on similar developments for the European market and the Americas. At CES this year, we're quite excited to present our next-generation solution with AI integrated into the vehicle cockpit domain as well. Operator: Our next question comes from the line of Elizabelle Pang from DBS. Huijun Pang: Okay. First of all, congratulations on the very strong third quarter results. A couple of questions from me around the gross margins. I understand we've discussed a little bit about the improvement in the gross margins earlier, but I would like to have more elaboration on that front. So firstly, we've seen that hardware margins have improved to 15%, which is up from 10% in the last quarter and also 9% last year. May I understand more information, the driving factors behind this hardware gross margin increase? Is this related to the mass production of the Pikes computing platform and do higher end Qualcomm products typically command higher margins? And following up, last question on this margin, would this margin be sustainable going into the fourth quarter and also next year? So this is my first question. Phil Zhou: To address your question regarding the margin performance in quarter 3. Yes, you are right. In the quarter, we executed pretty successfully in terms of the #1 portfolio selling. In quarter 3, we booked services revenue from many programs and which further pushed up our revenue mix from services and our margin as well and that is #1 strategy we implemented. The second thing is that we are able to manage our upstream supply chain cost pretty well. In the quarter, we managed to realize a decent cost down of our cost optimization through commercial negotiation and the VAV strategy as well and that is also beneficial for our gross margin improvement in hardware. And moving forward into Q4 and even in next year, I think the momentum will continue. And the strategy is working and we will further manage the hardware portfolio selling as well as the services software selling as well as the supply chain cost management. Huijun Pang: That's very clear. And may I just ask another follow-up question on the shipment. I'd like to understand more about the shipment mix specifically within ADAS. I would like to understand a little bit more how has the Skyland domain controller product sales performed in this quarter and in the recent quarter? And what is our outlook for the future ADAS domain controller shipment growth going forward? Phil Zhou: Peter, go ahead. Peter W. Cirino: Elizabelle, I was just going to say certainly the Skyland product has continued to grow. I think we're on a handful of vehicles in the Geely platform and continue to deploy to a few others as well. We also see a significant trend around fusion inside of the vehicle domain. So we're working very aggressively on deploying on our Antora platform as well as a next-generation platform as well a fusion solution that we'll bring into vehicles, which utilizes the capabilities that we've built with Skyland around ADAS as well as our cockpit solutions to provide a very cost-effective and advanced solution in vehicle to a number of different projects as we go forward. So I think we'll see that continue to develop as we go into next year and hopefully begin shipment in late '26, early '27. Operator: [Operator Instructions] Our next question comes from the line of Nora Min from UBS. Nora Min: This is Nora from UBS. I have 2 quick questions for Mr. Ziyu Shen. So my first question is among your current order intake, what percentage is from overseas and how fast do you expect this number to increase in the next several years? And the second question is do you intend to enter into new business initiatives such as humanoid robot, et cetera? And what is your latest progress on LiDAR product development? Ziyu Shen: Nora, this is Ziyu speaking. Thanks for the questions. The first one, overseas revenue, we are strongly moving forward right now. So we are targeting 2028, we have 30% revenue of the company from overseas outside China. And 2030, we have 50% revenue of the company from overseas outside China. We already had very solid pipeline. Also we announced within the last few quarters, we already had accumulated USD 2.5 billion total overseas revenue order we already had. So we are still running forward next quarter. We will keep updated to the market. That's the answer for your first question. The second one, our flash-based LiDAR is very going well. We are full speed R&D with our first customer OEM for robotics provider in the market. So we believe we'll be ready to the market next quarter 4 2026. That's what we are targeting now. So everything is going well. We're confident on that. Yes, that's the second answer to you, Nora. Operator: Our next question comes from the line of Derek Soderberg from Cantor Fitzgerald. Derek Soderberg: My other questions have been asked so just 1 question for me. We've seen technology companies, SoC, semiconductor companies become sort of a key negotiating tool for trade talks. Can you just update us on what's changing on that front and how you're positioning the company sort of in this newer geopolitical environment? Peter W. Cirino: Yes. Derek, this is Peter. Thanks for your question. As we look at our business as it continues to scale and grow, we're continuing, as we've talked about in many of these calls, to drive ECARX to be a global player in the automotive technology marketplace. We certainly see we've demonstrated with our products that we've launched on Volvo vehicles, the wins we've had with Volkswagen that we got to announce, the additional wins and potential programs in our pipeline that we have a clear ability to scale the technology globally, deliver very solid, mature, robust solutions into the market both on high volume vehicles as well as high technology applications. And I think we'll be continuing to grow the company in that direction. We announced earlier this year that we are launching a center in Singapore that will drive a lot of our global supply chain efforts. We'll house both in Singapore and throughout South Asia has a lot of our capabilities to deliver global solutions from those locations into OEMs in the European market and in the Americas. And I think we'll continue then to develop into a framework where we have a fantastic solution in China for China and high technology solutions that we're able to deliver to the global automakers in Europe and the Americas. So I think you'll see us continue to develop down that track. Operator: There are no further questions at this time. So I'll hand the call back to Ziyu Shen for closing remarks. Ziyu Shen: Okay. Thanks, operator. Thanks, everyone, to join today's earnings call. So we very appreciate that. Today is very important milestone for the company and for our team. So these earnings, our results very successful. We achieved the first time the breakeven and profitable in EBITDA level and free cash flow level in the company history. So we are so proud of the team because most of the tech company in automotive so they haven't started breakeven profitable, but ECARX is going well. The revenue is bigger and bigger and stronger. So also we are starting profitable and going forward, very health the financing situation. Also, we are full speed globalization. We have big volume and strong life cycle not only from China, but also for overseas in the future. Also, we already had a big win for the global OEMs. Also, we will full speed with other global OEMs soon. We believe and confidence our advantage will be very obvious and significant in the market. So thanks again and thank you, everybody. Thanks. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
Operator: Good morning, and thank you for attending the Oxford Lane Capital Corp. announces net asset value and selected financial results for the second fiscal quarter and declaration of distributions on common stock. My name is Braca, and I will be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Jonathan Cohen, Chief Executive Officer at Oxford Lane Capital Corp. Thank you. You may proceed, Jonathan. Jonathan Cohen: Good morning, everyone, and welcome to the Oxford Lane Capital Corp.'s Second Fiscal Quarter 2026 Earnings Conference Call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our CFO; and Joe Kupka, our Managing Director. Bruce, could you open the call with the disclosure regarding forward-looking statements? Bruce Rubin: Thank you, Jonathan. Today's conference call is being recorded. An audio replay of the call will be available for 30 days. Replay information is included in our press release that was issued earlier this morning. Please note that this call is the property of Oxford Lane Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited. At this point, please direct your attention to the customary disclosure in this morning's press release regarding forward-looking information. Today's conference call, including forward-looking statements and projections that reflect the company's current views with respect to, among other things, future events and financial performance. We ask that you refer to our most recent filings with the SEC for important factors that can cause actual results to differ materially from those indicated in these projections. We do not undertake to update our forward-looking statements unless required to do so by law. During this call, we will use terms defined in the earnings release and also refer to non-GAAP measures. For definitions and reconciliations to GAAP, please refer to our earnings release posted on our website at www.oxfordlanecapital.com. With that, I'll turn the presentation back over to Jonathan. Jonathan Cohen: Thank you, Bruce. On September 30, our net asset value per share stood at $19.19 compared to a net asset value per share of $20.60 as of the prior quarter. All prior quarter per share amounts being discussed during this call have been adjusted to reflect the 1-for-5 reverse stock split of our common stock, which became effective on September 5. For the quarter ended September, we reported GAAP total investment income of approximately $128.3 million, representing an increase of approximately $4.3 million from the prior quarter. The quarter's GAAP total investment income consisted of approximately $124.6 million from our CLO equity and CLO warehouse investments and approximately $3.7 million from our CLO debt investments and from other income. Oxford Lane recorded GAAP net investment income of approximately $81.4 million or $0.84 per share for the quarter ended September compared to approximately $75.1 million or $0.80 per share for the quarter ended June. Our core net investment income was approximately $120 million or $1.24 per share for the quarter ended September compared with approximately $112.4 million or $1.19 per share for the quarter ended June. As of September 30, we held approximately $366 million in newly issued or newly acquired CLO equity investments that had not yet made their initial distributions to Oxford Lane. For the quarter ended September, we recorded net unrealized depreciation on investments of approximately $68.5 million and net realized losses of approximately $18.1 million. We had a net decrease in net assets resulting from operations of approximately $5.3 million or $0.05 per share for the second fiscal quarter. As of September 30, the following metrics applied. We note that none of these metrics necessarily represented a total return to shareholders. The weighted average yield of our CLO debt investments at current cost was 17.4%, up from 16.9% as of June 30. The weighted average effective yield of our CLO equity investments at current cost was 14.6%, down from 14.7% as of June 30. The weighted average cash distribution yield of our CLO equity investments at current cost was 19.4% down from 21.6% as of June 30. We note that the cash distribution yields calculated on our CLO equity investments are based on the cash distributions we received or which we were entitled to receive at each respective period end. During the quarter ended September, we issued a total of approximately 700,000 shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $14.5 million. During the quarter ended September, we repurchased a total of approximately 1.2 million shares of our common stock pursuant to our share repurchase program for approximately $20.5 million. During the quarter ended September, we made additional CLO and equity -- CLO investments of approximately $145.2 million, and we received approximately $173.5 million from sales and from repayments. On October 24, our Board of Directors declared monthly common stock distributions of $0.40 per share for each of the months ending January, February and March of 2026. With that, I'll turn the call over to our Managing Director, Joe Kupka. Joe? Joseph Kupka: Thanks, Jonathan. During the quarter ended September 30, 2025, U.S. loan market performance remained steady versus the prior quarter. U.S. loan price index decreased from 97.07% as of June to 97.06% as of September 30. Against this backdrop, median U.S. CLO equity net asset values rose approximately 20 basis points. Additionally, we observed median weighted average spreads across loan pools within CLO portfolios decreased to 318 basis points compared to 327 basis points last quarter. The 12-month trailing default rate for the loan index increased to 1.47% by principal amount at the end of the quarter from 1.11% at the end of June 2025. We note that out-of-court restructurings, exchanges and subpar buybacks, which are not captured in the cited default rate remain elevated. CLO new issuance for the quarter totaled approximately $53 billion, reflecting an approximate $2 billion increase from the previous quarter. Additionally, the U.S. CLO market saw approximately $105 billion in reset and refinancing activity in Q3 2025 compared to approximately $53 billion in the previous quarter. Oxford Lane remained active this quarter, investing over $145 million in CLO equity debt and warehouses. During the quarter, we also directed or participated in more than 25 resets and refinancings taking advantage of tightening liability spreads to lower the cost of funding and lengthen the weighted average reinvestment period of Oxford Lane's CLO equity portfolio from January 2029 to May 2029. We continue to evaluate existing investments for opportunities to improve the economics of our CLO equity positions. Our primary investment strategy during the quarter was to engage in relative value trading and seek to lengthen the weighted average reinvestment period of Oxford Lane's CLO equity portfolio. In the current market environment, we intend to continue to utilize our opportunistic and unconstrained CLO investment strategy across U.S. CLO equity debt and warehouses as we look to maximize our long-term total return. And as a permanent capital vehicle, we have historically been able to take a longer-term view towards our investment strategy. With that, I'll turn the call back over to Jonathan. Jonathan Cohen: Thank you, Joe. Additional information about Oxford Lane's second fiscal quarter performance has been uploaded to our website at www.oxfordlanecapital.com. And with that, operator, we're happy to open the call up for any questions. Operator: [Operator Instructions] And the first question we have comes from Mickey Schleien with Clear Street. Mickey Schleien: Jonathan, how would you characterize trends in loan spreads in October relative to September? Joseph Kupka: So I think year-to-date, the year was dominated by this repricing wave. Through October, we've definitely seen a softness in the loan market with the LSTA selling off a bit. So that had put a bit of a pause on the repricing wave. With that said, now the loan market is now about over 40% trading above par. So I don't expect the repricing wave we've seen year-to-date to continue at this pace, but I think there's still a bit of repricing activity to come. Mickey Schleien: Okay. My next question relates to cash yield. What drove the decrease in the CLO equity portfolio's cash yield quarter-to-quarter? And how do we reconcile that against an increase in your core NII? Joseph Kupka: So the decrease in the cash yields was driven by two factors. One, we performed a lot of these resets and refinancings, which in the short term take a bit of a hit to the cash yield just because of the expenses coming out. And -- but the main driver was just this repricing wave that kind of compressed the ARB across all CLO equity vehicles and across the whole market. In terms of the core NII, that number tends to move around a bit due to first-time payers, which we've had a significant amount of these past several quarters and also repayments in terms of liquidated CLOs. Mickey Schleien: That's helpful, Joe. First Brands filed for bankruptcy at the very end of the quarter, and as we know, it was widely held among many CLOs with some having over a 1% allocation to it. So I'd like to understand what was the impact of its bankruptcy on your portfolio's value? Joseph Kupka: I would say it was pretty muted overall, even though there were some CLOs that had 1% positions. Overall, the average position was somewhere between 20 to 30 basis points. So there wasn't a significant impact, I would say, just given the diversified nature of CLOs in general. We also didn't see a huge impact to OC ratios, especially considering the robust OC ratios we've had in our portfolio. In fact, we saw a decrease quarter-over-quarter. Mickey Schleien: Yes, that was actually my next question, and -- I'm sorry. Joseph Kupka: No, sorry. Go ahead. Mickey Schleien: No, I was going to ask about the OC cushion, which, as you said, held up. And do you expect it to have a modest impact on portfolio yields going forward? I'm referring to First Brands. Jonathan Cohen: We don't really make those sorts of public pronouncements, Mickey, but I think Joe's comments sort of frame the issue from our point of view. Mickey Schleien: Okay. And Jonathan, if First Brands wasn't a big driver, what -- apart from loan spread compression, what drove this quarter's realized and unrealized losses? Jonathan Cohen: It was primarily loan spread compression, Mickey. I don't really think there was a secondary or tertiary element that was nearly as pronounced as that fact. Mickey Schleien: And within the realized losses, Jonathan, could you give us a sense of -- you're obviously trading and looking for some value plays. What's appealing to you? And what are you trading out of? And what are you trading into that's driving those realized losses? Jonathan Cohen: With about 300 line items, Mickey, you can appreciate, of course, that we're not really pursuing thematic trading strategies. We're typically selling things we think we can sell well, and we're buying things that we think we can buy better. Mickey Schleien: And a couple more questions, if I might. What would you say is the current level of AAA CLO debt, Jonathan, in the market? And could you quantify the remaining opportunity in your portfolio to refinance or reset liabilities? Joseph Kupka: Sure. So currently, the for Tier 1 AAAs, they just broke 120, so like 119, the best level currently. In terms of resets, that number is a bit back, call it, low 120s in terms of our go-forward opportunities. We were very active this quarter, resetting and refinancing any of our in-the-money positions. I don't expect that to be repeated this quarter. But starting next quarter, we see several more CLOs come out of their non-call period, which we see a lot of opportunity for continued resetting refinancing starting next year. Jonathan Cohen: And portfolio rotation. Mickey Schleien: Right, right. And I see that your average AAA spread is 133. So there has to be at least a handful that are in the money, right, Joe? Joseph Kupka: Yes, exactly. Jonathan Cohen: We would, yes, I think so. Mickey Schleien: Okay. And lastly, and I appreciate your patience. Could you give us a sense of your target balance sheet leverage ratio under these current market conditions? I mean it's pretty low right now. Jonathan Cohen: Sure, Mickey. We don't publish or announce a target leverage ratio by virtue of the fact that there are so many variables for us to consider, principally amongst them, the overall level of leverage on our balance sheet, which, as you referenced, I think, is on the relatively low side at the moment. But most profoundly, the cost of capital and ultimately, the use of proceeds. So we don't have a target that's specifically higher than where we're sitting right now. But as you can imagine, we're looking at that cost of capital, and we're looking at those uses of proceeds, essentially on a real-time basis. Mickey Schleien: Let me ask it a different way, Jonathan. Are you open to operating at a little bit higher leverage to take advantage of all the opportunities in the market, given how much volatility we're seeing? Jonathan Cohen: Yes, we are open to that possibility. Operator: Your next question comes from Steven Bavaria with Inside the Income Factory. Steven Bavaria: Jonathan, Steve Bavaria here. You guys obviously were the first ones to bring CLOs, previously an institutional asset class, obviously, to the retail market. And while you -- it was a while ago, I'd say we're all -- certainly my readers, we're all still scrambling to kind of catch up with what -- it's a complex asset class and how to analyze it, especially within a closed-end fund wrapper, so to speak. And one of the things that comes up a lot, and I'm not sure I even have it right, but you could help me. It seems because you're required to pay out 90% or so of your pretax income to your -- as a distribution and I guess an even higher percentage of any capital gains, you're not in a position like a regular bank. CLOs unlike regular banks can't and you certainly can't set up reserves for future loan losses, the way JPMorgan and others normally do. So it would seem if I'm right, that a lot of the losses in CLOs kind of appear at the end when the CLOs are winding down, that you're often forced to pay out distributions that in fact, are not going to be necessarily fully earned once a particular CLO winds down. If that's correct, then you're always going to have a certain amount of NAV erosion that's normal. In judging you, we should be looking at your total return, your total distribution, say minus any NAV erosion. And if that number is still an attractive number, then that's fine. Am I -- are we looking -- am I looking at that right? Is that essentially the proper lens to be evaluating your performance in? Jonathan Cohen: We believe so, Steve. I mean that's certainly how we view our mandate and how we run the portfolio within Oxford Lane. So we are a total return-focused investor. And the manifestation of that return can appear through the income that we receive from our CLO equity and junior debt investments. It can appear in the form of capital gains, potentially. It can appear to the investor through the distributions they receive and changes in the NAV, which can be positive or negative for any period. Certainly, we've had years, individual years where the total return has greatly exceeded the amount of the distribution. And we've had years where the total return has not equaled the amount of distribution, and therefore, there's been mathematically a diminishment to the NAV in those periods. But I think from a philosophical point of view, Steve, you're certainly thinking of it in a manner that's aligned with our own. Steven Bavaria: And there will -- because of that requirement that you pay out all of your -- or most of your pretax income, even though later on post -- once you absorb some of those, the losses that are normal, normal default credit losses are normal even in healthy CLOs, healthy loan portfolios, that there will always be a certain amount of over time NAV erosion that we should kind of expect that. And it's then a question of determining what NAV erosion is normal and what is abnormal? Is that essentially correct? Jonathan Cohen: Well, I mean, it's an opinion. So it's hard to say if it's correct or incorrect, but I think it's a logically consistent opinion, and it's one that we generally share in those markets. I mean -- but the reason, Steve, that -- or I should say, the result of the way that you've just described it, is that we have pursued for the last -- since 2011 when Oxford Lane Capital Corp. came public, we have pursued an active portfolio management strategy. In other words, we've basically committed ourselves to reviewing the body of our portfolio, essentially on a daily or real-time basis and making determinations and decisions based on relative value and absolute value in pursuit of this total return mandate. And the result of that is that you will see and you have seen historically that we've had relatively high levels of trading volumes, by virtue of the fact that, as Joe referenced earlier, we're looking to push out our maturity windows. We're looking to push out our reinvestment periods. We're looking essentially to actively manage this portfolio very much in view of the dynamic you've just described. Operator: We now have the next question from -- we have Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start just Jonathan, maybe get your view. Your spreads remain very tight in the primary market, yet there's still a great deal of uncertainty with regard to the macroeconomic outlook. There's been noted weakness in lower end consumer. The impact of higher tariffs are still unknown. You got the government shutdown, which could have primary as well as secondary impact. So just kind of curious, putting that together, do you think lenders and CLO buyers are being appropriately compensated for the level of risk in the economy today? Jonathan Cohen: I wouldn't make, Erik, that blanket statement. What I would say instead is that in the primary market, in new CLOs that we are involved with and purchasing. And in the secondary market, in terms of the trading opportunities that we see, we have and continue to see opportunities that we believe are compelling and are providing us with an adequate level of risk-adjusted return. But in terms of the market overall, there are certainly CLO transactions in the primary market and CLO transactions in the secondary market that we would not participate in because we don't think they're sufficiently compelling like every other market. I think to go into this asset class and to essentially buy the market has never been something that we've embraced. We've always been, I'd like to think anyways, and I believe more discerning and selective than that. Erik Zwick: Yes, that makes sense. And I guess kind of given that commentary, if you look at your pipeline, today are -- has the size of the pipeline changed relative to maybe 9, 12 months ago? Are you seeing fewer kind of attractive risk-adjusted opportunities given some of the macroeconomic overlay? Or is it still fairly robust? And maybe kind of part 2 to that question would be, in your view, are the more attractive opportunities today in the primary or the secondary market? Jonathan Cohen: Sure. Well, keeping in mind, Erik, that a forward pipeline really only refers to the primary market. We don't know what's going to be available to us at what price in 1 or 2 or 3 months in the secondary market. But Joe, why don't you speak a little bit to what we're seeing in the primary market right now? Joseph Kupka: Yes. I think to your question, things have definitely changed with what we're focusing on. Earlier this year and last year, we were very heavily investing in the primary market. Now to your point, that has changed a bit. We're very focused on the secondary market, while we're a little more patiently ramping in the primary and kind of waiting for the right moment to term out some of the CLOs. So I would say we're still seeing a large number of relatively attractive opportunities, but the type of those opportunities has and continues to change very rapidly given the tightening liability and the repricing wave we've seen. Jonathan Cohen: And the macroeconomic factors, Erik, that you referenced earlier. Erik Zwick: Yes. Great. And in terms of the net unrealized depreciation in the most recent quarter, curious, was that more reflective of individual security fair value changes or more due to broad market factors? Just curious what the drivers there were. Jonathan Cohen: I think it was more broadly based, Erik, principally predicated on the U.S. syndicated corporate loan spread compression dynamic that Joe was referencing earlier. Erik Zwick: Yes. And then if so, I guess, if we were to see spreads widen a little bit, you could certainly see some recapture of that unrealized depreciation in future periods if we were to see that. . Jonathan Cohen: Ceteris paribus, yes. Erik Zwick: Yes, yes. Okay. And then curious if I might have missed it if you said it earlier, quantity of new investments that have yet to make their first payments. Do you have that number handy? Joseph Kupka: I believe it was $366 million as of 9/30. Jonathan Cohen: $366 million, Erik. Erik Zwick: Okay. And you would expect most of those to make their first payments here in calendar 4Q? Joseph Kupka: About half to make next quarter and then the other half, the following quarter. Operator: I can confirm that does conclude the question-and-answer session. I'd like to hand it back to Jonathan Cohen for some final closing comments. Jonathan Cohen: I'd like to thank everybody on the call and listening in the replay for their interest and their participation, and we look forward to speaking to you again soon. Thanks very much. Operator: Thank you. I can confirm that does conclude today's conference call with Oxford Lane Capital Corp. Thank you all for your participation, and you may now disconnect.
Operator: Greetings, and welcome to the AMG Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Patricia Figueroa, Head of Investor Relations for AMG. Thank you. You may begin. Patricia Figueroa: Good morning, and thank you for joining us today to discuss AMG's results for the third quarter of 2025. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements, which could differ from our actual results materially and AMG assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles, or services of any AMG affiliate. A replay of today's call will be available on the Investor Relations section of our website along with a copy of our earnings release and reconciliations of any non-GAAP financial measures, including any earnings guidance provided. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information. With us today to discuss the company's results for the quarter are Jay Horgen, Chief Executive Officer; Tom Wojcik, President and Chief Operating Officer; and Dava Ritchea, Chief Financial Officer. With that, I'll turn the call over to Jay. Jay Horgen: Thanks, Patricia, and good morning, everyone. It has been a landmark year for AMG with record net inflows in alternative strategies and near record levels of capital deployed in growth investments across both new and existing affiliates. Our third quarter results reflect the building momentum in our business with a 17% year-over-year increase in EBITDA and a 27% growth rate in economic earnings per share. In addition, our organic growth profile continued to improve in the third quarter, driven by alternative strategies with $9 billion in firm-wide net inflows, bringing our year-to-date total net inflows to $17 billion which represents a 3% annualized organic growth rate. Through the third quarter across both organic growth and new affiliate investments, AMG has added approximately $76 billion in alternative assets under management, representing an increase of nearly 30% in our total alternative AUM. This increase includes $51 billion in net inflows into alternatives. Today, our affiliates manage $353 billion in alternative AUM contributing 55% of our EBITDA on a run rate basis and including sizable contributions from 2 of AMG's largest and longest-standing Affiliates, Pantheon and AQR. Both firms continue to capitalize on the tailwinds in their respective areas by leveraging their scale, innovative cultures and differentiated expertise which are collectively driving strong ongoing organic growth for AMG. These elements are continuing to have a meaningful impact on our business profile and earnings. And as you know, we expect each affiliate to be a double-digit contributor to AMG's earnings this year. Given the substantial increase in our alternative AUM, the significant growth and margin expansion at AQR and Pantheon, the positive contributions resulting from capital deployed in growth investments and the positive impact of our ongoing allocation of capital to share repurchases, we anticipate a meaningful increase in our full year economic earnings per share in 2026. Looking ahead, we have expanding opportunities to further invest in growth by investing in new and existing affiliates and by investing in AMG's strategic capabilities to magnify our affiliates success. Our new investment pipeline remains strong with active ongoing dialogue with prospective affiliates operating in both private markets and liquid alternatives. Our investment model continues to resonate with the highest quality partner-owned firms seeking a strategic partner that can enhance their long-term success while also supporting their independence. And our strategic capabilities, particularly in capital formation, increasingly differentiate AMG and our dialogue with prospective affiliate partners. We recently announced a strategic collaboration, which highlights the value of AMG's capital formation capabilities in the U.S. wealth channel. Brown Brothers Harriman, a globally recognized 200-year-old firm with considerable scale, chose to strategically collaborate with AMG to develop innovative products and deliver structured and alternative credit solutions to the wealth channel, a very strong statement on AMG's value proposition. Also in the third quarter, we announced the sale of AMG's minority stake in Comvest private credit business. AMG invested in Comvest to provide a combination of growth capital and strategic capabilities that accelerated the growth of its credit franchise. We were pleased that AMG's strategic engagement ultimately resulted in a positive outcome for all stakeholders, including AMG shareholders. The significant return of capital, nearly 3x our purchase price highlights the underlying value of our affiliates managing alternative strategies. Having committed more than $1 billion across 5 new growth investments so far in 2025. We continue to actively expand AMG's participation in areas of secular growth. We have an excellent capital position, which was further enhanced by the significant proceeds from the sale of our interest in [indiscernible] and Comvest. And given our ample financial flexibility and our distinct competitive advantages, we have an outstanding opportunity to further increase our earnings growth by continuing to make growth investments and return capital to shareholders. Finally, it has been an extraordinary year for AMG in terms of both organic growth and new affiliate investments, laying the groundwork for accelerating EBITDA and earnings growth in 2026. As we continue to execute our strategy, building upon more than 3 decades of successful partnerships, we are confident in our ability to continue to generate long-term earnings growth. And with that, I'll turn it over to Tom. Thomas Wojcik: Thank you, Jay, and good morning, everyone. AMG's activities over the course of this year illustrate our strategy in action. As we evolve our business mix more toward alternatives, our business is generating strong organic growth in both liquid alternatives and private markets. And we continue to invest in both our affiliates and in AMG's own capabilities to support future growth opportunities. This year, we have entered 4 new investment partnerships with alternative firms squarely aligned with long-term secular growth trends. We also announced a strategic collaboration to bring structured credit products to the U.S. wealth marketplace with BBH Credit Partners highlighting the strength of AMG's capital formation capabilities. And we engage strategically with our affiliates across a range of business initiatives, including new product launches, building out adjacent capabilities and supporting 2 of our private markets affiliates and their sales to consolidators. Taken together, these strategic actions and many other elements of our unique model drove significant earnings growth and cash flow generation, which we have invested and will continue to invest for growth. Fueling the execution of our strategy and the forward evolution of our business, while simultaneously returning capital through share repurchases and further delivering value to our shareholders. In the third quarter, AMG delivered $9 billion in net client cash inflows and $17 billion on a year-to-date basis, representing an annualized organic growth rate of 3% thus far in 2025. Our strong organic growth this year reflects rapidly growing client demand for liquid alternative strategies and ongoing momentum in private markets fundraising. In the quarter, our affiliates generated $18 billion in net inflows in alternatives, more than offsetting $9 billion in outflows in active equities and highlighting the advantages of AMG's business profile that is increasingly weighted toward high-growth alternative asset classes. In liquid alternatives, our affiliates value proposition continues to resonate with clients. With $14 billion in net inflows, AMG posted the strongest quarterly net flows in liquid alternatives in our history, driven primarily by tax aware solutions, and supported by positive contributions from a number of affiliates. Client demand for tax aware strategies remains substantial. And AMG's Affiliates offer highly attractive products. And more broadly, AMG's diverse group of affiliates managing liquid alternative strategies is well positioned to deliver excellent risk-adjusted returns for clients and attract new flows over time. Our private markets affiliates raised $4 billion in the quarter, mainly driven by another strong quarter at Pantheon and positive contributions from EIG and Abacus demonstrating the diversity of our affiliates offerings across private market solutions, credit, private equity, real estate and infrastructure. The ongoing fundraising momentum of our private markets affiliates reflects investors' conviction in their specialized investment strategies, along with the impact of ongoing secular growth trends. Looking ahead, the management and performance fee potential across our private markets affiliates, including some of our most recent new investment partnerships, which are not yet reflected in our results, represents a significant source of upside for the long-term earnings profile of our business. As we continue to form new partnerships with growing high-quality independent firms, such as our new investments in Northbridge, Verition, Montefiore and Qualitas Energy this year and our strategic collaboration with BBH Credit Partners, we are broadening our exposure to fast-growing specialty areas within alternatives and further diversifying our business. BBH's taxable fixed income franchise has delivered top quartile performance across strategies and market environments. Our strategic collaboration will bring the firm's industry-leading structured and alternative credit expertise into the U.S. wealth marketplace. As high net worth clients and their advisers continue to drive demand for alternative strategies, credit remains a core focus. And the return characteristics and scalability of structured credit make this area uniquely attractive. BBH is one of the industry's longest tenured and most active players with a differentiated structured credit investment track record across the full capital stack, and in combination with AMG's product development and distribution capabilities, we see significant opportunity to build unique investment solutions to meet growing demand. AMG provided excellent alignment with BBH's goals for a number of reasons. The complementary strengths of our respective businesses, access to significant seed capital, the permanent nature of our model and strong cultural connectivity across our firms. The strategic collaboration will accelerate the expansion of BBH structured credit franchise and will further enhance AMG's position as a leading sponsor of alternative strategies for the U.S. wealth market. The rapidly growing demand in U.S. wealth for distinctive alternative products is one of the most visible mega trends in the asset management industry today. And AMG is uniquely positioned to benefit. AQR has been a leader for more than a decade in developing and delivering excellent investment solutions to U.S. wealth clients and its innovation and tax aware strategies continues to drive rapid adoption. Pantheon was one of the earliest innovators in limited liquidity vehicles in private markets and product development and flows are accelerating across its product line. Our collaboration with BBH Credit Partners speaks to the success that AMG has seen thus far in driving growth in alternatives in the wealth channel, and we see significant opportunities ahead. As clients increasingly look to AMG as the industry's leading entry point to access the differentiated alternative investment capabilities of independent partner-owned firms, AMG's footprint in U.S. wealth is well positioned for rapid growth. Importantly, the success that we are having in the U.S. wealth channel is resonating not only with clients and existing AMG affiliates but also with new investment prospects as accessing this attractive market requires scale and is difficult, if not impossible, for many independent firms to do on their own. As we continue to invest in new partnerships with alternatives firms, we look forward to collaborating with additional affiliates to broaden their reach and expand their platforms. AMG's business has continued to evolve in 2025, driven by our focus on allocating our resources and capital to areas of secular growth. As we execute our strategy, we expect the contribution from alternative businesses to further increase, enhancing our long-term organic growth profile and earnings profile, and we are excited about the opportunities ahead. With that, I'll turn the call over to Dava to discuss our third quarter results and guidance. Dava Ritchea: Thank you, Tom, and good morning, everyone. It has been an exciting year for AMG. In 2025 to date, we have committed approximately $1.5 billion in capital across growth investments and share repurchases, and we continue to be in a strong position to execute on future growth opportunities and return capital to shareholders, given our significant cash generation and strong balance sheet. I will start by walking through the results for the quarter then will discuss the positive impact of recent capital activity on our forward earnings power and conclude with a discussion on our balance sheet. In the third quarter, we reported adjusted EBITDA of $251 million, which grew 17% year-over-year. This included $11 million in net performance fee earnings and reflected a full quarter contribution from Verition and Peppertree's final contribution. Fee-related earnings, which exclude net performance fees, grew 15% year-over-year driven by the positive impact of our investment performance and organic growth in our alternative strategies, partially offset by outflows from fundamental equity strategies. Economic earnings per share of $6.10 grew 27% year-over-year, additionally benefiting from share repurchases. Now moving to fourth quarter guidance. We expect adjusted EBITDA to be in the range of $325 million and $370 million based on current AUM levels, reflecting our market blend, which was up 1% quarter-to-date as of Friday and including net performance fees of $75 million to $120 million, bringing expected performance fees for this year to between $110 million and $155 million. This guidance includes a full quarter contribution from Montefiore, a full quarter contribution from Comvest's private credit business and no impact from our announced investments in Qualitas Energy and BBH Credit Partners, which are expected to close in Q4 and Q1 2026, respectively. We expect fourth quarter economic earnings per share to be between $8.10 and $9.26, assuming an adjusted weighted average share count of 28.9 million for the quarter. Looking further ahead, we anticipate a meaningful increase in our full year adjusted EBITDA and economic earnings per share in 2026, mainly driven by strong organic growth and our capital allocation strategy, and I'll describe each of these further. Organic growth in our existing business is having a meaningful impact on bottom line earnings. Strong organic growth in alternatives including record inflows and alternatives year-to-date is driving growth in AUM, having a positive impact on our aggregate fee rate relative to the prior year and incrementally expanding margins at some of our largest alternative affiliates. Furthermore, the approximately $1.5 billion committed to growth investments and share repurchases, combined with the sale of our stakes in 2 of our private market affiliates is expected to substantially increase our earnings in 2026. Additionally, we believe there is incremental upside to our earnings potential over time as we strategically engage with each of our 5 new partners in the next phase of their success. This combination of organic growth in our existing business and new investment activity has led to strong year-over-year earnings growth so far in 2025. And underpins our confidence in our 2026 earnings profile. Importantly, most of this earnings growth is in fee-related earnings delivered by products with longer expected duration. Finally, turning to the balance sheet and capital allocation. We repurchased approximately $77 million in shares in the third quarter, bringing year-to-date repurchases to approximately $350 million. We are increasing our full year guidance for repurchases and now expect to repurchase at least $500 million, subject to market conditions and capital allocation activity. Our balance sheet remains in a strong position with long-dated debt, significant capacity from ongoing cash generation and access to our revolver. Additionally, we received pre-tax proceeds of approximately $260 million from the sale of our stake in Peppertree, which closed in the third quarter and will receive approximately $285 million in proceeds from the sale of our stake in Comvest. Given our ample financial flexibility, which is further enhanced by the proceeds from these affiliate transactions, we are well positioned to continue to invest in growth opportunities and return capital to shareholders. We continue to employ a deliberate, strategic and disciplined approach to allocating our capital and investing in the ongoing growth of our business. We have a diverse, unique set of opportunities available to us, including investments in new affiliate partnerships and alongside existing affiliates, and in AMG capabilities. Through our capital allocation framework, we selectively engage in opportunities that align with our overall business strategy and that we believe will create significant long-term value. And looking ahead, we are confident in our ability to continue to generate substantial value for our shareholders. Now we are happy to take your questions. Operator: [Operator Instructions] Our first question comes from the line of Bill Katz with TD Cowen. William Katz: Jay, maybe one for you. I think the theme coming out of today's call is just the franchise momentum both from a de novo perspective as well as incrementally through inorganic. A, maybe I was wondering if you could just maybe delve a little bit more into BBH, how that sort of rose? Did they seek you out? And then just as you look at the pipeline looking ahead, how should we be thinking about activity level into next year after a really strong 2025? Jay Horgen: Great. Bill, and thanks for your questions. I will -- let me take the first one just on the momentum. Tom, I'm going to ask you maybe to talk about BBH and then maybe you can send it back to me and we can talk about pipeline. So check them all off. So yes, thanks, Bill. I think I agree with your setup. It has been a landmark year for AMG, an output of our strategy, as you've heard us talk about it over the last 6 years, both inorganic and organic, our flow profile, which is driven by alternatives. It's been improving for some time now. This quarter is our second significantly positive quarter. It is building and we feel good about the continued strength of it. Our strategic engagement with affiliates, collaborating with them to magnify their long-term success is generated meaningful results at places like Pantheon, AQR, Artemis, Garda and many others where we're working on business development initiatives to enhance their value. It's been, as you've seen, one of the most active years for us in terms of new investment activity, near record levels of capital deployment. We've announced for new investments and a strategic collaboration with BBH, which Tom will talk about in a moment. We've had two stake sales from -- two consolidators in Peppertree and Comvest. So it's just been an extraordinarily active year for us. Maybe looking at where the business stands today, alternatives contribute 55% of our EBITDA on a run rate basis. We're working hard to increase that to more than 2/3 in just a few years from now. We think that will continue to sustain our organic growth and also we see good opportunities to make those new investments. And finally, as we have been committed to disciplined capital allocation, it has resulted in $350 million of repurchases this year. You heard Dava say that we've just updated our guidance to at least $500 million for 2025. So it has been an extraordinary year in terms of both new investments and organic growth. And that lays the groundwork for accelerating EBITDA and earnings growth in 2026. So maybe, Tom, if you would mind, give us a bit more detail on BBH. Thomas Wojcik: Yes, happy to. Thanks for your question, Bill, I think Jay provided a lot of very good context in terms of our strategy overall. And really, when we think about the BBH strategic collaboration, it aligns very well with a number of different elements of our strategy and key themes and areas that we're really focused on like alternatives and like the growing opportunity for alternatives in U.S. wealth. Over the course of the past couple of years, you've heard us on earnings calls and some of our meetings talk about this repositioning that we've gone through in our U.S. wealth business really to just focus that organization on the opportunity and alternatives. We've built a new affiliate product strategy team. We've channelized our sales force to address both RIAs and the wire house opportunity. And we're partnering very closely with affiliates like Pantheon to build, seed and distribute differentiated investment solutions to U.S. wealth clients. So in a lot of ways, the strategic collaboration with BBH is both a recognition of the success that we've had to date in going through that change to our U.S. wealth platform and the opportunity and the success that we're seeing, but also the next chapter in terms of opportunity to build on that success with a great partner like BBH. BBH is one of the most respected and trusted brands in financial services globally, and we're very excited to work closely together with them. You asked how this came together. And effectively, I would say we found each other. They had an opportunity that they were thinking about in terms of an excellent structured credit franchise. We had a strong view on structured credit as an opportunity in U.S. wealth and there was a real complementary opportunity for us to come together and try and build something together. We do think that BBH choosing AMG to be their strategic collaboration partner is a very strong statement on our value proposition in U.S. wealth. And I mentioned some of this in my prepared remarks, but we think AMG was the right partner for them for a number of reasons. As I mentioned, the complementary strengths of our respective businesses there in terms of underwriting, pricing, risk management around structured credit and on our side, product development and capital formation resources, access to significant seed capital that we underwrote as part of this collaboration. The permanent nature of our model and also, very importantly, really strong cultural connectivity across our firms. We spent a lot of time together, got to know one another very well. And I think we have a shared vision for where we can take this. So collectively, we're really excited about the collaboration. We think it will materially accelerate the expansion of BBH structured credit capabilities and also further enhance AMG's position as a leading sponsor of alternative strategies for the U.S. wealth market as we continue to build momentum in that area. So Jay, maybe back to you on the pipeline. Jay Horgen: Yes. Great. I'll just say one thing. It was very validating and rewarding that our capital formation capabilities, and that's an area, which, as Tom just mentioned, we've invested heavily in repositioning it. It was a centerpiece of this strategic collaboration with BBH and we do think it will allow us to drive more product in the wealth space around alternatives. So we're very excited about that. Turning to the pipeline, Bill. So I know you heard me say that already that it's been near record levels of deployment from our perspective. We continue to see opportunities to invest for growth in new and existing affiliates. Our pipeline reflects this opportunity set. And maybe just giving a bit of color at a high level, we stay -- we're staying focused on areas of secular growth, both within private markets and liquid alternatives. Importantly, we are interested in businesses where AMG's strategic capabilities can add value and firms that would like to have a strategic partner. So that has increasingly become a part of the dialogue and part of our differentiated area for success. We'd like to be able to magnify our affiliates business plans, their business initiatives, and we're doing so through our active engagement with affiliates. We've had a proven track record of providing capital and resources in these areas, business development, product development and distribution. So we're excited about continuing to add new affiliates in areas that we think we can help them grow. This unique sort of advantage that we have now in addition to just preserving independence, which we've always done very well, as you know, the ability to magnify the advantages of partner-owned firms has really added to our attractiveness in the market. The last thing I'd just say around our pipeline, in addition to, we continue to have a significant opportunity to invest our capital and growth initiatives. We will remain disciplined as always. The goal is to ensure that we deploy our capital at the highest -- in the highest quality opportunities with a target mid- to high-teens returns as we've said in the past. We have been successful in doing that over the past 6 years. But if we cannot find good investment opportunities, we will look to return capital through share repurchases, and we've done that also during this period, having reduced our share count by 40%. So maybe I'll just leave you with a summary of our new investment opportunity. We feel really good about it. We feel good about our ability to originate and invest in new affiliates in areas of secular growth and we're confident that we'll continue to meaningfully evolve our business through these growth investments and enhance shareholder value over time. So thanks, Bill, for your questions. Operator: Our next question comes from the line of Alex Blostein with Goldman Sachs. Alexander Blostein: So lots of enthusiasm from you guys in 2026. It feels like it's a little bit earlier than typical to give guidance in 2026, but I was wondering if you kind of could help contextualize what that could mean for next year given a number of moving pieces including you alluded to expansion in the margins at AQR and Pantheon, that sounds like it's an important part of the story here as well. So any way you can help us frame what sort of the growth expectations you might have so far into 2026, would be helpful. Jay Horgen: Yes. Thanks, Alex, and good morning to you. I'll let Dava do the meat of this. Maybe just to set it up. One of the reasons why we're so excited about 2026 is that, as you've seen in the past, when we do new investments, the year in which we do invest new investments is a partial year. And so the full year contribution from those new investments actually happens in the next year, in this case, 2026. We've also had the added benefit this year of having organic growth really come into the middle of the year and continues -- the momentum continues. And as you heard and you rightfully pointed out, there's an added benefit there because it's into businesses where we actually have margin expansion opportunity. So maybe I'll let Dava expand on what we're seeing in terms of mix and forward look. It is a little early to land on to 2026, but I think we can give you a sense for it. Dava Ritchea: That's right. Thanks, Jay, and thanks, Alex, for the question. At a high level, we expect the combination of new investments, share repurchases and the impact of net inflows from alternatives to be impactful to our 2026 EPS. Really, given the strategic evolution of our business profile over the last 6 years towards greater participation and alternatives, the EBITDA impact of the growth that we're seeing today is really meaningful. The largest driver of that has been a turnaround in our net flow profile as we've moved the business from what was shrinking organically around 10% annually to a business that today grew 3% annualized on a year-to-date basis and 5% annualized this quarter. And as we've experienced an even larger EBITDA contribution, the past 2 quarters from our net flows than our organic growth rate would indicate. So we're seeing some further expansion in EBITDA than you would expect in our net organic growth rate. This trend is occurring because of the bifurcation we've seen between strong organic growth on the alternative side, and the headwinds on the traditional side. The growth in alternatives is moving the business towards a higher fee and longer lock strategies that, in some cases, have future performance fee and carry potential while the outflows have been more isolated to lower fee open-ended equity funds. So even though we tend to own more of the firms where we're experiencing outflows, the higher fee rate from the alternative products have more than offset this impact. And we'll give some further guidance on the next earnings call in terms of our overall thoughts on 2026. Jay Horgen: Dava, you might just want to also talk about just the composition between NFRE and PRE just briefly. I think that's also something that's meaningful that's happening. Dava Ritchea: Sure. So what's exciting that we've seen to date, again, based on both the combination of the new investment profile that we've been -- that we've had this year and also in terms of organic growth, we've seen our year-over-year aggregate fee rate and real growth in fee-related earnings. So you've seen that up about 15% on a quarter year-over-year basis. And the shift mix of our business is moving towards a higher contribution from fee-related earnings. Operator: Our next question comes from the line of Dan Fannon with Jefferies. Ritwik Roy: This is Rick Roy on for Dan. So you reported another quarter of accelerating liquid alts flows, and it sounds like momentum in the tax were AQR strategies continues to be a big contributor towards that. So maybe on that, I was hoping you could add a little bit more color on the full diversity of flows coming from the AQR broader franchise and maybe perhaps also describing the performance fee potential of the broader set of AQR strategies that are gathering inflows? And then maybe separately, if you could note any notable private markets fund raises to be aware of in the near-term and into 2026, that would be helpful. Jay Horgen: Thanks, Rick. I'm going to let Tom just sort of give you an overview of flows, and I'm sure within that, he will drill down on some of the trends that we're seeing. Thomas Wojcik: Rick, thanks for the question and Jay, actually, maybe after I go through this, you can give a little bit more color on AQR specifically, but I'll give you the whole picture and then we can fill in from there. To put the whole thing in context, our flows are primarily a function of 3 key drivers. The first is the alignment between our affiliates' investment strategies and overall client demand trends. The second is the evolution of our business mix and Dava just talked about some of this as to Jay, over time through both organic growth rates, the relative organic growth rates of our different business lines, and the investments that AMG is making to form new partnerships and growth areas in line with our strategy. And then finally, the third driver is really the lift that we're able to provide at the AMG level to our affiliates through new product development and distribution. In terms of alignment with client demand trends, with approximately 55% of our EBITDA now coming from alternative asset classes and a growing portion coming from wealth clients our overall positioning is very well aligned with forward trends. In terms of where we go from here, as we look to continue to push that percentage of EBITDA from all closer to the 2/3 level over the course of time, all of our recent new investment partnerships have been focused on alternatives. And significantly more than 100% of our total net flows over the past few years have also been in alternatives. And over that same time frame, we've grown alternatives AUM on our U.S. wealth platform from about $1 billion to more than $7 billion. And you're seeing the cumulative impact of that business mix evolution on AUM on our fee rate, as Dava just talked about, and on the contribution of EBITDA that's coming from alternatives overall. So to go into the individual buckets in private markets, as I mentioned in my prepared remarks, our affiliates raised $4 billion in the quarter and that's really a continuation of momentum that we've been seeing over the course of the past several years. It was another very strong quarter for Pantheon, alongside positive contributions from EIG and Abacus. And I think importantly, that really demonstrates the diversity of our affiliate offerings across a variety of different areas, private market solutions, credit, private equity, real estate infrastructure, where our affiliates are real leaders in these specialized strategies in the market. Liquid alternatives was another record quarter for us, $14 billion in net inflows. And as you referenced in your question, driven primarily by solutions for the wealth channel focused on after-tax returns at AQR but importantly, with positive contributions from a number of our liquid alternative affiliates, we're seeing real breadth in that area as well. This is now the fifth consecutive quarter where we've seen positive flows in liquid alternatives. And over that time period, we've seen $38 billion in total net inflows. Equities, we continue to see headwinds, and that's in line with the overall industry. You saw that this quarter with about $9 billion in outflows that said, it's been another good year for beta, and beta continues to support AUM levels overall. And we're also seeing some pockets of strength, Jay mentioned earlier, Artemis, River Road. So there are some real bright spots that we're excited about there also. So when you put all those things together kind of back into that initial framework, better alignment with overall client demand trends as we continue to shift our business, continued investments in new affiliates, active collaboration with our affiliates to develop and create innovative new products that can help to drive client demand through our capital formation capabilities, together with our confidence in our ability to continue and maybe even enhance and accelerate the impact of these growth drivers going forward, we feel like we're in a really strong position from an overall franchise perspective in terms of forward organic growth opportunities. Jay Horgen: And Rick, let me address AQR specifically. Incrementally, it has been very helpful to our flow profile, but maybe I'll highlight a few key attributes about that business is a very diverse business. And the way I describe it is it's a liquid alts business, 1 of the top 3 in the world. It has a pretty significant tax-aware wealth business that has a different dynamic than just its overall institutional liquid alts business. And then it has a 40 Act long-only business as well. Because of its excellent performance, it's seeing inflows in each of these areas. And so I think we would be remiss without sort of stating the obvious, which is a very big, diverse business with lots of different strategies and lots of different opportunities within it. Maybe I'll highlight, though, as I did last quarter, sort of a paradigm shift that's occurring in the wealth channel. And AQR is leading -- or has a leading position in this paradigm shift. The basic strategies to harvest losses, they've been around for decades, but AQR, they brought in additional set of tools and capabilities to it. They've kind of unlocked the power of investing for after-tax outcomes with the use of liquid alternatives, specifically using long-short investing techniques, either to track market data or they have a goal of absolute return, and that has generated superior after-tax outcomes, and that's what's leading to the significant flows. The shift in focus by RIAs to after-tax outcomes from their historical convention of evaluating on pre-tax returns, we think this is just in the very early innings. So the AQR has quite an opportunity ahead of them. As you know, they've been an innovator in liquid alternatives for more than 20 years now, their ability to bring new strategies and products to the market is one of the best in the industries. They've been building this tax-aware business for some time. They've developed an entire suite of products inside of separate accounts, limited partnerships and now mutual funds. Their strategies generate for us, management fees and many of them have a potential for performance fees. As I've said in my prepared remarks, AQR has the potential to increase their fee rates here over some period of time as their flow mix changes. They also have an opportunity to increase their margins, and we feel that in our EBITDA contribution that Dava mentioned earlier. I gave most of this background on the prior call. So I thought I might just kind of update you bring you forward on our thoughts today. So we see AQR as having a first-mover advantage. It obviously has a differentiated culture and an operating environment that is advantageous compared to most competitors. On the first-mover advantage, it takes time to get on platforms to penetrate the largest RIAs in the country to integrate into systems at the wirehouses. AQR has a more than 2-year head start, Is now finishing the onboarding just now with several of the largest wealth platforms. So they haven't even gotten on all of the parts of the market where they could distribute their product. So we do expect continued momentum from AQR in this area. But I would be remiss if I didn't comment on the institutional business, again, with their great performance. They have a very nice pipeline building on the liquid alternative side. And through the lens of AQR, we're seeing increased interest in liquid alternatives more broadly on the institutional side. So maybe the last thing I'll say about AQR is that their assets have grown from approximately $100 billion at the beginning of 2024 to $166 billion as of September 30. And so you can see there's quite a bit of growth, and most of that came from organic flows. And thank you for your question. Appreciate it. Operator: Ladies and gentlemen, this concludes our Q&A session and will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.
Operator: Good day, and welcome to BioCryst Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nick Wilder. Please go ahead. Nick Wilder: Good morning, and welcome to BioCryst's Third Quarter 2025 Corporate Update and Financial Results Conference Call. Participating with me today are CEO, Jon Stonehouse; President and Chief Commercial Officer, Charlie Gayer; Chief Development Officer, Dr. Bill Sheridan; and Chief Financial Officer, Babar Ghias. A press release and slide presentation about today's news are available on our Investor Relations website. Today's call may contain forward-looking statements, including statements regarding future financial results, unaudited and forward-looking financial information as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. For additional information, including a detailed discussion of these risks, please refer to Slide 2 of the presentation. In addition, today's conference call includes non-GAAP financial measures. For a reconciliation of these non-GAAP measures against the most directly comparable GAAP financial measure, please refer to the earnings press release. I'd now like to turn the call over to Jon Stonehouse. Jon Stonehouse: Thank you, Nick. We are very pleased to report yet another strong quarter for the year. Starting with ORLADEYO, we continue to see strong revenue growth year-over-year on a growing revenue base, well on our way to $1 billion at peak. Charlie will share the details as this was the first quarter with new competition, and we continue to see strong underlying growth and a growing prescriber base as we predicted. Next, we closed the sale of our European business and paid off our Pharmakon debt. And this not only cleaned up our balance sheet, but put us in a very strong financial position, generating operating profit and positive cash flow. Babar will share more details regarding our financial position. We are also making progress with our pipeline and expect early data that should give an initial view on activity and dose from our DME program, and we plan to share this early next year. If these data are encouraging, we have also made a decision that given the program is outside our rare disease area of focus, we will look to spin out or partner this program to put it in the hands of someone better suited to advance it further. Regarding BCX17725, Bill will share encouraging data from our healthy volunteer study showing evidence that the drug does get to the skin following IV administration. This is important as this is where the target for Netherton syndrome is and with a very potent inhibitor in BCX17725, we are excited to see in Netherton syndrome patients what effect it has on the disease. Enrollment is taking a little bit longer than planned, and we now expect early data in a small number of Netherton syndrome patients later in Q1 next year. Lastly, having announced the proposed acquisition of Astria last month and the expected close in Q1 next year, we are extremely excited to add a late-stage asset, navenibart, to our pipeline to leverage our expertise in HAE and bring patients a new treatment option with a low burden of administration. So clearly, we have been busy since last reporting quarterly earnings, and this is shaping up to be another outstanding year of performance for our company. With that, I will turn it over to Charlie. Charles Gayer: Thanks, Jon. We entered the final quarter of 2025 with continued momentum. We are raising our ORLADEYO revenue guidance to between $590 million and $600 million for the year, even after closing the sale of our European operations on October 1. And the exciting possibilities of the ORLADEYO granules launch for kids with HAE and the acquisition of Astria are just ahead. ORLADEYO continues to be the most differentiated prophylaxis therapy for patients with HAE. Most HAE patients would rather prevent their attacks with an oral therapy. Physicians know this, and they trust ORLADEYO. Even as 2 new prophylaxis products launched recently, offering patients the potential of once monthly injectable dosing, new prescriptions for ORLADEYO continued at the same strong pace we have seen over the past 2 years. In fact, we slightly exceeded the new patient prescription total from the third quarter a year ago. We also continue to expand the number of ORLADEYO prescribers with 64 new prescribers in the U.S., exceeding the average of the past 8 quarters. The well-established trends in patient retention remained unchanged, and we ended the quarter with a paid patient rate of 82%, right in line with the typical second half pattern compared with the first half of the year. As always, we're very pleased with the great results, but not surprised. Our deep insight and market simulation works consistently predicted that the growth of ORLADEYO would not be affected by new competition. We updated that work over the summer, and the 2025 results were nearly identical to the 2024 results, as you can see on Slide 8 in today's presentation. With the expected addition of ORLADEYO granules on top of the existing strong growth trends for ORLADEYO capsules, our market simulation continues to predict $1 billion in peak revenue for BioCryst in 2029, even after the sale of our European business. The analysis demonstrates that new injectable therapies primarily compete with existing injectable therapies. This is why we are so enthusiastic about the prospect of adding navenibart to our portfolio. With navenibart, we could have the lowest burden, most differentiated injectable prophylactic therapy, along with a long-time leading oral therapy, significantly expanding our ability to help patients in the HAE community. We expect navenibart to drive double-digit HAE revenue growth well into the 2030s after ORLADEYO revenue reaches a steady plateau. And we expect to manage costs by using the same rare disease commercialization engine that has made ORLADEYO so successful. Today, I'm also very pleased to announce that Ron Dullinger will succeed me as Chief Commercial Officer when I move to the CEO role on January 1. Ron led the sales team at ViroPharma during the early days of CINRYZE commercialization. While that drug changed the HAE treatment paradigm at the time, Ron always knew that an oral therapy was what many patients really wanted, and he wanted to be part of making that possible. Ron joined us in 2019 to build and lead the U.S. team -- U.S. sales team for the launch of ORLADEYO. And since 2022, he has served as General Manager of our U.S. and Americas business, fostering a team culture that is deeply caring and authentically focused on serving patients while also being relentlessly driven to improve. That's a rare combination, and it has produced amazing results. I look forward to what our commercial team will achieve under Ron's leadership. As we look forward to helping a growing number of HAE patients, our excitement about the potential to help patients with Netherton syndrome is also growing. I'll turn it over to Bill to describe our progress with BCX17725. William Sheridan: Thanks, Charlie. I'm very pleased to be able to share some findings from our ongoing Phase I study of BCX17725, our novel investigational KLK5 inhibitor designed to replace functions of the natural inhibitor that are deficient in individuals living with Netherton syndrome. This trial is designed with multiple goals in mind: number one, understanding the preliminary safety profile of BCX17725; number two, quantitating its systemic exposure with serum drug levels; number three, evaluating the distribution of the drug into the epidermis. This is very important because the target enzyme, KLK5 is expressed in that location. Number four, assessing its potential early treatment effects on signs and symptoms of Netherton syndrome. We are planning to first do this in a few individuals living with NS in Part 3 of the trial. The trial has so far progressed through multiple cohorts in healthy volunteers with different cohorts administered single or multiple doses of study drug. This gives us a handle on the first 3 goals. The dose level of BCX17725 has been progressively increased with up to 12 milligrams per kilogram administered by IV infusion. In the multiple ascending dose portion, 3 doses were given on a Q2-week schedule. In this trial, administration of BCX17725 has been safe and well tolerated with no safety signals seen and preliminary assessment of systemic exposure profiles supports continued testing of up to every 2 weeks dosing regimens. Some representative images from skin biopsies taken before and after dosing in healthy subjects are shown on the accompanying slide. These small punch biopsies are taken under local anesthetic and processed for imaging. The images shown use a technique called immunofluorescence microscopy. Antibodies are applied that specifically bind to the protein you want to detect, in this case, the drug, BCX17725. These complexes are then detected with secondary antibodies, covalently tagged with a fluorochrome, which is a chemical that fluorescence typically under ultraviolet or near ultraviolet light. That means we can see a specific color based on the fluorochrome used wherever the drug is located in the tissue specimen and the more drug there is, the brighter the signal. We can also use other differently colored fluorochromes to pick out structures such as cell nuclei. Although minimally invasive, we are limited in the number of biopsies we can take. So we decided to obtain a baseline biopsy prior to the first dose as a control sample and a post-dose biopsy 5 hours after the last dose of drug. The displayed biopsy sample images from a representative healthy volunteer in the 12-milligram per kilogram multiple dose cohort show the DNA located in cell nuclei in blue and the drug located in the extracellular matrix in green. The pre-dose sample shows the loose dermis with widely spaced bright blue nuclei and the dense epidermis with tightly packed nuclei with a very faint green signal due to nonspecific binding of the assay reagents. In the post-dose sample, there is an obvious difference with much brighter green fluorescence. You can use the blue nuclei as a benchmark. In the post-dose image, drug has flooded the loose connective tissue in the dermis and distributed throughout the epidermis. These are important findings. The drug was able to diffuse across the epidermal basement membrane into the extracellular matrix of all the layers of the epidermis. Drug getting to the epidermis will allow its access to the target enzyme KLK5 in patients with Netherton syndrome. Our investigators are quite excited by these results as are we, and we look forward to enrolling patients with NS into the trial in coming months. I'd now like to turn the call to Babar to walk you through the financial progress. Babar Ghias: Thanks, Will. My first full quarter as CFO of BioCryst was extremely eventful and was marked by several significant achievements, which I believe position us well for future growth and profitability. On October 1, we successfully closed the sale of our European business, providing an immediate boost to our financial position, enabling us to fully repay our Pharmakon debt. During Q3, we worked diligently on a highly strategic and transformative acquisition of Astria Therapeutics, which we announced last month, an acquisition which is expected to strengthen our presence in HAE and solidify double-digit growth trajectory for our portfolio over the next decade. As part of this proposed transaction, we also worked on securing a strategic financing partnership with Blackstone at a highly attractive cost of capital. Upon closing of the Astria acquisition, which is expected in Q1 2026, we will access up to $400 million of cash from this facility. But all of this was only made possible due to the continued strength of ORLADEYO and our improving operating performance. Please refer to our third quarter financials in today's press release. However, I would like to take a moment to elaborate on some of these accomplishments and their impact on our trajectory. Total ORLADEYO revenue was $159.1 million, representing 37% year-over-year growth. Of that ORLADEYO revenue, $141.6 million or 89% came from the U.S. As you heard in Charlie's remarks, we continue to see strong momentum in our business despite the recently announced approvals. Non-GAAP operating expenses, excluding stock-based comp and transaction-related costs were approximately $108 million (sic) [ $118 million ] for the third quarter of 2025, up from approximately $92 million in the third quarter of 2024. Some of this increase was driven by continued investment in R&D, which continues to be a priority for us. As you heard from Bill, we are very excited about the promise of these programs. We have also made a strategic decision to seek partners for our DME program after we evaluate initial patient data, in light of sharpening our focus on rare diseases and focusing our capital allocation on programs where we can create most value. Non-GAAP operating profit, excluding stock-based compensation expense and transaction-related costs was $51.7 million for the third quarter of 2025 an increase of 107% year-over-year as we continue to benefit from significant operating leverage. Our non-GAAP net income for the quarter was $35.6 million, resulting in non-GAAP EPS of $0.17 per share. We finished the quarter strong with $269 million in cash, which included cash held for sale by European entities. Our strong cash flow profile enabled us to make a $50 million prepayment on our Pharmakon term loan during Q3. And with the closing of the sale of European business, we also paid off the outstanding amount under the term loan of approximately $200 million. Our pro forma cash balance giving effect to these adjustments is approximately $294 million and 0 term debt. Due to the strong expected cash flow generation, we anticipate reaching $1 billion in cash during 2029. However, we will continue to evaluate various capital allocation opportunities to generate value for our stockholders, much like our recently announced proposed acquisition of Astria Therapeutics. We will also explore upon closing of the transaction, a European license of navenibart and strategic opportunities for the STAR-0310 program, which may yield further upsides. Moving on to guidance. Charlie already alluded to the revenue guidance, and at the same time, we are lowering our non-GAAP OpEx guidance to $430 million to $440 million from our original guidance of $440 million to $450 million. The European divestiture allows us the opportunity to continue to streamline our base business cost structure. We remain on track to deliver non-GAAP net income and positive cash flows for full year 2025. As previously stated in our acquisition press release, we are expecting to stay profitable on a non-GAAP basis as well as cash flow positive even during the development period of navenibart. In closing, I'm proud of our team's continued focus and execution as we work to drive sustainable growth and deliver meaningful improvements in patients' lives. Our strong results and disciplined operational and financial strategies position us to capitalize on future growth opportunities, strengthen our leadership in rare diseases and continue delivering value for our stockholders. Operator, we are now ready for your questions. Operator: [Operator Instructions] First question comes from Jessica Fye with JPMorgan. Unknown Analyst: This is Jose for Jessica. Of the 37% year-over-year ORLADEYO net revenue growth, how much of that was volume? And how much of that was better paid rate or net price? And on that front, how should we think about gross to net this quarter and going into 2026? And very quickly, how confident are you that you can maintain steady patient retention rates given the increasingly competitive landscape? Charles Gayer: I can start with that question. So of the 37% year-over-year, we had really steady -- we've had very steady volume growth over time, but there was a big portion of it that was price based on the improvement in paid rate that we described earlier this year, particularly in the Medicare segment. So the volume is growing at the pace that we expect and at the pace that we need to get to the $1 billion in peak revenue in 2029. As far as the patient retention with new competition coming in, as I mentioned in the remarks, our patient retention has been identical to our ongoing trend, not affected at all by the new products coming in the market, and we expect that to continue. Jon Stonehouse: Yes. And I'd just add, the logic behind that is these patients are really well controlled. They're getting similar control to injectable drugs, and they're on a once a day pill. And so what on earth would they switch to that could be better than that. Charles Gayer: And then gross to net is still about 15%, as we've announced earlier this year. Jon Stonehouse: And next year in that 15% to 20%... Charles Gayer: Yes. Next year, it will still be in the 15% to 20%, probably a little closer to the 15%. Operator: The next question comes from Laura Chico with Wedbush Securities. Laura Chico: One question with respect to the new prescriber numbers. I think this is the second quarter in a row you've been over 60. Just curious if you have any feedback, market research that can help us understand why they're deciding to prescribe now? What has been kind of the motivating factor more recently to accelerate the adds here? And then I guess, if you could share a little bit more color on what would the expected blended royalty rate look like in '26? I know you're projecting a step down over time here, but just kind of curious how we should be thinking about it directionally from '25 to '26. Charles Gayer: I'll start with -- thanks, Laura. I'll start with the prescriber data and then hand it over to Babar on the royalties. So the motivating factors, and we've described this before, is just physicians getting more and more comfortable with the long-term evidence, the real-world evidence for how well ORLADEYO works. What they understand now is that ORLADEYO works very well, equally well to injectable products in most patients. It either works or it doesn't. And if the patients don't have the benefit that they need, they move on. So physicians are really understanding that. That's the first part. The second part is our ability to find prescribers in this market and accurately target means that we are able to find physicians who have a smaller number of patients. So if you have one HAE patient, we will find you and ORLADEYO is becoming the treatment of choice for those doctors. Overall, as we grow the number of physicians, we consistently see a pretty equal balance between those smaller prescribers as well as the top 600 or so doctors that treat 50% of the market. So we keep chipping away at those top prescribers and launch to date over 80% of those doctors have prescribed. So we're really thrilled to show this consistent progress expanding the number of prescribers. Jon Stonehouse: And just one other thing I'd like to add, Charlie is, there's still physicians out there even in the top prescribers that haven't written for ORLADEYO. And one of the things we're extremely excited about next year is the pediatric approval because these docs have pediatric patients, many of them, and there is no reason that they should use anything but ORLADEYO for prophylaxis for these patients. So we think that's going to open up even more new prescribers next year. Babar Ghias: Yes. And on the royalty section, we are pleased to share that this quarter, we are tripping over the lower threshold, and it will continue to come down. As you can see in our slides, prepared slides, the rate is in the early -- the blended rate is in early teens. And while we have not given 2026 guidance, I can assure you that rate continues to come down because there's a cap on some of those royalties when you hit the $550 million. But as you can imagine, when we are out to provide you guidance, when you do the math, it will be -- it will continue to decline. And as we've said, over time, it will be in single-digits as we pay off the OMERS liability altogether. Jon Stonehouse: Yes. So as revenue goes up, profitability gets better and better and cash flow continues to flow. So it's a very bright financial future. Operator: The next question comes from Stacy Ku with TD Cowen. Stacy Ku: Congrats on the progress. So we have a couple of questions. First, on the new entrants, our KOLs do indicate there are a couple of patients switching from ORLADEYO to injectables, but the same clinicians are also saying that they expect ORLADEYO's share to stay stable. So beyond this anecdotal feedback and obviously, you all have highlighted the 1-year 60% retention. Are you able to share any recent metrics to suggest ORLADEYO is unlikely to be impacted by these injectable entrants? That's the first question. And then the second is on that pediatric HAE approval. As we approach the PDUFA date, maybe help us understand your views on the opportunity and what commercial strategy and preparation is ongoing to really make sure you all maximize that pediatric expansion? Are many of these patients already identified? Just help us understand as we get to the new year, any type of expectations around maybe some latent patient demand. Charles Gayer: Sure. Thanks, Stacy. As far as the new entrants, yes, of course, some patients are switching from ORLADEYO because 40% of new patient starts on ORLADEYO drop off within the year. And in the past, they might have dropped off to TAKHZYRO and HAEGARDA, now maybe they're more likely to switch to some of the new entrants. So that's exactly what we expected. What we're not seeing, though, is a change in our new patient prescribing patterns or a change in our overall retention rate. And as far as the data that give us confidence in this, as I mentioned, Slide 8, we redid our market research. We redid our big conjoint analysis and market simulation with all the new information about new and future competitors. And what you see is no change to our prior versions of this market research. It shows that ORLADEYO remains -- ORLADEYO patients remain very sticky, and we expect that to continue. As far as the pediatric approval, we see that there are about 500 patients today diagnosed with HAE under age 12. And only about 40% of those patients today are on or kind of in the prophylaxis space have tried prophylaxis. So we think that there's an opportunity both to grow the use of prophylaxis within pediatrics as well as for switching because an oral therapy is important to a lot of patients, but it's particularly important to kids with HAE. So as far as our strategy, and Jon mentioned earlier, the doctors that treat kids with HAE tend to be the same physicians that are treating patients over age 12. So we're already calling on these physicians. We know who is treating kids, and the team will be ready to go with the launch shortly after approval. Operator: The next question comes from Steve Seedhouse with Cantor. Steven Seedhouse: I was hoping you could expand on the decision to deemphasize, I guess, avoralstat for DME. Have you had an early look at the Phase I data there? And then looking at the updated pipeline slide, the undisclosed programs listed for rare diseases, at least that are preclinical. Can you give us some insights into what you're working on there preclinically and how close it might be to the clinic? Jon Stonehouse: Yes, I'll take that one. So regarding avoralstat, no, we haven't seen any of the data. We just enrolled the first cohort. And so this is a decision based on focus and expense. And by bringing a late-stage product like navenibart into our pipeline, we need to create space to be able to fund and bring that to the finish line. And these DME programs get really expensive the further on you go in clinical development. And quite honestly, we don't have the expertise there we do in rare disease. And so we just think it's better in the hands of somebody who has that expertise. And then on the undisclosed, we're not going to disclose what it is. It's early. It's exciting. But when it's ready to be shared, we'll have more information to share with you. Steven Seedhouse: Okay. And just quick on Netherton. Have you had any dialogue with regulators there and forming an understanding of what a pivotal program requirement might be? Jon Stonehouse: Yes, we have. Not enough to share with you the design of the pivotal program at this point. I think the biggest thing, and Bill, you can correct me if I get this wrong, is the bigger the treatment effect, the better options we have to move fast with this program. And we'll figure that out once we start getting data. But too early to predict kind of the design of the pivotal program. Is that fair, Bill? William Sheridan: That's very fair. I think once we have evidence of the effects of the drug in patients with NS and the safety of the drug in NS, then we'll have complete conversations with regulators about how to get it approved. Operator: The next question comes from Maurice Raycroft with Jefferies. Maurice Raycroft: Congrats on the progress. I'll just ask a couple of quick ones on Netherton. Wondering if you could just talk more about the slower enrollment there and how many patients you'll have in the first quarter data update next year? And do you anticipate dosing higher than the 12 mg per kg? And I'm wondering if you're still exploring the subcu dose? Or is it going to be an IV dosing going forward? Jon Stonehouse: Yes, I'll take the first part of it. You want to take the second. We're only off by a quarter. So it's a very slight delay in the program. And the enthusiasm, as Bill said, by investigators is really high, especially when they see the healthy volunteer data. We didn't expect to see the drug get to the target in healthy volunteers. And so that has been really encouraging data. And then, Bill, do you want to take the second part of the question? William Sheridan: Sure. Yes, we're exploring both subcutaneous and intravenous administration. We'll continue to do that. And we may explore higher doses, that option is open. Operator: The next question comes from Brian Abrahams with RBC. Brian Abrahams: Congrats on the continued progress in the quarter. Maybe just continuing on Netherton. Can you elaborate a little bit more on, I guess, what you're seeing from a PK/PD standpoint in those first couple of parts of the ongoing study? And I'm also curious what the trigger was for starting that Part 4, which I know you started in recent weeks. And then just secondarily, separately on ORLADEYO, just wondering what you're seeing in terms of demand from the normal C1 inhibitor population. I think that was a growth driver you cited in the past. Jon Stonehouse: Bill, do you want to take the Netherton and Charlie can take the ORLADEYO? William Sheridan: Sure. So Netherton is a fascinating disease. So it's all about what's happening in the epidermis. There aren't any plasma or serum biomarkers to measure. Secondly, we have a very tight binding, very potent inhibitor. And you have to think about what relationship the plasma concentration is going to have to the effects in the epidermis. And there could, in fact, be a disconnect between how long the drug sits in the epidermis after binding to the target compared to how long it circulates in the plasma. That being said, of course, we're measuring the blood concentrations of the drug, nothing unexpected there. Solely on that basis, we think that it's worth continuing to explore up to every 2 weeks dosing. But really, it's going to be looking at the effects on the disease. There aren't any pharmacodynamic markers to measure. It's the effects on the disease in patients with Netherton and when we get into that. Just a clarification, we have not disclosed whether we've started Part 3 or Part 4. Part 3 is just a few subjects with short-term dosing. That's the design. Part 4 enables longer-term dosing, and we look forward to stepping through both of those. Jon Stonehouse: Yes. And the expectation is that the data we'll have in the first quarter is Part 3. Charlie? Charles Gayer: Yes. Brian, on C1 normal patients, launch to date, that's been about 1/3 of the patients on ORLADEYO, and that's what we saw in Q3. Q2, you might recall, we had an exceptional best ever quarter for new patient starts. There was an additional bolus of C1 normal patients in Q2 because we released some new data. Q3 looked like the steady high demand that we've seen over the last 2 years with about 1/3 of the patients being C1 normal. Operator: The next question is from the line of Jon Wolleben with Citizens. Jonathan Wolleben: Just looking at sales so far this year in your guidance, it's implying that we're going to see a drop in quarter-over-quarter sales for the first time. We haven't seen that seasonality before. So hoping you could talk a little bit about your expectations, what's driving that? And if that's something we should expect moving forward or if this is going to be a one-time seasonality effect? Charles Gayer: Yes, Jon, it's going to be a one-time seasonality because we just sold our European business. So we're losing the sort of $10 million to $15 million of revenue that otherwise would have occurred. So next year, you will not see a drop in Q4. Operator: Mr. Jon, does that answer your question? Jonathan Wolleben: Yes. Operator: The next question comes from Belanger Serge with Needham & Co. John Todaro: This is John on for Serge today. Just wanted to touch on pediatric ORLADEYO with the ongoing review and the PDUFA in mid-December. Just curious if you guys have seen any impacts from the government shutdown, whether you've had continuous feedback from the FDA and whether you expect them to still meet that PDUFA. And then pending product availability, do you have any expectations for how the payer landscape will look in this segment? And whether or not you could expect a bolus of patients to come on board early upon product launch? Jon Stonehouse: So I'll take the first part. Charlie, you take the second. So with regard to the interactions with FDA, we're getting closer to the PDUFA date, and we're going through the things you think you would be going through at this point, late-stage in the review process. So there's nothing that we see that gives us concern about the government shutdown, that could change, but at least where we sit today, nothing that we see. Charles Gayer: And John, as far as payer landscape, we are in a really great spot with payers with ORLADEYO, and we expect the peds indication to slide right into that. So nothing special on the payer front. As far as the bolus of patients, we know that there's a lot of anticipation for this product. I'm sure we'll update you after we launch and get product into the market, we'll update you in 2026 as to the pace of patient growth. Operator: The next question comes from Gena Wang with Barclays. Huidong Wang: Wanted to ask about the Netherton syndrome also regarding the 12-milligram per kg IV dosing, by the way, very impressive biomarker data. I'm wondering what kind of safety you see in the patient -- in the healthy volunteer data? And then also, regarding the first quarter, the Part 3 data. So maybe if you can lay out what we should expect from this 1Q '26 data update from Part 3? And quickly, just housekeeping questions regarding ORLADEYO. I know you mentioned some of the comments, but I do wanted to double check with the actual numbers regarding the retention rate, are we still similar around 60% and the pay rate, I think last quarter, we talked about could be by year-end, 82% to 83%. Is that still the same? And then lastly is the patient segment, 50% switch from other prophy, is that still the same? Jon Stonehouse: All right. So Bill, why don't you take the safety and the design of the Part 3? And then Charlie, you can take the ORLADEYO. William Sheridan: So there's -- really, the thing to say about safety in healthy subjects is that it's very safe so far, it's been very safe and well tolerated. So there have been no safety signals emerging with multiple doses of the drug through the dose that you mentioned. So that's really good news. I think that with regard to what you can expect from Part 3, this is very short-term administration of the drug in Part 3. We're at the cutting edge of clinical science and investigations into Netherton syndrome with a parenteral drug. So we'll be discovering how long it takes in order to get an effect. So I don't know that yet. Will that short-term administration be enough to see an effect? Don't know. If we do, that would be very encouraging. If we don't, we'll just give the drug for longer and maybe we'll increase the dose. So I think I would temper expectations with regard to what we might see from short-term dosing in a few subjects with Netherton. Obviously, we'll be looking at safety. So we'll learn a lot and look forward to extending the dosing in Part 4 of the study. The sorts of things that you would measure are pretty obvious, itch, pain, skin redness and the like. Jon Stonehouse: And Bill, we're testing multiple doses in the Part 3. So we'll get that and start to zoom in on what we then want to look at Part 4. Is that right? William Sheridan: It's the first step for more extensive testing in Part 4. Jon Stonehouse: Great. Charlie? Charles Gayer: And Gena, as far as the ORLADEYO numbers, so yes, the patient retention rate is in line with exactly what we've seen over the last several years. So 60% of patients who start ORLADEYO make it to a year. And everything that we saw in Q3 tells us we're right on track with that same number. The paid rate, we ended Q3 at 82%, which is right about where we thought we would be. In Q4, I wouldn't be surprised if we end closer to 81%, even 80%. Typically, in the second half of the year, the paid rate starts to decline because we have all these new patients coming in and less of an opportunity to switch people from long-term free product to paid product. That opportunity comes in Q1 into early Q2 of the new year. And so we're right on track for where we need to be, and we expect to have a lot of those patients then switching to paid therapy earlier in 2026. And then as far as the source of business for patients, yes, the same basic trends where we get close to 50% of the people switching from other prophy history with other prophy products and then other patients switching from acute only coming over to prophy. And then a good number of patients, best we can tell, are starting ORLADEYO as their first HAE treatment ever because more of those are newly diagnosed patients. Operator: Thank you. This concludes the question-and-answer session. I would like to turn the conference back over to Jon Stonehouse for any closing remarks. Jon Stonehouse: Yes. We thought about ending the call with the rolling stones. This will be the last time, but thought different of it. But let me say this, it's been an honor to lead the employees of BioCryst for nearly the last 2 decades. Proud of what we built, what we've accomplished together and extremely excited and confident to see this team take the company into the future by delivering more and more innovative treatments for patients living with rare disease because in this industry, that's how you create real value. So thank you for your interest in our company and have a great day. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the fubo Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Ameet Padte, SVP, FP&A, Corporate Development and Investor Relations. You may begin. Ameet Padte: Thank you for joining us to discuss fubo's Third Quarter 2025 results. With me today is David Gandler, Co-Founder and CEO of fubo; and John Janedis, CFO of fubo. Full details of our results and additional management commentary are available in our earnings release and letter to shareholders, which can be found on the Investor Relations section of our website at ir.fubo.tv. Before we begin, let me quickly review the format of today's call. David will start with some brief remarks on the quarter and our business, and John will cover the financials. Then we will turn the call over to the analysts for Q&A. I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding our financial condition, anticipated financial performance, expected synergies and other benefits from our business combination, business strategy and plans, including our products and subscription packages, market, industry and consumer trends and expectations regarding growth and profitability. These forward-looking statements are subject to certain risks, uncertainties and assumptions. Actual results could differ materially from our current expectations, and we may not provide updates unless legally required. Potential factors that could cause actual results to differ materially from forward-looking statements are discussed in the earnings release we issued today, our letter to shareholders and in our SEC filings, all of which are available on our website at ir.fubo.tv. Except as otherwise noted, the results we are presenting today are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as discontinued operations. Please note also these results reflect fubo's stand-alone operations prior to the recent completion of our business combination with the Walt Disney Company's Hulu+ Live TV. During the call, we may also refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our Q3 2025 letter to shareholders, which is available on our website at ir.fubo.tv. With that, I will turn the call over to David. David Gandler: Thank you, Ameet, and good morning, everyone. This quarterly earnings call is unlike any other in our history, coming just days after completing our transformative combination with the Hulu + Live TV business, setting a new stage for what's ahead. The combination of fubo and Hulu + Live TV forms one of the largest live TV streaming services in America. Our combined nearly 6 million subscribers in North America make fubo the sixth largest pay TV company according to recent UBS Estimates. It's a defining moment for our team and our shareholders and the culmination of years of innovation and execution. Together with our strong stand-alone results, this combination underscores the enormous potential ahead, a consumer-first platform built on choice, value and profitable scale. Now looking at our third quarter stand-alone results, fubo ended the quarter with 1,630,000 paid subscribers in North America, our strongest third quarter performance to date and $369 million in total revenue alongside solid contributions from our international operations. We're also proud to report that we achieved meaningful improvements in both net loss and adjusted EBITDA with the third quarter representing our second consecutive quarter of positive adjusted EBITDA. Beneath those strong headline numbers, the health of our underlying metrics continues to improve. Trial starts increased and conversions from trial to paid meaningfully improved year-over-year, while churn declined nearly 50% versus last year. At the same time, we reduced marketing spend during a highly competitive sports quarter, reinforcing our path toward profitability and stronger margin expansion. These trends reflect growing consumer demand, higher engagement and the continued scalability of our model. Our mission remains clear: deliver must-have programming through a flexible value-forward experience. fubo continues to make watching live content easier and more valuable. The fubo channel store, similar in concept to Amazon Prime video channels, offers third-party premium services like RSNs, DAZN 1, Hallmark Movies Now and Paramount+ with SHOWTIME into one sports-first interface, removing friction and simplifying viewing. Our fubo Sports skinny service added lower-priced, high-value access to top sports content, including the majority of ESPN unlimited content and is driving record trial conversions. Together with the expansion of pay-per-view, which delivered double-digit sales growth in October compared to the prior month, these initiatives demonstrate fubo's ability to innovate, scale engagement and strengthen our live platform. We have built market-defining features, multiview, game highlights, game alert push notifications and catch up to live that increase engagement and make watching sports easier and more entertaining. These are the types of personalized capabilities we will continue to scale across our growing membership base. Fubo's recent results gives us much to be confident about, and we envision unprecedented opportunities at the combined company. We're expanding choice, not forcing one bundle. The combined company offers consumers a broad set of sports and entertainment-focused programming offerings from fubo and Hulu+ Live TV, respectively. Together, we give families flexible ways to rightsize their spend while broadening access to the best content. In the near term, we'll focus on programming efficiencies, ad tech uplift and marketing at scale, including through ESPN's ecosystem as well as deeper personalization. These are 4 major drivers to grow our subscriber base and achieve our profitability goals. In closing, we could not be more excited about fubo's future. We believe our third quarter stand-alone performance, coupled with the opportunities unlocked by our business combination with Disney's Hulu+ Live TV, solidly position fubo for future success. We want to thank our retail and institutional shareholders for your unwavering support and to our customers for your loyalty. We remain committed to building a consumer-first streaming service that delivers more live action, less friction and superior value. I will now turn the call over to John Janedis, CFO, to discuss our financial results in greater detail. John? John Jenadis: Thank you, David, and good morning, everyone. Our third quarter results reflect continued progress in both execution and profitability capped by a historic milestone, the completion of our business combination with Hulu + Live TV. We believe this transaction is a huge win for our company, shareholders and the market, and we could not be more excited about the opportunities ahead. Taking a look at the results for the quarter. In North America, we delivered total revenue of $368.6 million, down 2.3% year-over-year and reached 1.63 million paid subscribers, a 1.1% increase year-over-year and our highest ever third quarter subscriber count. In Rest of World, revenue was $8.6 million, and we ended the quarter with 342,000 paid subscribers. In North America, advertising revenue totaled $25 million, down 7% year-over-year, primarily reflecting the absence of certain ad insertable content and onetime benefits in the prior year period. That said, demand indicators remain constructive, including upfront commitments for the 2025, 2026 cycle, up over 36% versus last year, with nearly 1/3 of advertisers new to fubo. Non-video formats such as pause ads and branded activations grew over 150% year-over-year. These personalized and dynamic ad experiences are driving greater engagement and reinforce the stickiness of CTV formats beyond standard video ads. Net loss was $18.9 million or $0.06 per share compared to a loss of $54.7 million or $0.17 per share in the prior year period. Adjusted EPS improved to $0.02 compared to a loss of $0.08 in the prior year period. Adjusted EBITDA was positive $6.9 million, representing a year-over-year improvement of more than $34 million. This marks our second consecutive quarter of positive adjusted EBITDA, underscoring the strength of our cost discipline and the scalability of our model. I would also like to point out our continued improvement in expense efficiency with total operating expenses now approaching parity with revenue, our best ever third quarter performance. This reflects the benefits of disciplined content spending, optimization of marketing investments and ongoing focus on scalable growth. From a cash flow perspective, net cash used in operating activities was $6.5 million or a $9 million increase compared to Q3 2024, while free cash flow was negative $9.4 million, a decrease of $8.3 million compared to the prior year. Free cash flow improved sequentially versus Q2, but was lower year-over-year, driven primarily by working capital timing. We ended the quarter with a solid liquidity position and balance sheet flexibility, including over $280 million in cash. In summary, Q3 was another quarter of steady financial progress and operational execution. We've demonstrated consistent improvement in profitability metrics, disciplined cost management and continued engagement growth. With the Hulu+ Live TV combination now complete, we enter the next phase of our journey as a stronger scaled player in the pay-TV ecosystem, positioned to deliver sustainable profitability and long-term shareholder value. With that, I'll turn the call back to the operator for Q&A. Operator? Operator: [Operator Instructions] Your first question today comes from the line of David Joyce from Seaport Research Partners. David Joyce: First of all, congratulations on completing the combination early. I was wondering about the advertising side of the business. If you could delve in a little bit more into what the content that was removed to make the comparisons a little challenging. But going forward, you will have the new advertising relationship with Disney, where they're taking care of the ad sales but you get the revenue net of the ad sales commission. So is that across all of the subscriber base that they have the ownership of on Hulu Live? John Jenadis: David, this is John. Maybe I'll take the first part of that, and David will take the second. On the content portion of the question, just as a reminder, we dropped Univision effectively at the end of last year. So that had an impact is number one. Number two, we also had some residual Maximum Effort Channel revenue in there as well. And then third, unrelated, but there was also a political comp in there. And so if I were to kind of normalize for the 3 of those, I would say ad revenue would have been up modestly year-over-year for the quarter. David Gandler: Yes. And David, just to add to that, I think when you look at the results for the quarter, I think ads has been the only minor blemish on an otherwise outstanding quarter, but that's a high-class problem given our combination with Hulu Live. As we've stated, Disney will be taking over advertising sales, and we expect that as we collaborate and integrate our inventory into Disney's ecosystem and ad server, we should see pretty strong results relative to where we are today. So we're very excited about that. Operator: Your next question comes from the line of Patrick Sholl from Barrington Research. Patrick Sholl: Congrats on completing the transaction. I was wondering if you could -- now that the transaction has been completed, could you maybe discuss some of the differentiating factors on the -- basically the full services and why maintain both offerings in addition to the sports-focused package? David Gandler: Yes. This is David. I'll take that. So one is, I think this is one of the few cases of when companies combine that do not have any overlapping customers. Hulu Live does not overlap with fubo. They're similar, but quite different. We've been very focused on driving our sports identity branding and delivering capabilities for sports fans that I mentioned in my opening comments. Hulu has been more of a general entertainment bundle that has sports. And it's very important for us to continue to provide consumers with optionality and flexibility. And there's programming that we don't have on fubo today, obviously, top quality networks that are available at Hulu. So this only adds to the spectrum of offers that we provide consumers at different price points along the demand curve. So this is really part of our super aggregation strategy that we talked about as far back as 18 or 20 months ago. Patrick Sholl: Okay. And on the cost side, you had a pretty significant reduction in sales and marketing costs year-over-year. Is that partly a function just of kind of maintaining your target subscriber acquisition cost of about in that like 1x ARPU range and just with the sports product being kind of lower cost and just being mathematical from that? Or is there any specific things to call out in terms of subscriber retention or additions that you're able to find efficiencies on? David Gandler: Yes. Very good question. This is David. I'll take that. Look, I think that when you look at what we've been able to achieve this quarter, we had a 68% increase in net adds on a year-over-year basis while decreasing our marketing spend or sales and marketing line as a percentage of revenue by 21%. In part, that's due to the fact that we have many more offers in the market, everything from the fubo channel store to the skinny bundle to our Pro and Elite offers. And we've also begun to leverage AI, both on channel optimizations and creative testing. So all of these things have worked together, and we've stated many times that our goal is to be measured and disciplined, and we didn't see a reason to push any further given how expensive third quarter marketing is. And the last thing I'll say is that you're right, we have stated since 2020 that our goal is to maintain that SAC to ARPU of 1 to 1.5x. I'm very happy to say that this year, we've been well below the low end of that range. So we think we can become even more efficient, particularly as the structural shift in consumption continues to move in our direction. Operator: Your next question comes from the line of Alicia Reese from Wedbush. Alicia Reese: First, I was hoping we could dig a little deeper on the skinny bundle. The 20% sequential subscriber growth suggests that you've seen a nice uptick so far and the subscription ARPU suggests that the impact was pretty limited. Can you speak to at least qualitatively to the dynamics of the skinny bundle? Like are these new subscribers? And for those that converted from existing subscription tiers, do they primarily come from the base tier, mid-tier or premium tier? John Jenadis: Yes. Alicia, this is John. I'll maybe start with that one. Look, I'd say it's early days, clearly, but I'll share a couple of data points for you. Number one, look, we feel good about the $55.99 price point. At launch, the reach was about 1/3 of the country. Now it's north of 80% heading to full distribution by the end of the year. A couple of months in, we see virtually no cannibalization, and we think it's really expanding our addressable market. And I would just add a couple of metrics in the short term on retention and churn, it's early, but I'd say performing as expected, meaning better retention and lower churn relative to Pro and Elite. David Gandler: I was just going to add very quickly that we're seeing this type of success not only in skinny bundle, but this was a strong quarter across the board for all of our offers. But of course, the skinny bundle has really delivered on trial starts, conversion to paid, net churn at least in the early days of the package. Alicia Reese: Makes sense. And can you just discuss briefly how the Q3 marketing budget was allocated between promoting that heavy sports calendar and the skinny bundle? David Gandler: Yes. Look, I think we have a world-class marketing team and retention team. And I think we're very focused on ensuring that we scale profitably. And we obviously manage almost in real time the different packages to ensure that we're continuing to drive both top and bottom line. Operator: Your next question comes from the line of Laura Martin from Needham & Company. Laura Martin: David, now that you guys have closed the Hulu + Live deal, I'm wondering, they have 4 million subs, you guys have 1.5 million round numbers, 1.6 million. Don't they sort of -- are they sort of the dog and you guys the tail? I know you're running it, but I don't -- isn't the strategy sort of get eclipsed by theirs because they have so many more subs? And can you talk about just over the next 6 months, 9 months, how much is really you driving this company compared to fubo who -- or sorry, Hulu, which is so much larger? David Gandler: Yes, Laura, thank you. This is David. Good to hear your voice. Look, you and I have been going at this now for, I don't know, 5 years. I remember in the early -- my first meeting with you over COVID, I told you one day we would be contribution margin positive. And then 2 years later, I told you we would be gross margin positive. And I can tell you that I don't know about dogs and tails, but I can tell you that this is no longer a fairy tale. fubo will continue to drive significant growth. I can walk you through kind of areas in which that we believe that could be the case. One is you're seeing very strong net adds in a quarter that is typically very competitive. We've been able to add more products to market. We've had record churn -- net churn numbers, all positive. We removed Univision from the platform sometime in December. And just to kind of give you a little peek into Q4, we're seeing record Latino numbers, Univision, which is very positive. So I think actually fubo is going to be a very important growth engine for the company. There are a few areas in which I think we'll really sort of hope to take advantage of this new collaboration. One, I think, is quite obvious. ESPN's ecosystem of ESPN Radio, ESPN.com, flagship and other spokes that they have within that ESPN flywheel probably averages somewhere in the sort of 100 million monthly active users. This is a funnel that we have never leveraged before. So we think that there's probably significant untapped value for us to grow our sub base, again, profitably, which means it could have a very positive impact on our sales and marketing line. The second thing is an area where I think you've had a lot of questions on and maybe a little bit of frustration around advertising. I think that there's significant upside in our relationship with Disney. Once part of the Disney ecosystem, all of our football, basketball, baseball, soccer, all of that inventory will likely move over, hopefully sooner rather than later, but we're targeting sometime in the first quarter given some of the technical hurdles that we need to go through. We're transitioning our ad sales team over to Disney. So there's probably some pretty significant upside from where we are today relative to where we could be if you think about Disney Sports CPMs and their ability to just use their scale to fill our [indiscernible]. The third area, which I'm really very excited about, which is an area that we've significantly underperformed the market and probably a reason why the stock has underperformed is programming efficiencies. We have not been able to achieve what I would believe to be fair deals, and that's because everything is related to size-based [ MFNs. ] But as the sixth largest pay TV player, it doesn't really tell you much. I look at this as the second largest virtual MVPD player in the market, which means that those structural shifts, both from a consumption perspective as well as a monetization perspective are in our favor. And we think that we'll be able to grow that. And last but not least, an area that we really don't discuss a lot, which is the international piece. We've been really focused on our unified platform. As I like to say, timing is everything. That platform is almost ready to go. We'll be onboarding Molotov and migrating it onto the fubo platform. And Disney has 100-plus international subscribers in its D+ service. And I think that similar to the way Hulu Live has been embedded into Hulu and potentially into Disney+, we think that there's probably an opportunity for us to drive significant growth. Our ambitions have not changed. We want to be the world's largest live TV provider, and we're using streaming to make a smarter, cheaper and more profitable TV product. Laura Martin: Super helpful. You guys have always had a world-class tech stack. Do you find you're able to use any of the new generative AI capabilities to personalize the recommendation line or personalize what you're showing to different consumers? Are you using any of those capabilities to drive better product updates? David Gandler: Yes, of course. That's a great question. Look, I think what's interesting that people have not noticed or investors have not noticed about fubo is that we have removed a significant number of channels from the platform, yet ad inventory or ad [ availabilities, ] I should say, has grown year-over-year by about 30%. So what we're really focused on is recommending the appropriate programming for the appropriate user at the appropriate time. And so we've been using our AI capabilities to develop highlights for all of our sports moments and really put those in front of the consumers that find that content most impactful. One thing I will say as it relates to all of this is that I think when we started our -- I think during our testing the waters roadshow, Laura, you may remember this, but we had a long-term target, and we are basically almost there. So I think our target was roughly around $100 of revenue, ARPU back then. And then what we said was that our goal was to achieve 30% gross margins, which would then drive about 15% EBITDA margin. I'd like to say we're almost there. We are now somewhere in that north of roughly around 20% gross margin. This is a story that is just unfolding. Right now, we've got -- we need about 10 points to deliver on that 30% gross margin. And it's not much to believe. You're talking about 300 basis points of programming efficiencies, 200 to 300 basis points of advertising uplift, 100 or 200 basis points in G&A and technology. And then as you see, our efficiencies on the sales and marketing side have also been pretty impressive. So my view is that we're almost there, and this transaction will allow us to amplify all of the innovation and success and execution that we've put into this company. So I'm very excited about this. Our investors should be very excited about this, and I'm hoping Disney is excited about this as we are. Operator: Your next question comes from the line of Sebastiano Petti from JPMorgan. Sebastiano Petti: Congratulations on the deal. Just maybe if you could kind of help us think about now with the added scale that you have from the Live TV combination with Hulu, I mean, how are you thinking about rest of world? Is that still core to you over time? And if so, why? And as we're thinking about perhaps rest of world, I mean, are there synergies or maybe cross-bundling opportunities when you look at Disney's international streaming services? And then following up on that, I guess, maybe a quick one. Any benefit from the YouTube TV blackout of Disney from over the weekend? David Gandler: Yes. Thank you. This is David. Look, I'm very bullish on rest of the world. I have been. It's all about a timing question. Right now, as I just said, we are very focused on migrating Molotov onto the fubo platform. We'll look to partner with Disney internationally. I think this is going to create a tremendous amount of value for both companies. Disney+ will benefit from all the local programming that we're going to provide markets like France, there are probably 3 or 4 markets we'd like to start with in the next 18 to 24 months and then quickly move in to other markets because the platform has been built so efficiently. It is obviously core. I don't know why there's always a question around rest of world. I mean, you tell me, I think Reed Hastings used to talk about the fact that he wanted to be like YouTube because 80% of YouTube's revenue came from outside of the United States. We are no different. We think that we can be a global leader in the live TV streaming space. There are hundreds and hundreds of millions of people that still value live sports, live news, and we're going to focus on developing that strategy in the short term. And I think everyone on both sides is very excited about that. As it relates to YouTube TV and their -- I guess, their issues with Disney, that's not anything we can really talk about. What I can say is that just like last year, we see bumps all the time from people that are looking for programming. So there's not really much to say about that. The interesting thing is that while we have seen an influx of YouTube TV customers we're seeing all around improvements, as I just mentioned, including in Latino in terms of subscriber growth. So we haven't really marketed that. We're not attempting to take advantage of that. We'll let that play out as it will, and we're focused on our own business here. Operator: Your next question comes from the line of Clark Lampen from BTIG. William Lampen: John, maybe in light of the comments around LatAm customer strength to start 4Q, could we dial it back a little bit and maybe talk about early October reads across the entire spectrum? And then if we were to sort of focus a little bit more medium to long term, fill rates, programming efficiencies. David, I think you said that you haven't had fair deals thus far. Maybe update us on revenue and expense synergies, I guess, on a go-forward basis and how that might impact profit trajectory? At what point could we start to see sustainable sort of EBITDA and net earnings profitability? John Jenadis: Clark, on the first part of that question, was that specific to advertising? Or was that more broad? William Lampen: Correct me if I'm wrong, I guess, but the comment it sounded like it was on a subscriber basis. So is it -- if we're thinking about the subscriber trajectory of the business for 4Q, are you seeing the same strength with sort of core demos relative to LatAm? Or was there some bifurcation for one reason or another? John Jenadis: No. Actually -- so thanks for the question. Yes. So I'd say the strength we saw through the third quarter, meaning August, September has continued through October. And what I would say is that relative to plan, we're exceeding, I would say, on -- across all packaging. And so not just Latino, but also on Canada, skinny bundle, stand-alone RSNs and English. David Gandler: Yes. I would just add, look, the reason why we're continuing to formulate these different services and packages is because we want to reduce the cost of entry and at the same time, create attractive user economics. And you're starting to see that unfold this quarter. And as I mentioned, Latino, is really just a little seed is that we're seeing this across the board. So typically, our strongest quarters, as you guys know, is the back half of the year, third and fourth quarter, given the strength of the sports calendar. So we're, again, very excited about this. We're excited about our new relationship with Disney. I have to say the first few days have been extremely exciting. Everybody seems to be on the same page. We all know what we want, and it's going to be fubo's job to execute and drive shareholder value. John Jenadis: And then maybe on synergies. Look, when we announced the business combination in January, we highlighted content expense and advertising as really the key areas of synergies. David commented before about the ads team, they're already working with Disney in their offices as of this morning. So we are moving with urgency. So on the timing of that advertising synergy, I would say we'll see that in the short to midterm. On the content expense savings, remain very confident there as well. I think the opportunity is meaningful. And you're right, it's -- but it's not just fill rate for advertising. It's other factors as well. We think there's also CPM upside to name a couple. Operator: And that was our final question. This concludes today's conference call. We thank you for your participation, and you may now disconnect.
Operator: Hello, everyone, and welcome to the Ryanair Holdings plc H1 FY '26 Earnings Release. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Michael O'Leary, Group CEO of Ryanair Holdings plc to begin. Please go ahead. Michael O'Leary: Thank you, Nadia. Good morning, ladies and gentlemen. Welcome to the H1 results conference call. I'm joined by the entire team here in London and on other phone lines. We published the results this morning, Neil and myself have done a 30-minute Q&A on the website. So I would direct you to the ryanair.com website for that while you're there, book a low-fare flight. Quick couple of comments. One, as you see, I'd prefer to deal with Q2 because the H1 was distorted by the very ridiculously strong Q1 and the weak prior year comp. But if you look at Q2, so traffic is up 2% because of the Boeing delivery delays. They have improved in the last couple of months. We've now taken 23 of the 29 aircraft that they should have delivered to us at the start of the summer. That gives a little bit of headroom to increase traffic growth this year from 206 million to 207 million. So we should get growth of about 3.5% this year. Fares in Q2 were up 7%, very strong recovery. That is the recovery of last year's 7% fare decline, and we think we will continue that through the remainder of the year. I caution, we do have slightly stronger prior year or tougher prior year comps in the second half when we began to repair the OTA boycott or the impact of the OTA boycott was less significant. So the fare growth in the second half won't be as strong as it is in the first half. But overall, on the year, we're pretty confident now we get back all of last year's 7% fare decline, maybe a little bit above that, but it won't be much. Much more important, as always, unit costs well under control, only up 1% in the second quarter despite significant cost inflation on air traffic control and a little bit on the engineering side. Clearly, the lower hedge cost this year playing a significant role in that. And as a result, Q2 profits are up 20% to EUR 1.72 billion. Taking forward, in kind of themes I would give you that we want to cover in the call, Boeing are doing a much better job. I think they asked us to take those -- could we take the aircraft through August, September, October. We said didn't -- there were no use to us at that stage, but we would work with them. We would take those aircraft if they could deliver them. They've delivered 23 of the 29 aircraft in the last 3 months. We get 2 more in November and then the final 4 will be delivered in January, February of next year. So we will have all 210 Gamechangers in the fleet by the end of March next year or in advance of summer '26, which puts us well on track, I think, for traffic growth to 215 million, 216 million passengers in FY '27. And that will be the first year since the MAX groundings that we're not dealing with Boeing delivery delays in the spring or disruptions to our summer schedule. So we think that will lead to strong traffic growth and hopefully maintaining pricing and profit recovery into summer '26. The good news this morning is we've taken advantage of our recent fuel weakness. As you know, we were 85% hedged out to March 2026 or for this year at $76 a barrel, down from $84 a barrel last year. Today, we're able to announce that we're 80% hedged for FY '27 at just under $67 a barrel. That will be a very significant 10% saving on our fuel bill, will save us about EUR 600 million next year, which I think will enable us to incentivize and stimulate growth, but also fund what will be another painful increase in emissions ETS taxes and viral taxes in Europe, where Europe continues to damage its own competitiveness by taxing only intra-EU travel, whereas all the extra or the non-EU travel or people arriving to and from Europe are exempt from these egregious environmental taxes. Balance sheet continues to strengthen. We paid back the EUR 850 million bond in September. We have the final EUR 1.2 billion bond we will pay in May, and then we will be entirely debt-free with a fleet of 640 aircraft. We have hedged, and I think the treasury team has done a wonderful job start this year, the dollar was about 1.08 to the euro. It weakened in recent months with some of the Trump spectaculars to 1.24. And we've now hedged the first 50 of our 150 firm MAX 10 aircraft orders at 1.24, which is about a 15% euro cost saving -- euro saving on CapEx on those first 50 aircraft, and we're looking for opportunities to extend those CapEx hedges. And you can only do that with the kind of strong balance sheet Ryanair have. The real underlying, I think, story, though, is here that Europe capacity continues to be constrained and will remain constrained out to 2030 because of manufacturer delivery delays, Airbus fleet still largely grounded repairing engines, a program that won't be completed until 2028 or 2029. And therefore, I think as we add capacity next year, there's a reasonable prospect that we would grow traffic, but we'll see modest fare increases coming through the system. The one negative in Europe is Europe is continuing to fail on competitiveness. We've had the Draghi report, now it's 14 months old. He pointed to a whole series of areas where Europe can and must be more competitive. von der Leyen has committed herself to delivering on that competitiveness agenda and then done absolutely nothing for the last 14 months. All of Europe's airlines are calling for 2 competitive initiatives. One moved the ETS environmental tax emissions trading system tax rates in line with CORSIA, which is what the non-European airlines are paying. It is indefensible that Europe is harming itself by having these excessive environmental taxes, move ETS in line with CORSIA, and it would result in dramatic improvements in competitiveness and also lower fares for consumers traveling on intra-EU air services. And then second, reform Europe's broken ATC services. We need the protection of overflights during national ATC strikes. We cannot have a single market if it can be shut down every time some air traffic control union wants to go on strike. It isn't much of an ask. The legal mechanism already exists because in Spain, Italy and Greece, they already protect overflights during ATC strikes and they ground the domestic flights. But as we all know, in France, they protect a disproportionate amount of the domestic flights and cancel all the overflights. This is unsustainable and von der Leyen should take action. I think with what is a very impressive new Transport Commissioner, Tzitzikostas. He wants to reform, but everything ties in the dead hand of von der Leyen's office. So she should stop talking about reform and competitors and start delivering it, protect over flights and then fix staffing on the first wave of ATC staffing on the first wave of flights, which, again, Germany, France and NATS in the U.K. are inexplicably short staffed. It's inexcusable. The airlines we roster standby pilots and standby cabin crew. ATC, they just allowed the system to fall over and they cut capacity. It's not acceptable. Air traffic control fees have gone up 14% this year, and we're still getting a s***** third rate, third world service. And if von der Leyen can't deliver competitiveness, frankly, she should leave and be replaced by somebody competent who can deliver competitiveness in Europe. Other than that, I think the good news is we're seeing a sea change in environmental taxation at national level. Governments in Sweden, Hungary, Italy, Slovakia and regional Italy are all abolishing their environmental taxes. And we are switching an enormous amount of capacity away from high-tax economies like Germany, France and the U.K., where Rachel Reeves is increasing APD by another GBP 2 in April. And moving that capacity to Sweden, Hungary, Italy, et cetera, where governments are get it, they're abolishing the environmental taxes and they're also incentivizing traffic growth. So we want to reward those countries that are incentivizing growth and penalize those countries like Germany, France and the U.K. who are incentivizing tax increases and damaging growth. And that will continue. But I think the fact that countries like Sweden, the home of Greta Thunberg and flight shaming 5 years ago are now have worked out. They're abolishing the environmental taxes, gives us hope and I think some degree of optimism that the way forward is not penalizing Europeans. It is abolishing those taxes and allow airlines like Ryanair to invest heavily in new engine technology. Our new MAX 10s will carry 20% more passengers, but burn 20% less fuel per flight. So a 40% reduction in fuel and emissions on a per seat basis. Other than that, there's also some other government and competencies, the Irish government, which was elected last year on a program to abolish the Dublin Airport cap 12 months later, nothing done. We have a do-nothing Prime Minister and a do-nothing Deputy Prime Minister, both of whom have been sitting on their arses for the last 12 months, talking about passing legislation despite the fact they have a 20-seat majority. They're now talking about legislation might be moved by the end of 2026. Ireland and growth cannot wait for these do-nothing politicians. They have a 20-seat majority, they should pass the legislation scrapping the cap at Dublin Airport before the end of 2025 and allow the airlines, Ryanair and the other airlines to get on with growing traffic at Dublin Airport, the way we're growing, and we're adding aircraft in Shannon and Cork. So there's always some stupid government and some incompetent politician holding back the growth. But thankfully, there's better politicians in Sweden, Italy, Hungary, Slovakia, all of whom are working closely with Ryanair to abolish taxes and allow us to grow strongly. I think we're looking forward particularly with the improvements Boeing have made in the deliveries, the quality of the deliveries. Kelly Ortberg and Stephanie Pope are doing a terrific job. They have got -- they've gone up from rate 38 to rate 42 in October. We think the FAA will increase that to rate 46 in March, April next year. They are gradually catching up on the delivery delays. They are pretty confident that they'll certify the MAX 7 even with the current government shutdown in Q2 next year, the MAX 10 in Q3, which will be about 6 months in advance of our first 15 MAX 10 deliveries in the spring of 2027. So we have the 29 aircraft delivered this winter that enables us to grow to 215 million passengers in FY '27. The first 15 MAX 10s coming in the spring of '27 will enable us to grow to about 225 million passengers by FY '28. And then we are off and running on what I believe will be an 8- to 10-year program to grow from 207 million passengers this year to over 30 million -- 300 million passengers by 2034. Currently, we're making a profit of approximately EUR 10 per passenger. I think it's reasonable to suppose that, that profit will rise from EUR 10 towards EUR 12 or EUR 14 profit per passenger over the next 10 years. There will be 1 or 2 curveballs in the middle of that. We are a cyclical industry. We have a strong balance sheet. We will have 0 debt in May of next year. And I think we are poised for very strong growth, particularly if the European economies continue to lag in growth, people will get more and more price sensitive and will switch to Ryanair from high fare competitors elsewhere. So I have never been more excited about, I think, the growth outlook for the next 4 or 5 years. I think we have a number of challenges in moving politicians to a competitiveness agenda. But within that, Ryanair is going to grow strongly and profitably, I think, for the next 4 years up to 2030. And with that, Neil, I want to hand over to you, anything you want to highlight in the P&L or on the balance sheet? Neil Sorahan: Yes. I'll maybe just focus again on a couple of things in the quarter and in the half. Firstly, as you already pointed out, costs put in an excellent performance, up just 1% on a per passenger basis. That was down to our strong fuel hedging, which very much helped offset double-digit increases in ATC and environmental costs. We're still guiding modest unit cost inflation for the full year. What's modest, it remains somewhere between 1% and 3% on a full year basis, probably a little bit higher than the 1% that we had in the first half in the second half of the year. We have extended our hedges into FY '27, as Michael said. We've also extended our OpEx hedging into next year at 1.15 compared to 1.11 on the euro-dollar. So we're locking in significant price savings next year, and that will go a long way to help offset a jump up in our environmental ETS next year somewhere from about EUR 1.1 billion this year to somewhere between EUR 1.4 billion and EUR 1.5 billion next year. Balance sheet, rock solid, BBB+ rated, 610 unencumbered aircraft and in a very strong position now to be debt-free by May of next year, which I think is a great place to be. Also, we're locking in euro savings on our MAX 10 CapEx moving forward with a 35% hedge in place where we've hedged 35% at a firm order, that's 150 aircraft at 1.24. Buyback moving along at a nice pace. We're pleased with the pace that the brokers are moving at. They managed it well through indexation. So we're just over 35% of the way through that, and that will run out to the back end of 2026. And then finally, the last thing I'll point to business as usual, but we've announced an interim dividend this morning of EUR 0.193, which similar to last year, will be paid at the end of February. And that's all I wanted to touch on, Michael. Michael O'Leary: Okay. Thanks, Neil. With that, Nadia, we'll open up to Q&A, please. Operator: [Operator Instructions] The first question goes to Harry Gowers of JPMorgan. Harry Gowers: First question just on the Q3 fares, maybe you could provide us with what you're currently tracking for the quarter? And if you've seen any changes strengthening or weakening around that number in the last few months? And then second question on the online travel agents, that clearly, the fare comparatives are normalizing into the Q3 versus last year. I was wondering if you think you're still getting like any actual realizable uplift or specific tailwind from those official partnerships? Or is this just like fully past us now and we're back to a more regular kind of pricing cycle, just fully dependent on supply/demand in any quarter? Michael O'Leary: Yes. Thanks, Harry. I mean I wouldn't want to split out where we think we are on Q3 fares because so much of it is dependent on the close-in bookings at Christmas, over the Christmas and New Year period. But October is strong, up on last year. November is a little bit weaker, slightly down on last year's fares and Christmas at the moment is booking strong ahead of last year on fares. I think all I want to -- I wouldn't want to go any further than give you the kind of -- we have moved from being hopeful to being now confident that average fares will recover the full 7-year fare decline from last year in this year's numbers. We're up 13% average fares in the first half of the year. We have tougher prior year comps in the second half of the year. So you won't see, I think, 7% fare increases in Q3 or in Q4. But I think rounded out for the full year, we're pretty confident now we will be up -- average shares will be up 7%. Maybe we might get to 8% if we have a strong Christmas. But again, we need to see how those close-in figures book. And I think that is what leads us with a reasonable degree of confidence to see a strong profit recovery this year, but we can't put a number on it yet because it's so heavily driven by Christmas and the New Year holiday bookings. The new aircraft from Boeing will gives us the capacity to add a few extras there over that Christmas-New Year period. That's why we've been able to bring the traffic up from 206 million to 207 million this morning. On the OTAs, the big impact on us on the OTA boycott last year was through the first half of the year when you lost the people who I kind of complacently thought would be price sensitive. Therefore, they'll book the holidays directly with us. They didn't. A lot of them moved to the tour operators last year to the Jet 2s and the easyJet holidays. They've come back to us in the first half of this year. You see that reflected. We have weak prior year comps and a strong H1. We see some of those kind of tour operators, easyJet, Holidays Jet 2 (sic) [ Jet2 Holidays ] talking about a bit more price sensitivity in their bookings through the first half of the year. And it's because that traffic -- the OTAs have moved that traffic back to us. They need our low fare access. And so -- but that's not a key feature into the second half of the year. The OTAs are a lot less impactful in Q3 and 4. And therefore, we didn't have the same decline in airfares in Q3 and 4 last year. We've got much -- we have a tougher prior year comp, which is why we think, again, the second half of the year, you won't see 7% fare increases. It will be a little bit less than that. But overall, in the round, we'll come out at fares up about 7% on the full year. Eddie, do you want to add anything to that on Q1, Q2 or OTAs? Edward Wilson: No, I mean like what we've said, there sort of covers it off about what has happened, like slightly less in terms of fares in November, but Christmas, we're happy with how it's booking. So nothing really to add there at all. And I think we are through that sort of tail end of the OTAs, and I don't think there's going to be any further uplift. I just think it's, as you say, much tougher for our competitors out there on the prior year comparable. Operator: The next question goes to James Hollins of Exane BNP Paribas. James Hollins: I'll start one for Neil, actually. Just on the ex-fuel unit cost performance was only up 2%. I think noticeable was the EUR 30 million Q2 decline year-on-year in marketing, distribution and other. I'm assuming that's all lower distribution costs -- sorry, lower disruption costs. Or am I missing something else within that particular line? And secondly, Michael, clearly, using this platform as ever to get your point across on EU, progress on overflights, et cetera. Maybe just give us an update on what this new transport minister might be able to achieve? And secondly, whether there's any update on the sort of comedy baggage regulation they're looking at? Michael O'Leary: Okay, Neil. You okay if we have -- Tracey come in after? Neil Sorahan: Yes, sure. On the marketing line, I think you're particularly referring to some of that's down to lower EU261, lots of disruptions, but keeping them below the 3 hours. Equally, we've got up to 60 million people a week coming through on social, which is keeping our marketing costs way down. A little -- some of it's a bit of timing. We will do a bit more marketing over the Christmas period. And then offsetting that somewhat would be higher input costs for the onboard spend, which is going particularly well from an ancillary perspective. Michael O'Leary: Okay. Thanks, Neil. And on its commissioner Tzitzikostas, who's the Transport Commissioner, has had a really impressive start. One of the most notable things is they finally moved on the infringement proceedings against Spain over the crazy Spanish bag fines that were levied only on the low-fares airlines in Spain, but not on the high-fare airlines. It's clearly illegal. It's in breach of EU Regulation 1008/2008, which guarantees the airlines' freedom to set prices free from government interference or regulation. He does want to reform ATC. But like I think a lot of commissioners, he's frustrated. They're all expressed frustration at how little comes back out of von der Leyen's office. There is a real dead hand of Germany incompetence at the top of the European Commission and either she should deliver reform and deliver reform and competitiveness or go, preferably be replaced with someone who can actually do something. I would like to say we should get an Irish politician there given it was Peter Sunderland, who originally deregulated air travel. But given the lack of action from the Irish politicians on the Dublin Airport [ mad ], Dublin Airport cap, I wouldn't be recommending any of our Irish politicians either. At the EU Parliament, as is it won't is -- we elect a bunch of clowns, and we should be not surprised in a circus that they come out with crazy ideas. One of which is now that everybody should have the right to bring 2 free bags onboard an aircraft. We have politely pointed out that there isn't room on board the aircraft for 2 free bags for 189 passengers. That does seem to be a detail that they've missed. We've also pointed out that actual bag, one of the greatest things here that limiting people to bringing one free bag on board, and that was the wheeling judgment, the ECJ judgment in 2014, we do allow half the passengers who are priority boarding to bring a second carry -- free carry-on bag. That's about as much capacity as the aircraft has. But what the European parliament now part of this is that the commission under Tzitzikostas is looking for a reform of EU261. There talk about bringing compensation up from 3-hour delays to 4-hour delays, which does make sense. The parliament then pushes back with some ridiculous suggestion like 2, 3 bags on board. What that would do is they create huge queues at Europe's airports as everybody starts struggling with 2 bags through airport security. A bit like you have in American airports where you take forever to get through security because they're all bringing 5 and 6 bags attached to their persons through the airport. It would also mean inevitable flight delays because bags that don't fit in the aircraft would have to be taken away at the gate and put in the hold of the aircraft. You have more aircraft missing their slots and you would just gum up the whole system. But of course, a bunch of lunatics elected to the European parliament wouldn't worry about the day-to-day details of how people move. They only work about 3 days a week anyway and wouldn't be all that sensitive at the best of times to efficiency. This is why in America innovates, China replicates and Europe f****** regulates. And why Draghi has pointed 14 months ago, we need to get more efficient in Europe. And the best starting point would be stop issuing new bulls*** regulations invented by idiots in the European Parliament and start making Europe more efficient. If you really want to deliver efficiency for consumers of air travel in Europe and competitiveness, abolish environmental taxes or at least bring them into line with CORSIA and fix air traffic control. The European part will be much better off waste spending its time reforming air traffic control or protecting overflights in a single market than they would designing new and hopelessly impractical and unimplementable regulations, allowing passengers to bring 2 free bags on board an aircraft where there isn't room for the bags and they don't fit. Operator: The next question goes to Jaime Rowbotham of Deutsche Bank. Jaime Rowbotham: Two from me, both on growth. The first one on fares. Obviously, great to see you're making back what you lost from the OTA issues. But on an underlying basis, the pricing is broadly flat. And that's, I think, the scenario you're implicitly guiding to for this winter when the comps normalize. So as we look ahead to next summer, you're growing in Poland, Italy, Ireland, you'll shrink in Spain, Germany, France. But overall, you'll grow seats at about 4%. It looks like the industry will do 3% to 4% again as well. That being the case, I was a bit surprised to hear you talking about modest fare increases coming through the system, especially as you hinted that Ryanair will likely be passing some of its fuel cost decline on to stimulate growth. So would it not pay for us to tread quite carefully when thinking about the direction of your pricing next summer? Second one, you've announced EUR 25 million of annual investment today to accelerate cadet and first officer recruitment for the next 3 years. You've also talked previously about setting up 1 or 2 in-house engine maintenance shops. Is there any update on that project? Have you chosen the sites? And are there any other non-aircraft investments for growth that we should have on our radar? Michael O'Leary: Thanks, Jaime. I'm going to ask Eddie to deal with the growth question. I might ask Tracey McCann to come in on -- Tracey will come in on the EUR 25 million, on the first officer and on the engine shops update. Eddie, growth in 2026. Edward Wilson: Yes. I mean if you look out into the summer of next year, I think, just close to 75% of our growth will be in Italy, Poland, Albania and U.K. I mean like we've -- if you look what's happened in Italy, we've opened 2 new -- we've got bases in Trapani. Tirana base will open. We've got additional aircraft, 3 additional aircraft going into Modlin, 3 additional aircraft going into Krakow. And then you see as we begin to -- like it's not good to say that we're not growing in Spain. We're not growing in regional Spain. I mean regional airports in Spain are underutilized by about 70%, but we continue to grow in Malaga and Alicante where we will have -- probably we'll have 20 aircraft in both of those bases next year, and that'll be pretty much maxed out on early morning slots. We continue to grow places like Madrid, so it is getting more patchy and Barcelona is full. But yes, the way this is playing out in terms of you look at our competitors and their sort of cost inflation, and that's going to drive fares up while the gap between us and our competitors widens on a unit cost basis, and that gives us the opportunity to take advantage of what we believe will be like fares at least rising to some extent, the bias is going to be towards that. And we continue to grow, as I say, 75% of it across Italy, U.K., Poland and Albania and then a smattering of one aircraft increases across a wide range of bases where we're continuing to get low-cost deals. But like I could have allocated those 29 aircraft 3x over based on the appetite that's out there for particularly the stability that Ryanair brings and the longevity into those markets. Michael O'Leary: And I would just add to that point. I mean if you look at the non ex-fuel unit cost inflation in our competitors, whether it's easyJet, Wizz, Lufthansa, Air France-KLM, they are really struggling to contain unit costs. And that, I think, puts pressure on the next year to get fares up to cover these unit costs. The legacy carriers are also facing a much bigger penalty in terms of the withdrawal of the free ETS allowances. It has a much bigger impact on Lufthansa, Air France and IAG. And I think the pressure on fares is going to be upwards for the next year or 2. We have a much better unit cost discipline, and I think our fares will trend up behind them despite the fact that we've already banked up to EUR 650 million in fuel cost savings next year. Tracey, do you want to touch on the first officer recruitment issue and the progress on engine shops? Tracey McCann: Yes. So attrition rates are probably at the lowest we've ever seen. So we probably slowed down our recruitment this year of cadets probably to about 500. We should be up at about 1,000. So given the long lead time for promotions to captain been about 4 to 5 years, we're commencing recruitment now for then peak years for the MAX 10 deliveries. So there'll be a carry cost of about EUR 25 million per annum up to 2030. Michael O'Leary: And shop progress? Tracey McCann: So just on the engine shops, we're close to selecting our first MRO shop. We will open 2. So that will allow us to do 200 engines in each shop. The selection period is ongoing. There's nothing in our CapEx for this year, but we will probably start paying something next year, but we're close to announcing something on that very shortly. Michael O'Leary: We're in advanced discussions with GE and CFM on spares packages, and we would hope to have announcements of those, if not, before Christmas, maybe early in the new year. Operator: The next question goes to Jarrod Castle of UBS. Jarrod Castle: I was quite interested to hear you say that you think the profit per pax could go as high as EUR 14 at least over the next few years. And you've given some commentary on pricing and costs. But just some color on what gives you that confidence, assuming we've got like a stable GDP environment. There's no downturn, I guess. And then you've obviously spoken about a number of countries, Germany, France and I saw some comments on the U.K. But it does look like you're still continuing to grow in the U.K., which I think is about 1/5 of your capacity. And if I'm not mistaken, you're going to grow in summer by the sounds of things. So why is it still attractive to you? And what are your thoughts on the upcoming budget on the '26? Michael O'Leary: Okay. I'll maybe ask Eddie do the second half of the question on U.K. growth this year. Remember, the APD increase, that doesn't come in until April of '26. So -- but it's coming. Just on profit per passenger. If you go back to the kind of the broad brushes or my favorite back of the envelope, the real driver, I think, of our industry in Europe for the next 4 or 5 years is capacity constraint. We've gone through 25, 30 years where there was new airlines being set up, low fares airlines, the legacies were setting up low fare subsidiaries, everybody had new aircraft deliveries. There is very little capacity growth across Europe this year, next year or for the next 3 or 4 years. Nobody has any significant aircraft orders with the possible exception of Ryanair. Wizz had some orders and they've -- they're desperately trying to defer those orders now, which means their profits implode because all their profits come from [ Mizigel ] or Ponzi like sale and leaseback profits being recognized in the P&L, but that's an aside. So I think the demand for air travel remains strong. Yes, there are economic challenges in countries like Germany, France and the U.K. where the economies are not doing well, particularly in the U.K. post-Brexit. But people are not willing to forgo the travel. The kids, midterm -- we've just come through the midterm school break last week, very strong traffic flows, very strong bookings at high yields. Easter, summer holidays, Christmas, we're seeing strong demand for travel. I think, if anything, strong demand for travel with -- in Ryanair because we have such a pricing advantage over every other airline in Europe. Wherever we allocate the capacity, we are filling strongly. And I think that was reflected in this morning's bookings even into the remainder of October, November, December or November, December, where forward bookings are about almost 1% ahead of where they were this time last year. And we see that continuing. So I was asked earlier this morning, one of the interviews, if we saved EUR 650 million on fuel next year, will we pass that on in the form of lower fares? I think -- and my answer was, I think we can, but I don't expect to have to because I don't see -- if you look at the kind of cost inflation or ex fuel unit cost inflation in Wizz, easyJet, Lufthansa, Air France-KLM, it's high single digit, low and mid-double digits in the case of Wizz. Those guys have no future unless they constrain capacity and get airfares up for the next year or 2. And I think we will be the beneficiaries of that with a much more disciplined unit cost control. And I keep go back to Slide 4 in our presentation. If you look at the comparable unit cost advantage we have over every other airline in Europe, I think there's a reasonable prospect that we will see modest fare increases over the next 2 or 3 years plus or minus any unforeseen events, but modest fare increases, mid-single digits. And in Ryanair's case, most of that flowing through to the bottom line. Now we will have labor cost inflation in the next couple of years. I think ATC will continue to be out badly controlled by government. But overall, we will be -- we're moving into a decade where we're going to start taking aircraft at 20% more seats that burn 20% less fuel per flight. We're looking at a much more operating efficiencies coming through. And I think that justifies a reasonably modest growth in profit per passenger from EUR 10 to EUR 12 to EUR 14, I think, over the next 5 years to 2030. But then I'm one of like hopeless optimist, which is why I'm employed in the airline industry. Eddie, U.K. growth impact of APD. Edward Wilson: Yes. I mean, notwithstanding the sort of background of continuous APD growth in the U.K. The way we look at in terms of route development is not just season by season, but there's a continuous carousel of airports that we do deals with. And like if that -- if you've got airports even in a tough market like that, that are willing to share the investment with you in terms of lower cost, well, then we're going to reward that with extra capacity. And we've got extra aircraft going into places like Newcastle, which has gone from 0 to 2 aircraft based and 3 aircraft based now. Birmingham has got an extra aircraft. Liverpool has got an extra aircraft, Birmingham, Manchester, Stanford. All these places have extra aircraft going in because they're willing. We're in there for the long term. We're lowering costs there and incentivized for additional traffic. So it doesn't always go coterminous with the market as you make those investments, and it's going to put even more pressure on [indiscernible]. Michael O'Leary: Neil, anything you want to add there on U.K. growth or impact of APD? Neil Sorahan: Not particularly. I think we're -- Eddie and yourself have covered that off fairly well. On the profit per pax, I suppose just to reiterate, it won't go in straight line. There will be years where we'll be up and years where we'll be slightly down. Michael O'Leary: Okay. Michal Kaczmarzyk here as well, who's the CEO of Buzz. I might just add, I guess, help us to just to give you maybe his insight into growth in Central Europe, Poland, in particular, the charter market in Buzz. Michal, anything you want to add on growth in those non-tax economies like Poland and Central Europe? Michal Kaczmarzyk: There are good taxes. True. I mean Poland and CEE are performing very well. Demand is strong. We have now 80 aircraft allocated in the region. The Poland is the biggest part of the market with 44, offering more or less 40 million seats with the most attractive destinations in CEE. We have very strong brand recognition there at Ryanair, but also supported by our local structure bus generating over [ 3,500 ] direct jobs in Central Eastern Europe, supporting another 20,000 airport handling and so on. We make a lot of significant investment in the region through our hangars facility, but also crew training centers. We completed recently the biggest crew training center in Central Eastern Europe with 3 -- sorry, 4 full motion simulators. It's located in Krakow. We'll be able to train over 300 crew per day. We developed also our Warsaw ops center, focusing now on covering Central Eastern Europe, but also serves as a backup for Dublin ops center. So there is a lot of capacity still we can allocate in Central and Eastern Europe. The only -- the constraint is the number of aircraft we can allocate there. And we are in the good shape to take a lot of market share in the next 2, 3 years. Michael O'Leary: And there was talk last year of with moving aircraft back from the desert and basing aircraft in Central and Eastern Europe. Are you seeing much of Wizz in those markets? And how is the -- what's the -- Albania, where we're opening a base in Tirana, which is currently a Wizz base. How is the Tirana expansion base going head-to-head with Wizz? Michal Kaczmarzyk: So aircraft allocation -- I mean the Wizz aircraft allocation from the desert to Central Eastern Europe, I would say it's too late. I mean after pre-COVID, we increased in Central Eastern like 40%. We took their capacity or even pass capacity from the region to the region. So now we are the biggest in Poland, the Baltics, Croatia, Slovakia. We have the local structure there where we are able to compete in terms of cost level. There is no cheaper airline than past now in the region. Also with the highest fleet utilization ratio in the industry, over 6 hectares per aircraft per day. So the new base launch next summer will be Tirana for us, with quite significant capacity of Wizz. But what I mentioned, we are absolutely not afraid of that because our local structure there guarantee us the lowest cost. Once we deliver the lowest cost, we are able to deliver the lowest fares there as well. Michael O'Leary: Thanks, Michal. Eddie, anything you want to add on growth there before we... Edward Wilson: I mean just touch on the point there, you talk about Wizz and what's happening out there, where their policy or their growth strategy is to go back to Central and Eastern Europe. And certainly, what we pick up from the airports is that those that are incentivizing us to grow is that we're there for the long term. And you can see even cancellations in [indiscernible] from Wizz before they've even started back there. So some of that has been replicated. And you hear a lot of noise, but not a lot of lot of action that even extends to places like Italy, where we're doing almost 1,200 frequencies a week and you've got less than 100 frequencies a week from Wizz. So -- but I think airports recognize Ryanair is in for the long term, do a deal with Ryanair, get the cost down and you have the traffic for the long term rather than looking at these other short-term deals that are available [indiscernible]. Operator: The next question goes to Stephen Furlong of Davy. Stephen Furlong: Just on Boeing, last week, they had the results, and I thought they were pretty vague on the certification. They just said 2026, maybe the deliberately were for the MAX 10. I mean a little bit more work on the 10 and the 7 and hardware and software modifications, although they did say it was pretty straightforward. So just might talk about that, what exactly they're telling you. And then you mentioned labor. Could you just remind us what's the timetable for CLAs? I think most of them are in 2027 and stuff that would be great, the contract labor agreements. Michael O'Leary: Yes. I mean I think it's one of this -- I give Boeing more credit. The new management team is doing much more credit. The old management team would give us all sorts of pie in the sky, to be here tomorrow, next week and then miss targets all over the place. The new guys are much more cautious. They don't want to make promises they can't deliver. And I think that's the sensible place for them to be in. But you look at what they have delivered, they've got FAA approval to go from rate 38 to rate 42 in October. They're now talking about going to rate 46 in March, April next year. That doesn't really affect us. I mean we'll have finished our -- the Gamechanger deliveries at the end of February. But at least we have all 29 aircraft in for summer 2026. There is a risk at the moment with the government shutdown that certification, they're pretty confident talking to us. And actually, we get this on the other side from talking to EASA, who are involved in. EASA are very impressed with the work that the Boeing of the management team and the work that they're doing. And we get a lot of very positive feedback from EASA. So I think they're right to be somewhat cautious to underpromise and overdeliver. But we have a reasonable headroom there. At the moment, they're talking about MAX 7 being certified by -- in Q2 next year, MAX 10 in Q3. That could slip to Q4 or to Q1 of 2027, and we would still get our 15 deliveries in the spring of 2027. Now clearly, we'd be one of the lead operators of the MAX 10. I wouldn't have any issue with that. The sooner we can get them, the better. So -- but they're telling us and have gone in writing that they will meet our delivery date, the first 15 delivery dates, the first contracted 15 delivery dates in the spring of '27, they will meet. That's what gave us the confidence in the treasury function to go out and start hedging the U.S. dollar on those firm deliveries. And we're looking for more opportunities to extend those hedging. So I think Boeing were right to be a little bit cautious in their public commentary, but all of the delivery on the ground in terms of quality of what they're delivering to us and the timeliness of what they're delivering to us now has been nothing but impressive for the last 3 or 4 months. Now they clearly don't need any screw up along the way. But in Stephanie Pope who, is sitting on top of the production line in Seattle, there's somebody who's there every day. You can pick up the phone and call her. She gets back to you. She's really is well on top of it, and I would be very supportive of the work she's been doing. Maybe I'll add over -- so timetable on CLA, Eddie, while most of our labor contracts run out to -- our rates -- come up for renewal in April '27. Edward Wilson: And there's a couple of labor contracts that will be up 2 or 3 on the pilot side and again, a similar number on the cabin crew side. But like a lot of what we're -- it's not always just about pay. I mean, if you look at the disruption that's happened against the background of ATC and Ryanair's ability allow its people to actually deliver sort of a stable working environment underpinned by the continuation of the plan for roster, which will be a key part of any discussions on the CLA. And we've seen also over the last number of years, one of the dividends of doing local labor contracts is that people now not only are in the right -- most people are in the right place where they want to be, and it's relatively easy in terms of how they're paid, the local bureaucracy administration and labs have made a huge investment with that in terms of -- it's so much easier now. It's easier than it's ever been in Ryanair's history for people in far-flown basis to get the smart things done, how do I get my time off, how do I get my payroll queries, and that's all done through sort of a platform called Ryanair Connect. So there's lots of things like pilots and cabin crew more than ever value given the disruption that are there -- the disruption that is driven by ATC to have a stable working environment. I mean like this August, for example, we had our lowest cancellation level ever, completely different from the previous season. A lot of that, again, is about recovering on the day. So we'll be talking with our union partners in terms of the renewal of agreements. We will try to do long-term stable agreement, but underpinned by superior working conditions that I think are increasingly becoming more valuable. So it's not all just about one. Michael O'Leary: Touch on the Spanish CLA? Edward Wilson: We just concluded the Spanish CLA for the cabin crew, which was one of the last ones post sort of unionization. There were some bumps in the road, but actually was signed there last week, now we ratified by the local labor authority, and that's for cabin crew. That's very welcome. That goes out to 2030 into that deal. And that sort of sets somewhat of a benchmark for where we're going to go with the new deals that are going to come up, particularly on the cabin crew side. Michael O'Leary: And Darrell, you want to add anything to that on the CLA side and Chief People Officer? Darrell? Okay. Maybe Darrell's not on the line. Look, as you rightly say, Stephen, the labor contracts run out to April '27. That will [indiscernible] kind of is timed to meet the deliveries of the MAX 10s. And there's no doubt we're going to get a productivity gain out of those MAX 10 aircraft, not so much from the extra seats, but from the fuel consumption on the engines, which is dramatic. We are willing, I think, to share some of that productivity upside with our people. I think they -- but Darrell and his team have started those kind of discussions around 2026 and 2027. We have, as Tracey has already said, record low attrition. I mean we have almost no pilots and no cabin crew attrition at the moment. People are happy where they are. They're being well paid. They're in the basis they want to be in. Clearly, the Gulf carriers, which would historically have been a kind of the valve that would have recruited a lot of our pilots they don't have any capacity growth either at the moment. So things have never been more stable. But I think we will be seeing productivity gains coming over the next couple of years, and we are certainly minded to do deals with -- as long as we can do sensible deals. Will we do unsensible deals? No, we won't. I mean we've taken strikes in Belgium in the last 12 months. We've taken an occasional strike in Spain. We're happy to take strikes where people don't want to be stupid. We'll take strikes and we will face them down. But I think there is some upside coming in the next couple of years. And certainly, we will want our people to be at the front end of that. And if we can conclude new pay deals in the next -- either from April '26 or for April '27. And if that results in a step-up in labor cost, it's something I think we'd be willing to fund and finance. So watch this space, and we would hope to make progress on that over the next 6, 9, 12 months. Operator: The next question goes to Alex Irving of Bernstein. Alexander Irving: Two from me, please. First on ancillaries. Really good to see that robust growth continuing on from Q1. What's driving that? Is it product innovation? Is it pricing decompressing 2 years into 1 as you reinstate the OTAs and flat unit ancillaries at this time of last year? And then related to that, what do you expect for unit ancillary sales over the coming years? Second question is on CapEx. You've previously spoken about peak CapEx of around EUR 3 billion in FY '30, '31. You talked about locking in some of the dollar weakness and some of those gains into your future CapEx budget. What are your latest expectations for peak CapEx? When and how much, please? Michael O'Leary: Thanks, Alex. So maybe I'll ask Tracey McCann to take the ancillaries question. And Neil, you might come in and do CapEx, our peak CapEx. Tracey, ancillary? Tracey McCann: Okay. The ancillary growth, 3%. A lot of that is driven what we said from dynamic pricing. So we're starting to get better pricing on seats, better pricing on bags. We also have our order to seat service, which is increasing our onboard spend. And so probably fall back a little bit, you're going to be faced with the same thing on the comparables in the second half of the year. So maybe not as strong as the first half and probably about 2% per annum, I would say, beyond this year. But again, a lot of it is driven by what the labs team are doing in-house in driving them increments we can get on pricing. Michael O'Leary: Okay. Neil, do you want to touch on CapEx? Neil Sorahan: Yes, Alex, there's not a lot to add at this stage. We're only 35% hedged on the firm, the 150 aircraft. We haven't done anything on the options yet. The CapEx that we've guided in the past doesn't include engine shops. So it's a little bit premature to start changing numbers at this point in time. I prefer to wait until the engine shops agreed and then come out and refresh the numbers at that point in time. Michael O'Leary: John Norton here, Head of Trading. John, do you want to add on -- sorry, go ahead, Neil. Neil Sorahan: No, that's pretty much it. Michael O'Leary: John, do you want to add anything on CapEx on the treasury or currencies? John Norton: Yes. Thanks, Michael. Yes, look, we've got a nice layer in place there on the CapEx [indiscernible] for the MAX. I mean when you look at it at the start of the year, where euro dollar levels were down at 1.02, 1.03 in January. And then when you also factor in when the contract was signed and it was at 1.08. We have that nice space in place now to take us forward. Now we'll just look for opportunities when we see them just where markets going forward to build on that. Operator: The next question goes to Dudley Shanley of Goodbody. Dudley Shanley: Two questions. The first one, Michael, you were on CNBC this morning. And I think if I'm listening to you correctly, you said the consumers seem to be a little bit more price sensitive at the moment. How are you seeing that coming through your business? Is that just a temporary thing? And then the second question was to do with capacity constraints. Just what are you watching on that kind of 3- to 5-year view that it will remain as constrained? I know some people have been talking about the likes of aircraft from people like Spirit and think that's been shifted over to Europe. What do you watch? Michael O'Leary: Thanks. I mean where do we see consumer price sensitivity at the moment, I think, is the fact that forward bookings without any price promotion at the moment are running close to 1% ahead of where they were this time last year. And this time last year, we were actually coming off the kind of OTA pricing down 7%, lower fares. At the moment, fares are up in the first half of the year, 13%. We think that will be a little less in the second half of the year. And yet we're -- pricing is coming -- running against us or forward bookings are running against us. If anything, we're kind of slightly closing off cheaper seats to try to restrain forward bookings because clearly, we want to keep as much capacity we can for the closer-in bookings, particularly as you run up against Christmas and the New Year. In markets where we are expanding capacity, regional Italy, very strong. A new thing we've identified recently in Italy is Alitalia -- seem to have a number of their aircraft fleet grounded, particularly in the domestic market as the shortest spares. And we are expanding -- seeing very strong loads. Okay, the prices are lower in domestic, Italy, domestic Spain, that kind of stuff, but strong growth. And I note there is clearly a bit of consumer price sensitivity there. I'm campaigning aggressively against Rachel Reeves putting up APD or doing any more damage to the U.K. economic growth. But in a kind of slightly bizarre screwed up way, the more she damages economic growth and confidence in the U.K., the more people will switch away from paying higher fares to BA and others on to Ryanair. So I think that all augurs well for our growth over the next couple of years. Capacity constraints, what do we look for? I mean the only thing you can really look for is Boeing and Airbus orders. And they are -- the most recent one was Turkish, which I think was kind of preannounced by Trump when he was sitting with Erdogan at some meeting in Ankara. And even Turkish, which has announced an order for, I think, 200 or 250 narrow-body 737s, but they have no engines. They're now complaining that they can't get a deal out of the engine manufacturers. I mean in our day, when we order aircraft, you're Boeing, you go sort out the engines. But we wouldn't buy, order an aircraft unless it has engines attached. The market has moved so aggressively in favor of the engine manufacturers. People are now kind of ordering aircraft but with no engines and then kind of being price takers when they go to do deals on aircraft. Really, I don't see anything -- I mean if some of those aircraft appear out of Spirit, I think the chance of those appearing in Europe are 0. Airlines in Asia or in the Middle East and would be much more aggressive and willing to pay much higher lease rates than airlines in Europe. I see no demand among Lufthansa, Air France-KLM, IAG for capacity growth. They're all playing the same game. They've consolidated. They want to control capacity. If any, they'll keep shaving capacity so they can get air fares up. Wizz has canceled or desperately trying to -- well, IndiGo, not Wizz are definitely trying to postpone those Airbus orders into the mid-2030s, which by the time you've added 5 or 6 or 10 years of escalation, those already expensive aircraft will be even more expensive. And all easyJet is doing is upgauging from an A319 to 321s at their fortress airports, Gatwick, Paris, Switzerland. That makes sense. It's a sensible thing to do. But as we track across Europe, as Michal has said in Central Europe, we don't see Wizz anywhere. In fact, as Eddie has mentioned, most of the big incentives we'll get -- growth incentives we're getting from airports are from Wizz customer airports who are shooting themselves that Wizz is going to go bust in the not-too-distant future. I think there's a reasonable prospect and are getting Ryanair to come in there and kind of, if you like, almost as the insurance policy against a Wizz collapse. Now I don't think Wizz will collapse. But I mean, as a competitor, we wouldn't pay any attention to them at all. I mean the idea that they're going to close one of their desert bases in Abu Dhabi, noteworthy that they haven't closed the one in Riyadh, and they're going to move that capacity back to Central and Eastern Europe, well, [ whoopty doo ]. We haven't seen them yet. I think they've expanded their definition of Central and Eastern Europe to the stands. Apparently, most of the stands are now in Central and Eastern Europe, if you go by the Wizz definition. Meanwhile, we're charging in on top of them in Albania. They were competing with us in Italy and in Austria where 2 or 3 years ago, they disappeared. So we have a reasonably benign kind of map across Europe where most airports want us to grow there. And increasingly, countries want us to or incentivizing us to grow by abolishing environmental taxes. And that is Sweden, Albania. I don't go through the list again. One of the areas where airports were growing fastest in next year would be in Bratislava, where we had a 3 aircraft base. An hour up the road, the Austrians have failed to abolish their stupid environmental tax, which was less than EUR 160 million a year. Vienna has put up its fees by 30% since COVID. And all of the airlines, including now Ryanair are taking aircraft out of Vienna and putting in Bratislava. We had already announced an increase in our Bratislava base in 3 to 5 aircraft next year. And then about 3 weeks later, Wizz announced they're going to open 2 or 3 aircraft based in Bratislava, which is wonderful. Because in order to be able -- the only thing we could do to respond to Wiz arrival in Bratislava is put up our airfares there. So they'd be somewhat competitive with Wizz who come in there with fares that are about 40%, 50% more expensive than Ryanair. And the outcome will be exactly the same as it was previously in Vienna or in Italy. Wizz will lose, we'll win and the people of Bratislava will be left with the lowest fare airline, Ryanair, delivering all of that growth. But in Slovakia, there's a new transport minister, a new government, they've abolished environmental taxes. They've cut ATC fees by 50%, and the airport is incentivizing growth. Meanwhile, Rachel Reeves is over here in the U.K., considering whether she further increases APD, taxes the rich and follows the Marxist-Leninis North Korean growth model, which consists of taxing the s*** out of everything that moves with the result that nothing [ broken ] moves in the end. But to the extent that the U.K. economy suffers, I think more and more English people we can take will start fleeing to Ryanair and away from high-fare airlines like easyJet and BA. Operator: The next question goes to Conor Dwyer of Citi. Conor Dwyer: First question is for you, Michael. You were talking about how ETS credit prices should come in line with CORSIA, which would obviously be quite material if that did happen. But how much of this is hope and how much you think this might actually change? Is there a political will for this? And then the second question for Neil, on the cost per pax. It was obviously up 1% in the first half of the year, and you're talking about a bit of acceleration to the back half of the year, I think. You've got quite a strong fuel hedge position for that. So I'm just wondering where are you expecting some nonfuel cost pressure in the back half of the year? Michael O'Leary: Thanks, Conor. I mean talking about moving ETS to CORSIA, somebody has to leave the campaign. We've been calling for this for about 2 years. We didn't have the support of the flag carriers in A4E, Lufthansa, IAG or Air France-KLM. But they're now much more badly impacted by the withdrawal of free ETSs because they haven't grown for the last 10 years, most of their traffic was covered by free allowed ETS allowances. As Europe unwinds those free ETS allowances, they're getting much more hit or the cost impact on them is much more severe. And lo and behold, they're all now campaigning for moving -- well, if we're not going to abolish ETSs altogether, at least move in line with CORSIA, it is utterly indefensible that Europe taxes the s*** out of Europeans traveling within Europe. And yet the Americans, the Gulf carriers, the Asian carriers, all land and take off in Europe. They account for 53% of European aviation CO2 emissions and yet pay nothing. So I think the fact that A4E is now unanimous on this, I mean, how much of it is -- I'm much more optimistic that we will see some movement on that. Now we still have the dead hand of Ursula von der Leyen to deal with. But ultimately, I think you can even embarrass an incompetent German into -- I can actually do something on competitiveness. The Draghi report is 14 months old. She's done absolutely nothing. And I think if we build ahead of steam there, there's a reasonable prospect that Europe through the fog of failure will ultimately want to do something other than spend hundreds of billions on defense, but to make its economy more efficient. And air travel is clearly one of the ways of doing that. It would be material. It would be result in a dramatic or a significant reduction in airfares. Remember, passengers are paying these ETSs. It would result in a significant reduction in airfares. But at least it would mean that everybody in Europe is paying the same fair share as the non-Europeans. -- whereas at the moment, the Europeans paying all of the taxes, the non-Europeans getting completely free ride and useless Europe in the middle of it or useless von der Leyen sitting in the middle of it, terrified of Trump or taxing the non-Europeans. And so I think it's a call whose time has come. I also believe, and again, I'm one of life's great optimist, that actually, we will embarrass her into doing something about air traffic control or at least defending and protecting the single market. She was the one who was singing most vociferously during the Brexit negotiations that the single market is sacrosanct. We will do everything to defend the single market unless, of course, a couple of French air traffic controllers want to go on strike. So I think ultimately -- and I am much more motivated. Commissioner Tzitzikostas is really a guy who wants to get things done. He wants to deliver change. I think he really does want to transform air travel in Europe. He's from Greece. Therefore, they're very sensitive to making air travel more efficient. And I am very hopeful that him, together with the unanimity out of the A4E airlines, we will see some movement in Europe on ETS in the next year or 2. Neil, unit cost per passenger? Neil Sorahan: Yes, sure. Conor, a couple of bits and pieces. Firstly, I would expect that air traffic control charges will go up again in January this year. The service is just so abysmal that they have to put it up again. I think you'll see some of that marketing spend. I talked about some timing in there. Some of that will catch up into Christmas and into the stimulation for the advertising ahead of the summer. We're starting to see the Boeing compensation unwind. So that will have an impact on the maintenance line where some of those maintenance credits went. And then with the heavy maintenance at the back end of the year. Tracey also talked about we're going to start recruiting up on the cadets. That will kick off probably in the January time frame. So we'll be ramping up on the cadet side, but we'll also be ramping up as we always do ahead of the summer of 2026. So that tends to be back-ended costs in there, which is why I'm kind of been keeping the 1% to 3% unit cost inflation. Operator: The next question goes to Savanthi Syth of Raymond James. Savanthi Syth: Just on the first one, another question on the unit cost. But given you have hedging in place for next year and clarity around the Boeing deliveries, I was wondering if you could provide any kind of early thoughts on how we should think about fiscal year '27 unit costs? And then maybe a second question, just on the debt side. Usually, airlines that even have kind of good balance sheets find some value in having debt and being involved in that side of the financial market. So kind of was curious is the 0 debt view just ahead of kind of -- you do have the MAX CapEx -- MAX 10 CapEx, engine shop, other opportunities. So is that kind of a temporary 0 debt view? Or do you have a different kind of philosophy on the debt side? Michael O'Leary: Yes. Thanks, Savi. I mean I think on the hedging, I mean, I'll ask Neil to come back in and correct me if I get something wrong here. It's too early yet. We haven't done the budgets for FY '27. So I wouldn't get into unit costs at this stage other than we banked EUR 650 million in fuel cost savings with the fuel hedging. So that's a good strong start. I think the 2 critical elements on the hedging is we've hedged 80% of FY '27 fuel at just under $67 a barrel. We've made good progress on the currency hedging on OpEx. I'll ask John to come in -- John Norton to come in on where are we on the OpEx hedging for FY '27? John Norton: Yes. So we reached 80% of FY '27 at a level of [ 150 ]. So... Michael O'Leary: Where were we in the prior year? John Norton: So [ 1.11 ] [indiscernible] Michael O'Leary: Okay. So we've hedged away OpEx and a little bit of saving as well. And then clearly, it's not material in FY '27, but we've started to hedge the fixed orders on the MAX 10. So the hedging is locked down. We have the 29 aircraft will be delivered by Boeing. And I think that's much more critical here into FY '27. We have certainty now that we'll be able to deliver the headline traffic growth. And that's what drives ultimately the airfares and what drives the ancillary revenues. On the debt side, we're in this kind of artificial period. We have this kind of 2-year interregnum from '25 to '27, where in reality, we don't have a lot of CapEx. We could -- and we have -- we're coming up to -- in May next year, we have the 1.2 million bond. I mean we raised that coming out of COVID at less than 1%. So the cost of refining that bond that currently would be somewhere close to or close to about 3%, which isn't -- it's not a lot of money, but we don't need it at the moment. And therefore, collectively as a Board, our view is we should demonstrate to the market that we can pay down these bonds. When we start getting into '26 or '27, I think we would reserve the right to start. We would probably go back to the bond market as we get into the heavy CapEx again on the MAX 10. But we do so coming off with a strong balance sheet, BBB+ rated and say, look, we paid out back $4 billion worth of bonds post-COVID. And so I like -- we like the sense of we're not trying to be 0 debt for some kind of bulls*** philosophical reasons. We would expect to be -- to raise debt as long as we can raise debt cheaply, but only when we move into a period of heavy CapEx, which is where we'll be in '28, '29, we only take 15 aircraft in '27, we get another 15 aircraft in '28, but then we move up towards closer to 50 aircraft in '29 and '30. And so I would be of the view, you will see us pay down the last bond in May. We will try to build up gross cash of somewhere between EUR 3 billion and EUR 4 billion out of that. Other than that, we'll return the surplus cash to shareholders in dividends and buybacks. But then as we get into the heavier CapEx in '27, '28, '29, I think you'll see us go back to the bond market. Like there's nothing here. We have no principles here in terms of being -- having debt or being debt-free. It's just because of this kind of slightly strange -- it's the first time in 30 years, we go through a kind of a 2-year period with very little aircraft CapEx, pay down the debt, and then we can always refi again in '28, '29 from our position of strength. I don't know if you want to add anything on that on the debt. Neil Sorahan: Yes, I'd agree with that, Michael. I mean it's very much down to a cost decision at the moment. The cheapest way to fund ourselves is out of our own cash resources. And that's why we've decided to repay that bond out of our own cash. We've got nearly EUR 1 billion in dry powder in the form of our undrawn revolving credit facility. And as we've done in the past, we'll be opportunistic when we go back to the bond market. We'll go back at the time of our choosing and not just because there's a bond maturing and we have to roll it over. And I think that's how we will lock in the lowest cost ultimately long term for the group. So as Michael said, it's not just we have to be debt free. It's just it's going to fall that way for a period of time, and then we'll be back in the markets again. Michael O'Leary: And again, I would draw the point, as you look forward in terms of unit cost going forward FY '27. You look at our competitor airlines across Europe, the so-called low-cost airlines, they have huge net debt on their balance sheet, aircraft leasing costs, financing costs. And those costs are rising into the -- for the next year or 2. We will have 0 financing costs. We own 650 aircraft completely unencumbered. And it is another point of difference between us and the competition. It's also one of the reasons why they need to get airfares up in the next year or 2 to as their financing costs are rising and they have a huge leasing obligations. And why I think our underlying airfares may well rise into '27 and '28, whereas our unit costs will be well under control. Operator: The next question goes to James Goodall of Redburn. James Goodall: I just got a couple of follow-ups. So firstly, just on the MAX 10 deliveries. Do you know how many deliveries to other airlines are in front of you in the queue? I mean it looks like various airlines like United, Alaska, they've been pushing back some MAX 10 deliveries from '26 to '27. So I'm just trying to gauge the risk profile to you if the program gets pushed back any further, which I guess seems lower now given the deferrals from those airlines, but I would love your thoughts there. And then secondly, just following up from your comments around forward bookings being up 1 point in Q3. Does that forward book load factor level differ between the peak and the shoulder periods in Q3? And I guess, what does the higher book load factor level mean for you in terms of pricing strategy in the late market? Michael O'Leary: Okay. Thanks, James. Eddie will do the forward bookings. Let me touch on the MAX 10s. I mean, yes, one of the reasons why we're growing increasingly confident we'll get our first 15 deliveries in '27 is we are not delaying our MAX 10 orders. United who were the lead customer, I think, has delayed them. One stage they were talking about canceling the MAX 10s. We offered to step in and we take any MAX 10s they wanted to cancel. But it has helped, I think, Boeing to catch up with their production. I understand there's about 2 airlines in front of us. I think WestJet is one, Alaska might be another who are still ahead of us in the queue. Their due deliveries in middle to late 2026. Not sure whether they'll get them or not around. I think there's a reasonable prospect that the lead customer is likely to get the first MAX 10 deliveries in probably Q3 or Q4 of '26. We have about 6 months of headroom there before we get our first aircraft. And I would be reasonably confident we will take them. I don't think we'll be the lead operator. I don't think we'll get the first MAX 10 aircraft, but we might be second or third in the queue. And to those -- to my mind, it made no sense for United or some of those others to postpone the MAX 10s because you postpone them into the late 20s or early 30s, you're just paying a couple of more years of escalation. I would rather take the aircraft as quickly as I can get them. We don't have escalate -- well, we have -- we built in our price -- the price is averaged over the lifetime of the deliveries between 2027 and 2034. I want those aircraft as soon as I can possibly get them. I would happily take an aircraft -- any aircraft that has 20% more seats and burns 20% less fuel, will be an economically much more efficient and an environmentally much more efficient aircraft to operate here in Europe. And I would take as many as I can get as soon as I can get them, which is why we stepped in when United stupidly announced that they wouldn't maybe take theirs. I said, well, we'll take anything that United wants to cancel. They finished up not canceling and just postponing. I think we're about third or fourth in the queue, but it will be a reasonably short queue. I think the first deliveries will take place in Q3 or Q4 of '26 and our first 15 are in the spring of '27. Eddie, do you want to talk about forward bookings through November, December, maybe into Q4? Edward Wilson: Yes. I mean in Q4, we're only about 10% booked, so very little for Q4, so very little visibility there. If you look forward to, say, November has required some price stimulation, but we're happy with load factors. If you look in December and January, I mean, we've learned as well from previous years in terms of trimming our schedules as well there, particularly as we get into the -- beyond the first 10 days of January and also doing some trimming around the early December as well. So look, we're about 76%, 77% booked for November. Like our bookings are ahead of where they're marginally ahead of where they've been for each of those months, both November -- like November, December and January, comfortable with what we're seeing, but November is the one that needed a little bit of needed price stimulation to get there. But looking, we don't have to dig too deep, but we're ahead. And so we're happy, but you do have limited visibility. And like really like with 10% of bookings for Q4, you have no real visibility whatsoever. Operator: The next question goes to Muneeba Kayani of Bank of America. Muneeba Kayani: I just wanted to follow up on your outlook for the fourth quarter. Why are you saying there's no Easter benefit because there is the earlier Easter and a couple of days will fall into the end of that. So just wanted to understand your thinking around kind of the base effects into the fourth quarter. And then just on EU ETS, what sort of increase should we be expecting in fiscal '27? Because it looks like hedging levels on that are just 11% right now and the prices have gone up. So how much of those fuel savings could be offset by the ETS costs going up? Michael O'Leary: Okay. I'll ask Thomas Fowler, who's the Director of Sustainability, maybe take the ETS question for you, Muneeba. Let me deal with the outlook. I mean, yes, Easter Sunday next year is on the 5th of April. So the first weekend of the school holidays will fall into the last weekend in March. But it's not significant. We will get a little bit of a bump. But I think at this point, we're better off just to say, look, there will be no Easter benefit in Q4. If we get a little bit in the last 2 days of March, great. But really, most of it will flow into April. It's really only when you get an Easter on the end of the 31st of March or 1st of April, you see the first -- as we did 2 years ago, the first half of Easter was in the prior year Q4. Almost all of the impact of Easter next year will be in Q1. There will be a couple of days in March. And if we get a little bit of a benefit out of that well and good, but there's certainly no point in going out now, we have 2 days of Easter in March next year, what can you do? We bug all visibility in Q4, and we won't have any until we get out to the Q3 numbers in February. And we -- that's all we're trying to communicate now, Muneeba. And now I'll turn to optimistic Tom for the ETS outlook for FY '27, and you won't touch on '28 yet, unless we [ hear ] from Ursula von der Leyen in between now and then. Thomas Fowler: I think Neil alluded at the call [indiscernible] outlook. We think the ETS and SAF costs go from EUR 1.1 billion this year to somewhere between EUR 1.4 billion and EUR 1.5 billion next year, depending on the outturn of where the pricing is. Obviously, it is higher. Prices are higher going into next year, and we have to unwind the final loss of the free allowances. So somewhere between EUR 1.4 billion, EUR 1.5 billion for FY '27. Neil Sorahan: Thomas, is it worth pointing out that's the last big step-up as well that we're going to have? Thomas Fowler: Well, the last step of velocity allowance is, obviously, fair pricing changes, Neil, yes, like we hopefully won't see step up at that level the following year until mandates increase on staff in 2030. We do see the mandates grow a bit in the U.K. literally to 2030. But obviously, given it's only -- it's a portion of our business, we don't get the full impact of that through the line. Michael O'Leary: And again, sorry, and it calls into question. If Europe is serious about being competitive, this bulls*** tax needs to be rolled back. We need to bring it in line with CORSIA. And it's one of the reasons this unwinding of the free ETSs while Lufthansa, Air France, IAG are now much more vocal about the need to have a fair and level playing field on environmental taxes in Europe. We can't just be taxing ourselves to debt in Europe and exempting the Americans, the Gulf, the Asians and everybody else. It's simply insane only the Europeans would sign something that stupid and self-defeating. And therefore, I think the more we can -- the more and louder we campaign, the more likely we are to see some progressive reforms and pushing back on this bulls***. Operator: The last question goes to Ruairi Cullinane of Research RBC Capital Markets. Ruairi Cullinane: Yes, first question, a follow-up on the previous one. So it sounds like you're not focusing lobbying efforts on sustainable aviation fuel mandates. Would you like to see any changes there to rules in the U.K. or EU? And then I wondered if you'd be willing to comment on whether the U.K. has diverged at all from the Q2 fare trends you've reported or 3Q booking trends? Michael O'Leary: Sorry, Ruairi. Just speak up, you're very faint there on the -- I got the first half with the SAF. What's the second question? Ruairi Cullinane: Yes, the second question on the U.K. Has the U.K. diverged at all from the Q2 fare trends you've reported or Q3 booking trends that you've seen across the group? Michael O'Leary: Okay. Look, SAF, I'm not a believer -- sorry, I'm a believer in SAF, but I mean, there is simply -- the volumes will not be there to meet the EU 6% mandate by 2030 or the U.K.'s insane 10% mandate. You have the oil majors at the moment going back from the production of SAFs under pressure in the White House. I think the -- I think I join and I support the call of all the A4E airlines in Europe. We need to move these mandates to the right -- we may get to 6% or 10% by 2035, but I think there's no prospect of getting there in 2030. And I would be surprised even if the oil majors don't produce the SAF, there's nothing we can do to supply it. These are just another example of European -- British and European lack of competitiveness. The environmental agenda, there's a war in Ukraine, Trump in the White House. There is no, I think -- what is the word, there is no significant where -- if anything, the whole environmental agenda is moving backwards. We need competitiveness in Europe. And if the Swedes who were the home of the original environmental tax and flight shaming and all, if they worked out that Greta was wrong and they're abolishing their environmental tax, then surely the rest of the dodos in Europe will do likewise. So I think there is, I think, very little prospect of those SAF mandates being met in 2030. I don't think as an industry, we should abandon SAF, but we do need a much more either Europe and European governments should use some of the environmental taxation, this astonishing the SAF or the ETS taxation to incentivize the production of SAF or move the SAF mandates to the right or further out into 2030. There's nothing we see divergent in the U.K. Sorry, I'll let that to Eddie. Eddie wants to answer that question. U.K., Q3, fares and... Edward Wilson: I mean, as I said, like in November, required price stimulation. And even though -- if you look at U.K. leisure, U.K. leisure for us is about 1/3 of all of our seats out of the U.K., like where we've got -- you do see some price pressure there. But just in November, a lot of capacity has gone in there in the market. I think it's causing a lot more pressure for our competitors. It's a very small part of it. If you look at the rest of the U.K., our city to city, our ethnic traffic to the U.K. and Ireland and all that, that's in line with the rest of the network. That's only a slight call out there in terms of U.K. leisure, I would say. And a lot of it would be focused in the region, a lot of capacity within post-COVID. Some of that went to our competitors' way in terms of holidays last year. I think they're feeling more of the pain, but we're getting to those factors. Ruairi Cullinane: But are you seeing any divergence in U.K. traffic in [ U3 ] compared to non-U.K. or EU traffic in... Edward Wilson: I mean the only call that I would have is some of the U.K. leisure in November. And it's a very small part of our business, and the rest of the U.K. is as robust as the rest of the network Europe. Michael O'Leary: Okay. Ruairi, does that answer the question? Ruairi Cullinane: Yes. Michael O'Leary: Good. Okay. Any other questions, Nadia? Operator: We currently have no questions. Michael O'Leary: Okay. Listen, folks, thank you very much. I think we've done, what, 1 hour and 25 minutes. We appreciate your time on the call. We have extensive roadshows on the road, Ireland, U.K., Europe, North America for the remainder of this week. If you'd like a meeting on a one-on-one, please contact us either through Jamie here, our Head of IR or through the Citi, Davy, Goodbody. Thanks to Citi, Davy and Goodbody for arranging and facilitating the roadshow, and we look forward to meeting you all at some stage over the remainder of this week. If anybody wants to come visit us in Dublin after that, please feel free. As long as you fly Ryanair, we'll be happy to meet you. And otherwise, I think we are reasonably cautiously optimistic on the outlook, if not for the next 12 months, but I think for the next 4 or 5 years, keep focusing on the fundamentals. Capacity is going to remain constrained in Europe. We are doing much better deals with airports across Europe. Governments select -- are increasingly reversing these environmental taxes. And therefore, I think there's a reasonable -- I'd be reasonably cautious that we're going to see controlled growth certainly to 250 million passengers by 2030, 300 million passengers by 2034. And there's a prospect plus or minus the occasional unforeseen event that profit -- net profit per passenger will over that period of time, although lumpily move from EUR 10 towards EUR 12 towards EUR 14 per passenger. And we hope you'll all join us for the ride and see where it goes over the next 4 or 5 years. Thank you for your time. Look forward to being here this week, and thank you very much. We'll wrap it up there, Nadia, please. Thank you. Operator: Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.
Justin McCarthy: Good morning, and welcome to Westpac's Full Year 2025 Results Briefing. I'm Justin McCarthy, the General Manager of Investor Relations. Before we commence, I acknowledge the traditional custodians of the land in which we meet today. For us in Barangaroo, that's the Gadigal people of the Eora Nation. I pay my respects to elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people. I'm pleased today to be joined by our CEO, Anthony Miller; and CFO, Nathan Goonan. After the presentation, we'll move to Q&A. [Operator Instructions] With that, over to you, Anthony. Anthony Miller: Thanks, Justin, and good morning, everyone. I'm pleased to present Westpac's full year results to outline the value we're creating for customers, shareholders and the communities we serve. We began the year with a robust balance sheet and capital position. This provided us the capacity and flexibility to pursue our growth and transformation agendas. We are driving operational and business momentum supported by 5 priorities. To ensure we are there for our customers at the time and place that suits them, we've adopted a whole of bank to customer approach. Our refreshed leadership team is guiding our 35,000 people who are energized, engaged and turning our priorities into outcomes. It's not just what we deliver, but how, and that is why our focus on execution is key for Westpac. Disciplined execution is how we will achieve our goals. As Australia's first bank, we recognize the vital role we play in supporting economic prosperity. We're proud of our contribution as Australia's sixth largest taxpayer, helping to fund essential services and improve people's lives. Our employees bring this to life by volunteering their time and making pretax donations to more than 500 charities. Through our Rugby League and Cricket partnerships, we promote sport participation from grassroot clubs, including programs for schools, women and First Nations talent through to elite competition. We also offer free financial literacy programs across Australia, New Zealand and the Pacific to help educate thousands of people and small business owners every year. We're improving banking access in regional areas and investing in ag scholarships and technology to drive innovation. These initiatives create more prosperous communities while fostering trust and brand advocacy. Turning to financial performance. The result reflects our strategy of balancing growth with returns, while making necessary investments in people, innovation and transformation to support our future. Net profit, excluding notables, decreased 2% to $7 billion. Statutory net profit fell 1% to $6.9 billion. This led to a slight contraction in our key return metric, return on tangible equity. The impact was cushioned by the reduction in share count through the buyback. As we execute our transformation agenda, expenses are higher, lifting our cost to income to 53%. We're addressing the cost structure through our Fit for Growth program, which will help offset expense growth in FY '26. Our performance reinforces the need for us to focus on execution while managing RoTE and CTI. The steady financial performance and strong capital position saw the Board declared a second half dividend of $0.77, equating to a full year dividend of $1.53 per share fully franked. This equates to a payout ratio of 75% of profit after tax, excluding notable items. This is the slide I use to track our progress against our FY '29 targets. We put customers at the center of everything we do. To be Australia's best bank, more work is needed to lift customer and brand advocacy. In the past 2 years, we've gradually improved consumer NPS. We're currently ranked equal second and the gap to first place has narrowed. In business, we have established clear leadership in SME and commercial. However, our overall position shows work is needed to lift small business. For institutional customers, we aim to be #1 in our target markets by investing in our people's expertise and building stronger customer relationships. We are now executing UNITE. We will be open and transparent as we drive to complete this program. On performance, our decisions and approach are guided by delivering improvements to cost to income and RoTE. Our strategy supports our ambition to be our customers' #1 bank and partner through life. For our customers, we aim to win the whole relationship by delivering the whole bank. To meet more customer needs, we're offering the full range of products and services we have in a more timely and personalized way. For our people, we are investing in their development and leader capability while driving a high-performance culture where employees can perform at their best. On risk, we have completed the final transition of the customer outcomes and risk excellence program known as CORE. In response, APRA released the remaining $500 million of operational risk capital overlay, marking 5 years of meaningful change. Our commitment to ongoing risk improvements will continue, and our priorities for risk management to be recognized is our differentiator. Our transformation agenda is focused on delivering UNITE and 2 flagship digital innovations, Biz Edge and Westpac One. Ultimately, our performance will be reflected in how we execute on these priorities. Our service proposition is foundational to earning trust and becoming the bank of choice for our customers. Despite economic uncertainty in recent years, our customers remain resilient. We supported customers with 46,000 hardship packages with 3/4 of them back on their feet. Service quality is improving. For example, our financial market clients time to trade in the Commercial division is down by 30%. Our new brand positioning, It Takes a Little Westpac, along with our award-winning banking app and rewards program is strengthening engagement and loyalty. For businesses, we doubled our women in business commitment to $1 billion. We are growing our regional presence through new service centers. Our first location in Moree was well received by the community. Our latest Australian-first innovations, Westpac SafeCall and SafeBlock, supported a further 21% decline in reported customer scam losses. This is just a snapshot of the ways we're improving our service proposition to become #1. With a refreshed executive leadership team, we're placing a stronger focus on how we lead and support our people to perform at their best. Professional development programs, including the Business Performance Academy as well as skills training in data and AI are just some of the ways we are investing in our people. We've strengthened our employee value proposition to attract, retain and develop top talent while expanding benefits. We're also building the presence of our bankers where it matters most for our customers. Employee engagement remains strong, and we continue to invest to improve. Pleasingly, our consumer deposits grew by 10%, including offsets. This is a testament to the quality of our business and our customer base. It also reflects the effectiveness of our award-winning banking app and the competitive product suite, which we have, which provide reliable everyday banking solutions. We have expanded our capability in migrate banking. Prospective customers from several key markets can now apply for a transaction account before arriving in Australia. Our recent sponsorship with Cricket Australia will also present new opportunities in this target segment. Transaction banking is at the heart of our business strategy. New account openings of 130,000, supported transaction account growth of 13% this year. We also launched a new online payment solution, OnlinePay. With simple onboarding, it has attracted 1,000 customers within 3 months of launch. In Institutional Banking, we continue to maintain our lead in public sector deposits with growth of 11%. Financial institutions is also a target area where we are now seeing real momentum. Our goal of deepening relationships and supporting more customer needs is reflected in loan growth across business and institutional, where existing customers make up approximately 3/4 of new lending. Business lending increased by 15% with even stronger growth across target sectors of health, professional services and agriculture. Institutional lending grew by 17%. The portfolio is diversified, and we remain the country's largest lender to renewables. Growth in both areas has been accretive to RoTE. I'm very pleased that the average risk grades across the business and institutional lending books have remained stable, while absorbing this attractive level of growth. Looking more closely at mortgages. Our focus has been on getting the service proposition right, making it consistent, attractive and most importantly, easy for our customers. We've made progress. Time to decision has improved with most proprietary home loans now processed in under 5 days. In a highly competitive environment, we must get the service proposition right and then balance growth with return. Overall, I think we've managed this well. Returns have improved, supported by operating efficiency and disciplined execution. We've been more efficient in how we deploy capital with balances up and RWA down. Today's announced sale of the RAMS portfolio will further improve the operating efficiency of our mortgage business. We've targeted high-returning segments, including investors, where flows increased by around 4 percentage points to just under 40%. This was a deliberate move with our pricing competitive. In contrast, we positioned ourselves above market in owner-occupied. Momentum in early FY '26 has picked up and is tracking slightly above system. Looking further out, we see a clear opportunity to improve proprietary lending, which currently makes up just under 1/3 of new flow. We know what to do. However, progress will take time. It will be measured in years, not months. To support this, we're adding more home finance managers. We're enhancing banker incentives, and we're investing in the brand. Additionally, we're capturing insights and generating leads and opportunities by leveraging data, analytics and AI across the company to drive proprietary lending. UNITE is up and running. We finalized the scope, we have a plan, and we are now into execution. Some initiatives are progressing faster than expected, which is encouraging, while others are proving more challenging. This is typical for a project of this scale. Moving to a single deposit ledger meant we had to revisit about 1/3 of the initiatives to make sure we addressed all impacts and all interdependencies. This additional planning delayed our time line. We expect completion where we are accruing all target benefits to extend from the end of FY '28 into FY '29. To drive execution, we formed a centralized delivery team of 1,600 people focused solely on UNITE. We've also grouped the initiatives into 10 work packages to ensure we manage interdependencies and challenges effectively. In FY '26, we expect to invest between $850 million and $950 million in UNITE as we go flat out on execution. The program is expected to account for approximately 40% of annual investment spend in FY '27 and '28 before reducing in FY '29. Our progress is starting to deliver improvements that are making banking simpler and more connected for our employees and our customers. We've put some of those outcomes in front of you. Two things I want to call out. Westpac home loan customers can now set up multiple offset accounts with no additional fee. This is a key feature requested by our customers. Since February, we've opened more than 35,000 additional accounts. We've also completed the migration of private bank customers to Westpac with minimal attrition. The validation that we've done this well is shown in recent positive brand NPS. We've completed 8 initiatives and 51 are now underway. Most initiatives are green, a few are red, and we're prioritizing getting those back on track. We will provide updates on progress and continue to refine our disclosure to improve transparency. We invested $660 million in UNITE during FY '25, and this was slightly above our guidance. This was because we saw an opportunity to get additional work done now, and so we prioritized the resources to make that happen. Alongside UNITE, we're also modernizing technology through capabilities like Westpac One and Biz Edge for better customer and employee experiences. Biz Edge is our new lending origination platform, accelerating digital capabilities for bankers with AI-powered tools that support faster, more confident decision-making. This is dramatically improving how we lend to businesses by guiding applicants and bankers through the best pathway. Since launching in March, Biz Edge has processed nearly $5 billion in business lending applications. So far, time to decision has improved by 45%. More benefits are on the way for customers and bankers. For Institutional clients, Westpac One will be the new platform that brings together real-time treasury management, FX, trade and lending with powerful data insights. In December, we'll pilot the first Westpac One initiative with real-time transaction banking and a new modern digital experience for corporate clients. Advanced transaction banking capabilities like liquidity management, including multicurrency and cross-border capabilities, will be progressively dropped over the next 36 months. Once complete, the platform will deliver end-to-end liquidity and cash management, helping clients run and fund their businesses more efficiently. This capability will be market-leading and a differentiator in supporting our corporate, large commercial and institutional clients. AI represents a significant opportunity to improve the way our people work as well as the quality of their work to help us provide better, more consistent service to our customers. We're embracing new gen and agentic AI capabilities while also continuing to use traditional AI tools, like machine learning and advanced analytics. These are helping us automate tasks and modernize our technology. It's also giving our people more time back and providing bankers with more insights to serve customers better. The key is making sure we scale proven solutions. Examples with tangible benefits include strengthening defenses against fraud and scams, supporting faster approvals for mortgages and business loans, helping employees quickly answer process and policy questions and automating coding and testing. However, to realize its full potential, we must approach AI with an enterprise-wide mindset. We've appointed a global leader reporting directly to me to drive this across the entire company. We're moving at pace and recently launched the Westpac Intelligence layer, which draws on the enormous data and insights across the company to drive faster, safer and more proactive decisions. We have prioritized using the layer in consumer to support our focus on growing proprietary lending. It is already giving our home finance managers better insights to deliver faster, more personalized service. I'm really excited about what we will achieve as we broaden this intelligence layer and roll it out across the bank in the next 12 months. Nathan will now take us through the performance in more detail. Nathan Goonan: Thanks, Anthony, and good morning, everyone. It's a privilege to present my first result for Westpac. I recently took over from Michael as CFO, and I want to begin by acknowledging Michael's contribution over the past 5 years and wish him all the best for the future. I'm excited to be joining Westpac at an important time in the company's history. I look forward to doing my best to help our people deliver consistently for our customers. As foreshadowed, we've adjusted our disclosures to make peer comparison easier, now reporting net profit, excluding notable items as an equivalent measure to cash earnings among peers. Starting with the financial performance over the year before talking in detail about the half year trends. Excluding notable items, which related solely to hedging items, net profit was down 2% with higher expenses more than offsetting growth in operating income and lower credit impairment charges. EPS was flat, reflecting reduced share count from the on-market share buyback. Revenue was up 3%, comprising a 3% increase in net interest income, driven by an increase in average interest-earning assets and a 1 basis point decline in net interest margin and a 5% increase in noninterest income. Operating expenses were 9% higher, including the restructuring charge of $273 million. Excluding the charge, expenses rose 6%. These revenue and expense outcomes resulted in a decline in pre-provision profit of 3%. Credit impairment charges remained low at 5 basis points of average gross loans compared with 7 basis points the prior year. Half-on-half, we saw improving underlying trends, offset by increased investment. Pleasingly, pre-provision profit increased in Institutional, New Zealand and Consumer, while business and wealth held flat. Net profit was up 2% in the half and comprised of the following: Net interest income rose $335 million. Core net interest income was up 3%, a 2 basis point increase in core net interest margin and a 1% growth in average interest-earning assets. Noninterest income was up $143 million, mainly reflecting an increase in markets income, a combination of both client activity and market conditions. Expenses were up 9% or $520 million, including the restructuring charge. Overall, pre-provision profit was down 1%. Excluding the restructuring charge, pre-provision profit increased 4%. Asset quality metrics continued to improve, resulting in lower credit impairment charges. The charge of 4 basis points to average loans was down from 6 basis points in the prior period. The effective tax rate was 30.6%, down from 31.3%. As Anthony outlined, sustainably growing customer deposits over time underpins our ambition to improve returns. The growth of 4% in the half was pleasing and highlights the inherent strength of our customer segments. Mix improved with the reliance on term deposit decreasing from 29% to 27% of the book, while savings and transaction balances grew. We expect strong deposit growth to continue in FY '26 with our economics team forecasting system growth of 7%, reflecting continued improvement in household conditions. Strong deposit growth has supported lending growth in chosen segments. Gross loans increased 3% with growth across all customer segments. Australian Mortgages, excluding RAMS, grew by 3%, slightly below system as we balance growth and return in a competitive market. Australian business lending continues to show good momentum, growing at 8%. The larger commercial subsegment performed well, and we also saw growth in both SME and small business, which grew 9% and 5%, respectively. Prior to this half, small business had contracted or been flat in the preceding 4 halves. Institutional lending grew by 10%. The portfolio is well diversified with infrastructure, renewable energy and industrials underpinning growth. Lending grew 3% in New Zealand, where demand for credit remains subdued in a more challenging economic environment. The RAMS portfolio continued to run off. The balance at 30 September was $22 billion. The sale announced today is expected to complete in the second half of 2026. Until completion, these balances will continue to run off. Please bear with me as I spend a bit of time talking to net interest margin given the importance and likely focus. Core net interest margin increased 2 basis points to 1.82%. This follows a decline of 3 basis points in the prior half. We've seen a reduction in the amplitude of the components of NIM with all drivers having a modest impact. The lending margin was stable with an improvement in New Zealand due to fixed rate repricing, offset by a decline from auto finance, which was sold in March. Lending margins in business contributed less than 1 basis point. In Mortgages, the market remains competitive, but relatively stable, and we saw several factors play out. The cumulative impact of these was less than 1 basis point. These include the benefits from the initial timing impact from rate cuts. Deposits were also stable as benefits from the replicating portfolio and the repricing of the behavioral savings product was offset by the initial impact of rate cuts, customers switching to higher-yielding accounts and more behavioral saving customers qualifying for the bonus rate as well as the compression in TD spreads from prior period. Liquid assets contributed 3 basis points, reflecting reductions in trading securities. Whilst a positive to NIM, this is neutral to earnings. Lower earnings on capital detracted 1 basis point. The benefit from the higher replicating portfolio rate was more than offset by the impact of lower rates on unhedged largely surplus capital and the averaging impact of the share buyback. The contribution from Treasury and Markets rose from 12 to 13 basis points. Looking to first half 2026, we've included some key trends we expect to impact margin. We expect lending margins, excluding the timing impacts from rate cuts, to edge lower. Pressure on deposit spreads from the average impact of rate cuts and prior period switching to saving products is likely to continue. The replicating portfolio is expected to be a net benefit of 1 basis point. This includes a 4 basis point benefit from the total replicating portfolio, offset by a 3 basis point reduction in unhedged deposits. This reflects the decision to increase the deposit hedge by $10 billion. This was executed in September and October to provide further earnings stability through the cycle. The benefit from improved term wholesale funding markets is expected to be a slight tailwind. While mortgage margins appear relatively stable, lending competition remains difficult to predict, along with short-term funding costs and RBA rate cuts. To this end, we've provided 2 sensitivities to help understand the potential impact. The next 25 basis point rate cut, RBA rate cut, leads to an approximate 1 basis point contraction over the first 12 months, reflecting the impact on unhedged deposits and capital. Based on September balances, a 5 basis point move in the 3 months BBSW OIS spread equates to approximately 1 basis point of NIM. Quickly touching on noninterest income, which increased 10% for the half. Fee income was up 5%. Higher card fees reflected increased spending and fee changes, which are being phased in. Business and institutional lending fees increased due to strong balance sheet growth. Wealth income was up 3% with higher funds under administration. Trading and other income increased 27% from higher sales and risk management income, including foreign rates and foreign exchange and favorable DVA. Moving to investment spend, which increased 9% over the year. UNITE investment was $660 million as the project continued to step up through the period. The proportion of investment spend that was expensed increased to 60%. UNITE was the main driver with this work expensed at 74%. Notwithstanding the acceleration of UNITE, spend on growth and productivity initiatives was in line with that of FY '24. This includes Biz Edge and Westpac One. Risk and regulatory spend declined substantially after the completion of several projects, including the CORE program. Into FY '26, investment spend is expected to be approximately $2 billion, with UNITE accounting for just under half the total spend at $850 million to $950 million. This is in line with the fourth quarter run rate where UNITE spend was $225 million. Both risk and regulatory and growth and productivity investment will decline to allow the UNITE investment to accelerate within the expected $2 billion total investment spend. Moving to expenses. This slide is changed in presentation to better reflect the underlying drivers. My comments relate to movements over the year, which we believe provides a better guide to key trends. Staff costs increased $397 million as the new EBA began, superannuation rates increased, and we invested in more bankers in business, wealth and consumer. Technology costs increased $146 million, reflecting vendor inflation, increased demand to support growth and more cyber protection. Volume and other rose $199 million. Drivers include the important investment in our brand and marketing and higher operations-related expenses to support customers and prevent fraud and scams. This was offset by $402 million of structural productivity savings. This included the benefit of a simpler operating model, more automation and reductions in branch space. The ramp-up in UNITE added $399 million over the year. Looking to FY '26, staff costs will rise as we continue to invest in bankers and eligible employees receive a 3% to 4% pay rise under the EBA. The averaging impact of bankers hired from this year and higher superannuation rates will also flow through. Technology expenses are expected to remain a headwind. The expense contribution from investments will be driven by the mix shift towards UNITE with the increased cash spend expensed at approximately 75%. Assuming the midpoint of our guidance, this will translate to $190 million increase in operating expenses. This will be partially offset by the decrease in other investment. Amortization expense will continue to be a headwind in FY '26, although to a much lower extent. We remain focused on closing the cost-to-income ratio gap to peers over the medium term, and we need to structurally lower our expense base. Total productivity is expected to be at least $500 million in FY '26. This revised view of productivity will give us a consistent way to demonstrate the benefits from both UNITE and Fit for Growth initiatives. Overall, credit quality remains sound and with consumers and business portfolios performing well. Stressed exposures to total committed exposures decreased 8 basis points. This reflects a decline in mortgage arrears and reduced stress across most of our business segments. This half, we've continued to see improvement in 90-day plus Australian mortgage arrears. These have reduced from a peak of 112 basis points in September last year to 73 basis points, reflecting a combination of customer resilience and an adjustment to the reporting of loans when customers complete their hardship period. In New Zealand, mortgage arrears fell by 8 basis points to 46 basis points as rate relief began to feed through to customers rolling off higher rate fixed mortgages. We have provided the chart by industry for our non-retail portfolio. As you can see, business customers are managing conditions well with stress reducing across most sectors. Our portfolio remains well diversified across sectors and geographies. Looking forward, the 2 key drivers of asset quality outcomes are likely to remain the unemployment rate and asset prices. Total credit provisions were 2% lower at almost $5 billion. This reflects a $72 million decrease in individually assessed provisions and a reduction in model collectively assessed provisions driven by improvements in underlying credit metrics and the economic outlook. Offsetting the model-driven outcomes were 2 main items of management judgment. The weighting to the downside scenario was increased by 2.5 percentage points to 47.5% at the third quarter. The base case reduced by the same amount. In addition, we increased overlays by $108 million with overlays as a percentage of total provisions increasing from 3% to 5% in the period. As a result, overall coverage reduced by 1 basis point with total provisions now $1.9 billion above our base case. An improvement in the composition and funding and liquidity adds to our competitive positioning and helps provide medium-term earnings stability. The deposit-to-loan ratio has reached an all-time high of just under 85%. A more stable source of funds from household and business transaction accounts has reduced the reliance on term funding with issuance in FY '25, the lowest in 10 years. Our liquidity and funding metrics are above our normal operating ranges, which we believe is appropriate given the market backdrop. The strength of the capital position is a key feature of this result and provides us with flexibility and opportunities over the medium term. The CET1 capital ratio ended the half at 12.5%. Net profit added 80 basis points, while the payment of the half year dividend reduced capital by 58 basis points. Risk-weighted assets detracted 7 basis points with higher lending balances more than offsetting data refinements, improvements in delinquencies and a reduction in IRRBB risk-weighted assets. Other movements added 16 basis points, largely reflecting lower capitalized software balances and movements in reserves. There are several adjustments to consider for first half '26. These include the removal of the $500 million operational risk overlay in October added 17 basis points of CET1 capital. The new IRRBB standard came into effect on 1 October, and the extension of our non-rate sensitive deposit hedge has now been allowed for regulatory purposes. These 2 items add 39 basis points of capital. Offsetting this, the remaining $1 billion of the previously announced share buyback will reduce CET1 by 23 basis points. Following these adjustments, the standardized capital floor was met in October. Importantly, there are opportunities for us to manage the standardized floor, and we expect the impact on the CET1 ratio at the half to be modest. We've implemented a new capital target of 11.25% following APRA's changes to AT1. We have approximately $3.1 billion of capital above the new target after the payment of the second half dividend. The payout ratio, excluding notable items, was 75%, which is at the top end of our target range of 65% to 75%. This balances our strong financial and capital position while maintaining capacity to both invest and support customers. We have $1 billion of the previously announced buyback outstanding. We see value in the flexibility provided by this form of capital management. With that, I'll hand back to Anthony. Anthony Miller: The Australian economy is showing signs of improvement following a sustained period of below-trend growth. Household purchasing power is rising as real disposable incomes grow. Businesses are emerging from a period of subdued activity, partially supported by lower rates, easing input costs and some productivity gains. Westpac DataX Insights highlights an improvement in card spend growth at 6.5%, the strongest we've seen since April 2023. For business, commercial customers are feeling better, but it's still challenging for our SME customers. However, we've just started to see an improvement in cash flows off the back of firmer household spending. Underlying inflation is at the top of the RBA's target range. This will put pressure on the RBA to hold rates tomorrow. We are starting to see more growth driven by private rather than public investment. However, this transition has been slower than anyone expected. A smarter balance calls for bold, coordinated action across government, regulators and the private sector. It has been pleasing to see the focus on the productivity agenda in the national debate. Targeted action is key to unlocking Australia's long-term prosperity and resilience. An area we are focused on is addressing the housing affordability challenge. We need to tackle the structural undersupply of housing and efficiently deliver more houses in the $500,000 price range. More broadly, the global outlook is not without risk, with ongoing trade and geopolitical tensions a constant threat. Our strong financial position helps us navigate that uncertainty while being there to support our customers. It's pleasing to see business credit is expected to grow 7%, driving private investment. We're building on the strong foundations, and it is all now about execution. We have 13 million customers. However, to realize the advantage of that scale, we must drive more efficiency. We must complete our transformation agenda, and we must enhance our service proposition. Each business has a clear direction, has the right leadership team in place and must now deliver. I'm pleased with our progress and energized by the opportunities ahead. With disciplined execution driving momentum, we're deepening customer relationships and investing in our businesses to support sustainable returns for shareholders. Thank you. Justin McCarthy: Thanks, Anthony. We'll move to Q&A now. Our first question comes from Tom Strong from Citi. Thomas Strong: Just first question around the productivity benefits into '26. I mean you took $400-odd million in this year, and you've guided to $500 million in '26, but you've got the benefit of, I guess, incrementally $270 million from the Fit for Growth, which you took the restructuring charge for. So is that $500 million conservative, you think, in terms of the FY '26 opportunity? Nathan Goonan: Yes, why don't I start. Thanks for that. I think you've sort of read it the right way. That's a line item in terms of just showing on a consistent basis where we think the benefits of the restructuring charge, and then in the future, as UNITE becomes a more material piece of it, we'll continue to show our productivity benefits on a like-for-like basis through that line. As it relates to the greater than $500 million, I think that's the guidance that we've given. The benefits from the $273 million, we actually had a little bit in this year. So there's probably about -- we had $402 million productivity for FY '25. There's about $40 million of that will be benefits from the restructuring charge this year. And I think when we made the pre-release, we just made comments that we thought the rest of that will be phased reasonably evenly during FY '25 -- FY '26, and then there will be a little bit of benefit to flow into FY '27. So yes, look, we're expecting to do $500 million. We've got to wake up every day and strive to do better than that, but our guidance today is in excess of $500 million. Thomas Strong: Okay. That's very clear. And just the second question around UNITE. It was 35% to 40% of the investment envelope and you've clarified that, say, at 40%. You have kept the $2 billion per annum consistent over the next few years. Just given the reallocation towards UNITE and I guess, the decline in purchasing power over that time, do you think that $2 billion per annum is still appropriate as a view out to FY '28, FY '29? Anthony Miller: Look, I mean, that's a very good question. And you're right, we'll continue to ask ourselves, have we got that right. I mean in framing up $2 billion per year, it's really anchored around what can we do effectively and deliver, if you will, cost effectively and substantially. So it's really about the capacity of the company to deliver the change we need to undertake. If it's the case that we can prove certainly in what we deliver over the next 12 months that we can do more, then we'll remain open-minded about that. But at the same time, it's about balancing the capacity of the company to execute the change of cost effectively and also balancing -- making sure we deliver return to shareholders. So it's a balance that we'll have to navigate over the next 36 months. Justin McCarthy: Next question comes from Andrew Lyons from Jefferies. Andrew Lyons: Maybe Nathan, a question for you. I just want to try and flesh out how everything you've mentioned on expenses will ultimately impact growth in FY '26. So perhaps just referencing the various FY '26 considerations that you have provided us, can you perhaps talk in a bit more detail as to how you expect this to translate to the various moving parts that you have in your expense waterfall slide on Slide 27, please? Nathan Goonan: Thanks, Andrew. Good to hear from you. I guess I'm just going to try and find the slide, just give me 2 seconds. It's up on the screen now. So I guess a deep walk through these and maybe just happy just to go through them again and try and give a little bit more flavor as we go. I think we've looked at it on a -- the first thing is just to sort of look at it on an annual basis, Andrew, and that's what we've tried to do. I think on people costs, we do continue to think that, that will be an increase in expenses next year. We probably expect if you break that down a little bit, we've got some pull-through of things like the investment in bankers that we had this year. There's a pull-through of the superannuation guarantee coming through. So there's a few of those things. We probably expect that we'll have lower absolute wage growth. The EBA is into its second year. So it's a lower number year-on-year. But we do expect to continue to invest in bankers. So I think that number will continue to be a big feature as we look at FY '26. On tech, I guess my comment was just similar that we continue to think that, that will be a headwind. And then on volume and other, maybe just to break that one down a little bit and try and give a little flavor. Probably the one thing that's a little bit of feature of FY '25 was a reasonably material investment in the brand, which we're really pleased about and is important in investing in the business. And that was about $60 million in the year, $45 million in the half. So we'll have some of that flow through into next year, but maybe not as much. We gave the disclosure on UNITE. Clearly, that investment bucket is just going to be determined by how much skews towards UNITE and then it's expensed at a higher ratio than the other. So we tried to give a bit of guidance there. And then amortization was about $100 million for the year, and we expect that to be a significantly lower number. And then we've had the conversation about productivity. So they're the moving parts, Andrew. Happy to try and sort of be helpful or answer a follow-up on any one of those. But hopefully, in sort of laying it out that way, you get a picture of the moving buckets. Andrew Lyons: No, that's great. I appreciate that detail. I might just move on to my second one, just around volumes. You mentioned that mortgage growth ex RAMS was 0.8x system over the year, and you put that down to being a function of just focusing more on returns. But like to be honest, when we continue to speak to mortgage brokers and the like, we do still hear that even though the gap between the 2 bookends have closed, Westpac is still pretty aggressive on front book discounting. So I'm just keen to sort of understand how you recognize those or reconcile those two opposing views around pricing for growth versus still being pretty competitive from the perspective of brokers. Anthony Miller: Andrew, it's Anthony here. Definitely, we have to be competitive. And this product that is a mortgage today is a highly commoditized and very price-sensitive offering. So we just need to acknowledge that. The second thing is, yes, in certain areas where we felt it made real sense for us and the returns were right and reflected the customer base we have and want to get more of, such as investor loans, we were sharp on price. And we deliberately were because we saw the return and we felt it aligned with what we wanted to achieve. In terms of other parts of the portfolio, we were above market. And I know there's always lots of observations and commentary from participants outside the bank. Those were the two disciplines we set ourselves, which is we wanted to be sharp, we wanted to be very price-competitive in investor and then a couple of other segments that we're keen. And we were very happy to be above market on owner-occupied just given the shape of our book and the returns that we're going after. Justin McCarthy: Thanks, Andrew. Our next question comes from Ed Henning from CLSA. Ed Henning: I just want to go back to project UNITE and just dig into that a little bit more. You've told us today that you're investing more in '26 than you've previously announced and also the program is going to go longer. So the investment you're spending is more than you've previously flagged. Can you just give us a little bit more on what it's going to deliver in terms of financial outcomes and the timing of that? How much is actually during the program? And then how much is beyond the program? Or are you planning to give that at a later date? Anthony Miller: Well, certainly, what we'll be doing each year in March is giving you a comprehensive update on UNITE and giving you an opportunity to work and go through the detailed work streams with our team. So we'll definitely continue to provide that detail and that access to you. I mean in terms of the investment next year or this financial year of $850 million to $950 million, it's a deliberate range because it will be -- if we can invest that and deliver the outcomes we need to deliver, then we'll take that opportunity, point number one. The second is, in the construct of doing all of the planning that we've done and landing on the decision to go with one ledger, that necessitated us changing some of the investment profile of the program. And so therefore, we had to bring a bit more investment forward, which is why next year is a bit lumpier than we might otherwise have planned because with the decision to go to one ledger, we had to do more work upfront to be able to facilitate that migration in 24 months' time. And so that's the reason why it's a little bit lumpy thereafter. The second is that, we are keeping that investment envelope in a disciplined way at $2 billion because as I described earlier to the previous question, it's about the capacity of the company to execute and can we -- if we can deliver value and if we can, in fact, do more, then we will be open-minded to doing more. The other thing I would say is that in terms of the project itself being longer, I just sort of want to put some context in that for you. When we spoke to the market 6 months ago, we were completing and finalizing the investment and plan for a one ledger. We landed at the one ledger decision, and we had to replan accordingly. Previously, we had -- we had 30 September 2028 as the finish date, and that was just arbitrary that we wanted to have this program completed by the end of financial year '28. Now as a result of that replanning, reflecting the decision to go to one ledger, it's just worked out that we won't have all of the benefits accruing by 30 September 2028. It's likely to be a few months into financial year '29. So that's why there's a bit of an extension. There's just more accuracy that we can provide as a result of the planning we've undertaken. And the last thing I'd sort of say to the spot-on question you've raised, which is, yes, the nature of the program is that much more of the benefits do accrue later in the program. But there's nevertheless still, if you will, benefits being realized now, whether it be, for example, the small movement and consolidation into one private bank, that's already delivering us some cost savings. There's a number of other initiatives where we're already seeing benefits accrue. But the nature of this program is that what we're doing is we're taking all of these customers on two other tech systems and platforms and migrating them onto one tech platform. And only when you switch those two off and you eliminate all the products and processes that, if you will, have to be executed on those two platforms, do you start to fully realize the benefits, the cost to run that follows from that, the cost to change that follows from that. So it is tapered to the back end in terms of the benefits that will be realized. And the premise that we have with UNITE, its key feature is that it helps set us up in a way that we have structurally lowered our cost base so we can really start to achieve our aspiration, which is a cost-to-income ratio that's better than the average of our peers. Ed Henning: And just following on from that, you know, in March coming up next year, are we going to be able to get at that point what you think the savings will be through the period and at the end of the period? Or are you not ready to tell us that? Anthony Miller: Look, we have absolutely clear in our mind as to what we want to achieve as a result of the investment we're undertaking, which represents UNITE. But what I'd rather do is make sure we're delivering and we're executing before we start talking about outcomes. But rest assured, the whole focus here about UNITE is if we can consolidate the new-to-bank processes and systems onto one bank process on one system, then we would expect that, that sets us up to be able to drive to a cost-to-income ratio that's very competitive as compared to our peer. Nathan Goonan: And maybe I'd just add one thing, Ed. I think it may be different than some other programs, but I don't think it's necessarily a program where you take total spend and total benefit sort of narrowed in on just the UNITE benefits and sort of try and make sense of it that way. This is sort of large structural opportunity for us to then get our cost-to-income ratio much better than where it is today. And so I think in some ways, it's a critical enabler of what we've got to do on productivity, but it cannot be the only thing. And so what we're committing to do is just try in a transparent way, as we go through the program, highlight the benefits that we've got from our spend as we go. And then you'll also hear us continuing to talk about that productivity bar that I've already had one question on because we want to be held accountable for making the organization more efficient as we go, significantly enabled by UNITE. So it's going to be more than just the UNITE productivity that you'll hear from us. Justin McCarthy: Our next question comes from Matthew Wilson from Jarden. Matthew Wilson: Two questions, if I may. Firstly, we've seen a nice pickup in your business banking volumes. You're winning share there, which has been really good. However, it's taken 50 basis points or so off the net interest margin. Obviously, there's some reclasses in there. How should we think about how you'll manage the volume margin trade-off in that business right now? Are we at a base that we can grow within without impacting the margin too much? Or should we expect further? Anthony Miller: Why don't I invite Nathan to take first swing at that, and then I'll add some comments on top. Nathan Goonan: Thanks, Matt. And I think it is a good question. And clearly, when you get into the divisional disclosures, it is a number that stands out. I think it's just important, I think, when we're thinking about margins just to make sure we sort of go back up to the top of the house, if you like, and just think about what are the movements in the margin that are happening at the group level. And then the divisional is really a proportional impact of those. So we've made the comment that when you look at business lending margin at a group level, it contributed less than a basis point. I appreciate some of that is just the math of materiality relative to the mortgage book. But more importantly, when you look at the business lending -- business margin at a division, you've got pretty significant impacts from the deposit side of the book. So I think the right way to look at that is sort of just the business lending, which is where your comment was going. Business lending revenue was actually up 7%. So the margin point around the lending is not as material as the overall divisional thing, just given the impact of the deposits. I'd probably say just a couple more points, and then I'll let Anthony come in. I think the lending margin was more stable in business lending in the second half than it was in the first. And I sort of continue to sort of expect trends into the first half are going to be a little bit more like they were in the second half than what they were in the first. So we don't see that accelerating. I think that's really driven front book, back book in our business lending books are much closer together now. One of the features, I think, of this book maybe relative to peers is when you've been out of the market for a little while and then you do reenter the market and accelerate, you can have a bit more of a pronounced cycling from back book margins on the front book margins. And so we might have seen in any given period a little bit more here than others. But I think we're now at that spot where that's much more in equilibrium, and we should move more in line with peers. And then I'd just say sort of two more points. Looking forward, I think mix of this book will be almost more important than pricing. So there is a significant difference in margins between the subsegments, whether it be the size, so corporate versus SME versus small, there's a significant difference between sort of working capital solutions and term lending. So getting that mix right will probably be a bigger determinant than pricing itself. And then just last point on pricing, Matt, not to labor the point. But I guess I've come in and met with the team and spent a lot of time with them on this particular point. And there's probably nothing that I'm seeing in the pricing here that is that different to what I would have expected or seen elsewhere. I think the team are putting their firepower around retaining their existing customers. And so you see pretty good levels or high levels of retention of existing customers when they go to market, and that's good business, and we continue to encourage that. And then where they're trying to be a little bit more disciplined on price is just on the new-to-bank. And so we're probably seeing new-to-bank win ratios drift down a little bit in the last 6 months, but the business is still growing well, and we expect it to continue to take share next year, so a long answer. Anthony Miller: No, no, you hit all the points, and thanks for doing that. I mean I would just say that the growth that we've seen over the last 12 months, Matt, was in, call it, the higher grade part of the book. And so margins there, as you would expect, slightly tighter, but the return on tangible equity was very attractive. The other thing that we were pleased about was that, that growth with existing customers and those sort of retention rates in the sort of high 90s. And then win rates in the context of new to bank were in sort of much, much, much lower than that. So we're really, really thoughtful about where we deployed and where we grew. And we knew that there would be, if you will, some consequence to margin, but it was the right way to go after the opportunity in front of us. The only other sort of additional point to make about business bank, with that growth in the loan book being sort of 3/4 existing customers, only 1/4 new customers, what was really pleasing is that we saw a 13% growth in the transactional account, which we think is a really important sort of opportunity and capability we have at the bank. That 13% growth, what was very pleasing was that sort of about 53%, 54% of that growth was with new-to-bank. So we're bringing new customers in on a product suite that's a really attractive, a, return; but b, also a risk profile for us as a company. So we quite like the way Paul and the team are driving the shape of that growth in that division. Justin McCarthy: Matt, hopefully, your second question doesn't require such a comprehensive answer. Matthew Wilson: Hopefully not. Just with respect to your targets, so 6 months or so ago, you decided to set relative cost to income and ROE targets. In the interim, one of your key peers has sort of changed that line in the sand by producing some absolute targets. How have you responded to that? Because it makes your task a lot harder at the current scenario? Anthony Miller: Look, I expected this question. And in fact, I think I expected it from you, Matt. So thanks for playing consistently. Look, I respect Nuno immensely and what ANZ has done and he's put a marker down, and I wish him well, and we'll watch that process develop from here. We've spent a lot of time and effort to get a plan together, and we have that plan in front of us. And so I think our ambition, which is to be very focused on how do I structurally reset this company with UNITE, how do we then go after the productivity equation year-in, year-out over the next 36 months, bringing those together, we can see where we can get our cost-to-income ratio at a point which is better than our peer average. And so that's -- we've got clear goals, clear targets that we need to deliver, Matt. I'd just much rather, if you will, deliver and be dropping outcomes along the way rather than sort of putting some bold number in front of you. I think it's fair to say, as a company, we probably haven't the right to do that. We put a number in front of you 4, 5 years ago, and we didn't get to it. And so frankly, what we need to do is deliver and then talk about bold numbers and outcomes. Justin McCarthy: The next question comes from John Storey from UBS. John Storey: Firstly, obviously, on the Consumer division, you've seen quite a big improvement half-on-half. And just looking at some of the diagnostics on the actual Consumer division, reported customer surveys, NPS scores are pretty stable, Anthony, as you called out. But one thing that is pretty evident is your MFI number has dropped quite a bit. Maybe if you could give a little bit more details around that? And then just secondly, on the Consumer division, maybe just around the start of the financial year, if you could provide a little bit more color on how the division has been performing, particularly with regards to new business volumes and then also just channels in terms of where mortgages are coming through. Anthony Miller: Look, thanks for that question, John. And so Nathan, you're welcome to jump in as you see fit. Look, you're absolutely spot on. We have an aspiration to lift our MFI ranking from where it is. And if there was one aspect of the performance in Consumer, which has done some great work over the last 12 months, there's one area where we're disappointed and we're actively engaging on is the MFI outcome in Consumer. The irony is that the MFI score has come down a little bit, yet deposits have grown at a very attractive level of 10%. And we've done more work. And as we've unpacked that, we've noticed that actually it's much more in the context of what we call the regional brands, St. George, BankSA, Bank of Melbourne. And part of that is connected to the fact that we were less aggressive in how we were pricing our mortgage book in that area. And as a result, we saw some attrition in the transactional account, the MFI accounts that we really want. And so that was a really humble reminder to us that about not just looking at products like mortgages in a stand-alone only return setting, but to really think about the whole of customer and are we getting the balance right. And we've recognized that in that area, in particular, we weren't getting the balance right, and we've addressed that accordingly and are much more focused on how we grow and support those customers and obviously graduate the MFI. Pleasingly, as it relates to the Westpac offering, the MFI there has started to improve, and we're certainly pleased with the outlook and the momentum that we've got in that. I would say that the others -- if I think about also MFI in the space of 12 months in business banking, they've been able to lift it by well over 1 percentage point. So it does highlight that we do have the offering. We do have the product. We just simply got to get -- make sure it's a priority across the organization, which it now is. Nathan Goonan: Maybe I could just add a little bit on the current flows, John, just to take your second question. I would say that we've -- and Anthony mentioned this in his preprepared remarks, we've probably seen, well, one, I think the market is, in particular, your question goes to home lending, then I think that mortgage market has been accelerating. And I think that's been sort of well covered in the market, and you can see it in the system stats. We're certainly feeling that or seeing that. So we've had increases in pretty much every channel, and we're seeing increased applications. And so front-of-funnel activity, as Anthony said in his preprepared, is probably a little bit higher than where we've been trending on a market share basis over the second half. So we're probably at or around system wouldn't surprise us if our front-of-funnel actually meant that we had a couple of months here where we're a little bit above system. That has been growth in all channels. I think pleasingly, we think October, we're going to see a little bit of volume growth in proprietary. I think the team are very cautious when we talk about green shoots there, and Anthony said it's sort of years, not months. But I think as we've seen proportional increases in applications, the proprietary channel has been performing better than it was in prior periods in that period on a proportional basis. So that continues to be good. And maybe the other thing just to add that may be of interest, John, I think the first homebuyers guarantee scheme has certainly stimulated some interest, whether it was some pent-up demand there, but we saw sort of applications in the first couple of weeks when the changes were made almost went to 2.5x what they were for the first homebuyers guaranteed. It's moderated a little bit. I think last week, it was about 2x what they were. So it's still double. How much of that pulls through? So we're seeing a lot of that volume. I think how much of that actually fulfills is a bit of a wait and see, but it's certainly still a small portion of the bank, but it certainly stimulated some demand. Justin McCarthy: Our next question comes from Brian Johnson from MST. Brian Johnson: Welcome, Nathan. I had 2 questions, if I may. The first one is, I'd just like to understand, you've got a bucket load of surplus capital. You're trading at, I don't know, about 1.8x book. I just want to understand the strategic rationale behind selling RAMS when a buyback, for example, is not as accretive. And also if we could understand any kind of litigation risk or warranties that you've made to the buyers in respect of this business? And then I had another question, if I may. Nathan Goonan: Okay. I'll just start on a couple of specifics, and then Anthony can jump in. I think one of the important features of the transaction, Brian, is that it's an asset sale. So just by virtue of that structure means that we're retaining the entities. And then the assets, it's a loan sale. So effectively, the asset is transferred to the buyer. As part of that, we've given sort of customary reps and warrants and other protections for the buyer so that they know that the asset they're buying is effectively going to perform in a way that it says on the tin. So that's things like title and the enforceability of title and things like that. So all customary things. In particular, as it relates to things like indemnities, you just don't need to given the structure of the sale, that will just stays with the existing entity that we retain. Maybe just to give a little bit of a picture as to the financial impact of it, Brian, because I think prima facie, I would agree, it does -- you sort of -- every day, we wake up and compete really hard on household mortgages. And so it's a core product of the bank. And so prime facie, you've got to scratch your head a little bit when you're then willing to sell a portfolio of home lending. But there's a couple of important points here. It is on a completely stand-alone set of technology. So it's a business that runs almost independently from the rest of the business. And so you've got a cost base here that by the time that we get to completion will be almost equal its revenue base. And it doesn't necessarily give you the type of scale that you might intuitively think in your mortgage business, is sort of one of the key features of this relative to, say, just ceding a little bit of share. And maybe, Anthony, you can touch on it. The other key point is we've made quite a few statements today just about the inherent strength of the deposit franchise, the ability for us to go after transaction accounts in terms of being a strategic advantage for us as we think about our balance sheet structure. And this is a business that has, if not 0, very close to 0 crossover in terms of deposits into the mothership. Anthony Miller: I probably just develop a little bit more on one point, which is, our current mortgage book, Brian, is, let's call it, 21% market share. But essentially, we've got 3 different systems upon which it's spread. So in effect, I've got 3 small banks, 3 small bank cost challenges, 3 small bank compliance, 3 small bank risk challenges in managing the mortgage book. And so UNITE was about moving all of those onto one way of doing things on one target tech stack. And so we were always going to have to spend quite a lot of money, and we're going to have to spend a lot of effort and consume a lot of resource to move the RAMS mortgages onto the target tech stack. And so therefore, if there was an opportunity to do that much faster and more efficiently, which this asset sale represents, then we were open-minded to it because essentially, I have 1 percentage point less market share. But now instead of it being spread across 3 regional bank cost basis, it's spread across 2, and we're on our way to getting one. And importantly, if we complete this, as we target, in 2026, I'm accruing that run cost saving, operational complexity reduction, risk reduction 2 years earlier than was otherwise planned. And so therefore, that's an attractive outcome for the bank. And as I say, 21% or 20%, my scale is wasted on 3 systems. And so I've got to get to the one system to really enjoy the benefits of that scale. So that's why this opportunity made sense. And that's why when we found the right parties, who would be the right owners of these assets, it just made a lot of sense for us to get after it. Brian Johnson: Anthony, just as a subset of that, can I just clarify, there was a story in one of the media reports talking about ASIC and AUSTRAC talking about this. I think subsequently, we've seen a very, very small ASIC fine. Can I just confirm that as far as you're aware, within the RAMS business that you're effectively retaining the risk? Anthony Miller: Correct. So to the extent that we've engaged with the regulators, and it's well documented on a whole range of issues and concerns they had with the way the RAMS businesses were led, managed and prosecuted, we've now -- obviously, we retained that. We've just simply sold the assets. And more importantly, it allows us, as I say, to switch off or get off one of those bank systems. So nothing has changed in terms of the risk profile we had as a result of the ownership of that business. It's just simply much cheaper to run from here. Brian Johnson: So can you address the question, though. There is no AUSTRAC issue? Anthony Miller: Nothing that has been brought to my attention, Brian. Nothing has been brought to my attention. So I don't -- you'll have to send me the article or reference and sort of what context in which it sits. But in the context of AUSTRAC matters vis-a-vis RAMS, I don't have anything in front of me on that front. And I'm looking across at my General Counsel and my Chief Risk Officer, and they equally are acknowledging that we have no such issues at this point. Justin McCarthy: Thanks, Brian. Our next question comes from Jonathan Mott from Barrenjoey. Jonathan Mott: Just a question on UNITE, back to the topic that we talked a bit before. You give us a kind of a traffic light scheme on how the business is going, but there's been a bit of a change in the disclosure. At the first half, you had sort of the green amber red. And now you've got in scope. I'm just looking at Slide 16 here, you've got another classification in scope. And then you've had an increase in the number of amber and a small change in red. Can you give us an update on what that means? Why you're now saying this is scope confirmed? And if you're looking at 18 of the 38 are actually already in the amber and red. Anthony Miller: So thanks for the question, Jonathan. And just sort of let me break it down for you. As a result of all of the planning undertaken, we now have a plan in front of us, and we know what we need to do, in what sequence we have to do it. Those 13 scopes confirmed are essentially 13 initiatives that we now have a plan for. And at some point, over the course of the next 36 months, those, if you will, initiatives will have to be worked on. And so at the moment, not all of those 13 have commenced. And so therefore, to characterize it as green, red or amber is slightly redundant. And so therefore, the others, which we're now moving on because it's a real program of sequence. It's about what we do and how we follow up on each particular completion of work. And so these 13 initiatives will be done. And to the extent, once they start work on them, we'll then obviously recognize whether they're meeting the standards we set, meeting the time line we set, meeting the cost we set, and that will then determine whether they're characterized as green, amber or red. And when we were talking back in May results, 7 of the initiatives at that point were red, and it's now down to 5. What's happened is 4 of those 7 have now moved into Amber Green. One, in fact, has been completed or effectively exited. And so that's behind us. But we've also had 2 new -- or 2 initiatives being recharacterized as red. So that's why there's that change from 7 to 5 over the course of the last 6 months. What we'll keep doing, Jonathan, is to the extent that there's some confusion there, we will get sharper in how we set it out for you because I do want everyone at all times to see that this is a large -- this is a challenging complex program of work. We're absolutely committed to it and most importantly, committed to making sure that there is no surprises as we go through it. And so if we can do better in sharing with you where we're at, we will look to tidy that up as we go forward. Jonathan Mott: And second question, if I could. If you're looking -- I'm looking at Slide 22, 23, I think it is, which just shows the growth in deposits and consumer pretty strong at $15 billion and then $12 billion in mortgages if you exclude RAMS. But including in that number is very strong growth again in offset accounts. I think it was up another $5 billion. You've now got $73 billion in offset accounts. So two things about that. Firstly, are you comfortable with the growth in net of offset accounts because it really is lagging the system? And I know you said you want to get your service proposition right, but are you comfortable with that? And also, given the offset accounts are nearly all against owner-occupied property, it actually means your investor book, as a percentage of the total, excluding offsets, which is just sort of a deposit sitting there, is a lot larger. So can you ask us sort of that considering this net of the offset accounts? Anthony Miller: I'll make a couple of comments and invite Nathan to jump in. I mean, certainly, you're right to call out that the deposit agenda, the idea that we grow deposits and more importantly, get the shape of that right, John, is absolutely not where we want it to be, albeit we're really pleased with the progress we've made, but we would like a lot more in terms of the shape of deposits. And we were disappointed and acknowledge that, that we didn't catch what was happening in the regional brands as fast as we perhaps should have, and that's on myself. We're very much focused on now addressing that. And I think we've got that properly, if you will, tackled, and it's just about how we get after that over the next 12 months. I'm just really pleased though that the Westpac side of the portfolio is continuing to improve and is, obviously, a really critical part of our portfolio there on transactional and savings accounts. I suppose there's definitely -- there's things that if I think about our service proposition, one of the areas that I reflect on is making sure that transactional accounts, deposit services and servicing on that front is front and center for every banker in the company. And we've done a lot of work to recalibrate, for example, scorecards and incentives to make sure that all of our bankers in consumer and business bank understand the priority we attach to that. And pleasingly, we've got a good enough product suite, which means we can be very competitive. And I do feel like we're after that in the right way. I missed the second part of the question? Nathan Goonan: No, I think you've covered it well. Maybe, John, just to add 2 points. I think that you're right to call it out. There's about, as you said, 7% growth in offsets in the half, but importantly, 6% in savings as well. So we have seen strong growth in both those items. I think -- and you're right to call it out in the way you did. The growth in savings accounts is about attracting customers on the liability side and the offset is much more about the business that you do on the asset side. And there is a strong customer preference towards those. They've been growing, as you know, quite strongly as you move from a fixed rate portfolio into a variable rate portfolio, and we're pretty much exclusively there now. As we grow that side of the book, we'll continue to see growth in the offsets. Whether you're trying to target a certain amount of offsets or whether you're happy with it or not, I think it's a key feature of the mortgage product, and there is a strong customer appetite for it. Anthony Miller: Probably the other point you did raise was about investor loans. And we're very keen to continue to be competitive in the investor loan segment. That demographic, that audience is an attractive customer base for us. And we see a real value in being very supportive there on investor loans and more importantly, then converting and making sure it's a whole of bank, whole of customer relationship that follows from that. Justin McCarthy: Our next question comes from Carlos Cacho from Macquarie. Carlos? Carlos Cacho: First, I just want to ask about on your margins, your replicating portfolio benefit is expected to diminish from 3 bps to 1 bp. I was just wondering if there's any other potential tailwinds that are worth calling out as you head into FY '26 because it's mostly negatives that you mentioned as you walk through the waterfall, Nathan. Nathan Goonan: Carlos, Justin has given me the signal for one word answer. So maybe I'll jump straight into it. I think we did just try and lay out as helpfully as we can, Carlos, and happy to sort of pick it up later in the afternoon to the extent helpful. But I guess the other point that we made, if you narrow in on things where we could get a tailwind, I think term wholesale funding markets have been better. So we do expect a tailwind there. We do expect to continue to get some replicating portfolio benefits. We called out a basis point there, which is sort of net across the replicating portfolio and then the unhedged deposits. So there's a little bit of support there. And then I think maybe the other one is just to say on liquids. I think that has been a bit of a volatile item for us quarter-on-quarter. We did expect a sort of increase in investment securities at the third quarter that maybe didn't flow through to the same extent we thought. I do suspect as we go forward into the first half, just where the customer balance sheets are up to and how growth is going, we probably expect liquids to be down a little bit in the first half. And so while neutral to earnings, there might be a little bit of a benefit that flows through there. Carlos Cacho: And then just secondly, you've spoken about wanting to do better in proprietary mortgages. And obviously, it's a long-term strategy. But where are you expecting to win? Or where are you seeing wins come from? I presumably, it's either got to be a new customer who's a first home buyer or they're coming from other banks where they're proprietary or they're coming from brokers? Like do you track that? Is there particular targets you're hoping to do better in? Anthony Miller: Look, I mean, good question. I mean what we've got to do is just get the basics right in terms of how we go after proprietary. So we've got to get the service proposition right. We've made real progress. We've got to get the product right, and we've seen improvement in product NPS, time to decision down inside 5 days. We're operating and executing mortgages more efficiently than we have in the past. Our hygiene and data is in a much better place. So the returns are much more, if you will, better reflected in that. And then I think the things for us, though, is we just got to get, for example, more bankers. We lost too many home finance managers. So we're catching up on that. That takes 6 to 12 months for a good home finance manager to really get into their straps. And so we've started to get that resource allocation right. We certainly got to get a better compensation and incentive arrangement around for our home finance managers, and we've now got that right. We've got the scorecards right. We're also, at last, really taking the full power of the company in terms of the range of data and if you will, insights that come from all of what we have across the entire company to help get behind the home finance managers and give them real leads, which represent real insights and allow us to be much more proactive. And then you heard Nathan talk about investing in the brand. We spend a lot more money to get the brand profile up. So we're just putting in place all of the basics to really get after this area. And I'll be very candid with you. There's nothing more dramatic than just getting all those basics in place to allow us to get after it. It took us a number of years to get to this point. It's going to take a little bit of time to get out of this particular position. But I think we've got what we need to execute. And I was really pleased with some of the actions we took in private wealth last year, which we've already seen a really improved turnaround in first-party in private wealth, which tells us that if we get after this as we have in private wealth and consumer, we can deliver that same turnaround. It will just be, I think, a reasonable period of time of effort to get there. Justin McCarthy: Our next question comes from Andrew Triggs from JPMorgan. Andrew Triggs: I might just ask one question. Deposit mix shift, should we expect that to slow significantly next year? And maybe, Nathan, if you could break that down, please, between the percentage of deposits in behavioral savings versus the percentage of those products themselves where the customers are qualifying for the bonus rate? Nathan Goonan: Yes, I think on the deposit mix spreads, you've probably rightfully called it out. It's probably just really a story for us around the growth that we've seen in that consumer savings product. I think at an overall book level, we've had decreases in proportion to term lending. So I think the bigger determinant of going forward margins, which is really where you're going, is going to be on the savings product. And I would say a couple of things here. I think certainly, this is one of the areas where fourth quarter was a little bit -- showed a few different signs in the third quarter. So we saw, I think savings -- the savings balances in the fourth quarter grew $5 billion. They grew $2 billion in the third quarter. We've said there that we've got about 84%. I think we've given you an annual number there that are the people that are qualifying or achieving the bonus rate, that was actually probably a little bit lower through a couple of months in the middle of the year and then picked up a little bit in the fourth quarter. So I think those 2 main things are things that I'm expecting will flow through into the second half. It's probably -- into the first half. It's probably not so much a mix shift into these products, Andrew. It's much more that's where we're seeing the growth. Justin McCarthy: Our next question comes from Richard Wiles from Morgan Stanley. Richard? Richard Wiles: I'll just ask one question, too. It's following on from Matt Wilson's question around the business bank margin. In your business and wealth update a few months ago, Slide 17 showed the composition of the underlying margin decline. It was 22 basis points, and it was split across portfolio mix, deposits and lending. The decline in this half, Nathan, was 18 basis points. So actually pretty similar to the first half in terms of underlying trends. Could you give us some commentary around the mix between portfolio deposits and lending? Were the trends pretty similar? Or did they start to skew? Nathan Goonan: Yes. Thanks, Richard. Yes, I think my comments earlier to Matt, sorry if that was confusing was just really around the business lending part of that equation. So I think in the second half or in the more current period, we've seen a more moderation of the impact on the lending side. And you would have seen -- for all the reasons we've been speaking about on the deposit side, you would have seen a bigger -- a proportionately higher impact in the more recent period from deposits. Richard Wiles: Okay. So lending was 7% in the first half and deposits was 9%. Lending went down, deposits went up as a headwind for margins? Nathan Goonan: As headwinds, yes. Justin McCarthy: Our next question comes from Brendan Sproules from Goldman. Brendan Sproules: I just have a couple of questions. Firstly, on the Markets and Treasury contribution for this half, it looks like it's running at a run rate of sort of about $2.2 billion. Can you maybe talk about some of the benefits that were achieved this half? And will those sort of repeat into 2026? And how does the $2.2 billion relate to what you would think is a normalized level of earnings from these 2 divisions? Nathan Goonan: Yes. Maybe we can break it down a little bit, Brendan, and then Anthony knows that business well. I think it is very challenging in these business to grab 1 quarter and annualize that and sort of expect that that's where you're run rating -- like -- well, sorry, it is where you're run rating, but to expect that, that sustains over 4 quarters. So I think with these -- certainly, the markets business is a pretty mature business now. It's got a really strong FX, fixed income capability, and it's a pretty mature business now that would be -- should all market conditions being equal, just growing more in line with the underlying activity of our clients and the loan book growth. And then, Nell and the team have got ambition and are doing things to grow out a few more strategies that can build income sustainably in that franchise over time. But I think I would just think about that as more -- it should be producing pretty stable performance on the FX and the fixed income, and it will be more determined by underlying activity. In treasury, I think similar, we've got good disclosure on that over a long period of time. I think that number in and around $1 billion for the treasury has been a pretty consistent number. I think a couple of years ago, we might have had a $600 million, but I think in and around that area is about right. We're probably issuing a bit less wholesale funding, which gives them a few less opportunities. And even with the RAM sale, we expect to do a little bit less in that space. So maybe it comes off a little bit. But there's a few comments, Anthony. Anthony Miller: Yes. Look, I mean, definitely, the financial markets business, it's, I think, the leading franchise in the market now. A couple of just extra comments. I think there's real upside for us in the FX product suite and the penetration into consumer and business bank at Westpac is less than what it should be,, given the quality of the FX franchise we have. So there's real upside there in servicing our existing customers in consumer and business bank. Likewise, I think we're underweight in a few aspects like commodities and aspects of that business, which we see as a real positive for us. Perhaps the real sort of interesting jewel in the crown in there is just the credit business, the credit trading, the credit market making. Now that Australia with its savings bill is actually a genuine capital exporter, and we have a lot of Kangaroo bond issuance into this market, the franchise that we have there in terms of credit market making, origination and, if you will, distribution into this capital market is pretty impressive. It's the best in the street. So we're quite excited about how much more we will see in that business as Australia's position with the superannuation funds makes it a real destination for people to raise capital. Brendan Sproules: That's very helpful. My second question is just on Slide 29 around the impairment provisions. I mean, in this presentation, you've talked, Anthony, about the improving operating environment for the bank. You've also showed some lead indicators on asset quality where you're seeing impaired assets, for example, fall. I was just wondering what the thought process was around increasing the overlays and specifically the downside scenario weight and actually growing your excess provisions above base case in this period. Anthony Miller: I'll just let Nathan make a comment, but it was a robust process. And because clearly, the settings and outlook has continues to be surprisingly benign, but we need to be constantly vigilant and, if you will, balanced about what is going on and what may come our way. And so that's been a very congested and well-developed discussion inside the company with Nathan and I about what's the right outcome here. But Nathan... Nathan Goonan: Probably just to add, I think, Brendan, I think just take it as an indicator that we put a high value on medium-term earnings stability. And so I think when we think about this, it's similar to increases in hedge balances and then the management judgments around that. We've tried to just err on the side of a little bit more stability over time. Justin McCarthy: Our next question comes from Samantha Kontrobarsky from HESTA. Sam? Samantha Kontrobarsky: I'll just keep it to one. So you've recently appointed a Chief Data, Digital and AI Officer, which is a new step for the business. As you bring these areas together, how do you see this changing how Westpac competes? Is it mainly about efficiency and cost? Or could it fundamentally reshape the customer experience and growth? Anthony Miller: Thanks for the question, and that is what I work on every day in terms of how do we get that right. There's no doubt that there's a lot of hype and a lot of, if you will, excitement around the AI revolution or evolution, depending on who you speak to. We certainly think that its capacity to help us be more efficient, help our employees get their job done better, safer, more consistent is a really big and important opportunity that comes from having the right AI program. And so that was one of the key sort of drivers was to get a global thought leader working for and with me in terms of how do we look at the way we do things in the company and how can we do things better. It's a wonderful tool in the hands of employees, but you need to, therefore, invest in your employees and make sure they understand how to use this tool and how they can make it or can help them be more efficient. So that's definitely one emphasis. And there is definitely really interesting ways in which it will help us serve customers and provide a more attractive service proposition to our customers. And we're sort of already taking some of the model capability with this Westpac Intelligence layer, taking all of the data and all the signals that are coming into this company and using that to make better, faster decisions, which allow us to get back in front of our customer more proactively. So we're seeing it, Samantha, also help us in terms of being really good with our customers with a view that, that obviously drives engagement, connection and revenue ultimately. Justin McCarthy: Thanks, Sam. We'll move to some questions now from the media. So our first question comes from Luca Ittimani from The Guardian. Luca Ittimani: Can you hear me right? Justin McCarthy: We got you perfectly. Luca Ittimani: I just wanted to check. So in the wake of the Fair Work Commission decision, do you intend to change your work-from-home policies at all? Have you seen more applications or requests from staff for new or more flexible work from home request? Anthony Miller: Well, we have one of the most flexible work-from-home policies positions in the marketplace. So I think what we are going after, which is finding that balance for our people, I think we've got that right. So no, I don't need or feel a need to change that particular setting. We're also just reflecting on what we might do in response to that recent work-from-home decision by the Fair Work Commission, and we'll land on a decision as to what we will do later this week or the next. What I would also say is that we've got a tremendous level of engagement from our people. And if I look at some of the OHI scores and other engagement measures, just highlighting people are really engaged and really excited about what we're trying to go after and what we're trying to achieve as a company in terms of for our customers and in terms of how we work together as a team. So I feel really encouraged by just where we're at and motivated to go further with what we've got. Justin McCarthy: Thanks. Our next question comes from James Eyers from the AFR. James Eyers: Anthony, you've spoken about this deliberate pricing to attract investors in the residential property market. And you can see on Slide 66, your investor loans and interest-only loans, sort of the second half flow that is tracking well above the averages of the book. The sort of house price data out today showing house prices sort of growing at the fastest pace in a couple of years. And we saw that APRA data on Friday showing investor lending is pretty strong, like sort of 7% annualized, I think. You just said in response to John Mott's question, it was an attractive customer base. But could you just talk a little bit more about that? Like why are you targeting more investors? Are they sort of a better credit risk than owner occupiers? Is there a cross-sell opportunity for you? And do you foresee a little bit of a squeeze on the first homeowner buyers as a result of this investor growth that we're seeing come through? Anthony Miller: Well, I think we're seeing a squeeze on the entire market because of the demand, whether it's first-time buyer investor, there's just a lot of demand. And the key challenge of the day is we've got to get more houses built at the right price point, James. So every aspect of demand is being supported and is going fast, which is only driving the challenge and making it harder. In terms of the investor segment, I mean, yes, it's an attractive segment in terms of from a credit risk perspective. And yes, you're right in terms of, I don't like the term, cross-sell, but the idea that these are people who are investing in property who, therefore, may need an incremental services and support and how do we, therefore, bring this entire bank to them is something that I'm really drawn to, and we see it as a real opportunity for us. And we just got to, I suppose, go about it thoughtfully and be careful about the outlook and the risks that come from sort of going too far, too fast in a particular segment. But we think we've got the balance right. And it's interesting that we're forecasting a sort of 9%, almost 10% increase in residential house prices over the next 12 months. So it's certainly a positive outlook for people who can access the property market. James Eyers: Just a really quick supplementary on that risk -- go on, sorry. Justin McCarthy: No, you're right, James. Keep going, sorry. James Eyers: Just a really quick supplementary on that risk point, Anthony, we saw Lone Star make some comments in July that they begin sort of engaging with banks on implementation aspects around macro prudential tools just to make sure that could be activated in a timely manner if needed. And like back in 2015, I think you sort of had the investor loan growth sort of going above 10% and brought back to that number. And then there was an interest-only element in 2017, where they were sort of looking at that being about 30%. You're at 20% now, I think. So it's well under that. But how much sort of hotter do you think this investor lending growth trend sort of would need to get before you're in that territory again? Anthony Miller: Look, I don't have that answer, James, but we are very much or very cognizant of the balance we need to find. And we engage with the regulator. APRA is a terrific partner to us, and we engage actively often deeply with them about all of these particular issues. And so we'll be making sure there is no risk or issue there vis-a-vis the regulator. Equally, it's an opportunity that we've been pursuing over the course of the last 6 months, and we will continue to pursue it, but it will be balanced around the return. It will be balanced around the risk and it will be balanced around is it that we're converting these opportunities into broader, more substantive customer relationships and not just simply a lender loan. Justin McCarthy: Our last question comes from Steven Johnson from Seven West Media. Steven Johnson: Steven Johnson here from The Nightly news website. Anthony, earlier in your presentation, you said that you want to see more housing around the -- available for the $500,000 mark. Would you be able to explain why you want more housing available for $500,000? And what your typical debt-to-income ratio limit would be now considering the cash trades at 3.6%? Anthony Miller: So the thesis around just sort of promoting the idea that $500,000 is the right price point is really sort of predicated on the following: Median income in Australia is approximately $90,000. When we finance someone in the acquisition of a house, we will lend in the order of 5 to 6x their income subject to expense verification and the like. And so therefore, you've got something anywhere between sort of $450,000 and $550,000 of mortgage capacity. And then, of course, just assume, say, a 10% deposit. And so all of a sudden, you can see median $500,000 as a house, $500,000, $600,000 is just really critical if we're going to solve for, call it, average Australia or the median position in Australia. And the challenge is that properties are being built in major capital cities and the median house price of houses in capital cities in Australia is over $1 million. I am drawn to the fact that median house prices in regional Australia are closer to sort of $500,000, $550,000. And so I feel like Regional Australia is part of the solution potentially here. But I would say that the key is let's build more properties at the right price point to allow people to get access to the market. And so when we talk about building more properties, it just can't be building more properties that doesn't solve the actual challenge. How do we ensure the average Australian gets a chance to buy a property and live in their home of their dream. Steven Johnson: So basically, it's also a social issue that there's too many houses are at $1 million, the average full-time worker can't afford that. Are there going to be some societal challenges, some aspects that would hurt Westpac lending. Anthony Miller: Well, look, I think our success as a company is inextricably linked to the success of this country. And one of the challenges for this country is to get more housing, have more Australians being able to own their own property. And so therefore, I think it's really important. The challenge is that when you think about the cost to construct, you think about the time and cost and process for approval, all of those features contribute to it being very hard to be able to build a house at that price point. And so therefore, I think it's not sort of dependent upon developers and contractors, but it's really important that the entire community, government, regulators and all of us work out how can we create an environment where it's cost effective, it's rational and it's reasonable to expect you build house for $500,000 to $600,000 in Australia. Justin McCarthy: Thank you, Steven, and thanks, everyone, for dialing in. We'll be available over the course of the day. Thank you very much.
Operator: " Inge Laudy: " Linde Jansen: " Michiel Declercq: " KBC Securities NV, Research Division Marco Limite: " Barclays Bank PLC, Research Division Marc Zwartsenburg: " ING Groep N.V., Research Division Unknown Analyst: " Operator: Good morning, ladies and gentlemen. Welcome to the PostNL Q3 2025 results. [Operator Instructions]. [Audio Gap]. [Break] Inge Laudy: Good morning, and welcome to you all. We have published our Q3 '25 results earlier this morning. Unfortunately, CEO, Pim Berendsen, cannot join in this meeting due to personal circumstances today. So Linde will do the presentation. And after that, we will open up for Q&A. With that, Linde, I hand over to you. Linde Jansen: Thank you, Inge, and welcome to you all. Let me start with what highlights for this quarter. Let me start with our Capital Markets Day, which we held on 17th of September. There, we presented our new strategy and transition program, Breakthrough 2028, with the related ambitions. We launched our new purpose, connected to deliver what drives us all forward. And we launched our new strategic intent, being to grow our business, create sustainable value, lead through innovation, and make impact that matters. This is based on 4 pillars: Growth, Value, Innovation, And Impact. I will repeat our 2028 ambitions on the next slide, but let me first share the key takeaways for this quarter. The Q3 results came in as anticipated and landed below last year's results. At Parcels, volumes were up 1%. And this quarter, again, volume growth from international customers outpaced domestic growth. The Mail volumes declined by almost 5%, mainly due to ongoing regular substitution, but this quarter was supported by the first batch of the election mail and some other one-off names. The decline in normalized EBIT at Mail led to a year-to-date normalized EBIT of minus EUR 43 million, and this reinforces the urgent need for adjustments in the postal regulation. Good to mention that our cost savings are well executed and bring savings according to plan, both at Parcels and for Mail in the Netherlands. Furthermore, additional efficiency improvements at Parcels contributed to our performance. And emission-free last-mile delivery increased to 33%, which is 5 percentage points better than last year. The last thing to mention on this slide is the reiteration of our outlook for 2025. Before moving on to more details on this Q3 performance, let's do a quick recap of our Breakthrough 2028 program. Our strategy aims at delivering sustainable returns for our shareholders and value for customers, employees, and society as a whole. We truly launched a strategic turning point with our new transformation program, Breakthrough 2028, that drives our financial ambition. A short summary of the strategic objectives of our 3 business segments, which we will create as of 2026: First, E-commerce, where we will grow from volume to value through a differentiated approach and smart network utilization; secondly, platforms, where we capture international growth through asset-light models; and lastly, our Mail segment, where we want to transform to a future-proof postal service. Driven by the e-commerce market growth and our commercial initiatives, we aim to achieve GDP plus revenue growth, targeting at over EUR 4 billion in 2028 with a step-up in normalized EBIT to over EUR 175 million in 2028. A disciplined investment approach will drive incremental return on invested capital with an increase in Return On Invested Capital (ROIC) from 3.4% in 2024 towards our ambition of over 12% by 2028. And our approach towards dividends remains the same, in line with business performance, with 70% to 90% payout ratio while holding on to our aim to be properly financed. That's about a short recap of our Breakthrough 2028 program. Let's now move to the strategic attention points for Mail and Parcels, before I will explain the detailed Q3 financial results. Let me start with Mail. Early October, a next step towards a viable and future-proof postal service in the Netherlands was proposed by the minister. The following adjustments for the USO were proposed: D+2 at 90% quality as of 1 July 2026 D+3 at 92% quality as of July 2027 The consultation period closed last Friday. Without doubt, these adjustments are much appreciated. But at the same time, this proposal is still insufficient to cover the net cost. And therefore, it remains necessary to find a solution, therefore. And we have to keep in mind that the uncertainty in the timelines of the political process persists. In the coming weeks, we are expecting a decision on our appeal on the rejection of our request for financial contribution for 2025 and 2026, and also a reaction of the minister on our request for withdrawal of the USO designation. Together, these will determine our next steps towards a sustainable future of postal service on its path to reach the ambition as set out in our Breakthrough 2028 program. We will continue to make every possible effort to maintain reliable service and remain committed to accessible and financially viable postal service. Then to Parcels. As announced during the Capital Markets Day, that segment will be split in e-commerce and platforms as of 2026. And we will focus on the respective strategies as announced on the Capital Markets Day. The strategic initiatives already started and are progressing according to plan. In Q3, we see for Parcels a continuation of the trends as we have seen in the first half of this year. The price/mix effect was positive. Strong price increases were delivered according to plan. These are largely offset by less favorable mix effects that are more negative than we had anticipated. And that is mainly explained by the increased client concentration within our domestic volumes. With regard to the targeted yield measures, it is important to emphasize that these will come into effect gradually and confirm the strategic validity of our focus on consumer value, while also resulting in a slight loss in market share as anticipated. What is also important to mention that to date, we have been able to mitigate the adverse development in mix effect by own actions. Our flexible operational setup proved our agility and enabled additional efficiency improvements in our network and supply chain that contributes to our performance, on top of the ongoing planned cost savings program. Another focus area is our international expansion, especially in intra-European activities, where we are investing to capture future growth. In Q3, this resulted in the continuation of revenue growth at Spring, with some impact on the performance following our strategic investments. We are ready for the ramp-up in our operations for the peak season that is about to come. Together with our customers, we are putting all efforts in striking the optimal balance between volume, value and capacity utilization. Over to our key metrics. Let's start with the financial KPIs. Revenue in the quarter amounted to EUR 762 million, which is slightly above last year. And we see normalized EBIT at minus EUR 21 million, in line with our expectations. Looking at free cash flow, we see minus EUR 18 million in this quarter, bringing the year-to-date at EUR 98 million comparable with last year. And normalized comprehensive income that includes, for example, tax effects amounted to EUR 23 million minus. I will discuss these results of Parcels and Mail in a bit more detail in a bit. Then the nonfinancial highlights for this quarter. The share of emission-free last mile delivery improved by 5 percentage points to 33%. We have recently started the rollout of over 40 electrical vans in our transport services, so in the first and middle mile. Looking at NPS, we keep our average #1 position in relevant markets and see an improving NPS for the important ‘I receive journey’. And to evidence our innovative power, we have recently concluded successful experiments to explore how robotics can contribute to future parcel delivery, building on the knowledge and experience about the way we have implemented robotics in our sorting centers. Then our out-of-home strategy. That is continuing to gain momentum and the utilization rate being defined as the total amount of parcels, both to consumers and returns, during the week as a function of locker capacity is increasing and is now at 50%, while NPS scores for APL services remain high. Let's move to the financial details of Parcels. Revenue amounted to EUR 581 million, which is EUR 6 million above last year, following volume growth, price increases and mix effects. Overall, our volumes grew by 1%. Volumes from international customers continued its growth and were up 5% compared to last year and domestic volumes were flat. Overall, market share was slightly down as anticipated following our yield measures. We do see further client concentration with increasing share of volume from large players, domestic as well as international, but also platforms and marketplaces. In this quarter, the top 20 accounted for 57% of volume. With that in mind, it's good to see that the total price/mix impact was positive this quarter. Average price per parcel was up by $0.02, supported by targeted yield measures and regular price increases. Price increases have been implemented according to plan. But definitely, the mix effects are more negative than anticipated, driven by client concentration, predominantly within our domestic customer base. Furthermore, it is positive that our cross-border activities continued the trend. We have been seeing for several quarters with revenues at Spring up this quarter, most strongly in our intra-European activities, a promising development as international expansion is one of our strategic initiatives. When looking at costs, it should not be a surprise that in this quarter, we saw a significant organic cost increase. This is mainly labor related. However, we also see EUR 9 million in cost savings in Q3, and they were delivered according to plan. To be more specific, they came from ongoing adaptive measures like, for example, rationalization of services because we stopped parcel delivery on Sunday. Next to that, our flexible operational setup proved our agility and made us achieve additional efficiency improvements in our network, so in depots, supply chain and transport, to mitigate the adverse mix effects. In Spring, revenue growth was more than offset by the mix effects and the planned investments in international expansion. In the quarter, the financial impact from the implementation of U.S. trade barriers was limited, though we do expect some adverse effects in Q4. This brings us to the Parcels bridge, showing the reconciliation of the normalized EBIT from EUR 6 million in Q3 last year to EUR 4 million in Q3 this year. The volume growth contributed to our results, though was more than fully offset by the less favorable product customer mix effects, mainly within domestic. Organic cost increases amounted to EUR 70 million, following wage increases according to PostNL and sector collective labor agreements and indexation for delivery partners. As you can see, the impact from our price increases was EUR 30 million and came in according to plan. Other costs were EUR 11 million better, mainly as a result of the combination of cost savings and additional efficiency improvements in depots, supply chain, and transport, which we managed to deliver to mitigate the negative mix effects. In other results, I want to highlight that this is mainly applicable to Spring, where we see revenue growth being offset by mix effects. Furthermore, we again invested in international expansion, one of our strategic initiatives, which was approximately EUR 1 million this quarter for the expansion of the intra-European activities in Spring. Also good to note is that we continue to focus on further growth in Belgium. There, we also invested further. We invested in our distribution network, also amounting to EUR 1 million this quarter. Moving over to the results of our segment Mail in the Netherlands. There, the revenue amounted to EUR 289 million, exactly the same as last year. The volume decline of 5% this quarter was mainly related to substitution, a structural trend which you are seeing for a long time now but supported by the first batch of election mail and other one-off mailings. Furthermore, revenue was supported by 2 stamp price increases in January and in July of this year. Looking at costs, labor costs were up following the CLAs for PostNL and mail deliverers. However, when looking at sick leave rates, we see a first improvement compared to last year. These cost increases were mitigated by cost savings of EUR 10 million according to plan, coming from further adjustments in our current business model, such as the transition of business mail towards a standard service framework of delivery within 2 days. Altogether, this resulted in normalized EBIT of minus EUR 23 million and year-to-date minus EUR 43 million, as mentioned earlier, evidencing that the current business model for Mail is not sustainable. That brings me to the bridge of Mail in the Netherlands. Here, you see the elements of Mail I just discussed. Starting at the top, you see the stamp prices I referred to added EUR 9 million to revenue. The organic cost increases of EUR 10 million due to wage increases and other inflationary pressures are also visible. And finally, the cost savings of EUR 10 million and a bit lower labor costs related to sick leave were partly offset by lower bilateral results. Let's move over to the free cash flow. Free cash flow was minus EUR 18 million in this quarter compared to minus EUR 68 million in the same quarter last year and in line with our expectations. The delta versus last year is mainly explained by the working capital development coming from anticipated phasing effects and a nonrecurring tax settlement for prior years, including interest, which we paid in the third quarter of previous year. This brings us to the next slide, where you find our balance sheet and development of the adjusted net debt position. Of course, here you see the impact from the impairment in Q2 on our financial position, which in the end is impacting our equity. In the short and long-term debt, you see the EUR 100 million from the Schuldschein placed in June. So that was already the case in Q2, but obviously, you still see there. Movements in Q3 were limited. We ended the quarter at an adjusted net debt position of EUR 572 million. Recently, we launched a new bond with face value of EUR 300 million, a term of 5 years, and an annual coupon of 4%, and we tendered on the outstanding 0.625 percentage notes due September 26. EUR 195 million was accepted for repurchase. Please note that these related recordings and cash flows will materialize in Q4. We continue to manage our cash flow, balance sheet, and net position carefully following our aim to be properly financed. And as a reminder, we reclassified in Q2 part of cash and cash equivalents to short-term investments and adjusted comparatives. It has no impact on adjusted net debt or any other key metric. Then over to the split of normalized EBIT over the quarters. As mentioned before, in 2025, normalized EBIT has to be earned in Q4 even more than in 2024. We are ready for our peak season. Please keep in mind that the impact of pricing will be larger in Q4 than in the other quarters, which also implies that in Q4, pricing will exceed the impact from organic cost increases. When looking at year-to-date results, overall results came in, in line with expectation. For the remainder of the year, for Parcels, you should take into account that announced yield measures are expected to come into effect gradually. And for Mail in the Netherlands, we will see the majority of the election mail coming in, in Q4. In the right graph, you can see the indicative phasing for the savings is not fully divided evenly over the year, with a larger part of savings expected in Q4. Obviously, that is related to timing of some of the underlying measures. Please note that some of the savings are a bit more tied to the absolute volumes, which also explains why the amount of savings is, as usual, expected to be slightly higher in Q4. Then over to the outlook. Of course, we have to acknowledge that the external environment remains challenging and volatile. And as said before, the pace of client concentration due to changing consumer behavior is difficult to predict. We reiterate our outlook for 2025. We expect normalized EBIT to be in line with 2024 performance. Free cash flow is expected to be negative as, for example, CapEx will be above the level of 2024, including around EUR 15 million cash outflows related to the strategic initiatives. I repeat our intention to pay a dividend over 2025. We hold on to our aim to be properly financed, taking into consideration the anticipated improvement in the performance going forward and the progress towards a future-proof postal service. And good to add that normalized comprehensive income, which is, of course, the base for the amount of dividend is expected to follow a pattern that is more or less in line with 2023. In 2024, this includes some incidental positive effects. Well, this concludes my explanation of the Q3 results, and I would now like to hand back to Inge. Inge Laudy: Thank you, Linde, for your presentation. We will now open up for Q&A, and I ask you to limit your questions to two questions per person to set. So, operator, could you please explain the procedure for questions via the lines. Operator: [Operator Instructions] Your first question comes from the line of Michiel Declercq from KBC Securities. Michiel Declercq: I have two, please. The first one would be on the impact of the trade barriers. You mentioned that you expect a bit more impact of that in Q4. Can you give some color on this? Or can, is there some quantification that you can give to this? And the second question would be on Parcels on the price/mix effect. How I understood it at the beginning of the year was that the impact from the yield measures should gradually step in. Now if we look at the first three quarters, we actually see that the average pricing has actually come down. You're quite confident in the fourth quarter that you will see the biggest impact from the pricing. Can you maybe elaborate a bit on why the impact here should be the largest? Is there a big difference compared to last year in terms of surcharges or maybe penalties to your customers if their predicted volumes don't match with the actual volumes? Just why the impact of the pricing should be that much higher in Q4? And if you can quantify what you're looking at? Linde Jansen: Sure. And thanks, Michiel, for your questions. Let me take them one by one. Starting with trade barriers. Well, as I mentioned, so this quarter, we had limited impact. Of course, we do see more uncertainty and increasing volatility in the context of the U.S. trade policy and the responses from the counterparties. Well, it's not a surprise that tariff changes increase volatility and could slow down GDP growth, but could also generate opportunities on the other side, looking, for instance, at our knowledge with regard to customs. But it's, of course, too soon to tell and to say what is the exact impact for Q4. But what we see is that from a materiality point of view, we do not expect the impact to be material. It will be limited also in Q4. And to give some context on it, the direct exposure will be less than, is expected to be less than 1% of our revenue. Then that's on the first question. Then on your second question with regards to pricing for Parcels. I would not say the pricing, what you mentioned, pricing has come down year-to-date. That's actually not the case. What we see is that we, that our pricing has passed as we anticipated. What you see overall is that with the yield measures which we are taking, so we say, and we see that, that's gradually coming in. Obviously, that depends also on when new contracts are being renewed. Not every contract has the same starting date or duration of the contract where we can change that. But clearly, looking at the fourth quarter, also, of course, depending on volumes, when you see when you have made price increases, that obviously has a larger effect in the Q4 with peak periods. And there, wherever we have been introducing higher prices, yes, that obviously then also will have a higher effect, larger effect in Q4 than we have seen in the past quarters, because we have started with that gradually as of Q2. So that is why we expect the Q4 price increases for PostNL to be larger than the organic cost increases for the year. I hope that provides an answer to both your questions. Operator: Your next question comes from the line of Marco Limite from Barclays. Marco Limite: My first question is on the USO. Clearly, you set some scenarios back at the CMD in September, but we have had some more news in October. So, you're increasing prices by a lot as of 1st of Jan '26 on a year-over-year basis. And you're now implementing D+2 from early Jan '26. So my question to you is, do we think that this is enough for you to be breakeven in 2026? Linde Jansen: Yes, to start with, first of all, on the start day of D+2, that's not the 1st of January 2026, but 1 July 2026. And on your question on the developments of the breakeven point, what we highlighted in during the Capital Markets Day is that we had, we would lead to breakeven as of 2028 because that is the point where we move to D+3. At that time, the proposal from the minister was the 1st of January 2028 if a certain quality measure was achieved. That was the point of breakeven, so not 2026. So to respond to your question, we still will not be breakeven in 2026 for the Mail division given the developments, which we've had in the beginning of October because the main change over there was regarding the timing of the move to D+3, which was from 1st of January '28, he moved it more to the front 1 July 2027. And secondly, there were, he proposed reliefs on the quality levels, which were in the earlier proposal 95%. However, it's good to mention that this are just proposals from the minister and really uncertainty around the time lines and the political process really persists. Well, as you know, we've had the recent elections last week. So as I said, these are just proposals from the minister and not yet law, so to say. Marco Limite: Okay. And what is the time line for a possible response on the cash compensation? Linde Jansen: For the cash compensation, well, as you know, is that this proposal from the minister, it is a solution on the, it is a move or a first step towards a more future-proof situation. However, it does not serve or a solution yet for our net cost compensation. And as you may know or remember, we are, of course, still in proceedings on our financial contribution for 2025 and 2026. And there, we have appealed. And yes, we are waiting for the outcome of that. And as I said, on top of that, in the proposal from the minister, we also are looking still for a solution of our net costs in general. Yes. That is now not in our control, but we are awaiting a response on that from our appeal as well as the next steps from the minister. Marco Limite: Okay. And second question very quickly. So, once you achieve breakeven first half '27, sorry, 1st July '27 or '28. But then I mean, if we think about more longer term, once you achieve the breakeven, you raised the bar to the breakeven situation, but then we are once again in a situation where we will be, we have cost inflation, let the volume decline. So on the long-term, let's say, over the next 10 years, once you move to D+3, how can you make sure that the USO is, let's say, forever breakeven at least? Linde Jansen: Well, I think that is, of course, ongoing, what we are doing in Mail is trying to get an optimal network to ensure we are, well, let's say, organized as efficient as possible. I mean we don't have a glass ball, but we will make sure that we will do everything, put all our efforts to make it a future-proof situation. And as I said before, the, let's say, regulation or a solution for net costs is in the end, fundamental for a future viable situation. And that's why these first steps are welcome, but it's not yet enough to cover the full problem. Operator: We will take our next question. Your next question comes from the line of Marc Zwartsenburg from ING. Marc Zwartsenburg: First question is just a check because I think can you remind us on when the D+3 would kick in? Was it on the 1st of July '27? Or is it 1st of January '27? Linde Jansen: Yes. The proposal from the minister, which was done in the beginning of October was for the 1st of July 2027. So that is six months earlier than in the previous proposal from the minister. Marc Zwartsenburg: Yes. And then the quality has moved from 95% to 92%. That’s correct? Linde Jansen: Yes, correct. Yes. Marc Zwartsenburg: Then your Mail volumes, the minus 5% in Q3, there was a little bit of election in there. But as I remind from the earnings call, it was only a few days and not so much volumes. Most of it would be in Q4. So, if you exclude, let's say, the slight tailwind from the election in Q3, but what would have been then the underlying mail volume decline in Q3 would have been something like minus 5%, or minus 6% something like that? Linde Jansen: 5.6%, Marc. Marc Zwartsenburg: Sorry, I didn't get that. Linde Jansen: 5.6%, it would have been. So, looking at the impact from election mail, you see that in quarter three, the impact was EUR 2 million of pieces for this quarter and the remainder of it for the fourth quarter. Marc Zwartsenburg: And why is it only minus 5.6%? Is that just seasonality? Or is it just quite different from the normal trend of minus 8% to minus 10%? Linde Jansen: Yes. I think it's indeed seasonality phasing that is playing part. Marc Zwartsenburg: Okay. So in Q4, we should just assume the normalized, let's say, minus 8%, minus 10% and then add the support from the election. Is that correct? Or is there something seasonal there as well? Linde Jansen: Yes, more or less, yes, that's correct. Marc Zwartsenburg: Okay. And a question on the Amazon news last week for the investments in the Netherlands. Can you share your view on what they're saying because they want to tie their volumes in with what they have when this world wake ups. I know it's sizable client, but the other ones are bigger clients for you. So if volume shifts from your biggest client to your smaller clients and they also have a bit of a policy to do it themselves for a part. Can you show us your view what will be the impact on your Parcel volumes? Linde Jansen: Well, obviously, we are closely monitoring these developments in the market. And well, at this point in time, it's too soon to give some color on the exact implications. But what we see more and more increasingly is we see online stores expanding and getting more and more, which is also happening now with Amazon or they are testing new services and investing in the e-commerce market. And that's obviously also what we are doing. We continue to innovate in e-commerce and expanding our delivery preferences and really carefully look at consumer preferences, for instance, what we do with our out-of-home network. And with that, yes, okay, this is, of course, an event and a news which we closely monitor. And on the other side, it is still volume in the market, and we are just making sure that we continue our strategic intent and moves, which we mentioned during the Capital Markets Day to also reflect on any new or extended customers and platforms. But too soon to tell, too soon to give exact implications for that. Marc Zwartsenburg: Maybe a bit more detail on Amazon, how big is that client for you at the moment in terms of volumes? Linde Jansen: Well, I cannot give their exact color, but it's, as you say, not the largest client. Marc Zwartsenburg: It's a top 5 client, I believe. Linde Jansen: No, no, no. No. Marc Zwartsenburg: Okay. Okay. And then my last question, if I may. You mentioned that there will be more positive impact from price in Q4. You have taken some additional efficiency measures. Is it correct that the efficiency measures, the extra, if I take the flow chart, the now from the original plan and then the bridge to the EUR 11 million, which is showing there as other cost as a positive then the EUR 2 million is then from the efficiency improvements? Is that the additional ones you mentioned? Is that the correct one? Linde Jansen: Well, of course, it consists of pluses and minus. So that's not the, you cannot simply subtract the 11% from the 9% because there are, of course, pluses and minus in there. But what we see is that we have been or are able to put additional efficiency measures in our depots, transport. And there, we see that to counter our mix effects. And that is also something which we will obviously continue for our fourth quarter, which will come on top of the ongoing adaptive measures. Marc Zwartsenburg: Because if I compare the mix effect and the price effect, basically, they are a bit similar to what we've seen in Q2. Yes, shift yet feeding through while it was supposed to yield higher price and a better price/mix on balance, and that's not showing. So I'm just curious how you see that for Q4 because if it only, if the mix effect becomes bigger and the price becomes a little bit bigger, then you still have only a very mild positive price/mix effect, then you should have quite some additional efficiency improvements in Q4 to make your outlook. That's a bit where I'm puzzled. Yes. Linde Jansen: No. Well, yes. Maybe to explain is, as said, so our price increases and yield measures, they are, we are delivering them according to plan. So that is basically what we have, let's say, in control. Looking at the mix effect, where you see that's really depending on consumer behavior, that effect, that mix effect is bigger than we, more negative than we anticipated and to counter that and mitigate that. And obviously, also inherently in yield measures is also part of moving to efficient operations. There, we see the counter effect where we can control or can mitigate that negative mix effect. So yes, correct, the mix effect we anticipated is more. So larger clients getting faster big, so to say, than we had anticipated. And to counter that, we are ensuring that we put additional efficiency measures in place to mitigate that. And to your point on the yield measures coming in, that's really gradually. It's not that from one day to the other, it all hits in. That takes a bit of time. And clearly, also this quarter is, let's say, a mild quarter in the sense that not a lot is happening. So that also is, therefore, the effect of yield measures is gradually coming in and then also, of course, more heavily as such in Q4. Operator: [Operator Instructions] We will take our next question, and the question comes from the line of, please stand by, [Indiscernible] Unknown Analyst: I have a couple of questions. And I'm afraid the first one is a bit of a long one because I think it's important to understand the right context. Last year, around this time last year, you warned us for the fact that Black Friday and Cyber Monday were so close to Sinterklaas . I think you've learned a lot from last year or you got to mention it, but I'm sure that this year it plays as well because Black Friday is on the 28th of November. Cyber Monday is on the 1st of December. Sinterklaas is on the 5th of December. With the improving consumer confidence data we've seen in recent months, this could really be a challenge. How are you dealing with it? Do you see any prebuying that as we saw last year that people try to avoid Black Friday and Cyber Monday and that sort of thing. So my key question is, how do you manage it? And are you seeing prebuying already? For example, what can you share with us in relation to the volumes in Parcels you've seen in October? Linde Jansen: Well, of course, on October, I cannot comment. That's too soon to tell. But on your question with the, let's say, the density of those Black Friday and Sinterklaas , et cetera. Well, I think that's not something new. We have been, we have had this for more years where we experienced this type of density in the holiday or in the peak season, sorry. And so, what you see is that overall, those peaks get more peaky, so to say. So that is not just something for PostNL but is a general market trend. And we are in very close contact with our customers to ensure that we really optimize knowing that these days will be in the way these days will be; that we optimize volume, value and capacity utilization for this peak period, and also take into account, of course, our experiences, which we've had previous year to ensure that we streamline that peak period as good as we can. And clearly, we are very well on time with preparing for that and are really in close contact because with our customers because it's not just PostNL who needs to have that optimal utilization in the peak period, but it's actually for the whole ecosystem. So, all players in the ecosystem benefit from that. And that's why we are in close contact with them and also clearly communicate also to consumers around this. So yes, I can't say anything different that we are fully prepared for it and ready to have this organized in the most optimal way. Unknown Analyst: Have you seen any prebuying activity? Anything noteworthy that the trend was different at the end of the third quarter, for example? Linde Jansen: No, no, I haven't seen that. No. Unknown Analyst: My second question is around international volumes. If I look at the first quarter of this year, then we saw plus 15%, second quarter, plus 10% year-on-year. Now we see plus 5% I can interpret it in 2 different ways. One is that indeed, the value over volume strategy is beginning to show. But I've also heard that new parties have come to the market like Cainiao and Dragonfly, which are especially aiming cheap Chinese volumes as long as well, they are a party in the market. One of your competitors even described them as gold diggers. What is happening there? What is it exactly? Are you indeed more cautious taking on more volume from China? Or is it the competitive environment that is changing? Linde Jansen: Well, I would say, first of all, it's good to note that I think comparing by heart versus the growth of previous year, we already had a higher base. So, the first 2 quarters are not your starting point is different. Secondly, yes, our volume value strategy is clearly something which is what we aim for, and that is also for both domestic and international playing out there. So yes, that is, I think, the combination. Unknown Analyst: Okay. And then connected to that, there have been talks about implementing handling fees on Chinese Parcels. France was the first to announce that they were considering imposing a EUR 2 per item handling fee. And I recently read something that the Dutch are intending to do the same thing, if the French do it as of the 1st of January. Any news there? And how could it impact your business because [Schiphol] is one of the main hubs? Linde Jansen: Yes. Well, let me start. It's too early to provide you with a concrete statement on the impact. But in general, PostNL is supportive of a level playing field in the different European countries. However, well, as you already mentioned, the 1st of January, such a potential additional tax would really result for us in an operational challenge. It's not feasible to implement this well, we are talking about already the busiest period in the year, and it's a very short time frame to implement such a system. And it also can be, of course, disruptive, I should say. So, like with the U.S. trade barriers, where also international postal traffic to the U.S. was on hold for a bit. So that's why we are in conversations with the government on that as well. And so, we would really plea, if it's being implemented for a careful implementation, so to involve all parties and with equal timing for all the EU countries and not to diversify between the different European countries. So that being said, too soon to give a statement on that, and we are actively in conversation to align on the best approach to make this work. Unknown Analyst: And then my final question, that's an easy one, sorry for making your life so hard, nothing personal. But on the APMs, I understood that you're currently at around 1,250 APMs, APLs, you call. Linde Jansen: Yes, that's correct. Unknown Analyst: You were at around 1,100 at year-end last year. When I look back in the annual report, the intention was to increase that number by 500 to 600 a year. I can't imagine that during the peak period, all of a sudden, you're placing 400, 500 or so of the APLs. You have better things to do, I guess. What is the time path going forward? Because at the Capital Markets Day, also you highlighted the importance of APLs just the background of efficiency and that sort of things. Why am I not seeing a stronger pickup? The DHL, for example, is north of 2,000 already. It will be more and more difficult to find the right locations at the longer you wait. Linde Jansen: Yes. Well, we indeed clearly have our ambition towards over 3,000 in 2028. And what we see is that it's also about the size of the lockers which you place. So, amount of lockers is one thing, but size, how many of these lockers are in one APL is we are placing bigger sizes than initially planned. And yes, we are progressing on that. And clearly, you have to deal as well with all the governmental regulations with that, and we are clearly on top of it to deliver towards our ambition for the long term. And as said, we see positive developments in the utilization of the lockers which we place and as said, which are bigger lockers than we initially placed. So yes, that is basically where we stand. Unknown Analyst: So basically, what you're saying is there will be a catch-up in the years ahead. Linde Jansen: Yes. Yes. Operator: Okay. Then we have one last one, a follow-up from Mark, if I'm correct. So that will be then the last one for today. Marc Zwartsenburg: Yes, that's correct. A quick one. You issued a press release on the 5th of September that is asking the minister to withdraw the obligation of the USO. That's 2 days away that the 2 months are done. Should we expect some news flow in the next few days? Or can you help me with the timelines? Linde Jansen: Well, indeed, correct, we asked for within 2 months. But obviously, that is not in our control. So yes, I would say expecting it this month, but depending obviously on the time lines on the side of the government, and that is not something we can control. Marc Zwartsenburg: So could be any 6 months basically or without a date that's how. Linde Jansen: Yes, exactly, exactly. they don't confirm by then and then you get the answer. That's not how it works. Marc Zwartsenburg: And on the appeal of the cost compensation, is there. Linde Jansen: It's the same. It's also depending on there. So yes, you are just basically depending on their side and also on the legal system. So yes. Marc Zwartsenburg: Yes, I thought it was more like a court case thing that at some point, you need an outcome or is it not the case? Linde Jansen: No, no, we haven't received any guidance on when we can expect it. No, not at this point in time. Inge Laudy: Well, then we conclude our Q3 '25 results for now. Thank you all for participating and speak to you soon. Thank you all.
Operator: Welcome to BioNTech's Third Quarter 2025 Earnings Call. I will now hand the call over to Doug Maffei, Vice President, Strategy and Investor Relations. Please go ahead. Douglas Maffei: Thank you, operator. Good morning and good afternoon, everybody, and thank you for joining BioNTech's Third Quarter 2025 Earnings Call. As a reminder, the slides we'll use during the call and the corresponding press release can be found in the Investors section of our website. On the next slide, you will see our forward-looking statement disclaimer. Additional information about these statements and other risks are described in our filings with the U.S. Securities and Exchange Commission, or SEC. Forward-looking statements on this call are subject to significant risks and uncertainties and speak only as of the date of this conference call. We undertake no obligation to update or revise any of these statements. On Slide 3, you can find the agenda for today's call. I'm joined by the following members of BioNTech's management team: Ugur Sahin, Chief Executive Officer and Co-Founder; Ozlem Tureci, Chief Medical Officer and Co-Founder; and Ramon Zapata, Chief Financial Officer. With this, I'll hand the call over to Ugur. Ugur Sahin: Thank you, Doug, and warm welcome to you all as you join us today. As BioNTech has grown, our vision has remained constant, namely translating science into survival. We are building a global immunotherapy powerhouse, a fully integrated biopharmaceutical company with the science, scale, capabilities and the aim to deliver multiple approved therapies and reach patients in need. Cancer remains a systems problem, heterogeneous across patients and variable within individual tumors. We believe the future lies in rationally designed combinations, pairing potent and precise mechanism of action that create biological synergies. To this aim, we have purpose built a diversified clinical pipeline spanning mRNA immunotherapies, next-generation immunomodulators, ADCs and other targeted agents that enable development of potent, personalized precision medicines and novel-novel combinations across solid tumors. Our goal is to address the full continuum of cancer from resected high-risk tumors in the adjuvant setting to advanced and metastatic disease to treatment-resistant and refractory cancer. Our strategy concentrates capital on 2 priority pan-tumor programs that are designed to anchor various combinations. One is Pumitamig, formerly BNT327, a PD-L1 VEGF-A bispecific that unites checkpoint inhibition with vascular normalization in 1 molecule. We believe Pumitamig is particularly suited as a next-generation IO backbone to combine with chemo ADC and other immunomodulators. The other is mRNA cancer immunotherapy that is designed to activate and educate the immune system with precision. Our mRNA cancer immunotherapies have advanced in randomized late-stage trials with focus on the adjuvant setting. Both approaches have disruptive potential and align with our vision. We believe these programs could establish new standards of care and improve survival outcomes. Together, these programs provide breadth, optionality and scalable registrational path across solid tumors. We are investing deliberately scaling clinical development, building manufacturing that ranges from personalized to large-scale production and preparing for commercialization in key markets to reach patients in need. Now turning to how our achievements in the quarter relate to our vision and strategy. We see Pumitamig as a potential standard of care across diverse tumor types, spanning settings already treated with checkpoint inhibitors and those where checkpoint inhibitors have not demonstrated benefit. With our partner, BMS, we are executing a broad registrational program. This quarter, we made significant progress in advancing Pumitamig, taking concrete steps towards our registrational plan. In Q3, we progressed enrollment in 2 global registrational trials in lung cancer and remain on track to initiate the TNBC Phase III this year. This keeps us aligned with our target of first potential launches before the end of the decade. Across the portfolio, more than a dozen signal-seeking studies progressed. Either with chemo backbones to expand into additional indications or at novel-novel combinations with BioNTech proprietory assets. Importantly, we advanced clinical mono agent profiling of potential combination partners, helping to derisk dose, schedule and safety assumptions for future registrational design. These steps, including Phase III recruitment momentum, initiation of new combination cohorts and deeper combination partner characterization are all about informing the next wave of our registrational trials planned with BMS from now onwards. Turning to our mRNA cancer immunotherapy platform. In October, we presented Phase II trial updates for BNT111, our fixed candidate in anti-PD-1 resistant refractory melanoma and for Autogene cevumeran, our fully personalized mRNA cancer immunotherapy in first-line treatment of metastatic melanoma. Our data reinforces our view that adjuvant settings, where tumor burden is low and immune control is most effective represents, where mRNA immunotherapy can deliver the most significant benefit to patients. Ozlem will share details on how this readout sharpening our development focus. This quarter, we hosted our second AI Day. It underscores that we are not only pioneers in new pharmaceutical technologies, but a fully integrated AI-tech bio company with AI tools that enable discovery and development of innovative medicines. We showcased AI-based approaches designed to convert complex dimensions of data diversity into personalized therapy development. We demonstrated 2 distinct strengths of our AI capabilities, addressing inter-patient heterogeneity and intra-tumor variability and driving precision and potency in our treatment approaches. With regard to our COVID-19 vaccine franchise, which is partnered with Pfizer, we successfully launched our variant adapted vaccine for the current season following regulatory approval. With these launches in major markets and with a strong balance sheet, over EUR 16 billion in total cash, equivalents and securities, we have the resources and the flexibility to fund the oncology transition, while maintaining a disciplined P&L. Simply put, we are transforming scientific advances into late-stage programs in our priority oncology program across indications. In parallel, we are building the capabilities and the financial strength to translate positive data rapidly into market opportunities and most importantly, into patient benefit. With that, I will hand over to Ozlem to discuss our clinical execution and near-term data readouts. Özlem Türeci: Thank you, Ugur. I'm glad to be speaking with everyone today. I'll start with a top line status of the programs that are heading our pipeline before moving to specifics. Firstly, with our PD-L1 VEGF-A bispecific antibody Pumitamig, we are executing a broad registrational program in partnership with Bristol-Myers Squibb. Second, for our mRNA cancer immunotherapies, we have recently provided 2 Phase II updates that support and inform our current development strategy. And third, for Trastuzumab-Pamirtecan or TPAM, our HER2-targeted ADC known previously as BNT323 that we developed with our partner, Duality, we continue to progress towards first BLA submission now planned for 2026, subject to regulatory feedback. We are evaluating TPAM as a monotherapy into a randomized Phase III trials, 1 in metastatic endometrial cancer and 1 in breast cancer. For both studies, we expect data in 2026. We have also initiated a signal-seeking trial evaluating the novel combination of TPAM with Pumitamig. For Pumitamig, let me recap the clinical development framework, our refined 3 wave plan that we are pursuing with our partner, BMS. Wave 1 aims to establish Pumitamig in 3 foundational first-line indications, small cell lung cancer, non-small cell lung cancer and triple-negative breast cancer through global registrational Phase III trials. Wave 2 and 3 aim to expand the opportunity of Pumetamic by amplifying its differentiation, and we do this in 2 dimensions: first, through signal-seeking studies in combination with standard of care across tumors that inform our indication strategy and prioritization; and second, through novel-novel combinations, notably with our ADCs that enhance efficacy. We have delivered tangible progress on all these 3 waves in Q3. Regarding Wave 1, in small cell lung cancer, the global Phase III is recruiting and the Phase III dose is locked based on the dose optimization data set with a safety profile consistent with known PD-L1 VEGF chemo experience. In non-small cell lung cancer, the Phase II part of the seamless Phase II/III trial achieved full enrollment and the Phase III portion is recruiting. In TNBC, we remain on track to initiate the global Phase III this year, targeting the PD-L1 low segment, where unmet need is highest. This slide shows additional studies. These are supportive studies for dose finding, setting refinement and regional programs that contribute to the body of evidence supporting our 3 foundational global Phase IIIs. Wave 2 serves as our expansion engine. We now have more than a dozen chemo-based signal-seeking studies across tumor types and lines of therapy. In Q3, we opened new cohorts and continue to mature data sets that will feed into our pivotal planning. This helps to ensure that the next registrational wave is evidence-led and prioritized by benefit risk profiles, patient population size, well-informed study design and commercial opportunity alongside other key factors in our decision matrix. Spearheading this next round of pivotal trials, we are initiating 2 trials in partnership with BMS with registrational intent for Pumitamig in combination with chemotherapy in first-line microsatellite stable colorectal cancer and first-line gastric cancer. Wave 3 elevates the potential of Pumitamig through novel-novel combinations to maximize its clinical impact, reinforce class differentiation and set up a multiyear pathway to sustain the value and the longevity of the drug into the new decade. Here, several combo cohorts of Pumitamig with our ADCs or other novel compounds are already enrolling and have gained momentum in Q3. Initial data over the next year will inform decision-making for our first pivotal combinational regimen. In parallel, we are continuing mono-agent profiling of potential combination partners to set clear baseline for dose safety and sequence. Taken together, Q3 was a quarter of strong clinical execution that strengthened our registrational core, widened our expansion engine and advanced the novel-novel combination rationale that we believe will further distinguish and elevate Pumitamig over time. Let me now highlight 2 Q3 focal points. First, our first-line small-cell lung cancer registrational program and why the recent updates are catalytic. And second, our advances in mono agent profiling for refining our combination strategy. Small cell lung cancer remains a challenging immunologically cold disease in which responses to immune checkpoint therapy tend to be short-lived, resulting in modest gains over chemotherapy alone and low long-term survival. Over the last 18 months, we have built a cohesive evidence base across multiple Phase II studies in first- and second-line small cell lung cancer initially in China and now globally, showing encouraging activity and a manageable safety profile. This quarter, at WCLC, we reported the first global data from our Phase II dose optimization study in untreated extensive-stage small cell lung cancer, evaluating 2 dose levels of Pumitamig plus chemotherapy. All patients irrespective of dose had disease control at 20 mg per kg we observed a confirmed objective response rate of 85% and a median progression-free survival of 6.3 months. 30 mg per kg yielded a confirmed objective response rate of 66% and a median PFS of 7 months. Median overall survival data were not yet mature. Safety remained consistent and manageable with low discontinuation and no new signals beyond those typically seen with chemo and PD-L1 VEGF agents. 2 points are worth emphasizing. First, dose clarity, which is a critical derisking step for any registrational program. The global dose optimization readout allowed us to lock the Phase III regimen at 20 mg per kg every 3 weeks. Second, consistent performance across regions. Earlier China data sets in first-line extensive stage small cell lung cancer showed robust activity and manageable safety. The global Q3 data are consistent with those findings, which further strengthens our confidence in Pumitamig's benefit across patient populations and practice patterns. Together, these results support our ongoing global Phase III ROSETTA LUNG-01 trial, which compares Pumitamig plus chemotherapy against atezolizumab plus chemotherapy in untreated small cell lung cancer. In parallel, in China, we continue with second-line randomized Phase III trial of Pumetamic plus chemo versus chemo alone. This quarter, we expanded our Pumetamic small cell lung cancer program to include novel-novel testing, and we launched signal-seeking studies of Pumetamic plus our B7H3 ADC, BNT324 in both first- and second-line small cell lung cancer. As Phase III readouts and Phase I/II ADC combination data sets mature, we will be increasingly well positioned to select and advance additional regimens designed to establish long-standing presence in small cell lung cancer. This brings me to our strategy for advancing combinations of Pumetamic with other novel agents, one of our key differentiation approaches. The cornerstone is establishing mono agent evidence of activity, durability and safety before we decide to pair with Pumetamic. For our B7H3 ADC, BNT324, our mono agent database has expanded significantly over the last 12 months. B7-H3's broad expression profile aligns well with Pumitamig's expand tumor opportunity. In small cell lung cancer, BNT324 as monotherapy achieved an objective response rate of 56% with deep tumor shrinkage across the waterfall, an unusually strong single-agent signal in this setting. In non-small cell lung cancer, activity was observed in both squamous and non-squamous disease, including an EGFR mutant subset with an objective response rate of 21%. In heavily pretreated metastatic castration-resistant prostate cancer, we observed meaningful tumor shrinkage with BNT324 and a durable radiographic progression-free survival with a manageable safety profile. Recently at ESMO, we reported data for our TROP2 ADC, BNT325 in second-line plus TNBC with an objective response rate around 35%, disease control rate of roughly 81% and median progression-free survival of about 5.5 months. Also in Q3 for our HER2 ADC T-PAM, we saw a substantial expansion of the monotherapy data base by the DYNASTY-Breast02 Phase III trial, our partner DualityBio conducts in China that met its primary endpoint of PFS improvement versus trastuzumab emtansine in pretreated patients with HER2-positive un-resectable or metastatic breast cancer. T-PAM is another promising combination partner with the potential to expand Pumitamig's therapeutic reach into the HER2-expressing tumor spectrum. Taken together, these data provide a clear monotherapy baseline and help us set the bar for add-on benefit from Pumitamig plus ADC combinations. Across these programs, the mechanistic rationale is consistent. VEGF-A blockade can normalize vasculature to improve ADC delivery, while PD-L1 inhibition can convert ADC-mediated cytotoxicity and antigen release into a broader durable immune response, aiming for deeper debulking plus immune control. These represent complementary mechanisms that single agents cannot engage simultaneously. So operationally, we made 2 key advances in Q3, continued mono-agent profiling to refine dose and sequence and codification of our add-on benefit threshold and expansion of Pumitamig plus ADC cohorts across prioritized settings. Of note, our go/no-go decision-making process is driven by a holistic evaluation that goes beyond efficacy signals and safety profiles. We strategically assess market opportunity, unmet needs, competitive dynamics and weigh other key factors to ensure every decision aligns with our mission to deliver transformative benefit for patients. Moving now to our second oncology cornerstone, mRNA cancer immunotherapy. iNeST is individually manufactured per patient to target personal neoantigens. The biology and our clinical experience point to greatest relevance in earlier disease settings, where lower tumor burden allow the immune system to consolidate control. Our ongoing randomized Phase II trials are designed to test that premise in a rigorous way. Off-the-shelf FixVac that includes BNT111 for melanoma, BNT113 for HPV16 positive head and neck cancer and BNT116 for non-small cell lung cancer targets shared antigens and is intended to pair with checkpoint inhibitors and increasingly our next-gen backbones. We continue to advance execution and evidence generation across multiple tumor settings, while keeping optionality around where and how FixVac is best positioned longer term. This quarter at WCLC, we presented results for BNT116 plus cemiplimab as consolidation treatment in unresectable Stage III non-small cell lung cancer. We also presented data at ESMO from 2 randomized Phase II trials in melanoma, 1 with BNT111 FixVac and the other for Autogene cevumeran iNeST. I will briefly walk you through the melanoma readouts and their implications. Starting with BNT111 FixVac in the high medical need population of patients who had relapsed or not responded to PD-1 treatment. The Phase II study evaluated BNT111 plus cemiplimab against a historical control objective response rate of 10% reported for anti-PD-1 treatment in this setting. The study included 2 calibrator monotherapy cohorts to characterize the safety of each agent and its activity on objective response rate. The objective of this design was signal characterization, not cross-arm efficacy claims. In the monotherapy cohorts on progression addition of the second agent was permitted. More than half of the patients in each arm opted for this addition, after a median duration of [ IVA ] monotherapy treatment of around 4 months. The study met its prespecified primary endpoint by rejecting the null hypothesis of an ORR of 10% with statistical significance. The ORR of the combination was 18%, including deep and durable responses. Notably, 2/3 of the responses were complete responses, supporting the depth of activity. Follow-up showed a positive impact on long-term survival. 37% of patients were still alive after 24 months, 21% were free of tumor progression. Safety was manageable, driven largely by expected mostly grade 1, 2 cytokine-related events consistent with the mRNA platform. BNT111 monotherapy also demonstrated objective responses and a consistent safety profile. Taken together, these results support that BNT111 is active in this difficult post-IO setting and provide us useful footing to guide setting selection and optimal combinations going forward. Turning to iNeST. The data presented at ESMO come from our randomized Phase II trial evaluating Autogene cevumeran in combination with pembrolizumab versus pembrolizumab alone in first-line metastatic advanced melanoma. As previously disclosed, the trial did not meet the primary endpoint of a statistically significant improvement in progression-free survival. That said, we observed a numerical trend favoring the combination and overall survival. In the combination arm, 12 months overall survival was 88% and 24 months overall survival was 74% compared to 71% and 63% in the pembrolizumab arm, respectively. Of note, crossover was allowed and patients randomized to pembrolizumab received the combination at progression. For the overall survival analysis, those patients remain in their originally assigned arm, which can dilute the observed treatment effect over time. We observed robust neoantigen-specific T-cell responses in the majority of evaluable patients with multi-epitope breadth and persistence of T-cell clones well beyond induction, indicating that the mRNA therapy is mediating the intended biological activity that we want to achieve. The translational readouts give us 3 actionable insights. First, T cell response breadth correlates with activity. Within the combination arm, patients who mounted a broader neoantigen-specific T-cell response experienced longer progression-free survival, supporting our ongoing efforts to maximize antigen breadth and to target early and low tumor burden disease with still proficient immune cell priming capacity. Second, immune cell PD-L1 matters. We saw a trend of improved overall survival for the combination in tumors, where immune cell PD-L1 was high, while tumor cell PD-L1 did not discriminate overall survival in this data set, supporting that low tumor cell PD-L1 should not exclude tumor types from vaccine PD-1 strategies. Third, signal in IO-insensitive biology. There was a trend of improved overall survival with the combination in tumor mutational burden low patients. Precisely the population that typically gains less from IO. This is consistent with the concept that the vaccine can supply immunogenic targets, when endogenous mutation load is limited and further encourages development in settings such as pancreatic cancer and MSS colorectal cancer with low tumor mutational burden and unresponsiveness to IO. Altogether, these mechanistic insights support our ongoing randomized Phase II trials, both the specific indications we have chosen, which is colorectal, pancreatic and bladder cancer as well as our focus on the adjuvant setting, where tumor burden and heterogeneity is lowest and T-cell proficiency is still high. Now looking ahead, what comes next? We will continue to generate and present new clinical data across our oncology pipeline, data that directly steer late-stage decisions. For Pumitamig, we will share early data from our TNBC program in December, including from our dose optimization cohorts, which are central to defining the Phase III regimen. From our ADC platform, we expect additional monotherapy updates from BNT324 in cervical cancer and platinum-resistant ovarian cancer, from BNT325 in TNBC and from BNT326 in HER2-null and low hormone receptor positive breast cancer. These studies explore indications defined dose and sequence guardrails and set the add-on benefit bar for Pumitamig's novel-novel combinations. For the randomized Phase II trial evaluating Autogene Cevumeran monotherapy treatment versus watchful waiting in adjuvant ctDNA-positive Stage II high-risk or Stage III colorectal cancer, we expect an interim update in early 2026. The efficacy evaluation of the primary endpoint of disease-free survival is projected for the end of 2026, when the data set will have reached the intended maturity. Then later this year, we plan to present data together with our partner, Onco C4 from the nonregistrational first part of the ongoing global Phase III trial evaluating our anti-CTLA-4 antibody, Gotisrobart versus chemotherapy as a second-line treatment for squamous non-small cell lung cancer. Overall, these upcoming data points advance the same theme. Evidence-led prioritization by establishing dose finding and mono ADC baselines to further refine Pumitamig registrational path and leverage randomized setting-specific readouts to position our mRNA immune therapies where they are most likely to succeed. With that, I will now turn the presentation over to our CFO, Ramon Zapata, for the financial update. Ramón Zapata-Gomez: Thank you, Ozlem, and a warm welcome to everyone who has joined today's call. I will begin by reviewing our financial results for the 3 months ended September 30, 2025. Note that all figures are in euros unless otherwise specified. The total revenues reported for the period were EUR 1.519 billion, an increase from the same quarter in 2024, which was EUR 1.245 billion. This increase was mainly driven by the recognition of USD 700 million as part of the BMS collaboration in the third quarter of 2025. For context, in total, we expect to receive USD 3.5 billion in upfront and noncontingent cash payments from BMS between 2025 and 2028. We expect to recognize this as revenue in increments annually over the development phase of Pumitamig. For the third quarter 2025, we reflected USD 700 million in our revenues. Moving to cost of sales. This amounted to approximately EUR 148 million for the third quarter of 2025 compared to approximately EUR 179 million for the same period last year, driven by lower inventory write-downs. Research and development expenses were approximately EUR 565 million for the third quarter of 2025, compared to approximately EUR 550 million for the same period last year. R&D expenses were mainly driven by the initiation of late-stage trials for our immunomodulators and ADC programs and partly offset by cost savings resulting from active portfolio management towards our priority programs. SG&A expenses amounted to approximately EUR 148 million in the third quarter of 2025 compared to EUR 150 million for the same period last year. The decrease was mainly driven by lower external costs, partially compensated by our ongoing commercial build-out. Our other operating results amounted to approximately negative EUR 705 million in the third quarter of 2025 compared to approximately negative EUR 355 million for the same period last year. Our other operating results for the third quarter of 2025 was primarily influenced by the settlement of a contractual dispute. For the third quarter of 2025, we reported a net loss of EUR 29 million compared to a net income of EUR 198 million for the comparative prior-year period. This was mainly driven by the effect of settlement disputes. Our basic and diluted loss per share for the third quarter of 2025 was EUR 0.12 compared to basic earnings per share of EUR 0.82 and diluted earnings per share of EUR 0.81 for the comparative prior-year period. At the end of the third quarter of 2025, our cash, cash equivalents and security investments totaled EUR 16.7 billion, including the USD 1.5 billion upfront payment received from BMS. Our strong financial position empowers continued investments in our late-stage priority programs and preparations for commercialization of our diversified oncology portfolio. Turning to the next slide. We are updating the company's financial guidance for the 2025 financial year. Our previously issued revenue guidance range for 2025 was $1.7 billion to $2.2 billion. And today, we are increasing it to $2.6 billion to $2.8 billion. This is mainly driven by the recognition of USD 700 million from our BMS collaboration. Further guidance considerations, such as those related to our COVID-19 vaccine business, including inventory write-downs from COVID-19 vaccine sales in Pfizer's territories as well as expected revenues from the pandemic preparedness contract with the German government and revenues from our service businesses remain unchanged. Turning to expenses. We are lowering our prior 2025 financial year R&D expense guidance by EUR 600 million to a new range of EUR 2 billion to EUR 2.2 billion. This updated guidance reflects our active portfolio management that has enabled significant R&D efficiencies. As part of that, we follow a rigorous go/no-go decision-making across all development stages as part of the prioritization efforts. This allows us to focus on the programs in our portfolio, which we believe represents the largest opportunities. Consistent with our commitment to disciplined and sustainable growth, we are also improving our full-year guidance for SG&A and capital expenditure for operating activities. We are reducing our full year SG&A expense guidance by $100 million to a range of $550 million to $650 million as a result of ongoing cost optimization initiatives. We are also reducing our full-year guidance for capital expenditures for operating activities to a range of $200 million to $250 million to better reflect our targeted investment in manufacturing. Aligned with our disclosures earlier in the year, we expect to report a loss for the 2025 financial year as we continue to invest in our transition to become a fully integrated commercial oncology company. As Ugur outlined, we continue to focus on executing our strategy around 2 pan-tumor product opportunities, Pumitamig and our mRNA cancer immunotherapies. We currently have multiple ongoing Phase II and III trials across these programs, reflecting our strategy to bring novel combinations to patients. We expect to generate additional meaningful data for these programs in the months ahead. As we advance, we will continue to maintain rigorous financial discipline and remain focused on achieving long-term sustainable growth. Before concluding, I would like to invite you to watch our annual Innovation Series R&D Day event on November 11. During the R&D Day, we plan to provide a deeper dive into our oncology strategy, including plans for Pumitamig and our mRNA immunotherapy candidate. Thank you for your ongoing support and interest as we continue to create value for cancer patients, society and shareholders. With that, we would like to open the floor for questions. Operator: [Operator Instructions] We will now take our first question. From the line of Tazeen Ahmad from Bank of America Securities. Tazeen Ahmad: I wanted to get a sense about how you're thinking about the market opportunity for MSS CRC and first-line gastric cancer. Can you just talk about how your product can be particularly differentiated from what's currently used? Douglas Maffei: Tazeen, thank you for the question. We lost your audio there a little bit. Could you just -- sorry, could you just repeat that question? I just want to make sure we get it correct. Tazeen Ahmad: I wanted to ask a question about the market opportunity for MSS CRC and for first-line gastric. I wanted to get a sense of how you think about the opportunity relative to the competition? Douglas Maffei: Thank you, Tazeen. We got it this time. So that was a question about how we think about the CRC first-line opportunity in gastric and how it compares to the competitive field. So Ozlem, would you like to take that question? Özlem Türeci: Yes, I can take that question. Both indications as CRC and gastric first-line are still high medical need indications. And we think that the combination of VEGF-A and PD-L1 blocking from a biology point of view, has a rationale for development and has the potential of improving the clinical benefit for these patient populations. Operator: We will now take the next question from the line of Terence Flynn from Morgan Stanley. Terence Flynn: I had 1 question and then 1 just clarification. So for BNT323, was just wondering, if you can share any more color on the delay in the BLA filing in terms of the gating factor here? And then on the new R&D guidance, just want to clarify that, that reflects the assumption of some of the BNT327 expenses by Bristol-Myers and that, that was the driver of the change here, if there's other prioritizations that fed into this? Douglas Maffei: Yes. Okay. Thank you, Terence. So 2 clarifications in there. So maybe if we do the R&D guidance first, and I'll direct that one to Ramon. And then Ozlem, I'll direct the BNT323 BLA progress question to you after that. Ramón Zapata-Gomez: Thank you for the question, Terence. I would say that the lower guidance on R&D is not about reducing spending on BNT327. We are updating this guidance to reflect the lower R&D expenses for the year. The reduction is mainly driven by the phasing of certain programs and a deliberate focus on our key strategic priorities, meaning BNT327 as you rightly mentioned. We demonstrate disciplined portfolio management, but I would say it's too early to say whether this represents a structural shift. Depending on the pace of our late-stage programs, including the expanded efforts on Pumitamig, R&D spending will remain at similar levels or increase again next year. I think what really matters is that we continue to allocate resources with focus and flexibility to maximize long-term value and support our key strategic priorities and programs. Douglas Maffei: And Ozlem, would you now like to take BNT323? Özlem Türeci: I can take the second question, Terence. The reason why we -- originally, we guided towards end of '25 for BNT323 BLA submission. This moves now into '26 because we have continued discussions and conversations with the FDA to further understand additional data needs and are generating this information. The plan is still to submit in '26. And in '26, we will also get for this program data from our ongoing breast cancer study. Operator: We will now take the next question from the line of Daina Graybosch from Leerink Partners. Daina Graybosch: Thank you for the question. I have a question on the overall strategy with Pumitamig of Establish and Elevate as 2 steps. And why you're taking that approach versus in some indications doing them simultaneously let's say, in multi-arm Phase III studies with ADC combos and Pumitamig on top of traditional standard-of-care chemo to leapfrog, particularly where you have some early data with the ADC in an indication and the competition is fierce. Douglas Maffei: Thank you, Daina, for that question. So that's a question about our strategy for Pumitamig and the various stages, the various steps to our strategy with Establish and Elevate. So I'll direct that question to Ozlem. Özlem Türeci: You are actually right. We have this 3-wave strategy, Establish, Expand, Elevate. And even though we call it 3 waves these are activities, which are going on in parallel. We have a certain focus on the chemo combination or combinations with standard-of-care because these studies can be simply started much faster, and we have a focus on speed to be really first to market in certain indications. However, there is data generation in combination studies ongoing in these indications with our ADCs, for example, and will come very soon also following this established waves. Operator: We will now take the next question from the line of Asad Haider from Goldman Sachs. Nick Jennings: This is Nick Jennings on for Asad and the Goldman team. Given that the BNT327 Phase III trial in triple-negative breast cancer is initiating this year, could you provide any insight as to what we can expect to see in the Phase II details coming up at SABCS. And is there any new information we can expect that provides additional confidence in the Phase III success? Douglas Maffei: Thank you, Nick, for that question. It's a good one. So just to recap that from Pumitamig the Phase III triple-negative breast cancer, which is initiating and Ozlem, the specific question is whether we can provide any additional details on the Phase II results that we'll be presenting SABCS. Özlem Türeci: So we will present some more efficacy data, safety data and also dose data. Operator: We will now take the next question from the line of Akash Tewari from Jefferies. Manoj Eradath: This is Manoj for Akash. Just 1 question. So we recently saw HARMONi-3 trial in first line and the CLC making some changes to look at primary PFS and OS statistical analysis separately for squamous and non-squamous populations. So considering these changes, do you still think ROSETTA-02 trial in BNT327 plus chemo is sufficiently powered for PFS and OS endpoints in the Phase III portion. Will there be any trial change, any trial-design changes based on these new information? Douglas Maffei: So it's a little hard to hear some of the details on that, but I heard you talking about HARMONi-3 and whether that may have any read-through or effect on the way that we're conducting our trials for Pumitamig. So I'll direct that question to Ozlem. Özlem Türeci: Yes, we are constantly with upcoming new data, reevaluating our statistical analysis plans for ongoing trials, and we'll also look into this specific trial. Operator: We will now take the next question from the line of Yaron Werber from TD Cowen. Yaron Werber: Great. And I had a quick follow-up for Ozlem on BNT323. Just that the need to generate more data to support filing, can you be -- maybe a little bit more explicit? Do you need to generate -- it sounds like you're going to have more data, as you noted, in breast cancer next year. And so is the thought to then file for breast cancer next year. And what was the feedback for endometrial cancer? And do you still plan to file for that? Or maybe just give us better clarity. Özlem Türeci: Yes, maybe I was misleading for the endometrial cancer discussions with FDA, have nothing to do with the ongoing breast cancer study. It's not about generating new data. It's about follow-up data and further analysis. So that pushes the time line a bit into '26, but does not change our submission strategy and our plans for BNT323 overall. Yaron Werber: Okay. And that's for breast cancer. And then what about endometrial cancer? What's the plan there? Özlem Türeci: No, no, no. Endometrial cancer is our first submission. This is what we said all along. Originally, it was planned for '25. We -- this is pushed out to '26 because, as I said, we are in discussions with -- it's in pre-BLA discussions with the FDA and providing further data breast cancer, the breast cancer study, Phase III study is ongoing, will readout later in 2026. Operator: We will now take the next question from the line of Mohit Bansal from Wells Fargo. Mohit Bansal: So again, a question on VEGF PD-1. One key comment we get from KOLs or experts is that with these bispecifics, it does look like that they are better VEGF inhibitors, but it doesn't look like that the PD-1 is -- the component is better. So I mean, how do you think about that? And in the context of these -- this bispecific showing an OS benefit in lung cancer trials, how important it is for PD-1 to be better at this point, given that -- we are seeing good PFS benefit, but OS is kind of on border line. So I would like to get your thoughts on that. Douglas Maffei: Thank you, Mohit. So a question generally around how much confidence we or others have in the bispecific class. And you mentioned that VEGF binding is maybe better, but PD-1, you're saying maybe not as good in bispecifics. And specifically, that OS benefit in lung. So direct that question to -- Ozlem? Ugur Sahin: I can start and Ozlem can take the second part. Is it okay, Ozlem. Özlem Türeci: Yes, sure, please. Go ahead. Ugur Sahin: Yes. Let's start with our confidence. Our confidence is increasing into this drug class. And the confidence is not based on better VEGF better PD-L1s, but what the antibody really does as a bispecific molecule and we are seeing now that this is getting more and more clinical data that this is not only called on PFS, but also have an impact in OS. And maybe, Ozlem, if you would like to add mechanistic understanding how that could also be helpful. Özlem Türeci: Yes. Mechanistically, in principle, our preclinical data, and that was also part of develop of -- preclinical development and selection process for this antibody shows that blocking of PD-1, PD-L1 pathway, as well as the VEGF-A blocking in the respective preclinical settings is robust and it's not inferior to what you would see with the individual antibodies. Having said that, we also think that the fact that we have a PD-L1, not a PD-1 arm here as an additional elements to the mode of action, namely targeting of this molecule into the tumor micro environment. And this, again, is a very good condition to amplify both on the PD-1, PD-L1 side, but also on the VEGF receptor signaling side all the effects on economical and non-economical effects of these 2 targets. So this is the preclinical piece and mode of action piece, but the clinical data has to -- to tell the truth from the data we have across tumor indications. This is not yet Phase III data. We are very confident that the activity has PFS effect in certain important indications and also duration of progression-free survival starts to look good. Operator: We will now take the next question from the line of [indiscernible] from BMO. Malcolm Hoffman: This is actually Malcolm Hoffman for Evan from BMO. Thinking about the guidance range for this quarter, could you quantify how much of this reflects the relatively stronger quarter for COVID versus just general updates for the BMS collaboration and U.K. government agreements. I know you mentioned most of this was tied to the collaboration, but I was curious, if there were any minor changes on the COVID front would be helpful to think about the relative contributions there. I appreciate it. Ramón Zapata-Gomez: Thank you, Malcolm. So let us talk a little bit about the revenues. And I will refer to your COVID-19 question, but I also think it would be helpful for the audience to understand that bit of the BMS revenue. So on COVID-19. So for COVID-19, we continue to see a stable position with a strong market share and stable pricing. U.S. vaccination rates are roughly 20%, which is in line with what we had anticipated. We have always assumed lower volumes versus last year. So overall, the business is performing within our expectations for the year. While the broader market remains uncertain, we continue to lean on our strengths like strong brand recognition, reliable supply and rapid variant adaptation, and we do expect to close the year in line with our outlook. Now if we talk about the BMS revenues, the updated revenue guidance mainly reflects the collaboration with BMS, as you rightly point out. And under this agreement, we will receive a total of USD 3.5 billion in upfront and on continuing cash payments between 2025 and 2028. While the timing of cash inflows and revenue recognition deferred revenues will be recognized in broadly equal amounts over the next 3 years, with the remaining balance recognized together with a final payment in 2028. This will provide a clear and predictable contribution over the next several years. Operator: We will now take the next question from the line of Joshua Chazaro from Evercore ISI. Mario Joshua Chazaro Cortes: This is Josh on for Cory Kasimov. On your and your partner's decision to push Pumitamig into gastric cancer, did you see compelling clinical data, not sure if this is presented or not? Or is this push into this new indication based off your understanding of the mechanism of action? Douglas Maffei: Thanks, Josh, for that question. So it was a question about Pumitamig and our announced decision to move into gastric cancer, what was that based on? Have we seen any data that we can speak to that support that decision. So Ugur, would you like to take that question? Ugur Sahin: Yes. We have emerging data for Pumitamig in gastric cancer and as an indication, which -- for which checkpoint blockade is approved. It's an indication that we have seen responses in combination with chemotherapy and an indication where we see based on the data that we've got in other GI indications. A clear room for improving over standard of care. Özlem Türeci: And also the mechanistic rationale that anti-angiogenic and PD-1 targeting approaches are validated approaches in gastric. Operator: We will now take the final question from the line of Jay Olson from Oppenheimer. Jay Olson: We're curious about your collaboration with Bristol-Myers Squibb. And can you talk about the governance structure and which party makes the decisions for new trials and who leads the new clinical trials when you initiate them? Douglas Maffei: Yes. Okay. Thank you, Jay. Thanks for that question. It's an interesting one about how our collaboration with BMS works mechanically. I can't say that word. So Ozlem, I'll pass that over to you, who makes decisions for [ Auriga ], who makes decisions on clinical development. Özlem Türeci: But it's a classical approach with multiple collaborative arms. We have a JSC in which we discussed all the indications so far or indicate all decisions that are made are based from interest of both partners, but both partners have the opportunity to do combination trials with their products. Yes, regardless whether the other partner is interested to join directly or not. So we have a lot of flexibility in this collaboration aiming really to do all kind of studies and to exploit the pipeline of the other partner as exhausted as possible. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us today. My name is Tyler. I will be your conference operator for this session. Welcome to Grab's Third Quarter 2025 Earnings Results Call. [Operator Instructions] I will now turn it over to Douglas Eu to start the call. Douglas Eu: Good day, everyone, and welcome to Grab's Third Quarter Earnings Call. I'm Douglas Eu, Director, Investor Relations and Strategic Finance at Grab. And joining me today are Anthony Tan, Chief Executive Officer; Alex Hungate, President and Chief Operating Officer; and Peter Oey, Chief Financial Officer. During this call, we will be making forward-looking statements about future events including our future business and financial performance. These statements are based on our current beliefs and expectations. Actual results could differ materially due to a number of risks and uncertainties as described on this earnings call, in the earnings release, and in our Form 20-F and other filings with the SEC. We do not undertake any duty to update any forward-looking statements. We will also be discussing non-IFRS financial measures on this call. These measures supplement, but do not replace IFRS financial measures. Please refer to the earnings materials for a reconciliation of non-IFRS to IFRS financial measures. For more information, please refer to our earnings press release, remarks and supplemental presentation available on our IR website. And with that, I will turn the call over to Anthony to deliver his opening remarks before we open it up for questions. Ping Yeow Tan: Thank you so much, Doug. Really appreciate everyone being here with us. This quarter marks another vital step forward in our journey, not just in our financial performance, but in how we are building a more resilient tech-driven platform for the long term. Our growth was a key standout this quarter, accelerating to new records as product-led innovations drove nearly a 6 million year-over-year increase in monthly transacting users to 48 million. This fueled a 24% year-on-year increase in on-demand GMV or 20% on a constant currency basis. At the same time, we continue to maintain cost discipline and leverage our ecosystem scale to drive profitable growth. Group adjusted EBITDA rose 51% year-on-year to a new record of $136 million, marking our 15th consecutive quarter of sequential profitability improvement. Our adjusted free cash flow also improved by $185 million year-on-year to $283 million on a trailing 12-month basis. Now these achievements are the direct result of our consistent focus on improving accessibility, affordability and reliability. This has enabled us to continue growing earnings for our driver and merchant partners, while expanding our marketplace, bringing new users on the platform and deepening engagement and loyalty among our user base. As we head into the final stretch of 2025, we expect to exit the year on a high note. We remain on track for our financial services loan portfolio to exceed $1 billion and for full year on-demand GMV growth to accelerate from 2024 levels. As a result, both our Mobility and Delivery segments are well on track to exit the year at record GMV levels. With our teams executing with focus and AI unlocking new growth and efficiency frontiers at unprecedented speed, we are confident in our ability to drive sustainable long-term value for our users, partners and shareholders. With that, I'll now open the call for questions. Operator? Operator: [Operator Instructions] And your first question comes from the line of Pang Vitt with Goldman Sachs. Pang Vittayaamnuaykoon: Two questions for me. Number one, on the competitive landscape. Can you help us discuss some of the latest that you've seen on the competitive landscape, especially in Indonesia? You delivered a strong 24% year-on-year in your on-demand service overall. Wondering whether there's any color you can share for what is the growth you have achieved in Indonesia? And what have led to your strong outperformance versus peers? That's question number one. Question number two, can you discuss further on your latest update in guidance? What have led you to increase the guidance? And can you help us break down estimate by segment? Alexander Charles Hungate: Alex here. Let me take your first question, and Peter will take the second question. On Indonesia, it's a key market for us. Our business continues to perform strongly there. It remains a very competitive market. But what we're seeing is that the product-led growth strategy that we've been talking about for the last few quarters is driving an increase in MTUs for both deliveries and mobility, particularly the affordability, strategy is bringing in a lot of GrabBike and GrabCar Saver users at the lower end of the pricing ladder. And at the top end, Indonesia still has a lot of wealthy customers, and we've launched GrabExecutive there for mobility, and there's a lot of domestic tourism and business travel, which is helping drive our high-value rides and our priority food delivery services. We're also growing GrabMart, which is helping to drive those elevated levels of the delivery at GMV growth that we're seeing. So overall, it's a reflection of microcosm of what we're doing across the group. I would say you can't see these in the numbers, but I can tell you that there's strong growth in Indonesia, and a strong sequential margin improvement as well. So we're very comfortable with what we're doing in terms of the market position and our penetration of the overall opportunity in Indonesia, which remains huge and something we continue to be excited about as we invest in that country. Peter Oey: Pang, on your guidance question. Look, you've seen our numbers from Q1 to Q3, how we've been performing. And we're continuing to have that consecutive quarter-on-quarter growth in our EBITDA guidance, and part of that is the top line growth that you're seeing in the business that Alex just talked about. You've got that nice momentum in our deliveries business, growing at 26% clip. You've got our mobility business also growing at 20%. So -- and let's not forget also our financial service is growing at 40% revenue and our loan book continues to hit all-time high. So you've got nice momentum just overall from the top line side. But also at the same time, we continue to be very disciplined on our cost structure. You see our regional corporate costs increasing only 8% on a year-over-year basis. But what's more important now that we're seeing about 150 basis points improvement in operating leverage as a percentage of revenue of our regional corporate costs. And that gets critical as we continue to make sure that we're spending in the right areas. So we expect the strong top line growth to continue into the quarter where fourth quarter is usually our strongest quarter, and we're on track to make sure that we deliver all the things that Alex mentioned about affordability, reliability, accessibility. And so with that, we are more confident in raising our EBITDA guidance to the $490 million and $500 million for the full year 2025. I do want to caveat that as we enter into Q1, which is around the corner for us, it's one of our more softer season, which is really very traditional for us. So -- but we do expect to maintain that profitable growth going into 2026. Operator: Your next question comes from the line of Alicia Yap with Citigroup. Alicis a Yap: Congratulations on the solid set of results. Two questions. First, could you elaborate a little bit on your MTU growth? Have you seen any major differentiations in terms of the user profile you added this quarter compared to last few quarters. For example, is that more female this quarter, any more of the younger generations or any like the second or the lower-tier cities that contributed to the bigger additions of the new user this quarter? So any metrics that you could share would be helpful. And then second question is, given the successful conversions of the product-led innovations to drive the order growth and also the higher frequency per user as well as your explorations into the GrabMart and also the grocery business, so following few quarters of the accelerated GMV growth for your delivery business, how should we be thinking about the growth rate for the fourth quarter this year and also into 2026? Should the growth rate be normalizing around maybe mid- to high teens or would that be possible to stay above the 20% growth for 2026? And then if you are able to grow faster than the high teens or even 20% mark, would that mean your margins expansion will be more gradual or even potentially see margin flattish or declining for next year? Alexander Charles Hungate: Thanks, Alicia, for those questions. Let me take those 2. So MTU growth, as you saw, on-demand MTUs grew 14% year-on-year. In fact, DTUs grew even faster. So our daily transaction are growing faster than our monthly transactions. So we are succeeding in our goal of being part of the daily lives of Southeast Asian. On demand transactions, the actual transactions grew 27%. So you can clearly see that increase in frequency effect as well. And this is very much part of our strategy for driving the flywheel of increased demand, increased supply, improved quality of services and driving further demand after that. In terms of the demographics, Saver deliveries obviously have been instrumental in acquiring new users, growing frequency as well over the past few quarters. So almost 1/3 of our deliveries MTUs, joining the platform, the new MTUs are coming through Saver deliveries. So that's an important driver of the flywheel again this quarter. It's similar for transport, where we see GrabBike Saver and GrabCar Saver also bringing in a lot of MTUs. At the same time, as I mentioned earlier, when I was answering Pang's question, the high-value services are also growing fast. So high-value rides grew 66% year-on-year. And then priority delivery is also growing fast. So we're seeing growth at both ends of the pricing ladder, which is healthy. But the critical thing is that we're also being successful in cross-selling and retaining these new users to build long-term value -- long-term customer value. So what you can see overall, if you look at the GMV per MTU, so despite the strong growth in MTUs, the GMV spend per MTU grew 7% year-on-year. So I think that shows that your affordability strategy is both bringing in new customers, but also with our cross-sell is allowing us to deepen the value for each of those customers. So this growth effect is distributed both across big and small cities, you asked about that. But I would say that it skews to younger customers for the Saver products. But it does show that our product-led flywheel for deliveries and mobility is spinning faster and faster. And then your next question about growth rates going forward. We still feel that the -- our MTU penetration of Southeast Asia is low, when you consider the size of the population and the growing spending power. So when you look at what's driving these elevated growth levels in the last three quarters where we've managed to accelerate quarter after quarter, you can see that there are three elements, which I feel are all sustainable going forward. One is the product-led viral growth. Without increasing consumer incentives, we're able with group orders and family accounts to bring in new users, so the ecosystem is self-generating and bringing in new users on its own. We've also got this very strong GU base, GrabUnlimited is the biggest subscription program, paid subscription program in Southeast Asia. The users grew again 14% year-on-year to another all-time high. So they now represent over 20% of our delivery MTU base. This is also a sustainable driver of future growth. And then we have this adjacent GrabMart opportunity where now we have this functionality called GrabMore where a food user can just add on a grocery order to the food delivery that they're about to receive, proving to be very popular, and that will allow us to penetrate more and more of our large food base so that we can keep GrabMart growing. It's already growing at 1.5x the size of food, but we think there's potential to increase that penetration. In terms of the margin impact, we will be disciplined in driving sustainable growth, but also focusing on the absolute EBITDA growth. If you look at the margins this quarter, in fact, they've improved both for mobilities and for deliveries. As we've said in prior quarters, sometimes we'll launch new products and we'll promote those new products, and that will mean margins dip down. But overall, you can see that the margins this quarter have recovered to the average levels for the year. So there's no change in our margin outlook that we stated for the longer term. We still expect to get deliverers to 4% plus and mobility to 9% plus. So we believe we can do this while not sacrificing growth. As you heard earlier, we expect fourth quarter on-demand GMV to grow sequentially from the third quarter. So we will exit 2025 at record GMV levels and make a healthy entry into 2026. And we do expect margins for deliveries to continue to grow from these levels into next year even while we invest into new product initiatives and the grocery growth where we're seeing stronger and stronger traction. Operator: Your next question comes from the line of Navin Killa with UBS. Navin Killa: I had a couple of questions. One is with regards to your balance sheet. Obviously, strong cash balance, you raised the CBs earlier this year, and the business continues to be free cash flow positive. So how should we think about the use of this cash going into the next 12 to 18 months? And then secondly, in the context of some of the growth conversations that we have had, just wanted to understand how you are seeing the macro environment. And I mean, if you were to split this growth for this year between, let's say, macro market share gains and the impact of some of these initiatives that you've launched around new products, how would you qualitatively think of these three factors driving the growth? Peter Oey: Navin, it's Peter here. Let me kick it off with your first question around capital allocation, and I'll ask Anthony to chime in around the macro -- your question about macro. On the capital allocation framework, no change in terms of how we're thinking about it. And we've always been -- our focus as always on three pillars. The first 1 is around investing for organic growth. And you're seeing that in the business, the profitability of our business and the growth that you're seeing, and some of that came from also some product adjacencies and tuck-ins that we've done as part of that profitable growth that you're seeing. But the organic growth has been really critical. One way that we've been deploying the balance sheet is on our loan book. If you look at the loan dispersal for Q3, for an example, we hit roughly $3.5 billion on an annualized basis on that dispersal. So Q3 alone was up roughly about 56% on a year-over-year. And that's a majority of that is on our balance sheet itself. So it's a great use of capital for us. It yields a higher rate of return. Actually, it returns above our average cost of capital for us, and we'll continue to use that balance sheet as we recycle those loans. That's just one example in terms of organic. We're also obviously deploying some of those capital in terms of investing in terms of new products that we're earmarking for 2026. On the second pillar is around what we call very highly selective M&A, which are more opportunistic and those are a lot more where it's more speculative also. But those have a very high bar, as you know, and we've always talked about this. But where we have been investing in some of the longer-term bet that we're looking at for things such as autonomous vehicles. And we've deployed some of those capital in making in those critical investments that we're leaning into. You've seen the announcement that we made with WeRide for an example, May Mobility as part of our strategic pillar in terms of making sure that we are the pioneer and we're leaning in, in terms of autonomous vehicles deployment here in Southeast Asia. But overall, as a framework that M&A is a very high bar for us, and we want to make sure that the synergies that we can extract is of a greater value. And then third, where there's excess capital, Navin, we'll obviously look at returning it to our shareholders. So those remain critical. Those three things that we believe in the recent capital raise that it will give us strategic flexibility in the interest of our investors. We'll continue to look at and explore those longer-term growth that Alex mentioned and how do we create the best value for our shareholders. But we are always, always prudent in terms of how we are managing our capital and our balance sheet. So hopefully, that answers the question. Anthony, on the macro? Ping Yeow Tan: Thanks, Peter. And thanks, Navin, for a really good question, especially on the macro environment. So look, in Southeast Asia, there's been a lot of positive focus recently. As many of you are aware, Malaysia hosted the ASEAN Summit earlier this week, and President Trump visited a region to finalize trade negotiations with several of the Southeast Asian countries. I want to call out was the peace agreement between Thailand and Cambodia. These have been two very significant and positive events for the region, and we are seeing signs of tourism recovery in Thailand as the country heads into its seasonally strongest quarter of the year. Now to, Navin, your second part of your question, are we seeing weakness in consumption? The short answer is no. Our platform is proving to be highly resilient. We're not seeing a broad-based slowdown. In fact, our motto is built for this exact environment point to two key reasons. One, our strategy is countercyclical. The uncertainty in many ways actually accelerates our flywheel. We are seeing a healthy increase in partners coming into our gig platform to find income. And that, of course, improves supply. This also enables us to reduce wait times and enhance reliability and most importantly, it lowers prices for our users, which our users really appreciate. This increases our affordability and grows the overall user base, as you saw in our numbers, which is our key strength. Also, our focus on affordability is paying off. So this isn't new. Our focus on affordability, which we began in 2023, with products like Saver delivery, Saver transport, that was explicitly designed for this purpose. These services are now essential for users, enabling them to manage their wallets effectively. So this makes us a must-have service not a nice to have, which protects us from a pullback in discretionary spending. Look, but the reality is we may not be immune to macro trends, but our strategy is designed to be resilient and even opportunistic in this landscape. So we continue to reinforce this by partnering with governments as well. For instance, in Indonesia, we've been running what we call the Kota Masa Depan, which is a future cities program in partnership with the Ministry of Micro, Small, and Medium Enterprises, where we have worked to support small businesses and digital upscaling across nearly 20 cities. And in Vietnam, our AV launch is really to design to drive better NPS and also lower partners costs. These on-site projects, they strengthen our ecosystem and create a more sustainable, profitable business for the long term. So we are confident in our strategy and our outlook. Operator: Your next question comes from the line of Venugopal Garre with Bernstein. Venugopal Garre: Two questions for me. First question is more something that you discussed earlier in the call about the GrabMart business, the grocery business, which is outpacing the growth of full delivery. I wanted to really understand in terms of regions that are driving that growth for you, especially geographic regions and more importantly, I want to understand what are those big initiatives that you would need to incrementally take to make this a much, much larger segment? The reason I'm asking this is because grocery on an absolute basis is perhaps still relatively smaller in terms of penetration compared to the overall TAM that is there in the region. So newer models like with commerce, any thoughts around -- any change in landscape around the models that you might use to really scale up this business? That's the first question. The second one is more of a follow-up on the investment side of question that was discussed. I wanted to understand the investments that you have done in the autonomous tech company. This is largely to secure tech, or is it more in the nature of financial investment? And more importantly, could you also outline the current progress with respect to the rollout on autonomous. Alexander Charles Hungate: Thanks, Venu. This is Alex. Let me take the first question. I think Anthony will take the question about AVs. So you're right. Our deliveries -- our groceries business, GrabMart, is relatively small compared to the rest of deliveries. It's only about 10% of deliveries GMV today. So it's very small compared to the TAM that you correctly identified is out there. We are seeing GrabMart grow across all markets. And one of the drivers for that is the rollout of GrabMore, this capability that allows customers to add groceries to their food orders for the same delivery cost, proving to be very, very powerful for cross-sell into groceries. So GrabMart continues to outperform, growing 1.5x faster than food delivery segment. And we've also seen that the users of both food and mart demonstrate order frequencies that are 1.8x higher than food-only users. So we know that it's a great driver of stickiness and loyalty and long-term value. In terms of the various business models, we are experimenting about -- with some of the newer business models that would open up more TAM for us. So in Malaysia, where we have Jaya, we are experimenting with quick commerce around certain Jaya stores where we can really sweat the inventory and store assets. So without increasing our fixed cost, we're able to drive up the volume of orders quite significantly. Even though the experiments there are primarily grocery focused, but we have seen a nice step-up in demand when quick delivery is an option for customers. So I think there's something to build on there, and we've started to experiment in 1 or 2 other countries as well like Indonesia, where we work very closely with certain partners. So yes, I think watch this space, very early days for us. Grocery focus, but we are definitely exploring new models which can help us unlock future large TAM. Now Anthony, on AVs. Ping Yeow Tan: Yes. Thank you, Venugopal. Let me talk about the plans and our strategy regards to AVs. Now our recent AV investments are all very deliberate. It's part of our long-term strategy to lead the adoption of AV and remote driving across Southeast Asia and to secure the technology supply chain through strategic partnerships. While AVs are already a reality in parts of the world, we expect a longer ramp-up to mainstream adoption in Southeast Asia for a few reasons. One, Southeast Asia is still behind in the cost curve. Labor costs in Southeast Asia are significantly lower compared to the U.S. with Singapore being an exception. Now we believe, therefore, it will require considerable time for the unit economics to reach parity with human drivers. Second, the crossover point will occur when AVs become safer and even cheaper than alternative options before we see a huge transformation in the way current transportation is served. Now as the largest mobility platform in Southeast Asia, AVs and remote driving are something we must lean into. We'll continuously learn about the technical optimization of AV performance on our platform. We'll also maintain a hybrid fleet approach for the foreseeable future and intend to collaborate very closely with regulators across Southeast Asia. Now one of our top priorities as part of this I would say, essential part of this strategy is to work alongside regulators to upscale our driver partners as part of this shift. Our focus is to find the new jobs that will be required as we shift towards a hybrid transport world. We see new kinds of jobs emerging. For example, drivers could be remote safety drivers, data labelers, they could change LiDARs, cameras and so forth. So as we lean into AVs and remote driving with several partnerships already under our belt and more underway, we remain very excited about the longer-term opportunity to build capabilities to operate a word-class hybrid human and autonomous fleet to deliver the best experiences for our customers. Operator: Your next question comes from the line of Wei Fang with Mizuho Securities. Wei Fang: I have 1 quick one on the Financial Services segment. We've seen very strong growth there, right, but with sizable bad loan provisions, of course. I was just wondering if management can talk about what you have learned about the newly acquired customers in recent quarters? And how you are fine tuning your risk provisions going forward? That's it. Alexander Charles Hungate: Thanks, Wei. Let me take that one. You're right. We are accelerating our financial services growth, and we are reaffirming our goal to exceed a $1 billion loan book after excluding credit loss provisions by the end of 2025. You can see in this quarter, there's been an acceleration of loan dispersals. So we're now at a $3.5 billion run rate on an annualized basis, growing 56% year-on-year, so very strong underlying growth. We do see, as you mentioned in your question, an increase in the expected credit losses coming out of the models that we run to make sure that we're providing well for the future growth. It's a natural consequence of that growth. It's an upfront provisioning that occurs in the lending -- accounting of lending. And it's obviously offset against the revenue generation from those loans over their lifetime. So you should expect with this kind of accelerated growth that the ECLs will run through the P&L and sit on the balance sheet as you're seeing in the current quarter. What I would say though is if you look at the underlying performance of the Financial Services business, without taking those provisions into account, then our Financial Services segment adjusted EBITDA improved actually quarter-on-quarter and year-on-year by about $4 million quarter-on-quarter and $17 million year-on-year. That's an important measure for you all to see because it underlies that if we -- if we don't need to pull down all of those provisions, it underlies how we're getting operating leverage out of the growth of the business. You asked what we were learning from the customers. We are, in many ways, a data science company. So we are learning every single second of every single day from how our models ingest all of the different data points that we can generate through our ecosystem. Unlike banks, we can access a lot of unconventional markers of likelihood to repay that allow us to underwrite segments of the population in Southeast Asia that currently cannot access credit. These are often known as underbanked, unbanked. So a lot of what we do is about financial inclusion, bringing people into the market, allowing them to actually establish a credit record. About 1/3 of our customers could not access data because they weren't on a credit bureau -- could not access credit because they weren't on a credit bureau prior to borrowing from Grab and our financial subsidiaries. This is very important to us and very much aligned with our mission. The repayment record actually from those customers is very pleasing. They know that when they repay us, they start to establish a credit record and they start to, therefore, become included in the financial and economic prosperity of Southeast Asia. So we're very pleased to learn more about those customers and to bring them into the financial services domain for the first time. So the credit models -- every time we launch a new product, the credit models obviously take time to be established. But what you're seeing this quarter is that across the banks and GFIN where you're starting to see that we've got credit models maturing. We've got new models being launched all the time. We're increasing the cycle speed with which our data science improves these models. So that's why going into this fourth quarter, if you run the numbers, we're predicting an acceleration of the loan book size. And we also are indicating that, that acceleration will continue into 2026. Operator: Your next question comes from the line of Mark Mahaney with Evercore ISI. Mark Stephen Mahaney: Two questions, please. One, on the consumer incentives. Just talk about how we should think about where those will hold going forward. There's been a little bit of volatility, some leverage one quarter, deleverage another quarter. Is it -- are you running them at a level that you think is sustainable going forward? Or do you think we should expect to see leverage against those in the future? And then second, just talk about advertising intensity or what I mean by that is advertising revenue, the ramp that you're seeing. Just a little more color on where that is now? How much -- any new pockets of strength in there and how to think about growth for that particular segment over the next year or 2? Alexander Charles Hungate: Mark, Alex here. Let me take that. On consumer incentives, you can see it's come down a little bit this quarter. We think that we can keep it at around this level going forward because we're getting a lot of boost from the viral product rollouts that we've been doing. And so we find that the incentive level doesn't have to be as high despite the fact we're accelerating growth for both deliveries and the mobility also staying relatively high and transaction volumes in mobility going up to 30%. That's all been achieved with a reduction in incentives quarter-on-quarter. But I would say for -- in terms of modeling, you can assume that the incentives stay at around this level on the consumer side. In fact, this quarter, we've had to actually boost the driver incentives slightly because the growth in demand was so high. We needed to make sure that we can maintain the fulfillment quality and reliability of our services. So you can see that in contrast, there's a slight increase in driver incentives. So going to the core question, these incentives can go up and down a little bit quarter-to-quarter. But in terms of modeling steady state, I'd say we're about the right levels where we are today. The ads piece. The bigger we get, the more interesting we get for advertisers, whether those be the merchants on the platform or FMCG customers who want to advertise across the platform as well. I think for the food side, we see continued penetration of advertising. So we expect that to continue to move up gradually into next year. We've got total -- the total number of quarterly active advertisers joining our self-serve platform actually increased 15% year-on-year. So we're continuing to see new advertisers coming on to the platform, which is great. Many of them coming in through our self-serve capabilities. And then the average spend of the active advertisers on that self-serve platform grew 41%. So once people try the platform, they see it, it works very well for them in terms of ROAS, and they start to increase their spend. So these are both lead indicators of what we expect, which is a continued increase in the penetration of our deliveries GMV with ads. As we grow the GrabMart business, which we've talked about a lot on this call, we expect to be able to attract more and more FMCG advertisers. And there, if you look at some of the models in other parts of the world, you can see the penetration of advertising for grocery -- online grocery businesses is actually even higher than online food businesses. So that's something that as the scale increases, we should be able to improve as well. So we're very bullish about the advertising part of our business. In fact, I would say it's a key driver of margin growth in the longer run. Operator: Your next question comes from the line of Divya Gangahar with Morgan Stanley. Divya Kothiyal: I had two questions. One is actually a continuation of what you just said, Alex, on the advertising being a driver for deliveries. So my question is on deliveries margins path to 4%, could you talk about how different are the margins across countries just qualitatively and the role of some of these countries lifting up the overall portfolio margins. In the past, we've thought that Indonesia has been a drag, but looking at the competitive dynamics there, the margins for delivery seem to be relatively healthy in Indonesia at least for our competitor. So trying to understand how we look at that path to 4% from an advertising country-wise perspective as well as GrabMart and how dilutive that is to margins? So that's my first question. And my second question is on financial services. Now that we're closer to the breakeven year for fintech, could you maybe just share the framework and the milestones we need to hit over the next 6 months to be able to meet the target? And what do you see as the key risks? Also, if you can talk about some typical use cases that you're seeing for this loan book expansion, especially on the digital bank side, that would be helpful. Alexander Charles Hungate: Thanks, Divya. Yes. In general, the Mart business has a lower margin than the food deliveries at this point. But of course, that's a lot because of the speed of growth. And also because the dynamic with the FMCG advertisers is such that we get more valuable to them, the larger we are. So although we have a lot of interest from efficacy advertisers, I think we're relatively small compared to some other venues still in terms of commerce in general. And therefore, it's important that we continue this growth. And I think that's where you start to see improved margin on the GrabMart side. In terms of Indonesia, I can confirm Indonesia continues to grow strongly again for us. Our deliveries business in Indonesia grew in the high teens in this year-on-year for this past quarter. So although the margin is stable, we're actually able to generate a lot of growth from that situation. And like I was just saying, we feel that it's important to get larger in order to really realize the full opportunity from the Mart business. In other markets, for example, Malaysia, we've already reached our steady state margin target of around 4%, and that's where we're starting to experiment with some of these other models around instant commerce, as I mentioned earlier because there we can generate a lot more growth from entering into these adjacent markets based on the asset configuration that we have with Jaya Grocer doing very, very well in Malaysia, for example. So there are some differences across markets. You're absolutely right. But we're adopting a portfolio approach. So we're making sure we achieve our margin targets not just across different countries, but also across the verticals so that we can produce this kind of high growth but also maintain our margin progression towards those long-term targets that we've shared with you over the past quarters and years. Moving to Financial Services. Yes, we're coming now towards our breakeven year. I can confirm that we are reiterating that we will breakeven overall as a segment in the second half. So it's a combination of banks and GFIN and that the banks will breakeven in the fourth quarter. The milestones really relate to loan disposal growth, which, as you can see, is accelerating now through this annualized run rate of $3.5 billion in this current quarter. We started to see that the credit models are maturing nicely. We now have flexi loan products available for consumers in all 3 of the bank markets. We've just launched also a flexi loan product through our non-bank financial company in the Philippines, just in this last quarter. So we are able also to serve personal loan needs in other parts of the region beyond where we have those three banks using GFIN as the vehicle. We can share expertise about the credit modeling across those countries, which has proven to be very, very successful. As I said, we are really a data science company. So the way in which those models advance is super important to us. You can see that EBITDA can fluctuate as the ECLs flow through the P&L and into the balance sheet. So I think the key thing to watch there is that the segment adjusted EBITDA excluding the credit loss provisions is continuing to improve. So that gives us line of sight and confidence that we're going to hit those breakeven targets. So the key thing for you to watch is the loan dispersal growth. We are seeing operating leverage on the cost base, too. So we're confident that we can continue to manage the cost very tightly going into 2026. In terms of use cases, I think the last part of your question was asking about the different use cases. We are serving on the SME side, we're serving merchants that are on the Grab ecosystem. So we have tremendous line of sight of their cash flows. And therefore, the credit models have a unique advantage relative to a conventional bank that wouldn't have line of sight of those cash flows. So small businesses will be a big focus for us. The unbanked and underbanked as I mentioned, particularly gig workers were able to finance them very, very accurately. And you can see that -- well, I think we've said that the risk-adjusted returns from our lending activities are actually comfortably above our cost of capital, and they remain above that. And even as we grow at these rates, in fact, the returns improved slightly quarter-on-quarter. So we are continuing to grow very rapidly, but at the same time within the risk appetite that we've set for ourselves because of the performance of these credit models. I hope that helps in terms of some scenarios where we can provide unique capabilities to help the progress of Southeast Asia by bringing the -- bringing more and more people into the financial inclusion sphere. Operator: And your final question comes from the line of Jiong Shao with Barclays. Jiong Shao: Congrats on a very strong set of results. So first question is really the follow-up on the previous one on the food margins. I think in the last quarter, you talked about Q4 delivery margins should be up sequentially from Q3. I want to confirm that's still the case, but more importantly, looking into 2026, just want to get a better understanding on the sort of the pace of the margin expansion for the food business. And what are some of the factors may kind of make it faster or slower in terms of expanding the margins for the delivery business for '26. And my second question is around another way to monetize the delivery business. I think a couple of quarters ago, you may have talked about some of your thoughts around in-store kind of newer monetization, I recall you might have mentioned something to stop at these trials in '26. I was just wondering if there's any update around that? What may be the sort of the modality around that type of in-store monetization? Ping Yeow Tan: Jiong, let me take the food margin question that you asked about. The way we approached deliveries is a portfolio play. And Alex kind of alluded also earlier when he answered the question to Divya. So as you know, the portfolio of delivery product is quite broad and quite wide competitive to, say, to our mobility business. So if you look at it, we have the food business, and we have the Mart which is a composite of the grocery business, but also there are some other parts of the non-grocery that we also serve there. We also have other forms of food products that we have, things like group orders. We have also dine out those omni commerce product features that we've also deployed in the marketplace. So it's a real broad portfolio. So the way we think about it is the margins that you'll see in our overall deliveries is better to look at it as an overall deliveries business. It continues to be optimized. Now there will be times from quarter-to-quarter where we will invest and lean in into -- in adopting a product or when there's a product launch, and you've seen that in the previous quarters. But overall, food margin as our core business today continues to see improvement overall, which is exactly what we want to see because it's the most mature is about all deliveries, portfolio of products today. Where we are starting to invest also and also scale is in the area of grocery delivery or Mart deliveries that we've spoken a lot about is still underpenetrated. It's 10% from our overall deliveries business. We also have other products that we're pushing. If you look at our -- the cross-selling that we're doing also across our different footprint and Mart products, also it continues to increase. And we want to see more adoption of those other products that we've introduced from the beginning of this year. So as a strategy overall, it's a portfolio play. You'll see that we'll -- as a mixture of portfolio, those margins will be pretty much on an upward trajectory, but the mix between those margins will change quite a fair bit because again, the way that we're just on strategy in terms of scaling our deliveries business, that growth that you're seeing is a combination of those factors that you see on our portfolio play. At the same time, also as the countries in each of our countries also continue to execute, you'll see also the margin profile of those countries also looks somewhat a little bit also from our portfolio, different from country to country as we put on the gas on certain things, and we pull back on certain things also at the same time. So -- but overall, the trajectory is moving up in the right direction. It's a portfolio that you'll see and the monetization that comes with that also becomes really critical. And that's where Mark asked the question or Divya on advertising also is really important because the advertising piece is a wrapper that goes around our deliveries play, which is really critical. And we're bringing in more and more advertisers on the platform itself. So I hope that gives you a bit of a clarity. We don't do any in-store. We don't have any in-store in terms of offline retail or anything upside except for the Jaya portfolio that we have in the supermarket business. We do have certain gray stores that we use today, which is really important. But in terms of how we work with the offline retailers, especially is in the area of making sure we're bringing in more traffic to our food merchants. So the dine out that we do today brings today the -- all the ingredients for a user to transact from an online Grab app to an offline experience, whether it's through the in-store dining that we serve today, where they're also the reservation system that we're using now on the Grab app also that omni-commerce play becomes really important in terms of monetization, but also making sure our merchants are also continuing to increase their earnings and traffic at the same time. Operator: That concludes today's question-and-answer session. I will now turn the call back to Peter for closing remarks. Peter Oey: Well, thanks very much, everyone, for dialing into the call. We always appreciate your time. Anthony, Alex and I would like to express all our appreciation to -- especially through our driver community, all our merchant partners, and also to our users and shareholders for their continued trust on all of us here in Grab. I also want to thank you to all the Grab team for a great quarter. Thank you all. And we're looking forward to closing the year stronger than ever. We'll be on the road together with the IR team, Ken, Doug and I, we'll do our usual hitting the road, bringing the pavements. So we'll be attending various IR conferences across Europe, the U.S. and Hong Kong and Singapore over the next coming weeks. So if you wish to meet up, please just reach out to the IR team. We would love to see you in person. Until then, we'll speak at the next quarter earnings. Thanks, everyone. Operator: This concludes Grab's Third Quarter 2025 Earnings Conference Call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the EverQuote Q3 2025 Earnings Call. [Operator Instructions] I'll now turn the call over to Brinlea Johnson. Brinlea Johnson: Thank you. Good afternoon, and welcome to EverQuote's third quarter 2025 earnings call. We'll be discussing the results announced in our press release issued today after the market close. With me on the call this afternoon are Jayme Mendal, EverQuote's Chief Executive Officer; and Joseph Sanborn, EverQuote's Chief Financial Officer. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements concerning our financial guidance for the fourth quarter of 2025. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, plan, may, upcoming and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements, except as required by law. Forward-looking statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q on file with the Securities and Exchange Commission and available on the Investor Relations section of our website. Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website. And with that, I'll turn it over to Jayme. Jayme Mendal: Thank you, Brinlea, and thank you all for joining us today. We achieved record top and bottom line performance in Q3. Our team continues to help carriers and agents drive profitable policy growth amidst a healthy underwriting environment. We're making steady progress toward our vision of becoming the #1 growth partner to P&C insurance providers by delivering: one, better performing referrals; two, bigger traffic scale; and three, a broader suite of products and services. As we innovate new products, release features and further embed AI into our marketplace, we are fast evolving from a lead gen vendor to a growth solutions partner for our customers. We continue to partner more closely with carriers and differentiate our marketplace through Smart Campaigns, our AI bidding product. In Q3, we launched Smart Campaigns 3.0, which leverages our latest model to deliver better performance than our 2.0 version. For example, a customer who recently migrated from 2.0 to 3.0 saw a 7% improvement in ad spend efficiency, an early indication that the new model is materially improved. When customers adopt Smart Campaigns and experience these types of performance improvements, they often shift more budget to EverQuote. As we secure more budget, we also gain more data and as a consequence of our AI-driven systems can further improve campaign performance. As evidence of this flywheel working, in Q3, we were notified by a major national carrier that we have become their #1 customer acquisition partner in our channel for the first time. Turning to our local agent customers. We continue making progress in our evolution from a lead vendor to a one-stop growth partner as we roll out and gain adoption of additional products and services to help agents grow. As of October, over 35% of our local agent customers are using more than one of EverQuote's 4 agent products, which demonstrates broadening adoption, but also ample room for continued growth through product expansion within our existing customer base. Our consumer acquisition teams continued executing well in Q3 despite elevated competitive pressure in the insurance advertising landscape. In Q4, we have begun to ramp investments in scaling new traffic channels and programs to support future growth. Since our IPO in 2018, EverQuote has committed to growing 20% and expanding adjusted EBITDA margin by 100 to 150 basis points per year on average. Over the 6-year period through 2024, we delivered as promised with a 21% revenue CAGR and an average of over 200 basis points of margin improvement per year. As we approach the end of the year, we have confidence that we will deliver once again in 2025. And now we have set our sights on reaching $1 billion of annual revenue in the next 2 to 3 years while transforming into a multiproduct, AI-powered profitable growth solutions provider for carriers and agents. Consistent with our track record of saying what we will do and doing what we say, we look forward to updating you on our progress as we drive full steam ahead into 2026. I'll now turn the call over to Joseph to discuss our financial results. Joseph Sanborn: Thank you, Jayme, and thank you all for joining. Today, I will be discussing our financial results for the third quarter of 2025 as well as our guidance for the fourth quarter of this year. We delivered record results in the third quarter, achieving new quarterly highs for revenue, variable marketing dollars of VMD, adjusted EBITDA and net income. In addition, we continue to enhance our operating performance and drove expanding levels of profitability as reflected by our record adjusted EBITDA margin. Total revenues in the third quarter grew 20% year-over-year to a record $173.9 million. Revenue growth was primarily driven by stronger enterprise carrier spend, which was up over 27% from the comparable period last year. Revenue from our auto insurance vertical increased to $157.6 million in Q3, up over 21% year-over-year. Revenue from our home and renters insurance vertical increased to $16.3 million in Q3, up 15% year-over-year. VMD increased to a record $50.1 million in the third quarter, up 14% from the prior year period. Variable Marketing Margin, or VMM, was 28.8% for the quarter. Turning to operating expenses and the bottom line. As we scale and drive top line growth, we continue to expand operating leverage in our business through disciplined expense management and by utilizing AI and other technology investments to deliver incremental efficiency. In the third quarter, we grew net income to a record $18.9 million, up from $11.6 million in the prior year period. Q3 adjusted EBITDA increased to a record $25.1 million, representing a 33% increase year-over-year and significantly outpacing the strong revenue growth we achieved during the same period. Adjusted EBITDA margin expanded to 14.4%. Cash operating expenses, which excludes advertising spend and certain noncash and other onetime charges, were $25.1 million in Q3. As expected, this was up from the previous quarter by approximately $1.5 million for planned investments in our AI and technology capabilities, but effectively flat on a year-over-year basis. We reported operating cash flow of $19.8 million for the third quarter. To note, temporary timing differences in working capital impacted our cash conversion from adjusted EBITDA compared to prior quarters. During the quarter, we repurchased 900,000 shares of our Class A common stock for $21 million from Link Ventures, which is an entity affiliated with funds advised by David Blunden, EverQuote's Chairman and Co-Founder. We believe this was an accretive use of capital, which enabled us to efficiently execute a portion of our recently announced $50 million share buyback program. This transaction approach reduced shares outstanding by 2% in a manner that did not adversely impact liquidity in EverQuote's public float. This repurchase reiterates our confidence in EverQuote's ability to generate long-term sustainable growth and free cash flow while maintaining a strong balance sheet. We ended the period with no debt and cash and cash equivalents of $146 million. We continue to operate in a favorable environment where carriers are broadly enjoying healthy underwriting margins and consumer shopping activity remains elevated. We expect these conditions to persist for the foreseeable future. Of note, approximately 80% of our top 25 historical carrier partners were below peak quarterly spend in our marketplace in Q3, reflecting ample room for additional growth. Now turning to guidance for the fourth quarter of 2025. We expect revenue to be between $174 million and $180 million, representing 20% year-over-year growth at the midpoint. We expect VMD to be between $46 million and $48 million, representing 7% year-over-year growth at the midpoint. And we expect adjusted EBITDA to be between $21 million and $23 million, representing 16% year-over-year growth at the midpoint. As we continue to deliver better-than-expected revenue, we are taking the opportunity to invest in existing and new traffic lines in Q4. While these traffic investments will further build our competitive differentiation and better position EverQuote for long-term growth, they are expected to put some pressure on VMM and VMD in the period, which in turn impacts Q4 adjusted EBITDA and associated margin. Based on the midpoint of our guidance for Q4, we're expecting full year 2025 annual growth in revenues of approximately 35% and annual growth in adjusted EBITDA of over 55%, reflecting our strong operating leverage. It is also worth noting that the midpoint of our Q4 revenue guide in combination with Q3 results implies top line growth of 20% for the second half of 2025 compared to prior record revenues in the second half of 2024. In summary, our performance year-to-date reflects our steadfast commitment to strong execution and a clear strategy. As we look ahead to 2026 and beyond, we remain focused on our goal of creating a $1 billion revenue business by being a leading growth partner for P&C insurance and delivering on our long-term target of achieving average annual revenue growth of 20% with 20% adjusted EBITDA margins, a Rule of 40 company. We believe that our clear strategy and the strength of our team and operating model will position EverQuote to deliver continued growth and expanding profitability. Jayme and I will now take your questions. Operator: [Operator Instructions] Your first question comes from the line of Maria Ripps. Maria Ripps: Congrats on the strong quarter here. Just first, just thinking about the sort of broader industry backdrop. As you pointed out, carrier profitability has been strong and some investors have been asking whether, sort of, carriers are approaching peak margins. Can you please share your view on the sustainability of current profitability levels and what that means for customer acquisition spend? Jayme Mendal: Sure. Thanks, Maria. So yes, carrier underwriting is back to like a very healthy and steady state level. Acquisition spend tends to lag the profitability a bit. And so, we still see quite a bit of room to go in terms of the advertising spend keeping pace with the profitability trends. We still got -- at least we've got one major carrier, national carrier that's in the process of reactivating in Q4. We still got 80% of our top 25 partners below their historical high watermark of spend and still certain state carrier combinations that are kind of working their way through. So the good news is these soft market cycles tend to last 5-plus years, and we think we're in the very early stages of it. So we do see some opportunity for continued strengthening as the balance of the carriers catch up in terms of their advertising spend with respect to where their underwriting profitability is now. Maria Ripps: Got it. That's very helpful. And then you've talked about sort of elevated investments in AI capabilities, technologies of data assets here in the second half of the year. To the extent you can talk about this, what are some sort of key platform features or innovations that investors should expect in 2026? Jayme Mendal: Yes. So some of our most significant investment has been in our Smart Campaigns product. That's our machine learning-based carrier bidding product. We've been getting broader adoption of that product over the course of the last year or 2, and we've been investing in improving model accuracy and adding features to those models. And all the results that we've seen so far as customers adopt Smart Campaigns and then as we upgrade to newer versions is that they drive meaningful performance in carrier improvement -- and sorry, carrier -- meaningful improvement in carrier performance. So as that happens, the net effect is the carrier will allocate more budget in our direction relative to alternatives and it helps kind of propel this flywheel of better performance, better pricing, more traffic, more data, and that helps us drive more performance. So that's the area we've been most focused on. We do expect to extend some of the AI bidding products to local agents as we turn the corner into next year, and that's an area we've been focused on. I've also spoken a bit about conversational voice. We have managed to introduce AI voice into our call workflows, and that's achieving good levels of performance. And that's really beginning to allow us to interact more with customers through sort of AI modalities, which we expect to extend from that voice modality down funnel and into others over time. Operator: Your next question comes from the line of Zach Cummins with B. Riley Securities. Zach Cummins: Congrats on the strong performance here in Q3. Jayme or Joseph, both of you could probably comment on this. But can you give me a little more insight into kind of the incremental investments that you're making into new channels in Q4? Is there any way to break out kind of the anticipated impact that you're seeing to VMM in Q4 as a result of these channels? Just trying to get a sense of what's the best way to think about VMM over the next couple of quarters. Jayme Mendal: Sure. Why don't I start and then I'll let Joseph expand on it. So the channels, there's a handful of channels that we have -- most of which we have been active in, in the past, but have subsided through the hard market and now we're in the process of rebuilding. These are some of the -- characterize them as higher funnel channels. So that could be social, video, display, connected TV, things like that. And typically, when you launch new campaigns in these channels, it takes a while to kind of get the right creative, the right bidding strategy in place. And for that period of time, when you're just the early stages of optimizing those campaigns, they tend to run at lower, in some cases, even negative margin. And so that's kind of how it flows through into the financials. The other sort of category that we're focused on is AI search. Historically, we've not done much SEO traffic here at EverQuote for better or worse. Today, I'd say that it's kind of a positive thing because we haven't been -- there's been nothing to sort of disrupt as the organic search results have changed. And so we view the AI search as kind of a clean sheet for us, and we're making some investments in beginning to build out our presence in those platforms. Joseph Sanborn: With regards to -- so just turning to the numbers on VMM. If you look at the midpoint of our guide, it's sort of close to 27% on VMM margin. We were closer to 28.8% in Q3, comparable in Q2. So when I think about the impact in the quarter, it's probably a couple of hundred basis points of investment you're doing in new traffic channels on the VMM line. So just to give you a context. And I get is how we think about VMM, in general, we still think it's going to be in the high 20s over time. It will fluctuate quarter-to-quarter based on what's going on in the broader market. I think it's important to call out, when you think about VMM margin, 2 factors. One is, it reflects the advertising environment we do not control. We do not control what the advertising environment broadly. What we do control is how we apply our models and our technology to be efficient in going after that advertising dollar. Zach, you and I have talked about this in the past, but just for context, if you look at our VMM margin being in the high 20s, go back to 2023 when our business was much smaller. The VMM margin in auto was in the high 20s, and we're $250 million, $275 million business. The fact we're 2.5x bigger now in scale, and we're having the same margin speaks to, yes, there is certainly a more competitive advertising environment and more folks going after it, but our bidding technology is working. We're getting more efficient, and that's driving results. So we'll continue to make those investments this quarter, and you'll see those benefits as we progress into 2026 and beyond. Zach Cummins: Understood. And just my one follow-up question is just the broader appetite that you're seeing from your carrier partners to ramp up budgets? I thought it was interesting to hear that 80% of your top 25 still isn't at peak spend. So just curious what you're hearing from some of these partners and how they're thinking about deploying budgets as we move into 2026. Joseph Sanborn: Sure. So maybe I'll start with where we are now in Q4. So typically, we have a seasonally down Q4, if you go on the average of seasonality for the past 7 years. Typically, Q3 to Q4 is down sort of 4%, 5% dip. We're actually showing that we're actually expecting a quarter that's up at the midpoint, actually up in the full range of our guidance. So I think that reflects that we see carriers seeing really healthy underwriting margins that we've been talking about throughout this year. As we progress through the year, some of the uncertainty has been replaced by greater certainty, whether it be the impact of tariffs on underwriting costs, whether it be the cat environment. As we've gone further into the year, they're feeling stronger, and we're seeing that result in what we're seeing today, which is them define the normal seasonal pattern and really engaging to continued customer acquisition. As you look to next year, as Jayme touched on, the backdrop remains very strong for carriers. We see an environment where the health will continue on the underwriting margins for everything we're seeing and hearing from our carrier partners. As Jayme mentioned, often the health of the carriers, it becomes before you actually see the spend pick up as fully. So I think there's continued growth you'll see from carriers into next year. And you match that on the consumer side, where we have consumers continuing to shop for alternatives. And that's a really good combination for us. Operator: Your next question comes from the line of Jason Kreyer with Craig-Hallum. Jason Kreyer: So we're hearing a lot more from carriers that are pursuing kind of strategies that would have rebating to consumers. So I'm just curious what your take is on that, if there's any impact, if that kind of takes away from budget that historically could go into performance marketing or if that has any impact on what you guys could potentially absorb from carriers? Jayme Mendal: We've been -- we have not heard anything about that in our sort of interactions with carriers. I think it's a representative of the broader underwriting environment, which, again, is quite healthy, meaning the carriers are quite profitable. And so, rebates are one way they can sort of approach that depending on what problem they're trying to solve. But I would say the overarching problem that most carriers right now are trying to solve is growth. And that's all they talk to us about, and that's reflected in how they're kind of leaning into the marketplace broadly right now. Jason Kreyer: Appreciate it. And then so last year, as we got into this time of the year, we saw somewhat of a budget flush from carriers. You had pointed out the attractive profitability metrics. Is that predicated on guide? Or I'm just curious what you are assuming in the balance of Q4 here, what's baked into the guide? Joseph Sanborn: Yes. So for the guide for Q4 is obviously assuming carriers define the normal seasonal pattern being down from Q3 to Q4. So that what the underlying basis for that is the carriers are seeing sort of pulling forward investment into this quarter. I won't use the term you used. I'll say they were pulling forward growth investment into Q4 customer acquisition from -- and I think that's clearly happening, and that's reflected in our guide. Jason Kreyer: And Joseph, that like year-end budget flush doesn't -- isn't really having much of an impact to VMM, like that's not a component of the sequential pressure? Joseph Sanborn: So I guess when you look -- when you look at the VMB line, all other things equal, Q4 -- if you have an environment where you're defying the seasonal pattern on revenues being higher than the norm, that can put some pressure on advertising costs, particularly in Q4 on some traffic here as we have broader competition from retail and holidays. So there can be some impact in VMM in this quarter from that. But I'd say that's relative to what we described earlier, that's more modest than our investments in the new traffic channels. I think theoretically, it has some impact in Q4. But I guess when I still come back to the carriers and their budgets for the period, I think we go into this saying they feel very bullish and they're reflecting that. I think relative to last year at this time, I think they're coming into this quarter seeing with a greater sense of clarity on how the year is progressing. They're quite healthy. As they progress through the year, the uncertainty they may have seen, whether it's from tariffs affecting underwriting costs or uncertainty over the cat environment, those uncertainties have been replaced by clarity. As they've gotten those, they're able to lean in early in Q4, and we're reflecting that in our guide. Operator: Your next question comes from Ralph Schackart with William Blair. Ralph Schackart: On the call today, Jayme, you talked quite a bit about transforming the model from lead generation vendor to a multiproduct provider, which obviously would be a pretty important strategic shift. Just any more color you can provide without disclosing exact products for competitive reasons. But just conceptually, just trying to figure out where you're focused on product innovation. And then can you maybe sort of talk about the evolution of this change in the model? And would you be, I guess, sort of moving away from a transactional model or sort of like entertaining new revenue model in the future? Any help on that would be great. Jayme Mendal: Yes. Thanks. Yes. So I mean, we have strong large relationships with all the big carriers and thousands of local agents. And those relationships have been built and are predicated predominantly on the sort of referral, right, the click or the lead that we're selling to the carrier or the agent. And our sense is that the carriers and the agents, we can deliver them a lot more value by wrapping sort of value-add technology, data services around that core referral product. So in the case of a carrier, the example we've talked about is giving them bidding services through Smart Campaigns, is AI-enabled bidding solution. There are other services that -- on the carrier side, will not mention at this time. On the agent side, again, the vision is to really evolve to become their one-stop shop for all things growth. So agents spend money on leads to generate growth, but there are a lot of other things that they spend money on, whether it's telephony services or calls or digital services. And we've now built out a much more robust product suite that allows us to solve for the vast majority of agents' needs as it relates to growing their local agency. So the idea is build these deeper relationships, which add a lot more value. They're built on mutual trust, more data sharing and they're built on top of some of our distinct advantages in the data that we have and the technology that we're able to build around that data just to ultimately deliver more performance for the agent, for the carrier and also allow them to consolidate to have fewer vendors to deal with. So that's like the thrust of the strategy. As it relates to the commercial model, Ralph, I think over time, the answer is yes. And we started doing this with the local agents, like we do have, albeit relatively modest relative to the scale of EverQuote, but we do have a nice chunk of recurring subscription revenue that is building with the local agents as we execute on this strategy. And so, I do think there's opportunities to begin to think about evolving the commercial model over time. But the most important thing to us right now is to get the products right, to get them adopted, to prove the value and then we build from there. Operator: Your next question comes from the line of Mayank Tandon, Needham & Company. Mayank Tandon: Congrats, Jayme and Joseph on the quarter. Jayme, I wanted to touch on the $1 billion revenue target. Is that an organic target? Or would you also factor in M&A to get to that level? Because when I think about what Joseph said, the 20% growth model, then that would get you close to $1 billion in actually 2, 2.5 years. So just curious on sort of what are the underlying drivers behind that target and whether it's organic or does it include potential M&A? Jayme Mendal: Yes. So we have a plan to achieve that goal organically. And I'll let Joseph expand on how we think about M&A in this context. But when I talk about our path to $1 billion, it's an organic path, and we've got the road map. On the distribution side, it's really about just executing the playbook, which is improving the performance for carriers and agents through use of our AI products like Smart Campaigns in order to get more budget and more favorable pricing. We can take that budget, that pricing and push it downstream back into traffic to increase our traffic share. But at the same time, we're going to be expanding into more traffic channels, as we've talked about earlier already. So accessing more traffic and winning more of it. And then we've got a lot of room to continue growing in our non-auto verticals, specifically in home and as we start to consider other P&C verticals that might make sense under that umbrella. So that's more or less the ingredients of the path to $1 billion, and we think we can get there organically in the time frame that I suggested. Joseph Sanborn: Let me look at the math, I think you kind of got there is -- [ Mike ] just for those who weren't doing the math quickly, here you know that implies it took 3 years to be sort of mid- to high teens would be the growth rate. If it took 2 years, it'd be sort of low 20s in terms of business revenue growth rate. So I think that gives you a sense of how we frame it, like we feel bullish on our ability to get here through organic means. Do we see an opportunity to potentially supplement that through M&A? Yes, we see that opportunity as well. In our minds, M&A comes back to the same criteria we've discussed previously with folks is we view it as accelerating our strategy to win in P&C being the #1 growth partner to carriers and agents in this vertical. And we think there could be opportunities to do that. We do by no means see those as necessary to achieve that $1 billion goal. Mayank Tandon: Got it. That's super helpful. And then also just turning to margins. I think Joseph, you said 100 to 150 bps is the target model. I know that's not guidance. But just as I think about that, is that going to come from eventually maybe a little bit of an improvement in B&M when some of these maybe advertising pressures abate? Or would it be more heavily weighted towards operating leverage in the model? Joseph Sanborn: So I think when I look at EBITDA, I just give some context, right? So 2023, we had none, right? 2024, we went to 11.6%. I think we brought a lot of operating leverage into the model and really focused where we were spending on our investments in technology, the things that give us greater leverage. If you look at 2025 and the midpoint of our guide implies we're actually going to gain over 200 basis points at the midpoint from 2024, sort of 13.6% whatever. So I think you're seeing us at a pretty significant clip over the past few years. As we look to next year, we always say 100 to 150 basis points on average. I'd probably say we're targeting towards the lower end of that for next year as we think about EBITDA. But I also would say that our EBITDA, we view it as continue to be high cash converting. So that EBITDA will be a very high cash conversion into operating cash flow in the period, just subject to normal working capital. And then in terms of margins, I would say we still sort of -- we continue to see VMM in the high 20s. I think it's important to give some context on this, which is, it is a market where there's things we control and there's things we don't control. We don't control the broad advertising environment where we buy advertising. So if there's more demand in that market or less demand in that market that can impact advertising costs in the period. What we do control is the investments we make in our bidding technology and how we use that technology to more efficiently acquire traffic and drive that to our carriers and agents. And so when I think about the business, I'd say we still think high 20s. It will fluctuate quarter-to-quarter based on various things going on in the market and also the investments we're making. But again, on the operating expense -- and then on the operating expense side, we certainly will see a step-up from Q4 to Q1 as we customarily do. And we'll continue to be making investments in our technology areas around AI and other areas, our data assets that we think will build. We're playing investments to win. We're not just trying to do this to drive 20% growth and get to the EBITDA margin overnight. We are going to do it in a way that's setting us up to really succeed in this market long term and really be the premier growth partner to carriers and agents in the long term. Operator: Your next question comes from Jed Kelly with Oppenheimer. Jed Kelly: Just on investing in some of the newer traffic channels, how much of this is at your discretion doing this versus some of your competitors that are probably also operating at low 20% margins. And I imagine they're doing this to drive more traffic to carriers to get more budget. So can you just talk about how much of your discrepancy versus potentially responding to competitors? Jayme Mendal: We -- it's entirely in our discretion, right? I mean we are making like investments that are very much consistent with our long-term strategy. And we think these are investments that will help us achieve that $1 billion goal, grow at 20%, get to that 20% adjusted EBITDA margin over time. So this is all very consistent with our long-term strategy. We don't -- we have -- I mean, we don't pay super close attention to how our competitors' margins or ad costs are moving around over time, right? Like we have our financial plan, and we've got a pretty good track record of achieving that plan. I can appreciate that others may choose to make certain trade-offs at various points in time. But we've had a pretty consistent track record just kind of executing our plan and staying heads down. And getting into these channels will be important for us to achieve that plan because the demand from the carriers and agents is definitely there right now. And we've got to be able to continue growing volume to meet that demand. Jed Kelly: And then just as a follow-up, how should we view your OpEx and sort of your longer-term goals as a percentage of VMM, I guess, because one could argue your VMM is actually your true revenue, right? So how should we look at that? Joseph Sanborn: Yes. I guess, yes, I appreciate you made that comment before. I continue to look like EBITDA margins in a traditional sense relative to revenues, adjusted EBITDA margins. And so they were 11.6% in '24. At the midpoint of our guide puts some mid 13.5% this quarter, so a couple of hundred basis improvement from last year. And we'll add another 100 basis points as our target for next year. And we'll continue to that 100 to 150 basis points every year and thereafter. So I think that's how we think about it. And of course, as VMD scales, of course, our -- the thing we are doing is some dollars will go to the bottom line to drive incremental adjusted EBITDA and some dollars in a given quarter will go to investment. Those investments be it principally in technology areas and particularly around AI and leveraging our data assets to help us build a longer term -- to position us for longer-term growth and competitive differentiation. And that remains our strategy, and that's how we're approaching it. And that means OpEx, you'll see those investments as we build through next year. But just as we've done this year, we've managed very carefully in terms of as we add incremental investments, you've seen us -- we said at the start of this year, they would add 100, 150 basis points in adjusted EBITDA. We added actually 200 basis points. If you look at the midpoint of our guide that is achieved. And so I think we're very good at saying what we're going to do and then execute against that and then delivering those results. Operator: Your next question comes from the line of Cory Carpenter with JPMorgan. Cory Carpenter: I had 2 financial questions. Just on the traffic investments, how long do you expect those to impact VMM margins? And do you ultimately expect them to run at parity with your other channels? That's the first question. And the second question, a lot of talk around the 20% growth target. Maybe just ask directly, is that something you think is achievable next year given the tougher comp? Jayme Mendal: Yes. So I'll take the first one. I mean the investments, typically, when we're ramping up a new channel or a new traffic program, it's 1 to 2 quarters where we're launching, we're optimizing and we're scaling. At which point, I do think that we would -- these channels would kind of blend in at comparable -- at VMM levels to our existing traffic portfolio. So we don't view this as a long term -- these channels as weighing down VMM in the long term. But there's a bit of a start-up cost that you incur when we start launching into some of the new channels. Joseph Sanborn: And then in terms of our -- how we think about top line growth, there's some context, right? As we look at -- obviously, as you point out, we've had some tougher comps relatively speaking is given the very strong growth we've had '24 into '25 as auto recovery has progressed. What we mentioned in our prepared remarks is in the second half of '25, we've had 20% year-on-year growth relative to the second half of '24, which was a record prior to this year -- second half of this year. So I think you're seeing us continuing to do well as the levels start to normalize. And then we talked about our 2- to 3-year goal of getting to $1 billion in revenue. So I'm not going to tell you on this call if we're going to get exactly 20% next year or not. But I think as we look at it, we feel very good about averaging 20% over time and importantly, getting to that $1 billion goal in 2 to 3 years, top line growth organically. Operator: Our final question comes from Mitch Rubin with Raymond James. Mitchell Rubin: This is Mitch on behalf of Greg Peters. So I was wondering if you could provide us with an update on the progress of California with carrier participation and how much impact a full panel of carriers would be? Jayme Mendal: Yes. So California has been sort of steadily kind of ramping carrier by carrier, segment by segment. And so it's -- there is meaningful spend in the state now. I think it's like a top 3 to 5 state in Q3. Of course, it is the largest state. So it's still just -- it's not quite proportional to its potential scale yet. So we view California as having still some room to grow. It's a little hard to dimensionalize that, but we think there could be still some meaningful upside left in California as we progress into next year. And we would hope to get California back to kind of a steady-state environment sometime in 2026. Mitchell Rubin: Great. So my follow-up is you guys have done a great job of managing on advertisement costs. Where is there any room for improvement? Where is most of the incremental leverage going to come from investments in technology? Joseph Sanborn: So I think the way we look at the business on is we're always looking to drive efficiency in the business, right? How do we simplify, how do we be more efficient in the business. And as we've talked about in some of our prior calls, and I think it's been one thing that's been ingrained in us as a management team is how do we think about how we spend our dollars in a way that we're getting the right return for shareholders. It's having gone through the period we did. It's sort of a silver lining in that period. So that has continued. And we're continuing to see ways that we bring more efficiency in the business. So for example, this year, headcount is up roughly 10% if I look into Q3 where we landed, but operating costs are basically the same. That reflects we are driving efficiency. We're changing the composition of the team. We're also using technology to make the team more efficient and get more productivity through the team. As we look ahead to next year, we're not seeing a lot of significant increase in headcount, but we are seeing continued investment in AI areas and including technologies that help the team leverage AI more efficiently. And so that's where I think you'll continue to see us doing that. And that will be driving, I think, a lot of leverage for us and efficiency going forward. Jayme Mendal: Yes. Just to give maybe a couple of examples, right? Like where our AI bidding technology has really allowed us to do a lot more with our traffic operations teams where we've effectively automated a huge amount of work that used to be manual. Now we've turned that and through Smart Campaigns out to our carriers and our carrier-facing teams now have to do a lot less manual campaign management on behalf of carriers. So all of our bidding automation has been a huge unlock in terms of efficiency. Within our engineering organization, we've got broad adoption now of Copilots for engineering. In some cases, we have teams that are writing code like they're just inferencing code as the primary way of writing code. So we're getting some real benefit in our engineering organization. What else? We've talked about our voice agents, right. So our call center operations, we've now begun to introduce voice agents into that to reduce some of the reliance on human call center operators. So it's really at every sort of within every function of the business, we are finding ways to drive efficiency. And we are, in fact, going function by function to sort of systematically identify activities that can be automated using GenAI or just good old-fashioned software. And that is a process that will continue all through next year. Mitchell Rubin: I appreciate the color. Congratulations on the great path. Jayme Mendal: Go ahead, operator. Operator: And with no further questions in queue, I'd like to turn the conference back over to management for closing remarks. Thank you. Jayme Mendal: Thank you. And thank you all for joining. The state of the business is strong. It's getting stronger as we continue to produce record performance quarter after quarter. We are accelerating right now our innovation of new products, features, traffic data, AI capabilities. And as we do, we're transforming from a lead gen vendor to a growth solutions partner for our customers. We are very energized to continue growing towards our $1 billion revenue goal as we build EverQuote into the lean growth partner for P&C insurance providers. Thanks all for joining today. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Myriad Genetics' Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Scalo. Please go ahead. Matthew Scalo: Good afternoon, and welcome to the Myriad Genetics Third Quarter 2025 Earnings Call. During the call, we will review the financial results we released today. And afterwards, we will host a Q&A session. Our quarterly earnings release was issued this afternoon on Form 8-K and can be found on our website at investor.myriad.com. I'm Matt Scalo, Senior Vice President of Investor Relations. On the call with me today are Sam Raha, our President and Chief Executive Officer; Ben Wheeler, our Chief Financial Officer; and Mark Verratti, our Chief Operating Officer. This call can be heard live via webcast at investor.myriad.com, and a recording will be archived in our Investors section of our website, along with this slide presentation. Please note that some of the information presented today contains projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. I will now turn the call over to Sam. Samraat Raha: Thanks, Matt. Good afternoon, everyone, and thank you for joining us today. I'm pleased with our results, the actions we're taking to execute against our updated strategy, the stepped-up urgency and rigor in how we operate, leading to growing momentum as we head into Q4 and 2026. Let me start with our results. We generated revenue of $206 million, which decreased 4% year-over-year. When you exclude previously discussed headwinds, including UnitedHealthcare's decision on GeneSight and the divested European EndoPredict business, our business was stable with Q3 of 2024. In addition, there was a material $8.6 million prior period contribution in the third quarter of 2024 that did not repeat. Factoring in these previously discussed headwinds in the prior period change of estimates, year-over-year growth was 5%. In terms of testing volume, our solid results were supported by continued strong volume growth for MyRisk in oncology at 16% over the year ago quarter. We also saw volume growth for MyRisk for unaffected at 11%. This is a meaningful improvement from past quarters and reflects our ongoing efforts to enhance the customer workflow, including EMR functionality. Mark will provide additional color in his section, but certainly, MyRisk continues to see positive demand in the market and supports our profitable growth journey. GeneSight volume grew 8% year-over-year, accelerating from the first half of the 2025, as our commercial organization continued to focus on medium and higher volume accounts. Prolaris demand continues to be stable, and test volume growth up modestly year-over-year. As expected, volume growth for our legacy prenatal products, Prequel and Foresight, while flat year-over-year, showed improvement from second quarter, as we continue to increase the volume of testing customers affected in Q2 challenges and add new customers. Turning now to profitability. We generated strong adjusted gross margin of 70.1% in the third quarter and closely manage our discretionary spend as reflected in our adjusted OpEx line. Ultimately, we reported a healthy adjusted EBITDA of $10.3 million. I'll talk about our growth strategy in a moment, and Ben will talk later about our reiteration of the 2025 financial guidance. Moving to the next slide. I want to spend a few minutes reviewing our updated strategy and why we believe we will be able to deliver accelerated profitable growth in the years to come. Our first strategic pillar is to focus on the cancer care continuum to accelerate growth. We will achieve this by leveraging and growing volume of our leading hereditary cancer test, MyRisk, and also by expanding our portfolio to include other cancer screening, diagnostic and monitoring tests. Our second strategic pillar reflects our recognition of the opportunity to meaningfully grow prenatal health and mental health revenues at or above market growth. We believe, we can achieve this by leveraging recently launched products and strengthening our commercial execution, while maintaining a disciplined level of investment and resources in these areas. Our third strategic pillar is about our focus and commitment to delivering sustained profitable growth by continuing to leverage our industry-leading gross margin profile and maintaining financial discipline. Now one can say, what's different about this strategy from before? Well, there are 5 primary differences. First, it's about intentional focus and prioritization of funding and resources on the cancer care continuum opportunity. Second, for our cancer care portfolio, it's about going beyond our strong hereditary cancer and HRD positions and also offering tests for other relevant high-growth applications, including therapy selection and MRD. Third, it's about strategic partnerships. Unlike before, we see an increasing opportunity to serve attractive market applications in a timely manner by complementing Myriad's differentiated capabilities by leveraging select partnerships. Next, it's about having the right team with deep domain knowledge and proven experience in cancer, diagnostics, genomics and commercial execution to win in a dynamic market. And with the leaders that have joined Myriad like Lou Welebob for Biopharma and CDx Services, Hosein Kouros-Mehr for Oncology R&D, Vishal Sikri for Product, and Brian Donnelly as our Chief Commercial Officer, I'm confident in the strength of our overall team. Finally, it's about strengthening execution excellence, thinking and acting with elevated urgency, leveraging industry best practices for key processes and executing with rigor and discipline. On the next slide, let me provide updates on the progress we're making on the cancer care continuum strategy, many of which will be important catalysts for accelerating growth in 2026 and beyond. We're on track to launch our updated MyRisk test this month in November, and we expect this to support strong MyRisk growth in 2026 and beyond. In terms of offerings for other attractive high-growth cancer care applications, in September, we entered into a collaboration with SOPHiA GENETICS that enables us to provide pharma customers with biomarker validation and CDx development services using a leading liquid biopsy-based therapy selection assay. We're making steady progress on our ultrasensitive tumor-informed Precise MRD test and are on track to start offering the test for clinical use in the first half of 2026. First indication will be Stage II, Stage III breast cancer in the neoadjuvant setting. In addition, Myriad will present three MRD studies at the San Antonio Breast Cancer Symposium next month, two of which were just accepted this past week as late-breaking abstracts. We'll also be presenting six additional abstracts and other oncology-related studies for a total of nine abstracts at SABCS. We're also on track to launch our first Prolaris prostate cancer test that combines the power of molecular and AI, based on our partnership with PATHOMIQ in the first half of 2026. I expect to have more exciting news regarding strategic partnerships to share with you over the coming months. Also, I want to take a moment to share that we are making changes in our organizational design and investments to help improve customer experience, gain market share, and reduce operating expenses as a percentage of revenue going forward. The actions we are taking will in part result in the reallocation of headcount and funding to support growth in the cancer care continuum. This will include the meaningful expansion of our commercial team and increased funding for commercial launch and market activation programs to support the exciting new products that I just updated you on as well as increased funding for MRD R&D. On the next slide, let me provide brief updates on our second and third strategic pillars. In June, we commenced early access for our FirstGene multiple prenatal screen that we believe will support growth in our prenatal portfolio volume profitability and has significant potential to expand the prenatal market over time. Mark will provide more details on our experience during our early access and how this supports our optimism for strong commercial launch in 2026. Regarding mental health, we expect to continue growing revenue for our market-leading GeneSight test by concentrating high-value accounts, leveraging state biomarker laws, and building on the success, we've seen over the past few quarters. In alignment with our overall strategy, we will achieve this growth for both of these businesses while maintaining disciplined capital deployment. The third strategic pillar is about our focus and commitment to delivering sustained profitable growth. The organizational redesign and efficiency actions that I shared with you earlier will support our ability to accelerate top line growth while ensuring we grow operating expenses less than revenue. Before I turn the call over to Mark, I want to welcome our new CFO, Ben Wheeler. Ben certainly isn't new to many of you. And with 14 years of experience at Myriad, he has the knowledge, skills, and demeanor that make him our ideal CFO. Personally, I'm thrilled to partner with Ben in this important time for the company. Now let me hand it over to our COO, Mark Verratti. Mark? Mark Verratti: Thanks, Sam. Turning to oncology. In the third quarter, total oncology revenue was $81.8 million, a decline of 1% over the third quarter of 2024. I would call out that our MyRisk test continues to gain share with volume growth in the affected market of 16% and 11% volume growth in the unaffected market in the third quarter year-over-year. Shifting to prostate cancer. Prolaris revenue in the third quarter grew 3% year-over-year on positive volume growth and a continued improvement year-to-date. As mentioned on previous calls, we are investing in the commercial channel and other programs to grow and regain share in this market. As an example, Myriad is on track to be the only company that will offer AI, biomarker, germline and tumor profiling testing when we launch our first AI-enabled Prolaris test in the first half of 2026. I'm also excited to call out a strategic collaboration we recently announced with SOPHiA GENETICS. We expect this collaboration to support the development and global commercialization of comprehensive companion diagnostic solutions for our biopharma partners with the potential to add an important product offering to the Myriad menu and support the growth of our companion diagnostic programs. We look forward to providing an update on our progress going forward. Lastly, I want to call attention to our September press release regarding our latest MRD publication in Lancet Oncology. Our tumor-informed ultrasensitive Precise MRD test showed clinical value in patients with oligometastatic clear cell renal cell carcinoma, which is a very low-shedding tumor and requires an MRD test in the ultrasensitive range. Importantly, the study showed that in patients who were Precise MRD negative and maintained on metastasis-directed therapy, and not on systemic therapy, had an overall survival rates of 94% at 2 years and 87% at 3 years. The data is extremely promising because it highlights that using an ultrasensitive test like Precise MRD can potentially identify specific patients on MDT, who can delay systemic therapy and all of its associated side effects based off of their ctDNA status without sacrificing overall survival rates. As Sam mentioned, we are excited and expect to start offering our ultrasensitive Precise MRD test for clinical use in the first half of 2026. Expanding on MyRisk. With our current momentum in the hereditary cancer testing, now is a perfect time to launch Myriad's expanded MyRisk with RiskScore panel. The team is excited to get this new test in the hands of our customers and drive further growth and build on our leadership in the $6 billion market. This new panel adds 15 actionable gene targets and is the only panel to meet both NCCN high-risk assessment and ASCO strongly recommended guidelines. I can't overemphasize that point enough as guidelines impact provider decisions. In fact, many of our medical oncologists and genetic counselors, those that work with pan-cancer test populations, have been very interested in our expanded panel in order to not miss any patient who may have a hereditary cancer syndrome that may impact treatment. Now moving to our women's health business. In the third quarter, Women's Health delivered revenue of $85.2 million, an increase of 3% over prior year period. We're pleased to see incremental positive momentum in hereditary cancer testing in the unaffected market with revenue growth of 4% and volume growth of 11% year-over-year. This improving volume growth trend is particularly important as it reflects EMR-related workflow improvements put in place earlier in the year. And in September, we've completed the integration of our myGeneHistory assessment into EPIC as a way to better identify patients that qualifies for hereditary cancer testing and improve the provider experience, so we are optimistic about the potential for continued momentum. We also remain confident about the ongoing progress from breast cancer risk assessment programs that enable providers to rapidly identify patients who qualify for additional screening. We continue to see positive momentum at these sites and expect to make further investments in our commercial capabilities to accelerate this program through Q4 and into 2026 to fuel growth in MyRisk volume. As for prenatal testing, in the third quarter, we saw a modest rebound in volume growth from the second quarter and expect this trend to continue. As Sam mentioned, we introduced our multiple prenatal screening test, FirstGene and expect the commercial launch in 2026. This test provides added insights to providers and has the potential to expand the overall addressable prenatal testing market. We are pleased with our turnaround times, assay performance and early customer feedback. Now turning to mental health. In the second quarter, the team generated GeneSight revenues of $38.7 million on volume growth of 8% year-over-year. We continue to drive expansion of the ordering provider base by achieving a record number of ordering clinicians over 37,000 in the third quarter. While quarterly revenue continues to be impacted by UnitedHealthcare's coverage policy change in January, we submitted additional data in Q3 and expect to review this quarter as part of their typical review cycle. While we continue to work with United to achieve a successful outcome for both parties, we continue to make forward-looking decisions assuming the status quo. We are excited and proud of our payer markets team for securing positive coverage policies across 9 states for GeneSight year-to-date related to biomarker laws. Most recently, the California Medicaid program, Medi-Cal, added GeneSight with a September 2025 effective date. In addition, we are seeing benefit from optimizing revenue cycle workflows to maximize reimbursement. I will now turn the call over to our new CFO, Ben Wheeler. Ben Wheeler: Thanks, Mark. I'm especially pleased to join you today as Myriad's Chief Financial Officer. Myriad is a company whose mission I've been fully committed to for the last 14 years, and it's an honor to now represent our team in this role. While this is my first earnings call as CFO, I've had the opportunity to contribute to many of them over the years. Let me start with a recap of our third quarter consolidated financial results. For the third quarter, we reported revenue of $205.7 million, a decline of 4% year-over-year with test volumes up 3%, but average revenue per test down 7%. The growth in third quarter test volume reflects improved execution across our portfolio. As Mark pointed out, the hereditary cancer testing portfolio saw strong volume growth in the third quarter, increasing 11% year-over-year. Our mental health business saw volume growth of 8% year-over-year as the team continues to hit its stride following organizational adjustments made earlier in the year. The reacceleration in both unaffected hereditary cancer volumes and GeneSight volumes represent important proof points in our improving commercial execution. The year-over-year headwind in average revenue per test this quarter primarily reflects three factors, two of which we've discussed previously. First, we're lapping a difficult comparison against third quarter of 2024, which included an $8.6 million positive prior period change in estimate versus an immaterial amount this quarter. Second, we continue to see the impact from UnitedHealthcare's policy change with respect to GeneSight coverage, which took effect in January 2025. The third factor reflects modest shifts in payer mix within our hereditary cancer portfolio that had a larger-than-expected impact on average revenue per test in the third quarter. As you know, payer mix can be quite fluid, and it's something we actively work to manage through our commercial targeting and revenue cycle and payer markets teams. Our fourth quarter assumptions for average revenue per test take these third quarter dynamics into account. This quarter, these 3 factors have masked our strong ongoing work by our revenue cycle, payer markets and clinical development teams as well as the generally stable reimbursement landscape. As we mentioned last quarter, we're encouraged by the progressive stance some payers are taking towards ECS coverage, even in the absence of updated ACOG guidelines, and the ongoing traction we're experiencing with health plans that have implemented medical policies that conform to state biomarker legislation. We expect these positive trends to continue supporting prenatal and GeneSight reimbursement in the quarters ahead. My last comment on third quarter revenue. Sam referenced an underlying third quarter 2025 revenue growth rate of 5% after taking into account the impact of certain items on our Q3 2024 baseline, namely UnitedHealthcare's net impact on GeneSight of $7 million, the divestiture of our EndoPredict European business of approximately $1 million and the $8.6 million impact from prior period change in estimate in the third quarter of 2024 that did not repeat this quarter. By calling out these items, we're able to show what we consider to be a clear view as to Myriad's underlying performance trends. Even with these headwinds to third quarter revenue growth, we maintained adjusted gross margins of approximately 70%. This reflects a favorable test mix, continued operational efficiencies in our labs and underscores the strength and scalability of our business model. Third quarter adjusted operating expenses decreased by $1 million year-over-year, reflecting continued cost discipline across SG&A. We remain focused on maintaining the right balance between investing for future growth and driving profitability with a deliberate effort to allocate resources to our highest strategic priorities. Next, I'll speak to Myriad's profitability and liquidity. We generated $10.3 million of adjusted EBITDA and $18.6 million in adjusted free cash flow in the third quarter. Our strong adjusted free cash flow in the third quarter reflects the timing of collections from certain payers, as we noted on our second quarter call, and we don't expect this level of free cash flow generation to repeat in the fourth quarter. That said, the combination of our strong gross profit base and positive adjusted EBITDA demonstrates the leverage inherent in our operating structure and the profit and cash-generating potential of the business. Lastly, we have a solid balance sheet and access to $220 million in capital. Next, I'll talk about additional steps we are taking to drive business results. As part of our strategy to drive sustained profitable growth, we have launched a multiyear program to invest more than $35 million in strengthening our commercial capabilities with a focus on the cancer care continuum. This investment will be primarily funded through the company's streamlined structure, continued emphasis on organizational efficiency and disciplined capital deployment. Three core areas of future investment include: one, the expansion of our commercial organization, this includes meaningful growth in our field sales team and optimizing the structure and management of target territories; two, the enhancement of commercial capabilities and tools to support new product introductions and commercial excellence; and three, increased funding for strategic R&D programs, which includes current and future clinical studies for MRD as well as other areas. Part of our organizational redesign is to move to being organized functionally going forward. With this, we're reducing management layers and eliminating other roles. We believe these important actions will accelerate revenue growth and generate long-term value. Before I conclude, I'll cover our full year 2025 financial guidance. Based on our Q3 performance and our expectations for the remainder of 2025, we're reaffirming our full year financial guidance, which includes a revenue range of $818 million to $828 million, a gross margin range of between 69.5% and 70%, and adjusted OpEx range of between $562 million and $568 million as well as an adjusted EBITDA and adjusted EPS guidance ranges of between $27 million and $33 million and a loss of $0.02 and a gain of $0.02 for the full year 2025, respectively. Now let me turn the call back to Sam. Samraat Raha: Thanks, Ben. Considering breast cancer awareness month in October that just passed, I want to take a moment to reiterate Myriad's long-standing commitment to supporting patients and health care providers with breast cancer risk assessment and medical management tools. We will continue investing in tests that help improve breast cancer care. As we noted earlier, our MyRisk with RiskScore test is considered an industry gold standard, and we're looking forward to launching the expanded panel later this month. And then in the first half of 2026 to launching our first Precise MRD test for breast cancer. As for the third quarter, we demonstrated good progress across our commercial operations and development teams. Strong volume growth for a number of our tests supported this quarter's performance, while our overall gross margin remained resilient and among the industry's best. This, combined with our ongoing focus on operational leverage, allowed Myriad to drive another quarter of positive adjusted EBITDA while investing for future growth. With clear actions now being implemented to support the execution of our updated growth strategy, the Myriad team is energized to deliver on our mission to advance the health and well-being for all, positively impacting an increasing number of patients while driving accelerated profitable growth. I'll now pass the call over to Matt for Q&A. Matt? Matthew Scalo: Thanks, Sam. And as a reminder, during today's call, we used certain non-GAAP financial measures. A reconciliation of the GAAP to non-GAAP financial results and a reconciliation of the GAAP to non-GAAP financial guidance can be found in our earnings release and under the Investor Relations section of our website. Now we're ready to begin our Q&A session. [Operator Instructions] Operator, we're now ready for the Q&A portion of the call. Operator: [Operator Instructions] And our first question will be coming from Puneet Souda of Leerink Partners. Puneet Souda: Maybe, Sam, a higher-level question here. With the commercial focus and the investment you're talking about, can you talk a little bit about what are some of the offsets and the savings that you're able to manage as you go into 2026? How should we think about growth as a result of these investments? And obviously, profitability has been, as you pointed out, an important piece of the story. So how should we think about adjusted EBITDA in 2026, just given the focus in pushing for growth? I just want to understand a little bit in terms of the growth versus profitability focus that you have emerging on this call. Samraat Raha: Yes, Puneet, thank you very much for the question. And let me start and then Ben, I'll turn to you to add more color. So first, let me reaffirm embedded in your question, we are committed to profitable growth going forward and being able to accelerate that, as you know, we've talked about, by focusing in on the cancer care continuum. So the actions that we took related to the organizational redesign and changes in our investment focus, those actions, including, and Ben spoke to this already, reorganizing in a way where we believe we're going to be able to serve customers, be able to increase our win rate. This includes, in some instances where we've taken out multiple layers of management, we've made other choices on positions that we've deemed to be less critical than other ones that are related to having more feet on the street, if you will, to compete, and particularly timed with new upcoming product launches that we have that you heard me talk about. So between that and reallocation of investments, we are committed to growing revenue faster than we grow operating expenses. So that part of the profitability along with growth remains intact. I said a lot there, Ben. What would you add? Ben Wheeler: Yes. I would just say that the actions and the focus is absolutely consistent with the strategy as we focus on the cancer care continuum, and we want to grow revenue at an accelerated rate, and we want to do it profitably. We felt like we could rebalance the organization and focus on growth in the cancer care continuum by expanding the sales footprint and focusing on tools and also R&D to support that, and we believe that we can do that. Puneet Souda: Okay. And then a question on the NIPT side. Just wanted to get a sense of -- it does look like you came in softer versus us and consensus as well, just wondering if there was any share shift that you're seeing in the market. I know you talked about that you grew sequentially, but -- just wondering, given new entrants in the marketplace, mother-only blood draws with a competitor, others that are pushing it more aggressively into market, maybe just help us understand what you're seeing on the market end versus Myriad's position, and if you're seeing any share loss? Samraat Raha: Yes. So, Puneet, thank you for this question, too. And you might recall, we had some challenges that were related to our operational execution matters that were in Q2, which we've fully addressed. And we had predicted that it would take us multiple quarters to gain back to the level of growth that we'd expect, right, to be able to grow at or above market, which means at least in the single digit for volume, if not higher, because we do have the new products, which we've seen good traction from, be it Prequel at 8-week gestational age, Foresight with the expanded carrier screening. And most recently, we've also added F8 and FXN. So we're actually -- we have seen improvement where we actually decreased in volume, I think, 7 percentage points last quarter, and we talked about volume being flat. Now are we happy with flat? Heck no. We want to gain -- go back to being able to grow at or above market, but we're pacing actually exactly as we had anticipated and we had kind of shared with you. Now are there others that are growing and that are coming to market? Yes, that's a fact. I'm not commenting on that, but we are, by the way, excited about the opportunity to accelerate our own growth with FirstGene, which Mark talked about in his comments, which will be the combined 2-in-1 screen for NIPS together with carrier screening. Operator: And our next question will be coming from David Westenberg of Piper Sandler. David Westenberg: I'm going to actually follow on Puneet's question on NIPT business. Can you give us some color on the friction on the new ordering management system, why that is lasting into this quarter and why that wouldn't maybe necessarily end in the second quarter? And then just in terms of that market dynamics that he kind of discussed here, can you talk about how single-gene NIPT would play a role in kind of maybe some of the growth that you'd receive next -- or see next year? Do you expect any data differences, particularly after you complete the CONNECTOR study? And maybe can talk about some of those long-term differences you might see versus some of those long -- versus some of those competitors? And I'll have one quick NIPT follow-up. Samraat Raha: Yes. Thank you, Dave. Appreciate the question. Let me start, and then I'll invite Mark in answering with me here. Again, we wish we can just snap our fingers and gain back all the customers in the volume. I think we had described this previously. The matter is that many of the high-volume customers that we have, they are working with a -- us and a couple of other often -- other providers for these prenatal tests. And when we work through our -- when we have the challenges, which again, have been completely addressed, that led to some shifts in volume away from us. So we are improving on that. That's why we've gone again from 7% volume decline back to flat in terms of our volume. Again, that's not where we want to be. We're right on track to being able to now show volume growth in the coming quarters. It just takes time to regain and also to add new customers, and we have done that. It's just -- it's something that you just can't make happen much quicker than that. Second part of your question is related to FirstGene, again, our screen that combines NITS together with expanded carrier screening. And we are excited about that, Mark. Maybe you can talk a little bit about both what we've seen so far as well as why we think it's going to help us expand the market. Mark Verratti: Yes, sure. Thanks, Sam. Look, I think we knew when we started developing FirstGene that there were a couple of challenges within the carrier screening space. Number one is providers just didn't have enough time to really talk about all of the benefits, and there was a little bit of complexity in terms of ordering the products. Number two, we knew that only 30% of the time, fathers were also getting screened. And so we knew that there would be an advantage of having a single test where you only need to test the mother and then have the ability to look at the fetal recessive status. So since then, obviously, some competitors have entered the space, and they've had success. So if anything, that's just validated, what we already knew and has given us some greater conviction around the product that we're going to be bringing to market, we know that our product is going to be competitive from a scientific clinical perspective. Based on the footprint that we currently have, we're excited to be able to bring it to our providers. And so we think we will have a very, very competitive test that will have lower gross margins moving forward than our current product. So we are excited to be launching that next year. Samraat Raha: And Dave, you had asked a part of that. Yes, we believe this will help expand the market, the market opportunity for us and accelerate our growth, not relative to the 0% volume growth, but relative to being at or above market. So beyond what we really were previously, we should be getting back, it's growing faster than that. David Westenberg: Got it. I just want to maybe ask one more on just kind of the revenue opportunity growth from an ASP perspective in the coming years. Do you think that there's -- or can you remind us if you're getting paid for RDH (sic) [ RHD ]? When do you think you could get that -- see that happen? Any update on ACOG, microdeletions or expanded carrier screening? And then lastly, on that single-gene NIPT offering, as I understand, you would be not, no longer receiving the father -- or no longer running a father sample. Is there a chance to go back to reimbursement in the future for an additional reimbursement for that given the fact that you are saving the system money by not getting the father or testing the father? Samraat Raha: Yes. Thank you, Dave. I think you had quite a number of important questions built into. First, let me just provide some facts on that. what we provide today does not have RHD. So we're excited that when we actually launch this product that RHD will be included in our FirstGene offering. In terms of ACOG, we remain intrigued and interested and fully ready to catch the wave when ACOG guidelines are introduced. Important point related to ASP there, we have seen a number of payers in advance of that starting to see the value of the fuller expanded carrier screening and starting to reimburse for that. So that's good news. We expect that to continue as it is. Mark, do you want to speak to maybe the third question is related to opportunity father reimbursement related. Mark Verratti: Yes. Look, I think, we will -- as we continue to generate clinical evidence, and as you know, some payers will require us to get a very specific code for our FirstGene products, I think we are excited to have those conversations, but if you think about the time that it took to get expanded carrier screening, we're not necessarily going to rely on anything happening quickly within the reimbursement market. But for sure, any time, innovation comes out, if we can get it quickly adopted into guidelines, we'll be sure to be talking to payers about trying to get increased reimbursement because you are right, it is a win-win for both patients as well as those that are reimbursing it. Operator: Our next question will be coming from Dan Brennan of TD Cowen. Kyle Boucher: This is Kyle on for Dan. I wanted to shift over to the hereditary cancer side of the business. Volume grew 11% year-over-year off a pretty strong number Q3 last year. Just digging in a little bit, with any of the 3Q volume growth, sort of, any catch-up from the EMR issues you experienced in the last few quarters? And then maybe on that, I know some peers have really put up some pretty strong numbers in the hereditary cancer testing side. Is there anything going on in the market that's really accelerated over the last 11 months? Samraat Raha: Thank you for the question, Kyle. Yes, and we are pleased with the performance we had for our overall hereditary cancer portfolio, particularly for MyRisk, which will play an even bigger role going forward, as you heard us talk about with the launch of the updated expanded panel that we have later this month. I think you also asked, like is there anything specific going on? Is there a catch-up? I don't think so. The testing that has to happen as it relates to the oncology patient that happens in a very timely manner, we've continued to be strong there. What we have done, as you heard Mark talk about in his section, is we have continued to make improvements to the workflow for the actual customers. Some of the challenges that we weren't as easy to work with, we've improved on. We've had some improvements on the EMRs, the EMR part of the ordering and reporting journey. So those things, I think, have -- are starting to show fruit along with what Brian and his team have been doing have really been starting to drive. And I think we're still early days of our programs like the breast cancer risk assessment program and other things to really help those in the unaffected providers and health care systems better identify and bring patients forward. And I think that there's a lot more to come there. And the overall market, again, as a reminder, that market is closer to $5 billion, less than 50% penetrated, and it's a great market development opportunity for us and perhaps other competitors in the space. So I don't know, Mark, if you or Brian have anything to add about anything in the market, but what it does reaffirm for us, our results, and maybe the broader dynamics is a great foundation for Myriad with our gold standard tests to continue really growing profitably in '26 and beyond. Kyle Boucher: Got it. And then maybe on the partnership side, you announced the PATHOMIQ partnership earlier this year, you just announced the SOPHiA partnership. Where in the portfolio might you be looking to add more of these partnerships in the near term? Samraat Raha: Yes, great question. Our primary focus is, first and foremost, related to the cancer care continuum. And we are excited, by the way, by both of those partnerships. And for the Prolaris partnership with PATHOMIQ, as I said, it's -- and now that Brian is here, we're also -- him and his team are working in partnership with Mark and others to think about excellence in commercial launch, and that's why we're thinking about exactly how to sequence that into the first half of the year. In terms of next, where to look, what I would tell you is we are particularly interested in partnerships that allow us to expand into these high-growth attractive market segments of the cancer care continuum. SOPHiA is a great example of that. We knew that we needed an offering starting with -- for pharma partners in liquid biopsy for therapy selection using a comprehensive genomic panel. We're starting by leveraging the work that both SOPHiA have done in partnership with MSK. MSK-ACCESS is their liquid biopsy assay. So we're excited to start there with the option to provide that liquid biopsy assay down the line for clinical use for clinical testing. And if you think about the other exciting areas, important high-growth areas, that include other elements of therapy selection. It includes areas such as IO therapy response monitoring, other things we might be able to do to go even faster in MRD. Now, I'm not saying we're going to do all these, but these are illustrations of some of the things that we're deeply thinking about that we think would add value to the customers that we serve with a more comprehensive portfolio, but help us, also in a profitable way, accelerate growth. Operator: And our next question will be coming from Lauren Timmins of Jefferies. Lauren Timmins: This is Lauren on for Tycho. Just to kind of level set the volume growth and top line performance for HTT, in particular, revenue was down still 4% year-over-year, even though you had 11% volume growth. So maybe just kind of what were some of the biggest mix and ASP effects and how that is going to evolve, especially with the cancer tests targeted November 2025 launch? And then the second kind of follow-up question there in terms of the cancer care continuum. What are some of the specific, I guess, KPIs, whether that's integration pathways with oncology networks, EMR-triggered orders that you're going to be looking for, for targets for 2026? Samraat Raha: Thank you, Lauren. Appreciate the question. Why don't we start with you, Ben, to help with the first part, and then you can start with the second question? Mark, you can help with that one, too. Ben Wheeler: Sure. Yes. Thanks for the question. So we touched on the primary drivers that resulted in 4% decrease in revenue year-over-year. ASP was the driver of that. And the biggest pieces of that change year-over-year, naturally, we're still feeling the impacts of the medical policy change from UnitedHealthcare as it relates to GeneSight. Sam also referenced the $1 million impact for the divestiture of our EndoPredict business. So the combination of those 2 things were an $8 million headwind in the quarter year-over-year, and that resulted in flat revenue when we compare this year's Q3 relative to last year's Q3. And then Sam also referenced the change in estimate to revenue that benefited last year's Q3 of nearly $9 million that did not recur this year. So the combination of those 2 headwinds, when you adjust for those, we're looking at about 5% revenue growth year-over-year. And then in my prepared remarks, I talked about a couple of additional items that impacted ASP during the quarter. So as it relates to the enterprise, we had product mix that impacted our ASP, and then when we think about hereditary cancer specifically, we had some payer mix that impacted ASP. So we've been really pleased with the progress that we have made with our biopharma business, really strong ASPs in connection with that revenue, but that revenue is also lumpy. And because it is lumpy, we had some adverse effect to our hereditary cancer ASP as a result of the lumpiness of that biopharma hereditary cancer revenue in the quarter. And then we also had some impact to ASP for hereditary cancer as it relates to some out-of-period revenue, although it was not material to the organization during the quarter, it did have a little bit of an impact on ASP for hereditary cancer. Samraat Raha: Mark, do you want to take a little bit of the first question? Mark Verratti: Yes, Lauren, related to the KPIs, and we'll provide more of this as we get into 2026, probably at JPMorgan sort of beyond. But I think in addition to the standard KPIs, when you think of volume as well as revenue, I think as we think about the cancer care continuum, we'll be looking a little bit more into the providers that are actually ordering our test and thinking about how are we expanding that provider base as well as providers that are using multiple of our products. So we have several of our top customers today that we've heard from who want to just use a single lab like Myriad. And so I think our ability to be able to sell into that channel for both hereditary cancer, HRD, MRD, and our full continuum will be something that we'll be sharing in the future, but that's just a glimpse, but we'll share more at JPMorgan. Operator: And our next question will be coming from Subu Nambi of Guggenheim. Ricki Levitus: This is Ricki on for Subu. I wanted to ask another on women's health. I know a lot has already been asked, but you're quite differentiated in offering Prequel at 8 weeks. That's a week earlier than the blood draw for most of your competitors. And that time line advantage, though, is only really clinically meaningful if the patient and the physician are receiving their results sooner than the competing tests that are offered for a 9-week blood draw. So if your results take a 2-week turnaround, then the competitor takes a week after drawing the sample at 9 weeks, both of you are delivering results in the 10th week of gestation. So with that context, what is your current average turnaround time for your Prequel results today? Samraat Raha: Yes. I mean, I'll let Mark take this in more detail, but I believe our turnaround times for almost all of our products are industry standard or industry best. So there's not like an extended period. Mark, you know offhand. Mark Verratti: Yes, let me add to that because -- and I don't disagree with what you articulated other than I think the turnaround time of when they get the result isn't as important as when the patient is showing up. So for our providers who like to see the patient at that 8-week time frame, when the provider is showing up, they're able to use our test at that time. So it's more about patient convenience, and it's more about workflow as opposed to when they're getting the result on the back end. That said, as Sam mentioned, we have very, very competitive turnaround times. So often, they will be getting the answers, maybe 1 week sooner. But again, it's probably less about getting the result 1 week sooner as opposed to meeting the patient when they're coming into that OB/GYN office at that 8-week time period. And again, maybe that's not important to all of the providers, but to those that really care about it, that's where Myriad shows up best. Ricki Levitus: I see. That's really helpful context. And then maybe just as a follow-up for FirstGene, do you expect to have a similar turnaround time given that it's more of a combined assay, and then FirstGene is launching with the 9-week blood draw? I'm just curious if you're working in R&D on moving that up to 8 weeks as well. Samraat Raha: Mark, do you want to take this one? Mark Verratti: Yes. So we do expect to, when we launch fully commercially to move it to 8 weeks as well to answer that question. And we also expect a very similar around -- similar turnaround times as well. So yes, I would not expect any major delays related to the FirstGene test. Samraat Raha: And just to add, Mark, you had said in your prepared remarks, we've been pleased so far with the sample we've been running, the efficiency, the yield internally, all of that has been working really well. So there's no reason to believe as we ramp into full commercial launch that we shouldn't continue to have really, really tight turnaround times. Operator: And our next question will be coming from Lu Li of UBS. Lu Li: Great. I think the first one on GeneSight. You're expecting the volume to be mid-single digit to high single digit. And then you also highlight some of the reimbursement win from like California Medicaid. So how should we think about the ASP assumption for 2026? Samraat Raha: Yes. I'll start, then Mark and Ben, I'll look at to both of you to answer it. So, Lu, first, I will say very pleased with the team, both our commercial team as well as our payer team, if you will, on our rev cycle and payer market teams, both for being able to really be targeted and engaging customers. And you saw in Mark's slide, we had a record number of new prescribing physicians that also ordered GeneSight within the quarter. So the results -- remember, we're saying we should be growing at about the mid-single digit. We performed a little bit better than that this quarter. We're pleased by that. And I think in one of your prepared remarks, you also talked about the number of payers we've continued to add on for GeneSight, 9 new states beginning of the year, right, related to biomarker laws. But as it relates to ASP and what to expect next year, either you guys know we're not providing guidance for 2026. Is there any color that either of you would want to offer? Ben Wheeler: Yes, sure. I'll just maybe repeat that both Mark and I touched on the fact that we've been really pleased to see health plans implementing medical policies in compliance with the biomarker laws. And none of those medical policies have a significant impact in isolation, but we continue to work towards having wins everywhere that we can get those, and we'll continue to do that going forward. And so our expectation is that we will continue to have support with ASP for GeneSight. And like Sam said, we'll talk more about 2026 at a future date. Matthew Scalo: Got it. And then second question. So I think you touched on some of the organizational structure change. And you also mentioned there's -- and then you're going to shift some of the resources to kind of funding your key programs, but I guess, I wanted to get a bigger picture. Are you expecting any kind of like lower OpEx, like any sizing of that? Like any other areas that you expect to have more lower OpEx in addition to reallocation of the R&D, if that makes sense? Samraat Raha: Yes. No, let me start, and then you can add here, too. Listen, again, this is a very deliberate set of actions we've taken, all with the intention of being able to serve our customers better, show up, cover more accounts and improve the overall customer experience and win more. And specifically, some of the things I can tell you maybe answers your question is we will be adding a very meaningful number of additional sales-related positions. That's part of where the savings, if you will, related to our other actions are going to be applied as well as other programs really related to activating the new product launches that are coming up, right, be it the PATHOMIQ, Prolaris launch that we have the, of course, MRD being the most important one. And on MRD, it's both the programs on the marketing activation side, but it's also further on R&D for MRD R&D that we're going to be adding. So that's a high-level answer. I don't know if, Ben, if there's anything you would add to that. Ben Wheeler: Maybe the only thing I'll add is we'll focus on investment to support our account executives with tools to enable them to be effective in the work that they do. Operator: And our next question comes from Mason Carrico of Stephens. Benjamin Mee: This is Ben on for Mason. Just on the PATHOMIQ, Prolaris combination test, could you give us some insight into the cadence of clinical data releases on this assay? What should we expect to see, call it, over the next 12 months? Samraat Raha: Well, thank you for the question, Ben. We are going to be launching the test, our first combined test in the first half 2026. And again, this will combine our leading molecular test with the AI capabilities, looking at morphology and sting slides and really being able to draw conclusions on that. And the combination of which we believe will drive an increased level of clarity and to help physicians on what they do in treatment. So this is our first test, and it's at the time of biopsy. What we have planned then for some time in 2027 is another -- the next follow-on offering, if you will, which will allow us also to start addressing parts of the overall prostate cancer segment, which includes what happens post radiation or post radical prostatectomy. So that's a future product to come. But right now, our focus and what we've seen a lot of interest from customers in anticipation is for our first combined product launch in the first half. Matthew Scalo: Great. And you've highlighted the progress you've made reducing no-pay rates and tightening your RCM initiatives. Would you be able to quantify how much of the 2025 ASP benefit has come from some of these operational factors versus really the new coverage wins? And how much runway remains on the operational side? Samraat Raha: Ben? Ben Wheeler: Sure. Yes. So we've talked about the fact that about 1% decrease in no-pay rate is worth about $8 million or so in revenue. Now it's important to remember that with the change in UnitedHealthcare medical policy, it really muddies the water in changes in no-pay rate year-over-year. We had talked about being at about 42% in 2024, and from a comparison standpoint, it's an apples-to-oranges. And so we're not in a position to quantify the benefit of the impact that we have had this year, but I'll say that we continue to focus on improving no-pay rates and optimizing revenue cycle management. And then just maybe one more thing for context, as we think about where no-pay rates can go, if you think about across the portfolio, our most mature products in the hereditary cancer space, we're still looking at about a 30% no-pay rate. And so we'll continue to focus on reducing and improving no pays, but that just gives you an idea that the best case scenario from a no-pay rate standpoint, you're still looking at 30% plus with a really, really mature product portfolio. And then I would just add summary of that is we think that there are many years of opportunity and goodness from continued improving -- or focusing on rev cycle improvements to the ASP. Operator: And our next question will be coming from John Wilkin of Craig-Hallum. John Wilkin: So it looks like your MyRisk volume in the unaffected segment ticked up pretty meaningfully versus the last 2 quarters this quarter. And I know you guys have talked about some headwinds that you had seen in Q4 and going into Q1 just with delays in EMR integrations and such. But could you just parse out what you're seeing now that's driving that acceleration and how you see that continuing into the future? And also if you think the expanded MyRisk panel is going to drive any incremental acceleration on top of that? Samraat Raha: Yes. Thank you for the question. And, I think, as I might have mentioned, we are pleased with the continued improvement in the performance of the unaffected part of the market with MyRisk. And yes, it is the results and the meaningful impact or the pickup in the volume growth is a combination of really working on the pain points or the areas we can improve on the customer workflow includes the work that's being done by our teams related to EMR abilities, also just thinking -- working with the customers on what does it really take from day 1. It's not just about turning on the EMR, but what is the real experience like, what's happening in the office when orders are being placed, what are the questions that they have? So all of those things through customer success managers and other positions we've instituted, I think, are starting to make a difference. I think, again, also, we've done certain things related to our programs. We've learned ourselves as we're implementing these breast cancer risk assessment programs to continue to iterate and make those even more fine-tuned to drive value for our customers. So again, trying to identify and be able to identify, and then engage with patients for testing. So all of those activities, I think, have started to show some real promise and real impact already. There's no reason, by the way, to think that, that's not going to continue staying strong and get stronger as we implement more programs. And yes, we absolutely believe now having an updated expanded MyRisk panel, which, again, will launch this month, will only help support the growth at where we've been or even further. And Mark, I think you had in your prepared comments, this will be -- this panel will be the only one related to -- can you just state those words, the NCCN? Mark Verratti: Yes. It's the only panel when you look at the NCCN guidelines as well as the ASCO guidelines, they actually parse out sort of different levels. And so for NCCN, it will be the only panel that includes all the high-risk genes that they recommend as well as on the ASCO side, the ones that are strongly recommended. Samraat Raha: So the takeaway is we believe that this will be a very important catalyst for growth going into '26. Matthew Scalo: Got it. That's helpful. And then just on GeneSight, it sounds like you alluded to that your investments in that business going forward are kind of assuming that there is no change in UnitedHealth coverage, which seems prudent. But does that imply that, that business is going to be maybe less of a priority within the commercial organization? And just how do you balance that with the fact that -- I mean, it seems like that business has seen, excluding the UnitedHealth impact, a lot of momentum this year with added payer coverage decisions and more clinician adoption. Samraat Raha: Yes. Listen, I mean, we are pleased with the performance of GeneSight, and we really appreciate the hard work and efforts in a very focused way that our teams have been taking, again, both on the commercial side as well as on the payer market side and so forth. So we think it continues to be an important part of our portfolio. But what we have said very explicitly is in this new phase of Myriad, this new time of Myriad, we are incredibly deliberate, focused and disciplined on what we prioritize, particularly related to development and other growth. And that's really the point on GeneSight. Operator: And I would now like to turn the call back to Matt for closing remarks. Matthew Scalo: Thanks, Latanya. This concludes our earnings call. A replay will be available via webcast on our website for 1 week. Thank you again for joining us this afternoon, and have a good night. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Welcome, and thank you all for joining today's call, SBA Third Quarter 2025 Results. Please note that today's call is being recorded. [Operator Instructions] With that, I'd now like to formally begin today's call and introduce Mark DeRussy, Vice President of Finance. Mark DeRussy: Good evening, and thank you for joining us for SBA's Third Quarter 2025 Earnings Conference Call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer; as well as Marc Montagner, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including, but not limited to, any guidance for 2025 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, November 3, and we have no obligation to update any forward-looking statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website. And with that, I'll now turn it over to Brendan. Brendan Cavanagh: Thank you, Mark. Good afternoon. We are pleased to share another quarter of positive financial and operational results, including industry-leading AFFO per share. We continue to see strong leasing demand in both the U.S. and international markets. And as a result, we are modestly increasing our full year outlook for both new leasing activity and escalations. The bulk of the activity continues to come from new colocations as carriers both densify and expand their network footprints. And the backlog remains healthy as well, and it is steady compared to last quarter. Our services business also continues to perform extremely well, increasing revenue by 81% in Q3 compared to the prior year period, primarily from construction-related projects focused on network expansion. As a result of this activity, we are increasing the full year site development revenue outlook by $20 million. In addition to our strong operating performance, we have also had a number of other significant accomplishments since our last earnings report. We have recently completed the final closing of all remaining Central American assets under our purchase agreement with Millicom. The closings were slightly delayed from our prior assumptions due primarily to timing of regulatory approvals, but we are nonetheless very pleased with how this transaction went, and I'd like to thank our teams that worked tirelessly to get it done. We are excited about the future opportunities for SBA across the region. Also, subsequent to quarter end, we closed on the previously announced sale of our Canadian tower business earlier than anticipated. While the adjusted timing of both the Millicom acquisition and the Canada sale negatively impact our current site leasing revenue outlook, we are extremely pleased to continue to show progress related to our ongoing portfolio review that was originally announced back in February of last year. We continue to focus on being a leading tower company in each market where we operate and aligning ourselves more directly with the leading wireless operators in those markets. Pro forma for the Millicom and Canada closings, SBA owns a total of over 46,000 tower sites worldwide, representing an increase of 40% since 2020. Another recent significant accomplishment since our second quarter earnings report is today's announcement that Verizon and SBA have entered into a new long-term agreement that supports Verizon's continued network modernization plans. This new agreement builds on the long-standing partnership between our 2 companies and highlights the critical nature of our Tower portfolio and our ongoing efforts to help our carrier customers achieve their network goals. As part of this agreement, Verizon has committed to a certain level of growth through new deployments across SBA's best-in-class tower portfolio. The agreement enhances operational efficiencies for both companies and the length of the agreement provides both companies with stability and more certainty for the future. I'm very excited about this enhanced partnership, and I want to thank all who work to get this done. And if that wasn't enough, since our last earnings report, we took advantage of what we believe to be market dislocations, directing capital towards share repurchases. We spent $153 million at an average cost of $196.99 per share to repurchase and retire 776,000 shares. So far in 2025, in total, we spent $325 million to repurchase 1.6 million shares. As of today, we have $1.3 billion remaining on our authorization, and we continue to believe share repurchases play a significant role in creating shareholder value over time. We have been able to grow our portfolio and repurchase shares while still maintaining leverage below the low end of our previously stated range. As stated in today's press release, however, we are officially changing our financial policy and reducing our target leverage range to 6 to 7 turns of net debt to adjusted EBITDA. Marc will discuss these changes in more detail in a moment. So as you can see, there are a lot of positive things going on here at SBA. And the macro environment for mobile broadband growth is supportive of a bright future. Today, we are seeing a greater proliferation of 5G use cases, including fixed wireless access, which is nearing 15 million subscribers today with aspirations of over $20 million by 2028. Paired with increasing mobile data traffic, that's a heavy burden on today's networks. This will require ongoing network investment via overlays and densifications, including cell splitting, refarming of existing spectrum bands and newly acquired spectrum to meet those network needs. Looking further out, the recently passed federal spending and tax bill earmarks 800 megahertz of spectrum to help boost network capacity and support the next generation of wireless technologies, including 6G. The initial wave of upper C-band spectrum will be auctioned off by July 2027. And while there is still work to be done to identify which additional bands will ultimately be auctioned, upper mid-band frequencies such as 4.4 to 4.9 gigahertz and 7.25 to 7.4 gigahertz are currently being studied. These higher bands will not propagate as far and will require denser networks and new equipment at our cell towers. There is a lot to look forward to. Now before I turn the call over to Marc, I'd just like to take a moment to acknowledge Mark DeRussy. After 16 years with SBA and many more in the industry, Mark has decided to retire at the end of the year. This will be his last earnings call. Mark has done a great job representing the company to many of you over the years, and I appreciate his many contributions. [ Louis Friend ], who is an SBA veteran and well known to many of you, we'll be taking over Mark's IR responsibilities after year-end. With that, I will now turn the call over to Marc Montagner. Marc Montagner: Thank you, Brendan. The slight delay in closing of Millicom compared to our prior assumption around timing impacted the third quarter by $4 million and $3 million site leasing revenue and total cash flow, respectively. Adjusting for the timing of Millicom, our third quarter results were in line with our expectations. Third quarter domestic organic leasing revenue growth over the third quarter of last year was 5.3% on a gross basis and 1.6% on a net basis, including 3.7% of churn. $11 million of the third quarter churn was related to Sprint consolidation which we anticipate to be $51 million for the full year 2025. Our previously provided estimate of aggregate Sprint-related churn over the next several years remain unchanged. Non-Sprint related domestic annual churn continues to be between 1% and 1.5% of our domestic site leasing revenue. Turning to DISH. We currently have approximately $55 million of annualized revenue. Based on lease agreements, we expect approximately $25 million of churn in each of 2027 and 2028 with some small amount before and after these years. During the third quarter, 80% of consolidated cash site leasing revenue and 85% of adjusted EBITDA was denominated in U.S. dollars. International organic leasing revenue growth for the third quarter which is calculated on a constant currency basis was 8.5% on a gross basis. Total international churn remained elevated in the third quarter, mainly due to ongoing carrier consolidation. During the third quarter of 2025, we acquired 447 sites for total cash consideration of approximately $143 million, mostly related to the acquisition of sites from Millicom. Subsequent to quarter end, we closed on the remaining approximately 2,000 sites related to the Millicom transaction. Switching to the balance sheet. We have ample liquidity from both available cash in our $2 billion revolver, which as of today has a balance of $385 million outstanding, drawn mostly to fund the purchase of towers from Millicom and for share buyback. At the end of the third quarter, our weighted average interest rate was 3.8% across our total outstanding debt and our weighted average maturity was approximately 3 years. Including the impact of our current interest rate hedge, the interest rate on approximately 96% of our current outstanding debt is fixed. As you may have seen in our press release, I'm pleased to share with you our new updated financial policy and what it means for SBA going forward. Given the rising rate environment over the past few years and the lack of actionable M&A opportunities at attractive valuation, we have been operating below our steady target leverage of 7 to 7.5x net debt to last quarter annualized EBITDA. In the past few years, we intentionally opted to allocate excess capital to pay down debt and delever our balance sheet to minimize interest expenses and grow AFFO per share. Having operated with leverage in the 6 for several years now, we have concluded that 6 to 7x is the right leverage range for SBA for several reasons. First, it will have no meaningful effect to our future capital allocation strategy. Given our predictable strong cash flow, remaining leverage capacity and revolving credit facility, we'll still have plenty of flexibility to continue our share buyback program and to pursue attractive M&A opportunities. While operating in a target leverage ratio for the past 3 years, we have successfully pursued both options, including $625 million of share repurchase and $1.2 billion of M&A, all while staying below 7 turns of leverage. In short, our capital allocation strategy will remain virtually unchanged with a long-term goal of deploying capital to create high-quality FFO per share. Second, our revised financial policy will create a path for SBA to move towards issuing investment-grade debt. As you may have seen this evening, Fitch just issued their corporate rating on SBA at BBB- at both the corporate level and issuer level. This is now a second investment-grade rating. Pairing Fitch new investment-grade rating with S&P, SBA has a clear path towards raising debt capital in this new deeper credit market. As part of this transition and with our commitment to staying inside the newly revised target leverage rate, we will seek to reduce our percentage of secured debt to total debt as existing secured debt maturities come due or inside their par call window. We have already engaged with the rating agency and are highly confident that they are in full support of our new stated policy and next step. The third and final reason for this new policy is related to our dividend. We expect our dividend to grow over time, and we believe that it is financially prudent to operate our company at a slightly lower leverage to protect our dividend from potential future fluctuation in interest rates. In summary, the investment-grade bond market is the deepest and most robust credit market, which we expect will provide us with many benefits. This includes reducing our overall cost of debt over time, lowering future refinancing risk and extending our weighted average maturity, all while maintaining our ability to pursue a robust share buyback program and be opportunistic on the M&A front. I am excited about this new phase for SBA, and I look forward to providing you with further update on the topic. Let me now turn the call over to Mark. Mark DeRussy: Thanks, Marc. We ended the quarter with $12.8 billion of total debt and $12.3 billion of net debt. Our current leverage is 6.2x net debt to adjusted EBITDA remains near historical lows. Our third quarter cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a solid 4.3x. During the third and fourth quarter, we repurchased 958,000 shares of our common stock for $194 million at an average price per share of $202.85. We currently still have $1.3 billion of repurchase authorization remaining under our $1.5 billion stock repurchase plan. In addition, during the third quarter, we declared and paid a cash dividend of $119.1 million or $1.11 per share. And today, we announced that our Board of Directors declared a quarterly dividend of $1.11 per share payable on December 11, 2025, to our shareholders of record as of the close of business on November 13, 2025. This dividend represents an increase of approximately 13% over the dividend paid in the fourth quarter of 2024 and approximately 35% of the midpoint of our full year AFFO outlook. As Brendan mentioned, after 16 years here at SBA and over 25 years participating in the tower industry, I have decided to retire from SBA. This decision had been in the works for a while and was part of our overall succession planning process. [ Louis Friend ], who many of you know already has been my partner for the past 12 years, and I'm confident that I'm leaving you in good hands. He knows the company inside and out and will certainly be a joy to work with. I would like to express my sincere gratitude to my teammates at SBA as well as my friends and colleagues in the investment community for your support and friendship for all these years. And with that, I'm ready to open up the call for questions. Operator: [Operator Instructions] Moving to the first caller in our queue, Batya Levi with UBS. Batya Levi: Great. Mark, you'll be missed. I do want to start with the Verizon MLA question. Can you provide a little bit more color in terms of how that could impact new leasing revenue going into next year? Does it have amendment, colocation components as well? And also to the extent that they acquire more adjacent spectrum, how would that be MLA capturing that incremental revenue? And then maybe a quick follow-up on DISH. One of your peers have disclosed that they have received a letter from the company to be excused from future payments. Can you just address if DISH is current with you now and if they're also looking to exit the contract earlier than the renewal rates? Brendan Cavanagh: Okay. Sure. So first of all, on the Verizon deal, we are really, really pleased with this agreement because it is one that we think is going to be a contributor to our growth for a long period of time. It is building on a very strong partnership that we have with Verizon. In terms of the specifics, I can only share certain with you. It definitely has components that are built around both colocations and amendments. There is a minimum commitment around co-locations really for the next 10 years. So that will lock in a certain amount of growth that we can count on going forward. And amendments are still a part of the mix, and they will be driven based on activity and what's happening at the tower site. So we'll be able to capture that growth. And Verizon will get out of it, the ability to have access to our sites with certainty around what those costs are and ease and efficiency of doing business that will help them move quickly to expand their network and meet their objectives. So I think it really is a win-win, and we're particularly excited about that opportunity to work together for a long time to come. In the case of DISH, first of all, they are current on their rents with us. And under our agreements with them, we expect them to honor those agreements and to pay their rents going forward. We have had some correspondence between 2 companies back and forth. But I think at this point, it's best for me to keep that to ourselves between us and DISH, and we'll continue to have those conversations. But we feel good about our agreements and expect them to honor them through the balance of the term. Batya Levi: Got it. One quick follow-up on Verizon, if I could. Is it -- is the structure similar to what you have with AT&T where there was a step-up and then a step down through the contract life? Or is it more linear? Brendan Cavanagh: No, it's much more linear. It is not similar to the AT&T deal. That was kind of a onetime special structure that was particular to the situation with AT&T, but it is very different than that. Operator: Moving to our next question, Rick Prentiss. Ric Prentiss: Okay. Great. And Mark, good career, great career. Your math is wrong though, it's almost 27 years. We co-authored that seminal [ lease cycle ] and communication tower battle. Mark DeRussy: Yes, we did, Rick. We got a lot done. Didn't we? You might have checked out a few years, right, Rick. Ric Prentiss: Yes, I want to appreciate the comments on DISH, obviously, not a lot you say, but it's good to hear the current important means -- are your contracts paid like on first of the month type thing. So just currently they were paid for October, currently they are paid through November? Is there kind of a weird structure when payments are paid. Brendan Cavanagh: They're typically paid at the beginning of the month. So for the most part, they're paid through November, I guess, at this point, but, yes. Ric Prentiss: Okay. That's good. And on the Verizon deal, at the Park City Summer Summit, we heard some of the carriers, including Verizon talking about wanting to address high-cost sites, escalators, but on the other side, really focused on a lot of rural expansion. Did you guys bring in high-cost sites into the equation did you touch on escalators, which has always been kind of one of the sacred cows of the tower business. But help us just understand a little more nuance, maybe whatever you can on that Verizon transaction? Brendan Cavanagh: Yes. No, I mean this is mostly about future growth. So the existing base wasn't really touched at all other than to ensure some extensions to the length of the terms around those agreements. But in terms of the actual financial terms, they really weren't touched. Ric Prentiss: Okay. That's good to hear. And last one for me. T-Mobile on their earnings call, touched on something that confused some people where they were going to be taking a charge to reduce some of their existing base, not just the U.S. cellular churn but the existing base of towers, which we really don't see very often. So maybe you could just address it as one, where are you at as far as the T-Mobile USM churn? How much is it? And could you accelerate it? And does T-Mobile looking at doing something with some of their existing base that we're all maybe not aware of? Brendan Cavanagh: Yes, it's hard for me to comment on what they were specifically referring to. I mean, in our particular case, I think we shared before that we have around $20 million, I think, a hair less than $20 million of annual revenue from U.S. [ band ]. We've had minimal interaction with T-Mobile around those sites at this point. But we would expect that a lot of the overlap sites at least would end up getting terminated over the next several years. They have on average about 2.5, 3 years left. So in terms of what they were referring to beyond that, I don't really have any insight, Rick. Ric Prentiss: Mark, congrats again. Mark DeRussy: Thanks, Rick. Operator: Moving to our next question, Nick Del Deo. Nicholas Del Deo: First of all, Mark, again, going to miss working with you and really appreciate all your help over the years. Mark DeRussy: Yes, I appreciate it, for sure. Nicholas Del Deo: Brendan, kind of returning to the Verizon MLA, you noted a moment ago that the deal is much more linear than the AT&T 1 was. So I just wanted to clarify that a little bit. Were you suggesting that the commitments for new leasing activity are relatively linear over the 10 years or something else? Brendan Cavanagh: No. What I was suggesting is that it's a little more tied to -- directly to activity, whereas AT&T was a little bit more of a wholesale bonus escalator for access. So there wasn't the same kind of direct correlation. In the case of the Verizon deal, the pace -- there's a certain minimum amount that we would expect every year, but they certainly could do more than that. That could shift the timing earlier in terms of some of the growth, but that really will be dependent upon their use of their rights under the agreement. Nicholas Del Deo: Okay. And how should we think about all that from like a straight-line perspective, prospectively? Brendan Cavanagh: I don't know that it means a lot. I mean there will be some extensions to terms that I would expect to take place over time that would push up straight line in the early part of the agreement if, in fact, they're active with that. But otherwise, it would just follow along with as any new agreement that's being signed on a site would traditionally trigger? Nicholas Del Deo: Okay. Okay. That's helpful. And then maybe shifting gears just a little bit to BEAD. We now have some certainty around what might be happening from a fixed wireless perspective. And I'm wondering if you've done any work to try to mention what that might mean for you guys and if it might move the needle from a new leasing perspective? Brendan Cavanagh: Yes. It's hard to say for sure. I mean we obviously are pleased to see this move away from the fiber focused nature of BEAD that was there before and fixed wireless growth continues to be the leading component of subscriber growth for our key customers. So it's definitely a positive in that sense. But really, our insight into it and what's going to drive it is what our customers specifically are looking to do. And I think if it helps facilitate a faster move out into some of these markets where coverage is not available today, then that's going to be great. And that's probably a part of -- and this is just speculation on my part, but part of what Verizon is thinking about as they enter into an agreement with us like this is that it helps facilitate further expanding their network out into some of those areas. And whether some of that's supplemented by BEAD funding or not, I don't know. But it definitely is helpful. Operator: Moving to our next question, Eric Luebchow. Eric Luebchow: Thanks for the question, and Mark, obviously, we will certainly miss you. So maybe just touching on the new leasing outlook, we're almost at the end of the year, probably a decent visibility kind of heading into early '26. And it looks like you'll be run rating at about, call it, $40 million-ish of domestic leasing going into '26. So I guess how do you feel about that level, obviously, given that DISH or EchoStar will presumably be zeroed out next year? And what kind of activity levels are you seeing at the big 3 in terms of colos versus amendments? Brendan Cavanagh: Yes. I think it's a little too early. Obviously, we're going to give our outlook for next year on our next earnings call. So I don't want to front-run that, and we'll see how we finish the year out. The carriers have been active. Certainly, the new agreement with Verizon will help give us some confidence in what we can expect to see from them as we head into next year. T-Mobile has been very busy, and we have our master agreement with AT&T that's pretty well locked in. So we should be able to have, I think, impacts from new leasing activity that are in the same range as where we are today, but we'll see how things progress over the next several months. In the case of DISH, they were, for us, not a huge contributor anyway. If we look at this year 2025, and what their contribution was to new leases and amendments for this year, it was about $2 million of the total, but most of that was in the first half of the year. So their contributions here at the end of the year are not that great. So I don't -- in terms of like a run rate or their impact on that, it's negligible. But they were a contributor in a minor manner this year. So we'll have to consider that as we go into next year because, obviously, we expect that to be 0. Eric Luebchow: Yes. Understood. And maybe just as a follow-up, a lot of spectrum transactions announced recently between EchoStar and AT&T and SpaceX. So maybe you could just talk about monetization opportunities with some of the new spectrum that has been announced. I know you have an MLA with AT&T that could potentially limit how much upside you have. But what about some of the satellite spectrum that is being discussed. Do you think there's opportunity on terrestrial networks to maybe deploy that in metro areas where satellite coverage is harder to reach into our areas? Brendan Cavanagh: Yes. I think there is potentially opportunity, but it's really premature around the satellite piece of it. We have been doing some work. We certainly have had even some very, very preliminary conversations with Starlink about what their plans are. But I think they're also trying to map that out. So it would be premature for me to talk about what may happen from a terrestrial network standpoint with them. I don't think they've necessarily made that decision. And I'm sure you'll hear more from them, and we'll be following up closely on that in the future. So that remains to be seen. In terms of the spectrum that ended up in the hands of AT&T, I think, there are some limitations for sure under our agreement. I know that they've said that a lot of the upgrades they're going to do around the 3.45, in particular, would be more software upgrade oriented. So we'll have to see how that pans out. If they do decide to deploy the 600 megahertz, the timing at which they do that and the magnitude of what that requires will have an impact on what we're able to see in terms of monetizing it. And as of yet, there hasn't been anything. So I don't really have an answer on that today. But that's something that we will certainly be in conversation with them about and we'll be monitoring. But right now, it's a little early to say whether there's much upside there. But I'm hopeful around some of these items because I do think there's a lot of work to be done. And if we've got parties that are looking to spend and to really enhance the networks that are out there through the use of the spectrum, that will be a positive for us. Operator: Moving to our next question, Ben Swinburne. Benjamin Swinburne: Congrats to Mark and to [ Louis ]. Good to hear from you guys. I guess I'd like to pick up on that last comment, Brendan, if you're willing to, I know we can't speculate too much of what Starlink might want to do with a hybrid satellite terrestrial network, but maybe you could talk a little bit more high level about what that kind of structure might look like as it relates to SBA. Is that something you think could work in the market could be a bigger opportunity for anyone who's got spectrum that operates both over satellite and terrestrial networks since that would be a pretty interesting development? Brendan Cavanagh: It would be interesting, but then I have to punt on that question for now because this is really, really early. And I would be just truly speculating at this point. But as I said, when you see a significant amount of wireless spectrum end up in the hands of a new party, it's something we'll have to watch closely and evaluate what their next steps will be and what role, if any, we can play in that. So we'll watch it, and I'm sure we'll have more conversation down the road at some point about it. Benjamin Swinburne: Makes sense, but I tried anyway. Maybe just turning to the international business. I know you guys have been navigating carrier consolidation and dealing with some elevated churn. It's been kind of a moving target. Any update on how we might want to think about international churn as we look out over the next couple of years relative to what we're seeing in 2025? Brendan Cavanagh: Yes. I mean we've had quite a bit of consolidation that's taking place across our markets. And so that's certainly weighed on it. We've also had some challenges in Brazil, in particular, with Oi, not only the consolidation of Oi and their wireless operations into the existing 3 carriers that were there, the other 3 carriers that were there, but also their wireline business and their financial challenges. And so we have to kind of get through that, and I'm not being evasive because it's a constant moving target and the conversations are constantly ongoing, so we'll have to see where that shakes out. But I think once we get beyond those particular items, I would expect a significant step down in churn. But those couple of things that are still out there weigh on us. If we're outside of Brazil and you look at Central America, we've kind of gone through that already. We had a lot of that consolidation that happened in rationalizing among the carriers. And now we're in a place where it should be very minimal going forward. So each market is in a little bit of its own place. But certainly, over time, I think, if you look out a couple of years, I would expect the international churn to be much, much less than it's been here these last year or two. Benjamin Swinburne: Got it. Okay. And maybe just one last one back to Verizon. You touched on it briefly, Brendan, just sort of the benefits that they accrue from entering a contract like this. But I'm wondering if you could talk a little bit more about what Verizon gets out of it, what motivates them to sign a comprehensive MLA with you guys as they think about moving forward with their network just to help us think about their goals and how this could be a win-win for both companies? Brendan Cavanagh: Yes. And I think -- and I would suggest that you talk to them about that because they will be better at articulating a number of the benefits that they get out of it. But in our discussions and ongoing negotiations around the agreement, it was very clear to us that they have a lot of meaningful network plans going forward. They definitely are interested in continuing to expand their network into places where they haven't been before. And in order to do that in an efficient manner where they would know over time where they could kind of plan out what not only the cost would be, but what the timing would be and how quickly they could move to do that. It was very important to them to have a more comprehensive agreement that gave them that insight and they didn't have to do what we otherwise traditionally like to do, which is to talk about every single amendment and every single new lease application on an individual one-by-one basis and negotiate those, the time and energy that will be saved through that process for them and the certainty that they'll have around how that deployment goes is, I think, very valuable to them, and that's probably the main thing that they were focused on. Plus I believe that -- and I -- hopefully, they would support this, that we're very easy to do business with and tying some of their early work to SBA specifically gives them an advantage. And I also think our services business, which has traditionally been doing more work for T-Mobile historically, but has continued to grow in terms of the amount of work we do for Verizon. I think the ease in having one company sort of present end-to-end type service options for them in an efficient manner makes their deployment even easier. And I think that's something that SBA as a leading services company in this country is able to do. So all of those factors, I think, weigh into the value that they saw in the agreement. Operator: Moving to our next caller, Michael Rollins. Michael Rollins: I just want to also extend my congratulations to Mark on your career and the upcoming retirement and [ Louis ] for you for taking over the role. So congrats to you both. Two topics, if I could. Just circling back to the Verizon deal again. If you think about the leasing opportunities that you have on a multiyear basis. So looking beyond just '26, how does this deal influence your conviction on what you described previously in terms of those mid-single-digit domestic leasing growth opportunities on an annual basis? And then the second topic is you mentioned on the regulatory side, there were some delays in closing the latest acquisition for the regulatory reasons. And I'm just curious as you've engaged with regulators, maybe not just in this country but in several of the Latin American countries that you're in, what have you learned about the opportunities to more readily and flexible basis, pursue additional consolidation of the markets you're in versus markets where you may be getting to the point where it's tougher to do incremental deals? Brendan Cavanagh: Sure, sure. Yes. So on the Verizon deal, one of the things that was very attractive to us was the long-term nature of the agreement and the fact that it does provide for steady, reliable contributions that are very predictable, gives us confidence that we're going to see that over an extended period of time. So that was one of the things that we really liked about it. Now as I said earlier, it's possible that they become much more active earlier on, and we see more of that earlier. But it doesn't have to be that way. And our expectation, and I believe their expectation is that it will be more smoothly implemented over the course of the agreement. So that definitely is a big part of the agreement for us. And it gives us confidence in seeing that kind of mid-single digits growth percentage on the organic growth going forward, certainly, at least with Verizon. So then the second question was on the regulatory delays on the M&A, and that is all -- that's all been internationally related. And what we were referring to is specific, in this case, to Millicom. I mean, it's interesting. It's definitely something that we have to consider in markets where our market share has become quite significant as we look at sort of add-on or bolt-on acquisitions that we might do in those markets, it becomes certainly more challenging if you have a predominantly commanding position in that particular market. But in this particular case, while there was some of that in certain markets because of our presence there, we had delays in the process even in markets where we didn't have a presence. So it's not always the most obvious things that have come up, which is why, frankly, we were off on the timing. We would have expected to not have had some of these challenges in getting the deals approved and some of it is just an efficiency issue in some of the markets. But overall, we have a pretty good sense of where we're going to be able to add additional sites without a problem and where there might be some. And that's a factor when we would even consider bidding on a portfolio or working on a deal. So I don't see it as a major hurdle, but it's just part of the process and the checklist we go through. Operator: Moving to the next question, Jim Schneider. James Schneider: I was wondering if you could maybe talk about on the financial side, heading into next year, clearly, interest expense will be a headwind to AFFO. Maybe talk a little bit about any cost saves you contemplate that might partly offset that? Or do you feel like you're sort of at the right cost level right now? Brendan Cavanagh: You mean cost savings specifically around the financing costs. James Schneider: No, no, in terms of OpEx. Brendan Cavanagh: So yes, well, yes. So the interest expense, which is obviously a headwind because we have refinancings to do of some very low-cost debt. We are constantly looking irrespective of that, though, at how we run our business as efficiently as possible. And I think I would expect that we will continue to find ways to operate more efficiently. One of the things -- I know some of our peers have talked about finding efficiencies as the smallest of the 3 public tower companies here in the U.S., we've long had the highest margins. And so I feel like we've been pretty efficient in our overhead structure, but that's an area that we continue to look at. And one of the things that we spent time on is certainly the use of technology and new systems that we're putting in place to help us be more efficient. And as we grow in some of these regions, we're able to do that with very minimal additional overhead additions. So for instance, the Millicom deal, we added 7,000 towers in Central America. We've had to add a little bit of overhead to handle that increased portfolio size, but the relative need in terms of overhead is very, very small compared to what our base business is operating at. So we'll continue to find ways, particularly through growth to do that efficiently and have to add very little in the use of technology. So I hope that we'll -- you'll see us continue to be the leader in that space in terms of the margins. James Schneider: And then maybe just returning to Millicom for a second. Maybe give us a sense of -- since you've acquired the asset, any kind of change? Or how is the organic growth outlook you're seeing right now and over the next couple of years, kind of comparing to what you underwrote at the time you were diligencing the deal? Brendan Cavanagh: Sure. Yes. And it's and I will give you an answer, but it's very, very early. Obviously, almost half of those sites were just closed in the last few weeks. So there's no real experience time on that. And the bulk of the -- rest of it was closed a few months ago. So our time frame to evaluate that is very limited. But thus far, having said that, we have seen a lot of interest, particularly from the other leading carrier in the market in accessing those sites. And I expect that we'll continue to see that grow. And we -- my belief is that we're going to do better than what we modeled based on everything that I'm seeing and we'll let you know. I think a year from now, I'll have a much better sense of that. But I'm feeling very confident about that based on the early conversations as we're now getting to closings on these sites. Operator: Moving to our next question, Aryeh Klein. Aryeh Klein: I guess, first, Mark, wishing you well in retirement. It's been great working with you. Maybe from an M&A standpoint, now that you have the deal with AT&T and Verizon, how are you thinking about the one with T-Mobile, where I guess you don't have one? And does this deal with Verizon potentially to become a template there? Brendan Cavanagh: That -- I guess that remains to be seen. I mean every carrier has their own specific things that are important to them, their own network needs. And so we would see how that conversation goes. We have a very good relationship with T-Mobile. They've been, frankly, our leading customer for some time now. And we do have an agreement with them. It is set to expire about a year from now. So this is the time you should expect that we're having conversations with them. But I fully expect that we'll be able to work something out with them because the working relationship has been very, very good, and we'll just have to talk about the things that are important to them and that work well for us. And I'm hopeful that we'll end up in another situation where we have kind of a win-win like we did here with Verizon. So way too early to say how much of the Verizon deal would translate into that. I think each of those negotiations are really stand by themselves. So I would expect that to be the case with T-Mobile. Aryeh Klein: And then maybe just on the services business. How are you thinking about the sustainability of the recent trends there? And then it sounds like you touched a little bit on potentially doing more with Verizon there. I just wanted to check in on that and just the ability to maybe broaden kind of the relationships you have on the services side to do more there? Brendan Cavanagh: Yes. I think given the needs of the carriers in terms of the network needs, the growth needs that they've got, that it is something that we can hopefully sustain. I mean, we've had great success although to put it in perspective, this year, assuming we finish in alignment with what we've given as our outlook for the full year, this will be the second best year in the company's history for services. And so I don't know whether that's necessarily sustainable indefinitely because for the most part, we largely have 3 customers in that business. And depending on what's going on with any one of them at a given point in time, that can influence that. But I do think that our ability to deliver, some of our peers getting out of the business and the fact that we've been able to help them accomplish their goals continues to put us at the top of the list in terms of being a provider. And in the case of Verizon, what I mentioned earlier, is just simply as we signed this master lease agreement, while it's primarily about the leasing business, services was a component of that and what we can offer to them through our services business is something that I think they see value in. And I hope that as a result, we'll have a broadening of our customer base in that business that will include a lot more Verizon contributions than perhaps it has in the past. Operator: Moving to our next question, Mike Funk. Michael Funk: Mark, congratulations to you and [ Louis ] looking forward to working more with you. So -- but just wondering if you could give us some more background on the negotiations with Verizon, just maybe when they began was the first question. And then second, I think in your comments, you talked about carriers contemplating expanding FWA into more rural areas. Just wonder if there are active discussions you're having with the carriers or that's more anticipation of where they may be moving? Brendan Cavanagh: Yes. I mean on the fixed wireless piece, that's a little bit of anticipation. We obviously see activity with them where they are signing agreements in places where perhaps they hadn't been before. And it's a little hard for us to tell because the deployment for that is built around maybe meeting a fixed wireless need is -- doesn't look any different than it looks when it's a traditional 5G mid-band deployment. So it's hard for us to know specifically, it's really more anecdotal and in conversation with the folks that we deal with at each of our customers. So I think we'll continue to see fixed wireless as -- since it's a major driver of subscriber growth for our customers, we'll continue to see them push that out into additional communities where maybe they don't have a presence that we can handle that yet. On the Verizon deal, I mean, it was something that we've been in discussions with them around for much of the year, but I really can't share much more than that. You should expect these things take some time, but I think they had a desire to get it done as did we. And so we were able to move fairly efficiently on this, but it's been some time, certainly, it didn't happen overnight. Operator: Moving to our next question, Brandon Nispel. Brandon Nispel: Great. I think one more maybe on Verizon. You mentioned minimum commitments and then linear. How different is that minimum commitment relative to what you've been generating from Verizon in terms of new leasing I just want to get a sense, it doesn't sound like there's any sort of really big incremental step in leasing as we're thinking about next year. Just wanted to double check. And then, Brendan, any more sort of portfolio pruning or review that you guys are doing? And just how we should be thinking about cash from any more portfolio work being done, getting used? Brendan Cavanagh: Sure. Yes. I mean on the Verizon deal, I mean, I don't want to be too specific about the numbers, but you should just assume that, obviously, we wouldn't do a deal where we felt like it was going to produce something less than we would otherwise have gotten on a stand-alone basis. And so we feel very good about what it locks in. And in the case of the portfolio pruning, as you called it, I mean, it's really more of a portfolio review. And the difference in that is that in some cases, we have obviously eliminated markets. In other cases, we've invested more into markets. That's really what the Central American acquisition was about, was improving our positioning in those markets. And so we continue to look at the markets that are a little subscale or maybe not aligned with the best carriers and try to find the best way to improve our positioning in those markets. In terms of the crux of your question, which is really about cash proceeds and what might be available. I think that's probably way too early. And it's not -- if we were looking to leave, it wouldn't be because we're trying to generate some huge cash proceeds. I think the only exception to that was the Canada sale, which was a little more opportunistic, where we were able to secure valuation where we could generate a much higher valuation, frankly, than we get credit for in the public markets. And so that was a little more opportunistic. The rest have really been more about improving our focus in those markets, and we'll continue to evaluate that over time with the remaining markets. But there's nothing that's on the horizon specifically that we're working on today. Operator: Moving to our next question, David Barden. David Barden: I come back and Mark, you're taking off. Mark DeRussy: Glad to have you back, Dave. Brendan Cavanagh: He said he was leaving because you came back [indiscernible]. David Barden: I know, I can feel it. I can feel that energy and welcome -- and congratulations to [ Louis ], of course. So you guys know -- we've talked about this investment grade versus high-yield situation in the past. And there was a time where you had a choice between being the highest grade, high-yield borrower versus being the lowest grade high-grade borrower -- and I was wondering, obviously, S&P kind of moved the goalpost towards you when they upgraded you in July. And so this kind of came to you rather than you chasing it. But I was wondering if you could kind of elaborate a little bit on as we think about the refinancing costs in the model for the '26, in the '27, the '28, how does this change the game from a financial standpoint, do you think for your average person to evaluate. And then if I could, a second one, which was Brendan, I think you said something interesting about the Verizon deal about how they were building in places where they hadn't built before. I think that there's a concern that this direct-to-sell or the direct-to-device satellite program that Verizon has invested in that AT&T has invested in that American Tower has invested in that T-Mobile's relationship with Starlink, that these are reasons why carriers will choose maybe not to spend money in places where they haven't spent it before. Could you elaborate a little bit on kind of your experience about whether you think that that's a true statement or that's mistaken? Brendan Cavanagh: Yes. All right. Well, first, on the first one, you're right to a degree in that the rating has somewhat come to us. But it has come to us in part because our leverage has been at a much lower level here. We changed officially, obviously, our target leverage range in announcing that today. But we've operated within that range for 3 years now. So we've essentially been operating in a manner that is consistent with being an investment-grade company and it's just, frankly, part of the maturation process. And we think it's the prudent thing to do at this stage in our life cycle. So the only thing it really requires of us in terms of an action is to move towards less of a share of secured debt. And otherwise, we don't really have to change much in the way that we operate. So we think it's a good idea to do it. We think it's a good idea to do it for a variety of reasons. One, which you refer to as a cost. There although it is, I'd say, fairly small in terms of its impact around cost, which is why we're always hesitant to do it in the past because we felt keeping the additional leverage capacity allowed us to invest that increased capital and create greater returns for the equity. The truth is there haven't been as many opportunities to invest that capital. And we've been investing in any way because we're now down to a leverage point where we have a lot of additional capacity. So we will take advantage of the small differences in the cost. In the case of IG bonds versus high yield, you're probably talking about 50 to maybe 75 basis points of savings. So it's not inconsequential given the amount of debt that we carry. But it is a small saving. And against the ABS market to the extent that we replace that, it would be a much narrower difference, but probably still slightly better. So we still think around -- even if it's small around the edges, it's definitely a positive in terms of the cost of capital and just the depth of the market, and the tenors that we can lock in and some of the things that we'll be able to do over time in that market will be a benefit to us and to our shareholders. So your other question on the rural sites and the direct to sell. We -- and I'm just going to give you kind of my thoughts around it based on what we've seen. We have seen the carriers, at least some of them anyway, pushing more into rural markets and targeting some of those areas. I think fixed wireless access is a big part of that, but there's also been regulatory requirements and some other things that have driven some of that. And there definitely seems to be a desire to cover areas that they haven't been able to get to before. Now rural is a very broad term. There are rural areas that are smaller towns and there are rural areas that are -- have 3 people in them. And there are certainly going to be financial prudence brought to the decision-making by the carriers. And in places where it's just not economically efficient to do it, they're not going to go there. And I think those are the areas that direct-to-sell opportunities are certainly going to replace that, and you're already seeing it. I mean the carriers are using their partnerships with certain satellite providers in order to fill in those needs today. And here's an interesting thing. I think I may have mentioned this on a prior call, but it is an interesting thing I heard from one of our customers a few months back was, "Hey, you know what's great about the satellite offerings in the direct to-sell service is that we're getting to see where there are a lot of pings against the satellite and where it gets very concentrated in a particular area." What that tells us is that we need a macro -- a traditional macro tower or terrestrial solution in that location. It's actually providing them information about where there's a concentration of usage and it would be better served and more efficiently served by them in a traditional manner. What they're intending to see from the satellites is more of that isolated pinging of the satellite. So I'm actually pretty confident that there's still further expansion to take place into some of these areas, but there will clearly be other areas that just never makes any sense and that's okay. Operator: Moving to our next caller, Jonathan Atkin. Jonathan Atkin: Once again, congratulations to Mark and congratulations, Louis. Wanted to drill down a little bit on LatAm. Vivo talked about on their earnings call, the opportunity to optimize leasing costs. And at America Movil talked about potential carrier M&A in Chile. I'm just wondering if you could talk about kind of potential implications for SBA from kind of developments in LatAm, such as those and maybe others? Brendan Cavanagh: Yes. The challenge in some of these markets is that the ARPUs are materially less than they are here in the U.S. And so the carriers are -- not to suggest that the carriers here aren't cost conscious, but they are, but they are seeing a return on the investment they're making in the costs. And I think in some of these other markets, it's much, much tighter in terms of the returns. So of course, there's sensitivity to operating costs and tower costs are part of that is perhaps heightened. I think in the case of Vivo, their comments on their call, they were really talking about there being a need for greater sharing of infrastructure, which is interesting because we would agree with that. We're totally aligned with them on that. The reason that, that affects their thinking around cost is in Brazil, they share the ground rents. The ground rents are pass-through. And so if you have more customers on a particular site, you're able to share that cost together, and I think that's why they want to see that. And we are totally aligned with that and trying to push for that. And I think the idea of moving sites to accomplish that is a little bit backwards. But we're totally supportive of trying to have as efficient and operating environment in terms of shared infrastructure in these markets as possible because I think all parties will benefit in that particular case. And we're working right alongside our customers in each of these markets to try and optimize and make as efficient as possible the use of infrastructure. So everybody benefits. Jonathan Atkin: And then on the U.S., just wondering, given the multiples that one continues to hear about in the private market. Any philosophical thoughts about, I guess, the talk -- the opposite of tuck-in acquisitions, tuck-in divestiture, so to speak? And would that be something that you're philosophically opposed to? Or just what are your thoughts on that? Brendan Cavanagh: Yes. I'm not -- I wouldn't say I'm philosophically opposed to it. It's not really what we do. We're not looking to divest the assets that we have, but we would be open to it, of course, if we could achieve a valuation arbitrage that was so significant that it clearly made sense. But there are a lot of practical issues with that, too. I mean our current financing structure has limitations, the master lease agreements that we signed that are more broad-based have implications. And so we would have to really work through that. And I'm a little bit skeptical as to how people out there might look at it if SBA was the seller as opposed to what we've always been, which is a serial acquirer. So we'll have to see. I mean that's something we definitely talk about because there's definitely a disparity in terms of the valuations that, in my view, is totally illogical. And I would say, while -- some would say that those prices are too high and maybe they are in some cases, I would say that our valuation is way too low is really the issue. So hopefully, we'll see that narrow over time, and this won't be as big of an issue as it's been in recent times. We can do one more. Operator: We have one more question, Brendan Lynch. Brendan Lynch: Great. And Mark, congrats and [ Louis ] congrats as well. Maybe just 1 question for me. The FCC is considering auctioning 180 megahertz in , I think, it's 3.9 to 4.2 gigahertz band. Are there any carriers that would be able to acquire the spectrum and deploy it via software upgrade based on the spectrum that they currently have deployed? Brendan Cavanagh: I don't believe the answer to that would be yes. There would be -- this is sort of an adjacent spectrum band and the upper C band, I believe we would need to see from most of our customers incremental deployments, probably of massive MIMO in order to do that. But at this stage, there's a lot of work that still needs to be done around what that means. But our internal view at this point is that it would require incremental antennas and radios. Well, thank you all for joining the call, and we look forward to reporting our year-end results to you next time. Operator: Thank you to all of the speakers, and thank you all in the audience for joining us today. With that, our call is concluded, and you may now disconnect.
Operator: Scott Eckstein: Thank you, operator. Hello, everyone, and thank you for joining us today for Harmonic's Third Quarter 2025 Financial Results Conference Call. With me today are Nimrod Ben-Natan, President and CEO; and Walter Jankovic, Chief Financial Officer. Before we begin, I'd like to point out that in addition to the audio portion of the webcast, we've also provided slides for this webcast, which you may view by going to our webcast on our Investor Relations website. Now turning to Slide 2. During this call, we will provide projections and other forward-looking statements regarding future events or future financial performance of the company. Such statements are only current expectations and actual events or results may differ materially. We refer you to documents Harmonic filed with the SEC, including our most recent 10-Q and 10-K reports and the forward-looking statements section of today's preliminary results press release. These documents identify important risk factors, which can cause actual results to differ materially from those contained in our projections or forward-looking statements. And please note that unless otherwise indicated, the financial metrics we provide you on this call are determined on a non-GAAP basis. These metrics, together with corresponding GAAP numbers and a reconciliation to GAAP are contained in today's press release, which we have posted on our website and filed with the SEC on Form 8-K. We will also discuss historical financial and other statistical information regarding our business and operation, and some of this information is included in the press release. The remainder of the information will be available on a recorded version of this call or on our website. And now I'll turn the call over to our CEO, Nimrod Ben-Natan. Nimrad? Nimrod Ben-Natan: Thanks, Scott, and welcome, everyone, to our third quarter 2025 earnings call. Today, we shared strong third quarter results that exceeded our guidance and reflect both focused execution and growing market momentum across our broadband and video businesses. Revenue was $142.4 million, driven by strong unified RPD and fiber product shipments, along with year-over-year growth in broadband rest of the world and continued strong video performance across both appliances and SaaS streaming. In addition to these operational achievements, we returned capital to shareholders by repurchasing an additional $16 million of our outstanding common shares, bringing total repurchases under the current program to $66.1 million. We closed the quarter with backlog and deferred revenue of $495 million, underscoring consistent customer demand and visibility into future deployments as operators accelerate network modernization. Earlier today, we announced an expanded partnership with Charter to extend our cOS virtualized broadband platform and advanced operational tools across their entire footprint, including the deployment of DOCSIS 4.0 unified RPDs. This expansion reinforces Harmonic's leadership in virtualized broadband and our ability to scale next-generation architectures for the world's largest operators. Turning to Slide 5. Across the industry, broadband operators are making significant investments to modernize their networks for higher speeds and to deliver better economics and improve subscriber satisfaction. Network evolution has become a strategic imperative, elevating quality of experience, reducing churn and lowering operating costs are no longer optional. They are core business goals. Harmonic's virtualized broadband platform, cloud services and operational tools, together with our portfolio of compact, energy-efficient and feature-rich DOCSIS and fiber access devices are driving this industry transformation. Our customers rely on us to simplify network modernization, accelerate deployments and continuously optimize performance at scale. These capabilities make the business case for transformation both compelling and sustainable. Turning to Slide 6. Building on our broadband growth strategy, revenue in this segment reached $90.5 million for the quarter with gross margin of 47.3%. We now have 142 cOS deployments in production, serving over 37 million cable modems and ONUs worldwide, reflecting our unmatched scale and reliability in virtualized broadband. At this scale, the gap between Harmonic and the rest of the market has become extraordinary. Our field-proven consistency, operational depth and nearly decade-long production maturity place our platform in a class of its own. In addition to these results, this quarter, we also achieved several important milestones with key customers that highlight our leadership in Unified DOCSIS 4.0 and fiber convergence. Together with Mediacom, the fifth largest cable operator in the U.S., we completed the industry's first production deployment of a Unified DOCSIS 4.0 on a live extended spectrum network. This deployment showcased at SCTE TechExpo demonstrated symmetric multi-gig performance and live analytics with real subscribers, a breakthrough moment for the broadband industry. We are also powering GCI's modernization program with our cOS platform and Unified DOCSIS 4.0 nodes, enabling them to bring multi-gigabit broadband to some of the most remote regions in North America. This collaboration highlights how our technology helps operators extend the reach and longevity of existing HFC infrastructure. Additionally, Midco, a leading operator in the Midwest, continued its rollout of virtual CMTS and DAA nodes, selecting Harmonic to upgrade its HFC network and prepare for future 40 upgrades. Also, among recent highlights is a multimillion dollar RFP award from a leading -- operator in Europe, along with another win with an international Tier 1 operator, both partnered with Harmonic to power their next-generation broadband transformation. Our fiber business delivered another strong quarter, demonstrating both robust year-over-year growth and accelerating customer momentum. We continue to win new projects and follow-on orders across North America and international markets. A major highlight this quarter is our expanding collaboration with Comcast, which is deploying our fiber solution, including our virtual BNG and remote OLTs as part of its network expansion program. Comcast is adding roughly one million new fiber passing per year, leveraging our technology to deliver multi-gigabit symmetrical broadband with ultra-low latency. This expansion extends connectivity to new and remote communities and demonstrates how our solution accelerates fiber reach while simplifying operations and reducing cost. The fiber segment remains a key growth driver supported by record booking and expanding global adoption. Our Unified DOCSIS 4.0 strategy continues to gain momentum, marked this quarter by the first commercial extended spectrum rollouts. These live deployments validate the maturity and of the technology and are fueling growing operator interest as the ecosystem advances through ongoing interoperability work and increasing readiness of modems and smart amplifiers. Unified RPD shipments remain strong, and our new unified RF front-end tray is on track for initial shipments late in the fourth quarter. Innovation continues to be a defining strength for Harmonic. And this quarter, we expanded our capabilities of our broadband cloud platform to drive higher network intelligence and operational automation. We introduced new tools that allow operators to detect and resolve service issues in real time down to micro-outage levels, improving subscriber satisfaction and reducing churn. These capabilities leverage our advanced streaming telemetry to provide instant root cause analysis and to automate corrective actions and optimize field resources to dispatch with exceptional precision. At SCTE, we also unveiled Pathfinder, a patent-pending new self-healing capability within our broadband platform. Pathfinder enables the rapid mitigation of localized spectrum interference that could otherwise affect quality of experience for any group of subscribers. This functionality complements our Beacon Speed Maximizer technology, which dynamically adapts RF network configuration to maintain peak throughput even in challenging and dynamic conditions. Together, these innovations mark a new level of adaptive intelligence for Harmonic's broadband platform, reinforcing our leadership and unique differentiation. To summarize, our broadband business continues to perform, fueled by new deployments, expanding fiber adoption and advances in Unified DOCSIS 4.0. Our converged DOCSIS and fiber architecture is proven at scale, enabling operators to deliver multi-gigabit services with higher quality of experience and lower total cost of ownership. Fiber continues as a high priority as we execute successfully across a growing number of deployments. It stands out as a major growth engine for Harmonic with rising customer wins, expanding used cases and consistently increasing revenue. Meanwhile, the successful launch of Live DOCSIS 4.0 services and a maturing ecosystem are driving momentum and giving more operators the confidence to advance their own deployments. Combined with growing intelligence of our cloud-based capabilities, Harmonic is positioned as partner of choice for operators seeking to elevate broadband performance, simplify operations and maximize value from their network investments. These dynamics give us confidence in our long-term growth trajectory as Unified DOCSIS 4.0 and fiber deployments scale through 2026 and beyond. Turning to Slide 7. The video market continues to transform rapidly, shaped by new audience experiences and rising expectations for reliability. Broadcast-grade availability is now essential to streaming success, specifically for live sports, where even a brief disruption carries immediate business impact. The recent widespread cloud outages that took down major -- streaming, gaming and messaging services worldwide was a clear reminder of how dependent the industry remains on a few cloud providers. Our VOS streaming platform was designed from the ground up to avoid this single point dependency. It is fully cloud-agnostic, geo-redundant and capable of seamless failover across cloud providers. This architecture enables our customers to maintain continuity and deliver uninterrupted service even when a major cloud experiences downtime. At the same time, sports streaming is evolving rapidly with new innovation and differentiation. Leading platforms are competing to offer more immersive and personalized fan experiences. A major streaming platform is expanding its involvement in live sports through Formula 1 coverage designed to offer a data-driven and immersive experience by integrating live race telemetry, multiple in-car camera views and special audio to make viewers feel like they are inside the action. Meanwhile, Peacock recently introduced Dolby Atmos to Sunday Night Football, bringing viewers closer to the action than ever before. Such experiences highlight the next frontier of sports engagement, immersive, interactive and powered by real-time data. Our strategy aligns closely with that trend. VOS360 Media SaaS and VOS360 Ad SaaS now deliver sub-5-second synchronized low-latency streaming, multi-view experiences, AI-based highlights creation and dynamic in-stream advertising. These capabilities position Harmonic as a critical enabler of next-generation live sports streaming services. In the third quarter, video segment delivered $51.9 million in revenue, up sequentially and reflecting solid execution across both appliances and SaaS streaming. Our appliance business delivered solid execution through continued Tier 1 refresh programs, competitive takeouts and primary distribution wins, while SaaS streaming once again achieved record performance with $16.1 million in quarterly revenue, driven by global live sports deployments and new Tier 1 opportunities moving into scale. We also expanded our ecosystem of technology partners, including AI-specific ad tech integrations with Google Ad Manager and other leading monetization platforms. These advancements, combined with our unique advertising capabilities are driving strong momentum and wins for our VOS Ad solutions and redefining how live sports is delivered, monetized and experienced. Looking ahead, our combination of appliance strengths, accelerating SaaS growth and differentiated multi-cloud resiliency provide a strong foundation for continued profitable expansion in 2026 and beyond. Now I will turn to Walter for a deeper review of our financials. Walter Jankovic: Thanks, Nimrod, and thank you all for joining us today. Before I discuss our quarterly results and outlook, I'd like to remind everyone the financial results I'll be referring to on this call are provided on a non-GAAP basis. As Scott mentioned earlier, our Q3 press release and earnings presentation include reconciliations of the non-GAAP financial measures to GAAP. Both of these are available on our website. Here on Slide 10 are some financial highlights for the quarter. As Nimrod mentioned, in Q3, both our broadband and video businesses exceeded our revenue and EBITDA expectations. On a total company basis, revenue was $142.4 million, while EPS was $0.12. The year-over-year comparison was impacted by extremely strong performance in broadband during the third quarter of last year. Free cash flow during the quarter was $21 million, and our cash balance at quarter end was $127.4 million, a year-over-year increase of $69.2 million. I'd like to point out that this substantial increase in cash is net of $65.8 million in stock repurchases that we did during the past 12 months. Even at these recent quarterly revenue levels, we have continued to maintain profitability and free cash flow. Furthermore, given our expectations for broadband revenue growth in 2026, we are confident in our ability to expand profit margins and future free cash flow considering the high operating leverage we have previously demonstrated. Looking more closely at our businesses, third quarter broadband revenue and adjusted EBITDA were $90.5 million and $14.2 million, respectively. These year-over-year results were largely expected, reflecting the timing of operators shifting to DOCSIS 4.0 that we have previously discussed. Revenues for Q3 exceeded our guidance range, in part due to orders that we had expected to occur in Q4. Similar to last quarter, our Q3 rest of world revenue showed strong year-over-year growth as we focus on customer diversification. In our video business, we continue to see strong and consistent momentum as video revenue was $51.9 million, up 2.9% year-over-year, while adjusted EBITDA in this business was $7.7 million due to the increasing mix of recurring revenue and overall strong margins, coupled with our efficiency improvements. Importantly, we've continued to see strong growth in the video SaaS part of our business as this revenue line grew 13.6% year-over-year to reach a record $16.1 million. Moving to Slide 11. As we stated previously, we continue to focus on 3 capital allocation priorities. These include making targeted investments in our business to drive our organic growth, returning capital to our shareholders and identifying and evaluating inorganic growth opportunities or M&A that complement and leverage our growing broadband installed base. Aligned with our first key priority, we expect to invest in our inventory over the next several quarters to support our expected growth in broadband, which includes our rest of world customers, where we are continuing to make good progress. While our inventory was actually lower in Q3, this remains a priority as we continue to order material for next year. Returning capital to our shareholders is also important to us. As such, we will continue to engage in opportunistic stock repurchases under our share repurchase program, which authorizes up to $200 million of repurchases and doubled our previous program. Year-to-date, we have repurchased $65.8 million of our common shares under this program, including repurchasing shares totaling $15.7 million in the third quarter. As we stated before, we plan to fund these purchases with expected strong free cash flow generation over the next 3 years. Our balance sheet remains strong with ample sources of liquidity. At the end of Q3, we had $127.4 million in cash and $82 million available under our credit facility. We believe this is more than sufficient to support our capital allocation priorities. Additionally, I'm pleased to share that following an analysis of the recent passage of the One Big Beautiful Bill Act, as well as the impact of Section 174 R&D adjustments, we expect to realize a meaningful reduction in our cash income taxes by a cumulative total of approximately $50 million for both 2025 and 2026. This will further enhance our capital allocation plan as we consider additional investments to accelerate our growth in broadband. Now let's take a more detailed look at our third quarter 2025 financial results on Slide 12. As I mentioned earlier, second quarter total company revenue was $142.4 million. In the quarter, we had one customer representing greater than 10% of total revenue, which was Comcast accounting for 43% of total revenue. Total company Q3 gross margin was 54.4%, once again surpassing the high end of our guidance range and up 70 basis points year-over-year. Broadband Q3 gross margin was 47.3%, which was also above our guidance range and down year-over-year as anticipated, mainly due to tariff costs and mix. Video gross margin in Q3 was 66.7%, reflecting continued revenue strength from larger appliance deals, SaaS expansion and our cost optimization efforts. Moving down the income statement on Slide 13. Q3 total company operating expenses were $58.4 million, down 3.5% year-over-year as a result of our prior restructuring initiatives in video and additional cost actions. We expect OpEx to increase in Q4 due to seasonality. Our profitability metrics exceeded our guidance range as third quarter 2025 broadband EBITDA was $14.2 million and video EBITDA was $7.7 million. Total company EPS was $0.12. Q3 bookings were $133.3 million. The book-to-bill ratio for the quarter was 0.9 compared to 1.1 in Q2 '25 and 0.9 in Q3 '24. Broadband book-to-bill was above 1. Over time, we expect our book-to-bill ratio to normalize with some possible quarterly fluctuations and approach the historical benchmark of greater than 1, especially as we see growth in broadband due to Unified DOCSIS 4.0 and other customer ramps accelerate. Turning to the balance sheet on Slide 14. As I've noted earlier, we ended Q3 with cash and cash equivalents of $127.4 million. The sequential change in cash was mainly attributable to positive free cash flow in the quarter, offset by share repurchases. Days sales outstanding at the end of Q3 was 66 compared to 79 in Q2 '25 and 80 in Q3 '24. The sequential decrease was due to a larger number of shipments that took place earlier in the quarter, allowing for collections to occur in the quarter. We expect DSO to return to our typical levels. Inventory decreased $2.5 million in the quarter, and our days inventory on hand fell to 95 from 101 days last quarter. At the end of Q3, total backlog and deferred revenue was $494.5 million. Around 63% of our backlog and deferred revenue have customer request dates for shipments of products and for providing services within the next 12 months. Turning to guidance. We continue to anticipate a moderate pace of broadband upgrade activity in the short term. However, we continue to see positive tailwinds for 2026 as Unified 4.0 technology progresses and customer ramp readiness improves. We expect these positive developments to support increasing revenue growth in broadband during the course of 2026. Now let's review our non-GAAP guidance for Q4 2025, beginning on Slide 15. Given the timing of the DOCSIS 4.0 transition and macroeconomic conditions, similar to last quarter, we're taking a prudent approach to our Q4 guidance. For Q4, we expect broadband to deliver revenue between $85 million to $95 million, gross margins between 48% to 50% due to product mix and adjusted EBITDA between $10 million to $16 million. This broadband guidance includes an estimated tariff impact of less than $1 million in the Q4 margins, similar to what we saw in Q3 based on the current announced tariff rates and exemptions. For our video segment in Q4, we expect revenue in the range of $48 million to $52 million, gross margin in the range of 66% to 67% and adjusted EBITDA to range from $3 million to $6 million. On this slide, we have also provided total company guidance for Q4. In the interest of time, I will let you read through the details. Please also note that our non-GAAP tax rate remains at 21%. I would like to highlight that total company EPS for the fourth quarter is expected to be in the range of $0.06 to $0.12. In closing, we executed a very successful quarter with sequential momentum and results that exceeded our expectations across both businesses. As we finish 2025, we are starting to see the effects of DOCSIS 4.0 transition timing become the tailwinds we anticipate will drive our broadband growth in 2026 with increasing strength as the year progresses and operator ramp-ups accelerate. Based on all of this, we expect modest sequential broadband revenue growth in Q1 2026 versus Q4 2025 guidance, again, with momentum building as we move throughout 2026. This growth, combined with our substantial operating leverage and the cash tax benefits I mentioned earlier, leave us well positioned for not only stronger revenue growth, but also increased profitability and free cash flow as we move into next year and beyond. We thank everyone for their attention today. And now I'll turn it back to Nimrod for final remarks before we open up the call for questions. Nimrod Ben-Natan: Thanks, Walter. For the third quarter, we generated strong results that were once again above the high end of the guidance, driven by our progress in cOS deployments, Unified 4.0, fiber and video appliances and SaaS streaming. Looking ahead, we remain confident that 2026 will mark a return to growth, supported by expanding Unified 4.0 adoption, continued fiber expansion and growing impact of our intelligent cloud services. That concludes our prepared remarks. Walter and I are now happy to take your questions. Operator: [Operator Instructions] Our first question will come from the line of Simon Leopold with Raymond James. Simon Leopold: So it looks like your top customers continuing to be on an improving trend through this year. Just wondering how you're thinking about that long term? In other words, should we expect that you're on a path now to getting back to levels you've had historically? Or would you consider the current level somewhat normalized? And just wondering, you haven't had that second 10% customer in a bit. We think that, that customer has been absorbing inventory. Just sort of what's your expectation for when you get a second 10% customer? Walter Jankovic: Simon, it's Walter. So to address both of those questions, first of all, we're not going to specifically guide any one of our large customers here in terms of when they're going to be 10% or not. I think you can look at the history of that customer in terms of being a 10% customer in past quarters, and we expect that customer to return to that level at some point in time. With regards to how we think about our top customers, obviously, we are planning in tandem our view of our top customers as well as the rest of world customers as we look at the broadband picture for 2026 and beyond. Today, we shared in our prepared remarks commentary around how we see Q1 of '26 unfolding based on the visibility we have today as well as our expectations that the momentum will pick up as the year goes on in terms of the growth. We're just today starting to get some visibility around customers' plans for next year, and that will be fine-tuned over the coming months as it typically does as we enter into the new year. Operator: One moment for our next question. And that will come from the line of Ryan Koontz with Needham & Co. Unknown Analyst: This is Matt on for Ryan. Your fourth quarter guidance implies a change to normal seasonality, which if you look historically, is usually up strong sequentially. How should we think about that change this year? And then going forward, should we expect a return to normal seasonality? Walter Jankovic: Matt, it's Walter here. So with regards to our Q4 guidance, I think all year, we have been communicating the headwinds impacting us in terms of getting ready for the DOCSIS 4.0 transition, the Unified 4.0 platform specifically. And so I think with this year, specifically, we're looking at getting ready for that transition as we move into 2026. So that's why we're guiding what we're guiding for Q4 based on where we see things today in terms of that transition. But as Nimrod mentioned in the prepared remarks, we're seeing everything on track in terms of progress across the piece in terms of customers getting ready for deployment of Unified 4.0. Nimrod mentioned Mediacom in his opening remarks as a great example of that. As we look at customers getting ready for that transition, that's why we continue to point to 2026 in terms of growth and accelerating growth through that year. Nimrod Ben-Natan: And we also mentioned that the specific unified RF tray would only become available late in the fourth quarter. So that by itself is also a factor for Q4. Unknown Analyst: Great. And as a follow-up, earlier in the call, you had highlighted the strong growth coming out of your rest of world segment. Could you just share what the current market drivers are there for that strength? And how we should think about that opportunity for more customer diversification going forward? Nimrod Ben-Natan: Yes. So over time, we expect most of the global market of DOCSIS to make the transition from legacy into the virtualized platform for a long list of reasons. But I think, as I highlighted, the imperatives for the network evolution for them, increasing speed was historically the driver for that, but it's no longer the main driver. They have to do whatever they can to improve customer experience and satisfaction and as a result of that, to drive improvement of churn and reducing the operating cost. And the new platform with all the tools that we provide is enabling that. So --that's what we see globally, and we shared today a fairly long list of recent wins. And specifically, as it relates to DOCSIS 4.0 with the success and I think the Mediacom specifically kind of their launch of the service gave a lot of confidence to the rest of the market. So we clearly see that. And I also recognize the progress that we are seeing in the kind of maturity of the ecosystem, interoperability that is taking place by CableLabs, modems availability, smart amplifiers. So it's all coming together, and that's what's kind of driving our confidence. Operator: [Operator Instructions] Our next question will come from the line of Steve Frankel with Rosenblatt Securities. Steven Frankel: I'm wondering if you might quantify a couple of things for me. The extent of that pull-in in the broadband business that you mentioned, how material was that in pulling revenue, which you anticipated in Q4 into Q3? And then I have a video question for you when you're finished with that. Walter Jankovic: Yes, Steve, it's Walter. It was a few million dollars. Steven Frankel: Okay. And then maybe a ballpark on or some description of the Akamai impact on the video business that you mentioned in the slides, either in terms of revenue or new customer acquisition? How should we think about the leverage from that partnership? Walter Jankovic: Sure, Steve. I'll kick it off. With regards to Akamai, we've started onboarding customers onto the platform. And when you look at our sequential growth in video in terms of video SaaS from Q2 to Q3, a large part of that was a result of getting started with the onboarding with Akamai. Now that's going to continue in terms of several months to onboard additional customers onto the platform, and we see that as a big factor of growth as we move forward. And as we look at FY '26 and bring those customers on and get them to full run rate, it will be part of the -- big part of the growth story in SaaS next year. Nimrod Ben-Natan: The other thing is that, Steve, just on Akamai we are transitioning the media services, which is kind of the first layer, if you will. And some of these customers are then taking our additional services that we provide with VOS on live streaming and ad. So we see incremental revenues, and some of that was already reflected in the third quarter. Steven Frankel: Okay. But it will continue to build as we get into 2026 is what I'm hearing you say you're fully transitioned until some point in '26. Nimrod Ben-Natan: That’s correct. Steven Frankel: And then if I sneak one last one in. This Spectrum announcement today, that's saying there was a portion of their network originally they thought was going to stay 3.1. Now it's going to look like the 85% that you were focused on before, correct? Nimrod Ben-Natan: I think you should relate to what they publicly announced. If I'm not mistaken, they always talked about a 4.0 phase in their network evolution. I guess the news from our point of view is that both the virtual CMTS -- well, the virtual CMTS obviously supports 4.0 and future evolution of DOCSIS. There was a discussion around that during the recent SCTE TechExpo about going beyond 1.8 gigahertz. So future potential evolution of that will be covered as well as our participation in the Unified DOCSIS 4.0. Operator: One moment for our next question. And that will come from the line of George Notter with Wolfe Research. Unknown Analyst: This is Taren on for George. I just wanted to get a better idea of the sizing or potential opportunity of this fiber-to-the-home opportunity, the announcement you guys made with Comcast. I would love any more detail there and how you guys think about that going forward? Nimrod Ben-Natan: Yes. So I guess what we shared is the announcement we made around the SCTE, which we enable Comcast to do that on the remote OLT and software components like the virtual BNG and that Comcast is doing about one million new homes a year. We did not provide any financial details unit count or anything like that. But one million new homes is quite sizable in terms of what they do, and we power them to enable that. Operator: I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks. Nimrod Ben-Natan: We appreciate your continued interest in Harmonic and look forward to updating you on our progress in the future. Thank you all for joining the call. Have a good day. Operator: This concludes today's program. Thank you all for participating. You may now disconnect.
Operator: Christopher Brinzey: Thank you, operator, and good afternoon, everyone. Today, Biodesix released results from the third quarter of 2025. Leading the call today will be Scott Hutton, Chief Executive Officer. He is joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the Investor Relations section of the company's website at biodesix.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward-looking statements made on today's webcast. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott? Scott Hutton: Thank you, Chris, and thank you all for joining us today. At Biodesix, our mission is to transform patient care and improve outcomes through personalized diagnostics that are timely, accessible and address immediate clinical needs. We leverage a multimodal approach that includes genomics, proteomics and radiomics combined with AI to discover, develop and commercialize innovative diagnostic tests for physicians, biopharmaceutical, life sciences and diagnostic companies to help improve patient care. In 2025, we are focused on 3 main goals: growing our top line revenue, improving operational effectiveness and efficiencies that will help drive a positive adjusted EBITDA in the fourth quarter and advancing our pipeline for future growth and expansion. In the third quarter, we made progress on all 3 of these goals. Our growth is accelerating with revenue up 20%. We improved upon our already strong gross margins by 400 basis points to 81%. We improved adjusted EBITDA by 18%, and we presented clinical data that continues to support the use of our on-market products and demonstrates the potential of our product pipeline. Starting with our clinical offerings in lung diagnostics, our major focus remains on lung nodule management, where nodules are either found during low-dose CT screening for lung cancer or incidentally when the patient has an image taken for another purpose. We have implemented a 3-tiered commercial strategy that helps to improve the management of patients with lung nodules and increases the growth potential of our on-market test. This strategy started at the launch of Nodify testing with the interventional pulmonologists who are typically responsible for diagnosing lung cancer. We then expanded into their referral network in general and community pulmonology. Most recently, in this past year, we have very selectively expanded further into the referral network by calling on primary care providers. By taking this next step into the pulmonology referral network, we have expanded our access to the available nodule market that includes 50% of patients with pulmonary nodules who are managed in primary care. This approach enhances the value of Nodify Lung testing by first helping general pulmonologists and primary care providers triage patients by risk of malignancy to be referred in for intervention or managed locally, then helping interventionalists prioritize higher-risk patients for prompt diagnostic intervention. Our first large cohort of primary care sales representatives were in the field for the full third quarter, and we've been encouraged both with the response from providers and with test adoption from their target accounts. Prior to the initiation of our primary care pilot conducted in 2024, only 4% of Nodify tests were ordered from primary care. In the short time this new effort has been in place, that number has increased to 11% in September. Overall, total tests ordered from primary care in the third quarter grew 75% over third quarter of '24. Last week, Dr. Susan Garwood, the National Physician Director for Pulmonology Service Line, Pulmonologist and Thoracic Oncology Medical Director for HCA Enterprise, conducted a national webinar on Nodify Lung entitled "A Triage Tool Supporting Primary Care Referral Decisions." During the presentation, Dr. Garwood shared their early experience of a 4-clinic primary care practice that recently implemented Nodify Lung testing to assess lung cancer risk across their large patient population. By implementing Nodify Lung testing, they identified multiple patients with early-stage lung cancer where curative surgery remained a viable option while avoiding unnecessary strain on bronchoscopy suite resources that would otherwise be required to evaluate dozens of patients. A recording of this webinar is available on our website. We continue to receive similar positive feedback and success stories from our team and directly from health care providers nationwide as we execute our strategy. We have also made significant progress in making it easier for clinicians to order and implement our test in their practices. In fact, one added benefit to our expanded sales strategy is the availability of on-site blood draw capabilities. This has historically been a challenge in pulmonology, where we frequently need to leverage our extensive mobile phlebotomy network to draw blood away from the office. Once a patient leaves the physician's office, we face the all too common challenge of patient compliance to ensure the blood draw is completed. Completing the blood collection on site before a patient leaves the facility, either through on-site phlebotomy services or through our own capillary draw kits, resulting in more tests being delivered than if the patient leaves and needs to schedule a blood draw at another time. Ordering the test in the primary care setting and collecting the sample on site helps to overcome this challenge. Similarly, electronic ordering streamlines the process and ease of use for the physicians in their office. Customer retention in those offices who utilize digital ordering is significantly higher than those who do not. Since Nodify launch, we've expanded our digital test ordering capabilities through our Biodesix physician portal and a number of early EHR integrations. Through these efforts, our digital ordering has increased by 43% over last year. In the third quarter, we had an average of 85 sales reps in the field who delivered 15,700 total lung diagnostic tests, up 13% year-over-year. We are continuing to execute on our stated strategy and plans and are expecting to have an average of 93 to 97 reps in the fourth quarter. Next year, we anticipate returning to a cadence of adding approximately 6 per quarter, continuing to drive patient access to cutting-edge diagnostic testing. In addition to our volume growth, our average revenue per test improved by 7% over the second quarter of '25 due to our market access team's success in gaining more coverage and contracting for our test as well as process improvements and subsequent successes from our revenue cycle management team. In addition to our commercial efforts, we continue to generate clinical evidence to drive physician and payer adoption of Nodify testing. Two weeks ago at CHEST, which is the largest annual pulmonology meeting, we presented interim data from our CLARIFY study, new health economics and outcomes data, and there were multiple independent presentations and abstracts on Nodify. CLARIFY is a retrospective chart review evaluating the use of Nodify testing in real-world clinical practice, expecting to enroll approximately 4,000 patients. In the presentation, Dr. Michael Kammer, the Head of AI and Radiomics at Biodesix, reviewed data on Nodify CDT from the first 1,000 patients enrolled in the study, just 1 year after the study began. The data showed consistent performance of Nodify CDT in a real-world setting versus prior clinical research with similar sensitivity and specificity. This study is an important addition to our existing evidence package for Nodify testing, introducing data from a real-world environment that will continue to reinforce the clinical utility of Nodify. The results from the independent analysis build on existing clinical evidence showing the value of Nodify testing at independent practices across the country, the performance of the test in nodules detected in lung cancer screening programs and showing that Nodify testing had superior performance as compared to PET scans. More data will be released in the coming months, including at the upcoming ILAC-ASCO North American Conference on Lung Cancer in December. Shifting to development services. We continue to see strong interest in our partnership service offering. We leverage our multi-omic approach and R&D expertise to help deliver insights that our biopharma, life science tools and diagnostic partners use to personalize patient care and help improve disease detection and treatment decisions across various disease types. In the third quarter, we delivered $1.9 million in revenue, growing 97% year-over-year. The funnel has also continued to grow with the team exiting the quarter with $12.9 million under contract, but not yet recognized, representing a 16% increase over last year at this time and another all-time high. Moving to our product development pipeline and services partnerships. We had multiple presentations on our products in development at a number of medical and scientific meetings. Our current pipeline consists of our combination proteomic and genomic MRD test, expanded indications for VeriStrat into several new tumor types with immunotherapy selection and digital diagnostics. Multiple presentations on the MRD test were presented at the Tricon Precision Medicine Conference, the AACR Annual Meeting and ddPCR World. Our unique MRD test combines the proteomic information from our risk of recurrence test that can give insights into a patient's immune profile, along with tumor-informed genomics that leverage the high sensitivity and specificity of multiplex droplet digital PCR for disease monitoring. One exciting recent update is an expanded product development partnership with Bio-Rad Laboratories in which we will conduct the development, clinical validation and regulatory submissions of certain high-complexity in vitro diagnostic assays based on Bio-Rad's ddPCR technology. The first assay will be ESR1, which is becoming critical in HR-positive, HER2-negative advanced breast cancer. We expect the partnership to expand, enabling highly sensitive and specific detection of additional genomic markers utilizing Bio-Rad's QX600 platform. This is another key partnership in addition to those already announced with Thermo Fisher Scientific and Memorial Sloan Kettering Cancer Center and are examples of the strength of the Biodesix development services offering, including the conduct of assays under design control, quality management systems, regulatory and reimbursement support for in vitro diagnostics. Coming up on November 12 at the AMP Annual Meeting in Boston, representatives from Bio-Rad, Thermo Fisher and Memorial Sloan Kettering will join a panel led by Dr. Gary Pestano, our Chief Development Officer, to present on the Biodesix R&D developments, our unique and highly specialized partnerships with these premier institutions and updates to the product pipeline. A recording will be available on our website following the event. Overall, we are very encouraged by the continued strong year-over-year growth in this business and believe there is significant potential for upside as both existing business and additional opportunities mature. Finally, turning to guidance. Based upon how we closed the third quarter and based upon the momentum we're seeing early in the fourth quarter, we are comfortable increasing our revenue guidance range for 2025 to $84 million to $86 million. With that, let me turn it over to Robin for a review of our financial performance for the quarter. Robin? Robin Cowie: Thanks, Scott, and good afternoon, everyone. Third quarter total revenue was $21.8 million, a 20% increase over the prior year. Lung diagnostic testing revenue in the third quarter of 2025 was $19.8 million from approximately 15,700 tests as compared to $17.2 million from approximately 13,900 tests for the third quarter of 2024, representing 13% growth in test volumes and 16% growth in revenue and accelerating growth in both volume and revenue over second quarter results. Several quarters ago, you may recall that we discussed an issue we were having with a couple of Medicare Advantage plans instituting administrative barriers to paying claims for our Medicare covered tests. In the third quarter, following the efforts of our market access and revenue cycle management team, one of the largest plans restarted paying for current claims, which contributed to the increase in ASP. Please note that we are still working with the plans in our attempts to collect on older claims, which were not recognized as revenue or booked as AR in the past. Development services revenue was $1.9 million in the quarter, representing 97% year-over-year growth. We ended the third quarter with $12.9 million under contract. And as Scott previously mentioned, this represents another all-time high. Our gross margin percentage in the third quarter 2025 was 81%, up 400 basis points from 77% in the third quarter of 2024. Despite continued supply cost pressure and existing macroeconomic uncertainty, we expect gross margins to remain near 80% to finish out the year. Overall operating expense, excluding direct costs and expenses, was $24.7 million in the third quarter, which was a 10% increase over the third quarter of 2024 and a 4% decrease versus the second quarter of '25. Total SG&A was $21.7 million versus $20.0 million in the third quarter of '24, an 8% increase. Of note, total SG&A was a 3% decrease versus last quarter despite having 11 or 15% more sales reps in the field. As Scott said before, we are continuing to scale the sales team and expect 93 to 97 sales reps in the field in the fourth quarter. R&D expense was $3.0 million versus $2.5 million or a $500,000 increase year-over-year, but a $300,000 decrease from the second quarter. R&D reflects the investments in clinical studies to help advance adoption of our lung diagnostic test and advancement of our pipeline. Net loss for the third quarter of 2025 was $8.7 million, an improvement of 15% year-over-year and an improvement of 24% over the second quarter of '25. Adjusted EBITDA, which excludes noncash and other onetime items, was a loss of $4.6 million, which was an improvement of 18% year-over-year and an improvement of 36% over the second quarter. We ended the quarter with $16.6 million in unrestricted cash and cash equivalents, which was impacted by timing of collections, resulting in a $5.2 million increase in accounts receivable, offset by net cash inflows of $4.8 million from our ATM facility. The increase in accounts receivable reflects higher lung diagnostics revenue, newly secured development services agreements and the timing of cash receipts, which have been collected during the fourth quarter. As Scott discussed, we are updating our full year 2025 revenue guidance to $84 million to $86 million for the year. Because of our strong gross margins and the planned and actual expansion of the sales team and the rep productivity achieved to date, we expect to achieve adjusted EBITDA positivity in the fourth quarter. Now I'll turn it back to Scott for some closing thoughts before the Q&A. Scott? Scott Hutton: Thank you, Robin. To summarize our achievements in the third quarter, we delivered accelerating revenue growth. We improved our already strong gross margins to greater than 80%. We maintained our cost-conscious approach, resulting in a quarter-over-quarter decrease in operating expense. We improved both net loss and adjusted EBITDA on our path to profitability. We continued the execution of our strategies, including expansion of our sales team, increase in our service revenue and funnel and the addition of new partnerships. And we presented data on our existing tests and pipeline. Before moving on to questions, I want to restate that we have the best lung health focused team in diagnostics and continue to make significant progress in developing a market in an area that has not historically used diagnostics in the way that other medical or oncology specialties have. With first-mover advantage in lung nodule management and an ever-increasing body of robust clinical and health economic data, we are creating the momentum to drive greater clinical and payer adoption as we move through 2025 and beyond. With all this happening, it's a very exciting time here at Biodesix. We look forward to sharing more with you in the coming quarters. I would also like to remind everyone that November is lung cancer awareness month, a month dedicated to educating people on this deadly disease and driving awareness that early detection can save lives. Let's now move on to questions. Operator, let's start the Q&A section. Operator: [Operator Instructions] Our first question comes from Andrew Brackmann with William Blair. Margarate Boeye: This is Maggie Boeye on for Andrew. Maybe first, just to start, Scott, is there any way you can talk about some of the signals or proof points that your primary care expansion is working? I appreciate that commentary you provided in the prepared remarks about the volume growth contribution from PCPs, but just any other color you can provide there? Scott Hutton: Yes. Thanks, Maggie. Appreciate the question. Yes, we've highlighted that this is not about us just going out and cold calling on primary care practices. And so those initial proof points really start when a pulmonologist encourages us and introduces us to their referral network. It's a warm handoff and introduction. They usually stay involved in that early education. And so we get immediate feedback. We have the ability to receive questions from the primary care physician. When we compare that to what we saw in our pilot that we conducted last year, it's very consistent. And so we think we're continuing to make progress. Our marketing materials are slightly different. Their questions are a little bit different than pulmonologists because their practices are different. So each and every month, we get a little bit better on that front. And as we gain more traction and have additional success, we've got greater confidence. And so it really is about broader adoption and utilization. One of the things we're tracking, Maggie, and we'll share more about it in coming months and quarters is we really are starting to see primary care physicians highlight earlier detection and diagnosis. And so one of their biggest fears at primary care is that a patient might sit in their practice and they've missed a cancer. And so in a number of these early adopters on the primary care side, they're starting to track that they're getting earlier diagnosis. And so we feel confident that long term, that will make a significant impact in those patients' lives. And so we look forward to sharing additional data as we have it. Margarate Boeye: Great. And then maybe just next, I know you have that R&D event next week, but so I don't want to steal any thunder from that. But just anything you can share with respect to some of the ways you look to expand your product portfolio as we move into 2026? What should investors be on the lookout for? And how should we think about investment into those expansions? Scott Hutton: Yes. Great question, Maggie. I appreciate it. We're really excited about AMP. We had highlighted earlier this year that we had hoped to have an R&D Day. We chose to utilize AMP for that because of our partners. Bio-Rad, Thermo Fisher, Memorial Sloan Kettering will all be there. So they'll all be participating in our R&D Day. So what you can expect is really an update on all of the ongoing efforts that we have with them. And we will talk a little bit more about our pipeline. And so as you asked, thinking about 2026 and beyond, we know that our product development pipeline is underappreciated, and we plan to change that. We'll continue to highlight the progress that we've made. We think that we've got some exciting new developments that we can share and hopefully commercialize additional tests in the years to come. But Gary Pestano, our Chief Development Officer, will be leading that. We anticipate additional follow-up calls with him. We will have a recording of that AMP R&D Day so that we'll post that on our website and others will have the ability to see it. But we think partnership -- our partners speak volumes. And knowing that Memorial Sloan Kettering chose us, Bio-Rad chose us and Thermo Fisher chose us, allowing them the opportunity to share why they chose us, what makes us different and how that will be meaningful to patient’s long term, we think that speaks volumes. And so, we're eager to let them speak. Operator: Our next question comes from Kyle Mikson with Canaccord Genuity. Alexander Vukasin: This is Alex Vukasin on for Kyle Mikson. Congrats on a solid quarter. So, I guess just taking a step back, so you've expanded the sales force from 65 reps in 1Q. Now we're at around 85 in 3Q, expecting that 93 to 97 again for 4Q, so that's fantastic. But could you just elaborate on the ramp-up of the new sales reps as well as roughly what you think peak average sales per rep could be at full productivity? Scott Hutton: Yes, Alex, great question. One of the things that we used the pilot with PCP last year to assess was if the call point was different and then what that sales rep productivity could look like. One of the things that we shared was that the ramp was consistent. And so, from hiring to training and onboarding, we saw a consistent performance improvement over time. We've seen that stay consistent now that we've begun the expansion. And so, we feel confident and we keep striving to get back into that minimum $1 million per sales rep in terms of sales rep productivity. And we've seen opportunity there to continue to grow and expand that. So, we're confident that we can do that. As we continue to hire these professionals, we'll continue to build a narrative around territories since it's a complementary team approach. We'll have 50 territories here as we exit Q4 going into 2026. We're going to continue to invest, as we've stated, and build out that sales force at about 6 sales reps per quarter. It will be a mix between associate sales consultants and primary care-focused sales consultants. We feel strongly that the 50 territories that we have locked today, we won't have to hire additional pulmonology sales consultants. So, from a rep productivity metric, we want to get them back to what we saw before we began hiring them and then continue to leverage their access into primary care. We're eager to prove that out, and we'll look forward to sharing some of those performance metrics at the end of the fourth quarter and as we progress into 2026. Alexander Vukasin: That's fantastic color. And one more for me. So, switching gears a little bit. Do you feel that increased direct competition in the space as well as new tests across lung cancer testing continuum potentially be necessary to push some milestones in the space forward such as HEDIS measures or updates to test guidelines? Scott Hutton: Yes, Alex, it's a great question. What's been interesting over time is lung has been particularly difficult. We've seen a number of diagnostic competitors enter the space and exit and/or stop. We've got a significant first-mover advantage. We continue to focus on what we can control, putting everything in place to ensure that those patients in dire need are getting the support that they need. There's a lot of really interesting research ongoing. There have been some introductions on the therapeutic side. None of that hurts. The more awareness that we bring to this, the better off we're going to be. the HEDIS measures getting pushed out was disappointing, but we're still eager to do our part. One of the things that we do know is that when we get broader screening adoption, we're going to identify those patients at high risk at a greater rate. When we do, Nodify testing will benefit and provide strategic value there. So, we continue to play our part. We feel confident about the offering that we have and the value we're providing. But we're also cheering for those blood-based lung cancer screening tests because we know that those tests will only allow us to provide earlier detection and diagnosis. And again, here we are in November, which is lung cancer awareness month, where we're advocating for awareness and early detection and diagnosis. So yes, we do think that rising tide raises all ships. Operator: Our next question comes from Thomas Flaten with Lake Street Capital Markets. Thomas Flaten: Robin, would you be willing to quantify the amount of the Medicare Advantage back pay that you got in the third quarter? Robin Cowie: We didn't actually get much back pay in the third quarter. It was more that they started paying on new claims. So, there was no unusual amount of revenue in the third quarter from back claims. Thomas Flaten: So, following on from that, then how sustainable do you think that uptick in ASP is going forward? Do you have a similar uptick in the third quarter of last year? Do we expect it to rebound back down? Or can you help us think about that? Robin Cowie: I think third quarter of last year, we did have some back claims, and I think we talked about that in the quarter. I'll be sure to call that out if and when we do collect on back claims so that you can look at sort of a normalized ASP. But what we're seeing is we're seeing consistent payment on those Medicare Advantage claims, and we feel good about that going forward. Thomas Flaten: Got it. And then of the increase in the guide, it was primarily an upping of the lower end, how much of that is due to the diagnostic revenue versus the services revenue? Robin Cowie: It's very heavily tied to the diagnostics revenue that's the lion's share portion of the revenue for the company. And so as that moves, so does the total. Operator: Our next question comes from William Ruby with TD Cowen. William Ruby: This is William on for Dan. On the adjusted EBITDA positivity, just wondering kind of where your confidence level stands on reaching that in the fourth quarter? And then just what are your views on capital needs over the next few years with your cash where it stands right now? Robin Cowie: Yes. We feel pretty confident about reaching adjusted EBITDA positivity in the fourth quarter. With the way we ended the third quarter and the strength going into the fourth quarter, we feel good about that guide. And then on the capital needs front, we feel good about where we are. We're continuing to increase our revenue. We improved our gross margins. We kept our OpEx pretty much flat, and we're continuing to build towards that cash flow breakeven. So while we did use a little bit of the ATM in the third quarter, partially to offset the increase in AR that we saw, which we noted in the call, we collected that money in the fourth quarter. We continue to drive towards profitability based on the existing business. Operator: And I'm not showing any further questions at this time. I'd like to turn the call back over to Scott for any further remarks. Scott Hutton: Thank you, operator. In closing, I want to express my gratitude to all the remarkable members of the Biodesix team who have shown unwavering belief in and dedication to our mission, vision and culture. Our collective commitment and daily contributions are centered around making a positive impact on the lives of patients through our health care provider customers and our industry partners. I'm truly thankful for your efforts. Thank you. You may now disconnect. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.