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Operator: Good morning, and welcome, everyone, to this webcast for the presentation of the Q3 2025 report from NORDEN that was published this morning. [Operator Instructions]. With that, I'll hand over to CEO, Jan Rindbo; and CFO, Martin Badsted, from Norden. Please go ahead. Jan Rindbo: Thank you very much, and also a warm welcome from my side to this Q3 presentation of our results. Let's dive into the numbers. And in the third quarter, we delivered a net profit of $26 million. This was driven by asset management and vessel sales as we continue to realize values from our fleet portfolio. And what is also evident here is that with a rising market and rising asset values, we've seen our NAV increase by 7% in the quarter. With better-than-expected performance and also this rising market, we have raised our full year guidance on the 28th of October to a range now of between $100 million to $140 million. We have also had a busy year so far with 45 asset transactions. So this is one of the hallmarks of NORDEN, where we are actively using the asset markets to optimize our fleet portfolio. With that, I will hand you over to Martin Badsted to take a closer look at some of our numbers. Martin Badsted: Thank you very much, Jan. So looking first into the NAV, where, as Jan said, the NAV increased 7% since the end of June to now DKK 362 per share. You will see that from the table, 2/3 of our NAV or the fleet value at least is in dry cargo, whereas the last part is in tankers and, of course, also supported by a fairly strong balance sheet with a net financial position of $375 million. We have added some sensitivity analysis here shown on the right-hand side, where we show what happens to the NAV if you change the underlying asset values or forward rates by 10% or 20%. And you will see in the upside bars here in the graph that a 10% change will actually give you an 18% upside and a 20% change will give you 37% upside in the NAV figures. Turning to the business units, starting first with Freight Services & Trading. We made a loss of $14 million in the quarter, mainly driven by poor performance, especially in Capesize in our Dry operator large vessel segment. Importantly, the Dry operator small vessels actually did quite well and generated a profit of $9.1 million. And when you combine the 2 segments, we are seeing improved performance towards the end of Q3 and into Q4. Tanker operator made a profit of $2.4 million based actually on very good TCE earnings in our tanker pool. And actually, that led to a margin per day -- per vessel day of $1,700, which is a very strong number, although a little bit down on the numbers from last year, which were exceptionally strong. Logistics have actually improved its operating performance and have now delivered $1 million of positive EBITDA during the quarter. In asset management, we continue to do quite well in both of our segments. So we made a profit of -- EBITDA profit of $62 million in the quarter. $27 million were from sales gains, still leaving $35 million in the quarter in operational performance. In dry, we benefited from high coverage taken on at times when the TC rates were stronger than now. And in the tanker owner, we benefit from the spot position that we have in a market that has been tightening during Q3. And as Jan said, we have been super active in managing our portfolio with 22 sales and 22 new additions to the fleet and actually also buying 1 vessel into our own fleet. And that means that even though we are selling quite a few vessels and realizing those values, we actually still have a strong portfolio of 83 options that provide good upside in potential tightening markets. Turning to the market development. You will see here from the graph that it was a fairly soft first half. And then in the beginning of Q3, the Supramax rates spiked, as did Capesize and other rates in the market, mainly on the back of strong coal volumes. This has actually continued so far during Q4, still on strong coal volumes, but actually also on a rebound in bauxite transportation. We actually think that the fundamentals are pretty strong in the market at the moment and not least supported by all the uncertainty of geopolitical uncertainty and sanctions being in place that generally is supportive of rates in this environment. In the tanker space, we also saw improvements in Q3. You see here the dark line actually coming up above the line showing the rates from last year. So here also, we are talking about geopolitical uncertainties, sanctions, trade skirmishes and so forth, which actually tend to lead to longer distances and therefore, require much more tonnage to transport the same amount of volumes. After the end of Q3, we have also seen a very strong development in crude tanker rates based on OPEC deciding to add more barrels to the market, thus leading to more transportation. And even though we haven't seen so much trickle down into the product tanker rates so far, we actually believe that, that will happen for the rest of the year and into 2026, leading to a strong market development also for our MR tankers. That does last, we think, into the first half of 2026, after which there will be some pressure from newbuildings coming into the market towards the end of next year. And with that, I will hand you back over to Jan. Jan Rindbo: Thank you, Martin. So in markets that are driven by geopolitics and that are quite volatile, it's good to have a dynamic and flexible model to adjust to that kind of environment. So in NORDEN, we have 4 drivers in our business model. We have dry cargo and tankers, and we have also owner and operator activities. And actually, within the dry cargo segment, we are in multiple vessel classes, and we also have our logistics business. So it means that we have a broad spectrum of activities where we can adjust our investments and exposure between. And what that gives us is, over time, it delivers better returns than more simple businesses. And we can see here on the right-hand side that NORDEN have been able over a rolling 5-year period to generate superior returns on our invested capital. We have also seen, though, that we have a higher volatility in our earnings and specifically in our freight services and trading business. And here, we do have a focus on generating a higher level of stability in those earnings, while, of course, at the same time, maintaining all the upside that we like from the optionality and therefore, move us to more to the left side in the graph that you're seeing on the right-hand side in terms of volatility. If we turn to the next page and look at the full year guidance. So as mentioned, we raised our guidance on October 28 to a new range of between $100 million to $140 million. And if you look at our position below, where we have the open days, you can see that we have a long position across the business, both in dry cargo and in tankers, which means that we are currently benefiting from the sort of momentum that we see both in the dry cargo and in the tanker markets. So we continue to see good earnings in the asset management part of the business. And we are actually seeing an improvement in the operating earnings in Freight Services & Trading, where we are moving closer to breakeven levels here towards the end of the year. With that, we turn to the last page before we go to Q&A. And just summarizing that we've had a good first 9 months of the year with a total profit of $111 million and a return on invested capital of 10%. We have raised our guidance, as I just mentioned, on better-than-expected operational performance and also rising markets, which also partly has led to the increase in our net asset values that now stand at DKK 362 per share. We've been extremely active in the asset markets, where we've had a total of 45 transactions. And I think what is notable here is that we have also built a core fleet now of multipurpose vessels. Most of them will deliver in the future, but it is sort of positioning NORDEN in that segment where we see great upside, both from demand and a low order book. And then we have a range of actions to ensure that this improvement we are now seeing in FST will continue and push into 2026 onwards. With that, let's turn to the Q&A session. Operator: Thank you. We are now ready for the Q&A session. [Operator Instructions] And we have a first written question here that is, how is the market you operate in affected by the U.S. tariffs? Jan Rindbo: Yes. Good question. And especially right now, of course, where there are -- where we just had this meeting in Korea between President Xi and Donald Trump. So obviously, if we start sort of in the helicopter, tariffs is not good for trade. It creates barriers for trade. But having said that, what we see in shipping is that trade flows tend to shift with the barriers. So for example, using the soybean trade as an example right now, where China, instead of buying in the U.S., they have been buying a lot of soybeans in South America. And at least in our business, we can quite easily adapt to that and simply load the cargoes, move the ships to South America instead of the U.S. So I think that's the benefit of, again, having a flexible business model. Now I think with the tariffs, that has created a lot of noise in the world. But when you look at world GDP growth, and you actually look at underlying sort of economic developments, we have not seen a huge impact. The world carries on. So at least so far, you can say, the consequences of higher tariffs have not really been felt in the global economy. Operator: Thank you. And then we have another question here is, how is the balance between owners' market and charterer's market developing? Martin Badsted: This is actually still something that we are struggling a little bit with. We call it also a challenging operating environment. So for instance, if you take some of the dry cargo vessels that we are operating, we are seeing that asset prices are very firm. Period rates are actually also quite firm. And it's still quite hard for an operator to take in ships on period and put them into the spot market and actually make a positive margin on that. It has probably improved a little bit during the quarter with the tightness of the market where spot has also come up. But it is still a general challenge that we see basically across the segments, but probably mainly in the bigger segments. Operator: Thank you. And another question here. How are you balancing market exposure long, short into 2026? Jan Rindbo: Yes. So I think we showed on one of the previous slides, we showed the position where we are long across the group. I guess I can show the slide here, where you see at the bottom that we have a long position across both dry cargo and tankers and especially actually into 2027, because this is also the time where we will take delivery of some of the owned newbuildings that we have ordered on Capesize in Japan and also a number of the leased vessels are coming into the portfolio at that time. Of course, if markets continue to go up and asset prices rise, we also have the choice that we can declare purchase options and keep the vessels and further build this position out in time. And we can, of course, also go out and do additional deals. The challenge, I think, at the moment is that asset prices are high, newbuilding costs are high. So to order a new vessel comes also with a pretty hefty price tag. So it's not a sort of a slam dunk decision. Even though you have a positive view on the markets to go out and order vessels, they are at a historically high cost. Operator: Thank you. And another question here. When do you expect to see positive margins across the segments in the Freight Services & Trading division? And how do you see the margins developing into '26, '27? Martin Badsted: So I probably cannot comment directly on exactly what we see there. But what we have said in the report and in the presentation here is that based on the good trend that we are seeing in recent months, we are actually expecting that the FST margins will move towards breakeven levels for the remainder of the year. And also that the initiatives that we have put in place to improve performance will take effect and work as we expect during 2026. So we are seeing we are on a good trend, but I cannot be more specific than that at the moment. Jan Rindbo: I think I can add just one thing, and that is that what we did see in the third quarter was that 3 out of the 4 segments were actually positive. So the challenge, as Martin also said earlier, is mainly on the larger vessels. And that is, of course, where our focus is to turn that around. Operator: [Operator Instructions] And another question goes here. What market effect have you seen so far from sanctions towards Lukoil and Rosneft? Martin Badsted: I think it's a little bit early to actually expect a meaningful impact of this. There is also the element that when you sanction parts of the market, then flows and activity tends to move to other parts of the market. So I think it's still early days, but our view is probably that we won't -- we shouldn't expect a big impact of that particular sanction package. Operator: Thank you. There seems to be no further questions. So I'll leave the word to management for final remarks. Jan Rindbo: All right. Well, thank you very much for good questions. Thank you very much for your interest. And we look forward to see you again at the next presentation. Martin Badsted: Thank you.
Bong Kwon: Greetings, everyone. I am Peter Kwon, Head of KB Financial Group IR Division. We will now begin the 2025 Q3 business results presentation. Thank you very much for participating in today's earnings release. We have here with us executives from the group, including our Group CFO, Sang-Rok Na. We will have our CFO cover 2025 Q3 major business results, and then we will have a Q&A session. I will now invite our group CFO to walk us through 2025 Q3 business results. Sang-Rok Na: Good afternoon. I'm Na, Sang-Rok, CFO of KB Financial Group. Thank you for joining the third quarter 2025 earnings presentation by KBFG. Before running through the third quarter performance, let me first talk about our approach to profitability against changing business environment. Amid continuing slow growth trend, we face wide-ranging factors, including interest rate and FX volatility, government housing market stabilization measures and policies to revitalize the capital market. Navigating this environment and underpinned by robust fundamentals, KBFG mitigated the impact of external uncertainties as it continuously ensures stable earnings capacity. On strong growth of core deposit base, we defended the group's NIM resilience offsetting external volatilities, while through nonbank subsidiaries portfolio, we are building a well-balanced earnings structure in this new wave of change. We are also maintaining appropriate RWA growth, absorbing the impact arising from multiple variables, which we believe forms a steady foundation for the group's overall profitability. Under the government's target of KOSPI reaching 5,000, Korean economy is at an inflection point where the pivot of the economy is moving from real estate to capital market. In line with such change, KBFG will leverage this opportunity and turn the tide of change to one that can strengthen our profit-making capacity in order to broaden the basis of group's future growth. Upon the bank and KB Securities WM channel, we will expand brokerage, credit and sale of investment products to broaden the basis of earnings while supporting financial asset growth of the Korean people. Leveraging our accumulated expertise and influence in the capital markets, we aim to lead the market tide characterized by expansion of productive finance and venture capital and capture emerging and new business opportunities. And I believe our experience in investing into venture and innovative companies and the success cases we were able to draw from them will provide greater boost for our market leadership as we make investments into growth sectors. Thus, supported by well-prepared leadership, KBFG will proactively respond to change, driving quality improvement in earnings structure. Before moving on to financial performance, first on Q3 cash dividend. Today, Board of Directors approved KRW 931 DPS with total cash dividend amounting to KRW 335.7 billion. Q3 cash dividend per share increased KRW 135 Q-on-Q, excuse me, year-over-year on the back of increase in total dividend sum beginning of the year and the impact of share buyback. Next, moving on to financial performance of KBFG. Group's net profit for the quarter reported KRW 1.686 trillion, while on a cumulative basis as of Q3 increased 16.6% year-on-year, reaching KRW 5,121.7 billion. Cumulative group ROE in Q3 was 12.78%, an improvement by a large margin versus last year. This was driven by solid core earnings and with the absence of ELS reserving impact and gains from sales of holdings in our consolidated funds in Q2, there was sizable recovery on the nonoperating accounts. On top of this, rigorous cost control efforts were compounded, driving and attesting to group's solid fundamentals. Meanwhile, nonbank business accounts for 37% of cumulative Q3 net profit as we maintained diversified earnings portfolio. Next, I will move on to detailed breakdown of earnings results. Group's third quarter cumulative net interest income was KRW 9,704.9 billion, flat year-over-year. In Q3 '25, group's net interest income was KRW 3,336.2 billion, but removing the base effect of costs related to liquidation of fund being recognized as interest expense, NII was flat Q-on-Q. Next, I will elaborate on bank loans in Won growth. As of end September 2025, bank loans in Won stood at KRW 375 trillion, a 3.3% growth compared to last year and a 0.9% growth Q-o-Q. Household loans recorded KRW 182 trillion, a 0.7% growth Q-o-Q and corporate loans centering on large corps and robust SME loans grew 1.0% Q-o-Q. Taking into consideration the government stance of strengthening household debt management and housing market stabilization measures, we expect household loans to show limited growth for the time being. However, we plan to rebalance household loan portfolio from a profitability perspective and pursue a loan growth strategy focusing on robust SMEs to secure our interest income basis. Next is NIM on the bottom right of the page. Q3 bank NIM stood at 1.74% on the back of funding cost management efforts and group NIM posted 1.96%, maintaining a similar level to the previous quarter. In particular, despite the contract in loan yields this quarter, the bank's NIM remained stable at around KRW 7.9 trillion growth in core deposits alleviated funding pressure, enabling a steady defense of our margin. Next, I will cover noninterest income. Q3 cumulative group noninterest income posted KRW 3,739 billion, a 1.1% decrease Y-o-Y. Q3 cumulative other operating income posted KRW 786.6 billion, a 15.4% decrease Y-o-Y, and it was primarily attributable to the base effect from the reversal of KRW 123 billion in KB Insurance, IBNR reserves in the previous year. On the other hand, Q3 cumulative net fee income posted KRW 2,952.4 billion, a 3.5% growth Y-o-Y. Along with the increase in stock market trading volume, brokerage commission income grew significantly, while strong bancassurance sales and the expansion of trust-related earnings also contributed to improved performance. In particular, in case of our subsidiaries, KB Securities showed 16.5% net fee income growth and KB Asset Management showed 23.3% of net fee income growth, respectively, and drove group's fee income expansion. We believe that this increase in fee income from the capital market, in line with the ongoing momentum of capital market revitalization, has ample potential for further expansion going forward. Since around 70% of the group fee income is generated by nonbanking subsidiaries centering on the capital market, we plan to strengthen nonbanking competitiveness to further expand our fee income basis. Next, I will cover general G&A. Q3 cumulative general G&A posted KRW 5,007.7 billion. And on the back of continuous cost efficiency efforts, it stopped at a 2.8% increase Y-o-Y. Q3 cumulative group CIR recorded 37.2% and is being stably managed within our target range. We have been exerting efforts to save recurring expenses and at the same time, maintaining an appropriate level of investment in essential areas, including IT, disaster prevention and strengthening information security. We are strategically expanding investment in growth areas, including AI. And going forward, we will heighten our cost structure efficiency through selective cost implementation. Next is Page 8, group provision for credit losses. Q3 provision for credit losses posted KRW 364.5 billion, a 44.4% decrease Q-o-Q. Q3 group credit cost went down 25 bps Q-o-Q, posting 30 bps and on a cumulative basis, recorded 46 bps and transitioned to a lower stabilization trend. To give more color about the main reason why this quarter's provisioning decreased around KRW 290.6 billion Q-o-Q, it was on the back of the conservative additional provisioning stance we had until now as well as slightly alleviated burden on provisioning accumulation through the portfolio improvement efforts, which took place from the second half of last year as well as the bank retail credit assessment model advancement. In addition, there was a partial provisioning reversal due to NPL recovery in Q3. So overall provisioning size decreased significantly. We believe that our efforts to strengthen risk management until now have been gradually showing results. And considering this trend of improved soundness, we believe that this year's group -- this year, group's credit cost will be managed around the mid-40 bp range. I will now cover group's capital ratio. At the end of September 2025, estimated group BIS ratio posted 16.28% and CET1 ratio recorded 13.83%, respectively, securing one of the highest levels of capital adequacy in the industry. 2025 September end group risk-weighted asset posted KRW 358 trillion and increased 3.5% compared to the end of the previous year. In Q3, the KRW 48 depreciation of the Korean Won against the U.S. dollar acted as a driver of RWA growth, but through RWA monitoring and portfolio adjustment, the FX effect was absorbed, and we adequately manage RWA growth at an appropriate level. From the next page, please refer to the detailed materials regarding the performance results I have just covered. With this, I will conclude KBFG's Q3 business results presentation. Thank you for your attention. Bong Kwon: Thank you for the presentation. We will now begin the Q&A. Operator: [Operator Instructions] We will take the first question, Do Ha Kim from Hanwha Securities. Do Ha Kim: I have one question on margin, and you talked about the reversal. So first, on margin, it seems like the decline has now stopped. And there's been an offset in Q4 or for next year. Do you have, maybe not, a specific number in terms of the guidance? Do you see that the decline in margin has now stopped? And are you looking forward to a turnaround? And you talked about the reversal from the recovery of the NPL. What is the amount? Bong Kwon: Give us one moment as we prepare for the answer to the question that you've submitted. Jong-Min Lee: Yes. Good afternoon. I am Lee, Jong-Min. I'm the CFO of KB Bank. First, we'll talk about the NIM outlook. If you look at Q3 NIM, it was 1.78%, so it's 1 basis point increase. And basically, the rate down-cycle has somewhat slowed. And also our core deposit on an average balance basis, there was an increase of KRW 4.3 trillion. So through our efforts in reducing the funding cost, we were able to defend the margin from the stagnant loan growth. Now under the government policy in terms of having a very rigorous control over household debt, we believe that for the time being, the loan growth is going to be limited. We will continue to focus on expanding our core deposit and also reducing the funding costs. That would make the key pillars behind the NIM. We are going to focus on company's institutional sales and expand on the low-cost deposit so that we can drive further savings in terms of funding cost. On an annual basis, in the second half or in Q4, we expect the NIM -- of course, it will be impacted by the movement of the market policy rate. There are multiple views regarding how the market rate is going to go going forward. However, looking at the overall direction forward, we think that in the second half, there's going to be a quite gradual decline at low single digit. That is what we are forecasting. And in order to defend its impact on margin, we're going to really make that up and offset the impact through strengthening our deposit base. Regarding the reversal of the provision, and you asked me about the size, it's around KRW 70 billion. Basically, overseas acquisition, we were able to recover certain bad debt there. And for domestic regarding the knowledge complex centers and the loans that were extended, there was a recovery, and that was reflected on the reversal. Operator: We will take the next question from ANZ, [indiscernible]. Unknown Analyst: Two questions from my side, please. One is, given that the policy rates in the U.S. are falling now faster than those by BOK, what is the plan for the financial group or for KB Bank -- for Kookmin Bank to issue additional Tier 1 securities in foreign currency in U.S. dollars? That's number one. And second question is, what is your guidance for NPL coverage for the foreseeable future? Do we expect it to decline further? Or you will keep it at the current levels or approximately around those? Unknown Executive: Can you repeat the first question on the Tier 1 capital? Did you say issuance of USD-denominated Tier 1? Unknown Analyst: Yes. So is the bank -- is the group or the bank planning to issue U.S. dollar-denominated additional Tier 1 securities given that the cost of foreign currency debt is now falling faster than the Korean won policy rate? Bong Kwon: Yes, give us one moment. Sang-Rok Na: Regarding the first question, now the FX rate is very elevated at this point. And compared to the fall in the U.S. Fed rate, if you look at Korea, we have a household loan-related issue and also there are real estate packages. So we do expect that the interest rate decline is not going to be faster than the U.S. So in consideration of that, so at this point, the U.S. dollar-denominated bond or any issuance of a hybrid bond issuance denominated in U.S. dollars, we're not yet considering to do that. You also asked about the coverage ratio. Right now, we are at about 130% coverage. Now over the past 2 years, we've really cleaned up our bad assets. And also there were some factors that drove reversal. So from -- it is correct that it went down from 200% level to 130% level. Now over the past 2 years, we've maintained this trajectory. So as we complete the NPL cleanup and we've seen improvement in the portfolio, we think that the inflow of new NPLs is going to be limited. Now having said that, our reserving discipline is going to stay intact. So the coverage ratio compared to where we are right now may slightly go up. Operator: We do not have any questions in the queue as of now, so we will wait. We will take the next question from BNK Investment Securities, Kim In, Director Kim In. Unknown Analyst: Congratulations, and thank you for the good performance. Bong Kwon: Can you speak up a little bit? Unknown Analyst: I think for KB for Q3, your earnings are good, but this could be a little bit sensitive. But as you probably know, we are hearing some talk about fines, administrative fines. So if you can comment on this, can you tell us about your thoughts, what is currently on your mind regarding these fines? Operator: We will soon answer the question, please. Sang-Rok Na: I am the CFO of the group. So to briefly elaborate, currently, regarding the size of the fine or the timing, it is very hard for us to comment because of its impact or the amount or the calculating standard, it is not finalized. So it is difficult for us to answer it in detail. And for the basic fine or the deductions, I believe that the authorities have shown us some clear guidance. And looking at the current situation, we are actively giving them our responses. So I think that we're in the process of coming up with a reasonable resolution. I'm sure that we will have some impact, but we are doing our best to minimize the impact, and we're working very hard. So we will work hard so that it will not actually have an impact on the shareholder return policy that we have committed ourselves to. And our bank CFO, I think, will also give a few comments, but maybe we can just conclude the answer at this time. Thank you. Bong Kwon: We will actually wait just a little more. Operator: We do not have any questions in the queue as of now. And we will take the next question from HSBC Securities. We have Won Jaewoong. Jaewoong Won: Despite the challenging environment, thank you very much for your great earnings. I have one question and for core deposit growth, I think that is quite notable. And regarding your core deposits, I think all other banks have this increase. So I think NIM has gone up. But I think that the competition is getting fiercer. Do you think this trend will continue for the time being? Or do you think that because there was the great elevation because of some maybe one-offs, so I'm curious about what was the main reason for this? And another question is, on Page 14 of the presentation, I think when we have a booming stock market for savings products, or I think a lot of the money moves to demand deposits. So do you think this is a trend? Or do you think it's because core deposits are coming in from the outside, so this is actually growing? So if you can explain about this phenomenon, it will be greatly appreciated. Bong Kwon: We will soon answer the question, please. Jung-Soo Huh: Yes, I will answer your question. For the bank, for the core deposit increase, regarding the reasons, I think on the whole, the interest rate fell. So that was a big impact because when the market rate falls, we tend to have more core deposits. So they are elevated. So I think that is the basic direction. I believe that recently, we had some of -- more customers that actually are using us to deposit their salaries. And on the whole, I think we have this increase in our customers that is leading to more core deposits. And I think we -- there are some changes so that we can receive more of these deposits from institutions and others and companies. So I think through these changes, we're seeing more companies and institutions that are providing more core deposits to us, and we are making many efforts. And I think in the stock market, we can see that with unsecured loans, it is inching up a bit and coming in as demand deposits and then going to the stock market. So I think we have this money move and it's going back and forth. So I think regarding whether that had a big impact, we will need to wait and see. But I think for individuals, we had more customers, customer numbers increased, which was the biggest impact. And I think for corporations, it's because we had some changes to make this easier for them to give us their accounts. Operator: Next Cho, Jihyun from JPMorgan. Jihyun Cho: I have two questions. First one has to do with the productive finance. What are your plans regarding productive finance? And also for RWA and CET 1, what's the impact that you're projecting? Also for the loan growth up to Q3, compared to your peers, we see that your loan growth is weaker and KB usually has a strength in the household lending space. So going forward, in terms of the loan growth, there is expectation that it may be difficult for you to achieve the target that you've said. So we'd like to gain some insight on Q4 and for next year, what is your loan growth projection, especially in relation to all the inclusive finance related effort? So there was a big write-back in Q3. And because that size is quite big. So in the second half, you seem to allude to the fact that the overall size of the reserve is going to be more downsized. What can we expect in Q4? Are you looking towards a write-back of the reserves? And your NPL dipped slightly. Is this -- do you think it peaked out? Are we now in a secular trend in terms of the NPL decline? So I would like to gain your thoughts on this. Bong Kwon: Give us one moment. Sang-Rok Na: Thank you for the good questions for productive finance and its impact on RWA. Let me briefly respond to that. Now since there hasn't been any official announcement, we have all the preparation that we've set aside. And once that announcement is made, we will share with the market as to what the extent or the size of this support is. And so in light of the government's official guidance, we will be determining the size of the product to finance package. But of course, the amount is important, but what's more important than the mere amount is that our asset structure has to be transformed in a way that actually improves on the RWA and that whole process and having that in parallel is what's most important. What that means is that our asset structure now is overly tipped towards properties and financial assets. And if that is redirected to SMEs and manufacturing sector, where we increased the RWAs that basically is our basic approach. So when it comes to not just the productive finance package and also its impact on our assets, there are certain areas that we do need to lower our exposure on. So in consideration of all of those factors that we are planning our RWA direction. So we think that next year, we will be amply -- we will be able to amply meet that RWA growth rate of around 5%. I say that because from the government's side, they're trying to revitalize the capital market, and they've made adjustments to the risk weights, lower than for the securities for the RWA securities. Now -- so we believe that we are in good alignment with the government's policy approach as well. So for next year, there is an impact of this productive finance. And so in controlling the RWA, it's become much more complicated for us to manage against RWA last year. And this year, as we monitor the RWA, we were able to build up on our know-how and experience. So we are very certain and confident that we will be able to continue to do so as we move into next year. In terms of the loan growth, I'm going to turn it over to CFO of the bank to respond to that question. Jung-Soo Huh: So in terms of the loan growth, just to add, now our bank on a quarterly basis, we try to ensure stable growth, so Q1, 2 and 3, we are growing at about the same rate. So under that approach for the loan growth, especially for household, it will be 3%, 6% to 7% for corporate loans. That's the growth rate that we are working under, so which will bring us about 5% of an annual growth. And we believe that we will be able to achieve that same level next year as well. Sang-Rok Na: Well, I would also like to add one more thing. So in terms of the growth of the loans and the assets, if I could elaborate, yes, there is the loan growth aspect. But if you look at this pivot changing to the capital market, now there is also a potential growth from the securities. So if you look at our asset mix, the loan growth is about 4.5%. That's the expected projected growth. For the securities, we expect it's going to show about 9% securities investment. So for next year, in terms of the mix of our assets, yes, loan growth is important, but there's also securities investment domain that we will also focus on to really drive growth. Just one more thing because you did ask about the asset quality projection. As you have mentioned up to the first half of the year, we went through some difficult patch. But starting end of last year, we've taken on a quite aggressive approach in improving and enhancing our portfolio. Thanks to these efforts, we have seen the outcome of that starting the second quarter, and we believe that, that improvement continued on into the third quarter. So in terms of the delinquency rate, in terms of NPL ratio, although a bit cautious, I believe that we are now in a period where we are now starting to see a recovery. And especially for the stimulus packages of the government and also support packages for those people and the vulnerable part of the society, we believe that there will be some gradual improvement. In terms of credit cost, we started off at an elevated level in the first half of the year, but we were very conservative in reserving -- we were very conservatively reserving and now we are seeing a reversal of such loan reserves. And we believe that this type of a trend can continue on until the end of Q4. So CCR we will be able to achieve the target that we set originally. Now having said that, when it comes to asset quality and the level and the extent of that improvement is going to be contingent on how the domestic market recovers and what the situation is for the real estate market. Those are also factors that will impact that going forward. For borrowers who are vulnerable, we will make sure that we keep a close monitoring of those segments so that we can have a rigorous control. Operator: We do not have any questions in the queue as of now, so we will hold. Bong Kwon: I think we had a very good Q&A session. And we have actually from Samsung Securities, Kim Jaewoo, who will ask the next question. Jae Woo Kim: I have two questions. The first question is related to asset quality that was mentioned and regarding credit card delinquency rates. I think we are seeing a notable decline. So if asset quality is improved, and I think for vulnerable borrowers, you said you have a prudent attitude. But do you think internally -- do you think that we have had meaningful improvement? Or do you think that you will need to wait and see, and this is just what happened in Q3? And I think regarding your forecast for Q4, then for next year for provisions, so what is the level that you're expecting? Because looking at the credit cost for this first half of this year, well, there was an elevated effect in March. So I think if it shows that the economy has deteriorated, do you think that for next year, how do you think it will change? And my second question is the capital adequacy ratio, and I think it has improved significantly. And I think that excess of 13% in RWA, you mentioned that. So based on that, so when we have simple calculations, I believe that we could see actually more than expected. So maybe I'm speaking a little bit earlier than is concerned. But I think for this year, we are expecting about excess of 50%. Then what do you think is the window that we should open to? And do you think that will be quite difficult? Or if it follows the formula then for next year, as you had mentioned, do you think that you can have differentiated TSR that can lead the industry? So can you tell us what we can expect? Bong Kwon: We will soon answer your question. Thank you. Jung-Soo Huh: Regarding credit card delinquency, I would like to answer that question. As you had mentioned, for a credit card, from late last year, we have been very aggressive and active in entry management and having good write-offs and sell-offs. So due to this, we have had portfolio improvement. And I think we're seeing the effects of our efforts materialize. So I think regarding the positive results, it is not just a one-off effect. I think this will actually continue until next year, the positive results. Of course, for the receivable, the voluntary adjustment and others, we will do so. But I believe that we will be able to manage it at the current level. You also asked a question about asset quality and the level of CCR for next year. And as was mentioned previously, I think until now, we will maintain the stance for management that we have had until now, and I think early 40% range could be the goal that we are going to pursue. Sang-Rok Na: Regarding Q4, capital adequacy rate and expectations for next year's shareholder return, well, regarding the amount of TSR or shareholder return, well, I also have very rosy expectations, and I'm keeping an eye on the situation. And regarding the capital adequacy ratio, well, I think that we have had a very high FX rate and it's being maintained. So we need to have ample buffer for that. So we have been managing our RWA. In Q4, there are seasonal factors. So it normally falls. And I think this pattern will also be repeated in Q4 of this year as well. So we need to take that into consideration. And regarding TSR, whether it will go up or down, well, you probably know we can't really comment on what we think will happen. But regarding the excess capital that goes beyond our committed number, well, we do have a protocol and this protocol will be maintained next year as well. But what we can comment on for sure is that regarding the timing or the size of TSR, regarding what we showed this year, we will be very flexible like we had been this year. And this means that in Q2 of this year, there was the expected shareholder return that we had actually implemented earlier than scheduled. So we will maybe pursue a similar stance next year, but we have the first half and second half of the year policy that we will actually commit to and we promise the highest level of TSR in the industry. So we will do our best to meet our commitments so that we can satisfy the expectation that you're looking for. Thank you. Operator: So we have Cho Jihyun from JPMorgan also wanting to ask a question. Jihyun Cho: Yes, just one more question on shareholder return policy. In the General Meeting of Shareholders, you would make resolution on the dividend payments through the use of the capital reduction. So regarding the separate taxation on dividend, now basically, for high dividend paying, criteria is 40%, cash dividend rate or 25% cash dividend, and then looking at past 3 years -- comparing to the last 3 years' average, for instance. So there are different criteria. Now -- and there's a lot of controversy that it should only be a cash basis of 40%. Now so if -- 25% plus 5%, if basically that theme is what's decided at, then only the company that's doing cash dividend of 30% or 40% that are subject to that separation of taxation. So then can we increase the cash dividend rate up to that ceiling to provide the benefit as much as possible to the shareholders? Now there could be multiple scenarios. How are you going to manage the mix between the dividend and the share buyback and cancellation? Bong Kwon: Give us one moment. Sang-Rok Na: Well, thank you very much for the question, a very good question. Now in the first half of the year, we've mentioned during our earnings call that basically in expanding the retail investor base, and to have the positioning and status as a household name in terms of the capital market investment that basically is our tenet, and we stand by that, and we are considering and looking at reviewing various different elements. So I think that's to the extent that I can share with you at this point because the policies or the law itself has not yet been determined or confirmed. We will engage in active discussion with the outside market as well. In terms of the requirement for that separate taxation for the dividend income because the rules and guidelines have not yet been confirmed, it's quite difficult for me to give you a definitive answer at this point. But when we announced our plan, when PBR is from -- to move from 0.8 to 1, we are going to have a higher level of share buyback and cancellation up until a point we reach a certain PBR ratio. For cash payout ratio, and if the requirement is 30% or set at 40%, so a much higher level, then cash dividend payout ratio, it's difficult for us to really just increase that quite steeply, although the requirement yet has not been determined, we will once again look at the mix between the cash dividend and also the share buyback. Basically, we would based on the discipline that we are using. However, if the taxation requirement is set at a level that we can amply meet, then we will also proactively consider the way to benefit the retail investors as much as possible. Bong Kwon: Thank you very much for the answer. We don't have any questions in the queue as of now. And I believe that we have had a good amount of discussion for about 45 minutes since we had the beginning of our earnings release. If you have any questions, please feel free to contact our IR department. And we will wait just a little bit more if you have any other questions. Well, I think questions are over, and we will conclude our business results presentation and Q&A session. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Kenneth Hsiang: Hello. I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our third quarter 2025 earnings release. I am joined today by Joseph Tung, our CFO. Thank you for attending our earnings release today. Please refer to the safe harbor notice on Page 2. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please do not ask questions or you may leave the session at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk, and our actual results may differ materially. For the purposes of this presentation, dollar figures are generally stated in New Taiwan dollars unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. For today's presentation, I will go over the financial results, and Joseph will give the company's guidance. Afterwards, we will be available to take your questions during the Q&A session. With that, let's get started. During the third quarter, both our ATM and EMS businesses outperformed our original sales and profitability expectations. Packaging and testing utilization percentages were in the high 70s. Loading on LEAP and traditional advanced packaging lines were generally full. Our wire bond utilization also showed some improvement. Our test business continues to grow faster than our assembly business, with our chip probe testing leading the way. From a profitability perspective, with our factory loading being better than anticipated, we were able to extract higher operating leverage. However, the company's performance was still impacted significantly by foreign exchange. Despite the NT dollar's near-term decline in value against the U.S. dollar, for much of the third quarter, the NT dollar traded at a relatively appreciated level when compared with the second quarter. During the quarter, the NT dollar moved from an average exchange rate of TWD 31.2 to TWD 29.7 per U.S. dollar, strengthening by 4.6%. Simplistically, we estimate that for every percentage point appreciation of the NT dollar relative to the U.S. dollar, we see a corresponding 0.3 percentage point negative impact to margins at the holding company level and a 0.45 percentage point negative impact to margins at the ATM level. Using this simplified approach, foreign exchange had negative sequential impacts to our holding company and ATM margins of 1.4 and 2.1 percentage points, respectively. And annually, negative impacts to our holding company and ATM margins of 2.4 and 3.6 percentage points, respectively. Heading into the fourth quarter, we expect a more stable NT dollar environment with an average exchange rate of TWD 30.4 per U.S. dollar. Please turn to Page 3, where you will find our third quarter consolidated results. For the third quarter, we recorded fully diluted EPS of TWD 2.41 and basic EPS of TWD 2.50. Consolidated net revenues were TWD 168.6 billion, representing an increase of 12% sequentially and 5% year-over-year. On a U.S. dollar basis, our sales increased by 17% sequentially and 14% year-over-year. We had a gross profit of TWD 28.9 billion, with a gross margin of 17.1%. Our gross margin improved by 0.1 percentage points sequentially and 0.6 percentage points year-over-year. The sequential improvement in margin is primarily due to higher loading and our ATM business, offset in large part by foreign exchange. The annual improvement is primarily due to higher utilization and beneficial product mix, offset by foreign exchange. We estimate that foreign exchange had a negative 1.4 and 2.4 percentage point impact to our gross margins on a sequential and annual basis, respectively. Our operating expenses increased by TWD 0.2 billion sequentially and TWD 0.7 billion annually to TWD 15.7 billion. The sequential and annual increases in operating expenses are primarily due to higher R&D costs. Our operating expense percentage declined 1 percentage point sequentially to 9.3% and was flat annually. Operating profit was TWD 13.2 billion, up TWD 3 billion sequentially and TWD 1.7 billion year-over-year. Operating margin was 7.8%, up 1 percentage point sequentially and up 0.6 percentage points year-over-year. During the quarter, we had a net nonoperating gain of TWD 0.8 billion. Our nonoperating gain for the quarter primarily consists of net foreign exchange hedging activities, offset in part by net interest expense of TWD 1.4 billion. Tax expense for the quarter was TWD 2.6 billion. Our effective tax rate for the quarter was 19%. Net income for the quarter was TWD 10.9 billion, representing an increase of TWD 3.4 billion sequentially and TWD 1.2 billion annually. On the bottom of the page, we provide key P&L line items without the inclusion of PPA-related expenses. Consolidated gross profit, excluding PPA expenses, would be TWD 29.4 billion, with a 17.4% gross margin. Operating profit would be TWD 14 billion, with an operating margin of 8.3%. Net profit would be TWD 11.6 billion, with a net margin of 6.9%. Basic EPS, excluding PPA expenses, would be TWD 2.68. On Page 4 is a graphical presentation of our consolidated quarterly financial performance. On Page 5 is our ATM P&L. The ATM revenue reported here contains revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses. For the third quarter of 2025, we had record revenues for our ATM business of TWD 100.3 billion, up TWD 7.7 billion from the previous quarter and up TWD 14.5 billion from the same period last year. This represents an increase of 8% sequentially and a 17% increase annually. On a U.S. dollar basis, our ATM revenues were up 13% sequentially and 27% annually. Our test businesses growth as a whole continues to outpace our assembly business as a whole, growing 11% sequentially and 30% annually. Gross profit for our ATM business was TWD 22.7 billion, up TWD 2.5 billion sequentially and up TWD 2.9 billion year-over-year. Gross profit margin for our ATM business was 22.6%, up 0.7 percentage points sequentially and down 0.5 percentage points year-over-year. The sequential gross margin increase was due to equipment utilization rate improvement, offset in large part by NT dollar appreciation. The annual gross margin decline was primarily due to NT dollar appreciation, and to a much lesser extent, higher electricity rates, offset in large part by higher loading. On a constant currency basis, relative to our first quarter, we estimate our gross margin would be roughly 4.2 percentage points higher during the quarter. This difference would have put our adjusted third quarter gross margin of 26.8% in the middle of our previously stated structural ATM gross margin range. During the third quarter, operating expenses were TWD 11.8 billion, up TWD 0.4 billion sequentially and TWD 1.2 billion year-over-year. The sequential increase in operating expenses was primarily related to higher overall R&D costs, including labor, equipment and factory supplies. The annual increase is primarily the result of R&D ramp-up and labor-related expenses. Our operating expense percentage for the quarter was 11.8%, decreasing 0.5 percentage points sequentially and down 0.5 percentage points annually. The decline was primarily the result of higher revenues during the quarter. As we previously have mentioned, we believe our spending in R&D, on an absolute dollar level, will continue to increase. But as the associated LEAP revenue syncs up with the R&D spending, our operating expense percentage should continue to moderate. During the third quarter, operating profit was TWD 10.9 billion, representing a sequential increase of TWD 2.1 billion and an annual increase of TWD 1.7 billion. Operating margin was 10.8%, up 1.3 percentage points sequentially and up 0.1 percentage points year-over-year. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 23.1% and an operating profit margin would be 11.6%. On Page 6, you'll find a graphical representation of our ATM P&L. Please note the generally upsloping revenue bars. Using the first quarter's foreign exchange rate, we estimate the gross margin percentages for the second and third quarters would be 24.1% and 26.8%. On Page 7 is our ATM revenue by the 3C market segments. You can see here that the Computing segment continues to become a relatively larger component of our business. This was largely driven by a higher percentage of LEAP based revenues. On Page 8, you will find our ATM revenue by service type. Here, you can see the 2 service types containing LEAP services, bump and flip-chip and testing. Both are becoming a larger component of our overall business. We expect continued momentum in these areas heading into 2026. On Page 9, you can see the third quarter results of our EMS business. The annual seasonality of our EMS business has been inconsistent over the last few years due to differing device ramp-up schedules. As such, we believe the annual comparability of our quarterly results may be impacted. During the quarter, EMS revenues were TWD 69 billion, increasing 17% sequentially, while down 8% year-over-year. The sequential increase in annual decline were both primarily the result of differing underlying device seasonality. Sequentially, our EMS business's gross margin declined 0.2 percentage points to 9.2%. This slight change was principally the result of product mix. Operating expenses within our EMS business decreased by TWD 0.2 billion sequentially and declined TWD 0.5 billion annually. The sequential decline is primarily the result of lower compensation and professional fees. While on an annual basis, the decline is primarily related to lower compensation expenses. Our third quarter EMS operating expense percentage of 5.6% was down 1.3 percentage points sequentially, while annually, our EMS operating expense percentage declined slightly by 0.1 percentage points on lower spending and revenues. Operating margin for the third quarter was 3.7%, up 1.1 percentage points sequentially and up 0.4 percentage points year-over-year. The improvements are primarily the results of higher loading rate and some one-time inventory-related adjustments. Our EMS third quarter operating profit was TWD 2.5 billion, up TWD 1 billion sequentially and TWD 0.1 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application. The third quarter application mix shows the seasonal ramp-up of our customers' consumer products, with our consumer segment growing while all other segments declining in application share. We believe, at a strategic level, our EMS business faces similar technological manufacturing trends as our ATM business does. Trends such as power delivery and thermal control are core themes at the forefront in both our ATM and EMS businesses. Having the ability to address customer challenges at both the ATM and EMS level allows us to provide a broader set of technical solutions to our customers. On Page 10, you will find key line items from our balance sheet. At the end of the year, we had cash, cash equivalents and current financial assets of TWD 83.4 billion. Our total interest-bearing debt increased by TWD 55.6 billion to TWD 295.7 billion. This increase was primarily due to the completion of a TWD 50 billion syndicated loan to fund our CapEx. Total unused credit lines amounted to TWD 344.7 billion. Our EBITDA for the quarter was TWD 32.6 billion. Our net debt to equity this quarter was 63%. On Page 11, you will find our equipment capital expenditures relative to our EBITDA. Machinery and equipment capital expenditures for the third quarter in U.S. dollars totaled $779 million, of which $534 million was used in packaging operations, $199 million in testing operations, $40 million in EMS operations and $6 million in interconnect material operations and others. In addition to spending on machinery and equipment, during the quarter, we also spent $716 million on facilities, which includes land and buildings. The overall environment appears to be strengthening. For us, the upward seasonality during the third quarter has been the strongest since the COVID timeframe. From a customer sentiment perspective, the pendulum appears to be swinging from booking capacity on an as-needed basis to prebooking capacities and making sure raw materials are available. As a whole, our customers are now looking for more assurance and security in their supply chains. For the quarter, LEAP and test services continue to lead growth for the company. LEAP continues to be driven by AI. Although we are seeing more customers target their products for use within the AI super cycle, many new products are inferring AI capability or AI readiness. Products are expanding new and smart AI capabilities and features. Newer generations of products are becoming more robust electronically, while allowing streamlined access to certain aspects of GenAI capability, such as video and document creation. The key is whether the end consumers are enticed to integrate new generations of products into their lives. And to that end, AI does appear to be upping the basic standards of quality in various contexts, not just limited to the school, office and social media. And there does appear to be the not so subtle ominous angle of you need AI to be competitive. This is bringing an intelligence and capabilities arms race to everyone's front door. In such a context, understanding the seemingly insatiable need for more capable chips and hardware seems fairly straightforward. From the packaging and test perspective, the higher the AI computational capability, the stronger the chips packaging and testing needs are. Critical improvement paths in power delivery, processing bandwidth and thermal performance will continue to drive our LEAP services. With that, I'll hand the presentation over to Joseph to present the company's outlook. Joseph Tung: Thank you, Ken. Let me give you the fourth quarter guidance. Based on our current business outlook and the exchange rate assumption of USD 1 to TWD 30.4 versus in third quarter, we have TWD 29.7 exchange rate. Management projects overall performance for the fourth quarter of 2025 to be as follows. On a consolidated level, in NT dollar terms, our consolidated fourth quarter revenue should grow by 1% to 2% quarter-over-quarter. Our consolidated fourth quarter gross margin should increase by 70 to 100 basis points quarter-over-quarter. Our consolidated fourth quarter operating margin should increase by 70 to 100 basis points quarter-over-quarter. For ATM, in NT dollar terms, our ATM fourth quarter revenue should grow by 3% to 5% quarter-over-quarter. Our ATM fourth quarter gross margin should increase by 100 to 150 basis points quarter-over-quarter. For EMS, in NT dollar terms, our EMS fourth quarter revenue should stay flat or decline slightly quarter-over-quarter. Our EMS fourth quarter operating margin should be similar to fourth quarter 2024 level. With that, let me also give you some color for the full year. For ATM, we're seeing better-than-expected momentum of mainstream business, given the continuing recovery of the general market. While our leading-edge revenue, we are on track to reach the USD 1.6 billion mark as planned. Altogether, we expect ATM 2025 full year revenue to exceed our target and grow over 20% year-over-year in U.S. dollar terms. As for machinery CapEx, we expect to further increase our full year CapEx by another few hundred million U.S. dollars to meet customers' requests and to support continuing business momentum into 2026. The increase is largely for wafer probing for both AI and non-AI chips as well as for general capacity ramp and some new initiatives for year 2026. With that, let's give it back to Ken to open the floor for questions. Kenneth Hsiang: Thank you, Joseph. During the Q&A session that follows, we would appreciate if questions can be kept concise and asked one at a time. I will be receiving each question and repeating the asked question to Joseph. Again, we'll be limiting the number of questions asked to 2 questions per turn, but asked one at a time. Operator: The first question is from Gokul Hariharan of JPMorgan. Gokul? Gokul Hariharan: First question, obviously, on LEAP, could you give us a little bit more color about how the progress has been on LEAP revenues this year? I think you had the TWD 1.6 billion guidance or additional TWD 1 billion guidance. What are we tracking to compare to that guidance now? And any indications for what it could do next year? I think based on our own math, it looks like it could easily double next year. And you're also raising capacity and CapEx pretty much every quarter. And also, on LEAP, what is the margin contribution from LEAP-related business? Is it already accretive or it will turn accretive once you reach a certain kind of revenue run rate, and any indications on that? That's my first question. Joseph Tung: Gokul, you are looking for revenue progress and generally kind of what you're thinking for this year. Gokul Hariharan: Yes. Joseph Tung: Okay. Like I said, the -- we are on track in reaching our TWD 1.6 billion mark this year. Everything is progressing well. I think we have shown very strong momentum in the AI and HPC related part of the business. In terms of the revenue mix, I think, because of the geopolitical uncertainties, in terms of packaging, we are a little bit short from our original target, but that was sufficiently replenished by our more than expected growth in our test business. So we are very, very confident that we will reach our TWD 1.6 billion mark for this year. And going forward into 2026, we see -- we continue to see very strong momentum. And we are very, very confident that we will gain another -- over TWD 1 billion kind of revenue increase for 2026 in this space. CapEx-wise, we will continue to make heavy investments in our leading edge, I think, to support the strong momentum that we are seeing today. And I think AI or HPC is really -- the momentum is here to stay. We're not going to be shy on making the necessary investment to not just secure our dominant position in this space, also to expand that dominance against our competitors and to fully support our customers' needs. In terms of margin and return, I think the -- as steady state, as we mentioned before, the LEAP would definitely be both margin as well as return accretive. And we are quickly reaching that point at this point. Gokul Hariharan: Okay. That's very clear. Maybe one other question. Can you talk a little bit about pricing? I think, Ken mentioned in the opening remarks that you're pretty much running full on flip chip and bumping. You're pretty much running full on LEAP. I think last time around, I think Dr. Wu had discussed about potential price negotiations. Anything that you can report on what are we seeing on pricing for your overall offering? Should we expect that pricing should go up? I think OSAT pricing doesn't usually go up that much, but just wanted to understand how we should think about pricing going into next year. Kenneth Hsiang: Gokul, you're looking for commentary on overall just pricing environment for us for this year and next year. Gokul Hariharan: Yes. And maybe also specifically on LEAP as well as your flip chip and bumping kind of advance -- the mainstream advanced packaging business as well because the customer set is slightly different. LEAP, you're kind of largely partnering with the large foundry. Joseph Tung: Well, without giving -- without getting into specific, I think, in general, I think our pricing remains to be resilient. And I think it's very sensitive to talk about pricing. But as a whole, I think we will continue to set the -- our pricing, the most suitable pricing structure based on the current situation. I think there are a lot of moving parts, and there are a lot of uncertainties in front of us. But in general, I think we will continue to make our pricing a very, very resilient level. Gokul Hariharan: Maybe if I kind of tweak it a little bit, Joseph, like what is customer feedback? I think I'm sure that everybody is talking about this. We hear that from your fabless customers as well. But I just wanted to understand like what is customer feedback to pricing even in -- I wanted to think about a little bit more on the mainstream stuff, like flip-chip CSP or flip-chip BGA, where there is no super cycle of growth. Even in those areas, are you able to have some like value app programs coming through? Kenneth Hsiang: Are you asking for expansion on the original pricing question there? Gokul Hariharan: Yes, sir. Maybe talk a little bit more on the mainstream advanced packaging as well, yes. Joseph Tung: For mainstream, I think we are seeing the continuing recovery of the general market. And therefore, I think pricing wise, I think, it's right now at a very stable level. Operator: Next question is from Charlie Chan of Morgan Stanley. Charlie? Charlie Chan: Yes. I just unmuted myself. First of all, congratulations for very good results and outlook. My first question is really on sort of supply chain related discussion. For example, what's the update plan for you to do the U.S. operation? Because your major customers -- major foundry partners are all very active in the U.S., and there seems to be -- your competitor, Amkor, in that presence. So one is that your updated plan for the U.S. operation to enjoy that ASME kind of growth. And also, we are very concerned about the sort of T-Glass shortage. I think a lot of customers are going through with your fab to see if they can secure more substrates, right? So I'm not sure if they would be kind of a gating factor for your next year's growth. So this is the first question. Kenneth Hsiang: That's -- Charlie, that sounds like 2 questions. So let's start with question number one, the U.S. building out perspective. Joseph Tung: Okay. Thank you for your question, and thanks for coming to my concert. Charlie Chan: Yes, it was a great one. Joseph Tung: U.S., we don't have anything new to report except that -- let me reiterate what we mentioned last time that we were invited by our customers to look at the investment opportunities in the U.S. We are currently still engaging in discussion with our customers and we're evaluating different opportunities, but no decision is made at this point. But whatever decision we will eventually make, it will have to make economical sense for us. In terms of the competition, I think Amkor has its own mind. So I think I'm not going to answer for Amkor. But overall, we will continue to be watchful on the overall competition landscape and see how we can better position ourselves in terms of meeting this competition. Kenneth Hsiang: So Charlie, do you want your second question to be about your previous question on T-Glass and such? Charlie Chan: Yes, maybe we can save it for maybe second round. But my major second question is really the final test completion. So I know this one is a little bit controversial, but I wanted to get your updates or confidence level about your final test market share at major customers' next-generation GPU. Yes, and by the way, congratulations for a very strong share price. So I think your efforts were recognized by foreign shareholders. Yes, so second question is really about your final test business updates. Kenneth Hsiang: So you're looking for a more comprehensive explanation or update on our final test market share gains. Charlie Chan: Yes. Because your Taiwanese competitor seems to be very aggressive in the cashless purchase and capacity expansion as well. So I hope both can win. Yes, so I just wanted to get a little bit more color about your realistic assumption about your final test market share. Joseph Tung: I think, as we mentioned, we have been aggressive, and we have been pretty successful in terms of expanding our test business. I think for this year, our test business growth is going to be twice the packaging revenue growth. And we will continue to make large investment into our test capacity. But our resources are also limited. We don't have unlimited resources to try to cover everything in the market. So right now, the main focus for our investment in test is really on the wafer probing. And I think we will continue to on this effort for the time to come. And in terms of final test, I think we are making the investment -- necessary investment at this point to build up the capacity. And we're expecting to have meaningful revenue being generated in the later part of next year when we start serving the next-generation AI chips. Operator: Next question is from Bruce Lu of Goldman Sachs. Zheng Lu: Can you hear me? Kenneth Hsiang: Yes. Zheng Lu: Okay. My question is regarding to your revenue split for your incremental TWD 1 billion revenue in 2026 for your AI-related revenue. We understand that the revenue contribution is more geared to testing for this year. Are we able to see incremental more revenue contribution from packaging? And to be more specific, can we get more like packaging-related business from both outsourcing as well as your own packaging or AI packaging business? Kenneth Hsiang: Bruce, you're asking for the incremental revenue for this year, right? Zheng Lu: And next year, your -- because Joseph just said that we will see another additional TWD 1 billion revenue for next year, right? Kenneth Hsiang: He may have said that. So yes, okay. Joseph Tung: For the TWD 1 billion increase of our leading-edge revenue, I think the breakdown is TWD 650 million from packaging and about TWD 350 million from test for this year. For next year, well, we'll see how things go. I think the -- we'll kind of give you a ballpark number saying that we will be having maybe at least TWD 1 billion revenue growth. But in terms of the exact composition, I think that remains to be seen, and we'll base on the current situation to allocate our resources and to grow both of the business, but without -- right now, we don't have a set mind on what kind of breakdown it will be. But what I can say is that test seems to be -- continue to have stronger momentum at this point. Zheng Lu: I see. So the testing will grow faster than packaging next year within this TWD 1 billion? Joseph Tung: It has been growing faster than the packaging. But come next year when the new generation product comes on stream, the competition may have some changes. But what I'm saying is that we are seeing -- we're continuing to see strong momentum in test at this point. Zheng Lu: I see. Okay. The second question is for -- again, I want to drill down a little bit for the U.S. plan. I mean, TSMC has utilized asset plan to build some CoW process, and Amkor committed to build some substrate process. So it seems to me that they have -- your customer, your competitor seems to have at least one supply chain in U.S., which probably -- what's the strategy for ASE at the current stage? Obviously, you probably don't need a 2 supply chain in United States, right? So the potential -- losing some market share for TSMC Automotive business is definitely a threat for our future business, right? So can we elaborate more about like what's the strategy from ASE? Kenneth Hsiang: Bruce, you're looking for a reiteration on the U.S. plan on our behalf. Zheng Lu: Yes. . Joseph Tung: Well, we don't fight for market share just for market share's sake. We fight for the market share that makes sense or make profit for us. If we don't see return, if we don't see at least acceptable margin, then that's not the part of the business that we want to pursue. I think the -- like I said, regardless if it's U.S. or in any part of the world, for us to make an investment, it has to make economical sense. So that's -- if Amkor feels that with that kind of investment they can make a profit out of it, fine. But right now, we're not sure on that. Zheng Lu: So there's no way to pass on the incremental cost to the customer in order to make the investment like profitable? Joseph Tung: Well, it's not just about pricing, it's about the overall infrastructure, which -- that can support that kind of a business at a reasonable cost structure. And even with some premium pricing, whether that cost -- that can cover the costs associated with it remains to be seen. Right now, I think that's a very tall task actually. Operator: Next question is from Laura Chen of Citigroup. Chia Yi Chen: Can you hear me? Operator: Yes. Chia Yi Chen: I just want to consult, Joseph, your view on the gross margin outlook, and also, congratulations for the great result. Do you think we see quite full utilization rate like Ken just mentioned? At the same time, there is a stronger testing business. I recall, Joseph, you mentioned before that in the longer term, if the utilization rate get back to 80% plus, the gross margin could go back to high 20s. So just wondering how is the dynamic now. Are you also -- and also, you are increasing the CapEx for the future demand. So just wondering how should we think about the gross margin outlook into next year or longer term? Kenneth Hsiang: Laura, are you looking for commentary on the relationship between utilization and our margin structure? Chia Yi Chen: Yes. And also -- yes, and at the same time, we are also increasing CapEx. I believe that there's also some increasing in depreciation costs. So just wondering the dynamic right now, how should we think about the gross margin outlook? Joseph Tung: Well, if we exclude the foreign exchange impact, I think we have already come back to our structural margin. Like Ken mentioned in third quarter, if we were on the same ForEx level as quarter 1, our margin should be around 26.8%. And going into fourth quarter, there will be further margin improvement. And again, at the same currency level, we should be over 27%. So what we mentioned before, once our utilization reaches 70% and above, then we should go back to our structural margin range. But unfortunately, the foreign exchange does have a pretty big impact on our overall margin. But having said that, I think we will continue to -- I think right now, the foreign exchange seems to be stabilizing now. We will start our margin effort from this level. And we are very confident that with the continuing expansion of our leading-edge business, we're confident that we will continue to see -- as the capacity being ramped up, we are confident that we will continue to see margin improvement. And right now, we are very confident that in 2026, for the whole year, we should be -- we should have a gross profit margin for ATM at the structural margin range. Chia Yi Chen: We are looking for that. My second question is that -- about the leading-edge advanced packaging. ASE also developed your own focus technologies. Just wondering that how is the current progress in the customers' engagement. It's not just focused on the outflow opportunities on substrates. Also, how does ASE's -- your own focus progress? Kenneth Hsiang: Laura, you're looking for an update on our internal advanced packaging solutions, just as a focus. Chia Yi Chen: Yes. Right. Joseph Tung: Well, obviously, in terms of the overall capacity, I think for CoWoS or CoWoS like 2.5D, I think our foundry partner as well as ourselves is still scrambling to try to make the necessary investment for our capacity to catch up with the demand. And so given the tightness, I think, obviously, there will be customers -- other customers that would like to have other alternatives or solutions for -- to meet their demand, and that creates a very good business opportunity for us to try to sell our own solutions. And on that, we are making the necessary investment at this point. And we do have engagement with multiple customers. And -- but these things take time. I think the -- what we're expecting is that by latter part of next year, we will start to see meaningful full process revenue coming in serving multiple customers. Chia Yi Chen: Okay. So does this also included in your at least TWD 1 billion revenue increase into next year? Joseph Tung: Yes. Operator: Next question is from Sunny of UBS. Kenneth Hsiang: Sunny, are you there? Sunny Lin: Yes. Could you hear me okay? Operator: Yes. Sunny Lin: So congrats on the very good results and guidance. Glad to see LEAP business ramping up and gaining momentum going to 2026. So maybe a question on mainstream. Could you help us understand the recovery ahead? And so when you guide IC ATM sales to grow 3% to 5% sequentially, how is the growth by mainstream and LEAP? And how should we think about the cycle for mainstream going to 2026? Do you see the current utilization rate being a good base for critical recovery going to 2026? Kenneth Hsiang: Sunny, you're looking for basically our more trailing edge capacity or trailing edge plus traditional advanced packaging capacity. Sunny Lin: So mostly on the mainstream, so wire bonding, die bonding? Kenneth Hsiang: Okay. You're looking for commentary on more traditional packaging and then -- for this year and into next year? Sunny Lin: Yes. How should we think about the cycle from here? Joseph Tung: Well, as I mentioned, the mainstream business is -- we're seeing better-than-expected performances. And I think that's a result of the general market recovery. And also, in some part of the -- in different sectors, we are also seeing ourselves gaining shares, particularly -- if we look at different sectors, I think communication and -- communications, and of course, PC or computing is recovering better than the other, like automotive and industrial. But nonetheless, I think the recovery is very obvious at this point. Maybe in terms of automotive, it's kind of moving in a slower pace than the other 3 sectors. But on that, we actually posted a very, very good growth in our automotive business. I think for ATM this year, we're going to see over 20% growth in this part of the business. I think that's largely as a result of we continuing getting -- gaining market share in this space through our factory automation. In general, I think, in the beginning of the year, we were saying that we will have our leading-edge giving us 10% growth and mid- to high single-digit growth coming from the mainstream. Obviously, as I mentioned in the beginning of the session, I told everybody that we're going to exceed our revenue growth target to over 20%. So that means the mainstream performance is much better than what we were expecting in the beginning of the year. And we're not seeing anything negative at this point in terms of mainstream business. So without giving you any further guidance for next year, but we do think that we are in a very healthy space at this point for both in the general market, and we're still seeing very strong momentum in the leading edge as well. Sunny Lin: Maybe a very quick follow-up. So for Q4, is the utilization rate for mainstream continuing to recover a bit? Joseph Tung: Yes. I think in the -- like what Ken just mentioned, I think our bumping and flip chip are pretty full. Wire bonding is improving, although it's not entirely full, but it is steadily improving. Sunny Lin: Got it. My second question is on gross margin. So from here, one, with the improving measuring business, and then secondly, accelerating ramp probably for LEAP going to 2026 and a stabilizing FX, should we assume for IC ATM, the gross margin recovery should accelerate in the coming few quarters? Kenneth Hsiang: Sunny, you're looking for an update in terms of forward-looking commentary regarding our gross margin structure. Sunny Lin: Yes, especially on the pace of the improvement. Joseph Tung: Well, we're not in a perfect world, right? There's still a lot of moving parts and uncertainties in front of us, which includes foreign exchange movements. So yes, I think the general trend is very certain because as we continue to expand rapidly in our leading-edge, which is margin accretive, so that gives us a very good pace for our margin improvement going forward. But in terms of the pace, I think there's still -- I think right now, it's still too early to give you a clear path of what kind of pace we're going to have in terms of our margin expansion. Sunny Lin: Got it. Also, on LEAP, is there a margin difference between outsourcing and full-process CoWoS, meaning if you start to ramp more full process from second half of next year, will that further boost your gross margin for IC ATM? Joseph Tung: I think, in terms of full process, we're still at the early stage, so it's kind of difficult to make any meaningful comparison at this point. I think both needs to be at really a more stable level for us to make the comparison. I think theoretically, regardless it's our own full process or outsourced, leading edge does give us margin accretion. Operator: Our next question is from Felix Pan of KGI. Junhong Pan: Can you, guys, hear me okay? Operator: Yes. Junhong Pan: Yes. So my first question regarding to -- I have seen your foundry partner incremental CP test outsourcing demand. Just correct me if I was wrong, but I found it very difficult to quantify how big for the TAM is. Maybe for you, it's really hard to comment on the same, but maybe on the TAM side or even the percentage of the BOM, can you just give us some sense how can we quantify, how big for the CP test demand? Just any color will be grateful. That's my first question. Kenneth Hsiang: Felix, I think I'll take this one. In terms of the overall TAM, for something like that, I would say that that's not quantifiable, at least from our perspective. This is something that is probably known by our foundry partners. And you may want to address the amount of work that they want to outsource directly to them. We don't quantify that at this point. Junhong Pan: Okay. Yes. So my second question is, I think during the TSMC's latest earnings call, I think C.C. emphasized customers of customers engagement. We do see the incremental engagement. From your perspective, do you see the similar pattern, the engagement from customer to customer as well? Or -- I think there's a lot of thing happening this month, so I just want to -- if any color you can share, is any business model change or you have seen incremental customers' customer engagement as a TSMC as well? Yes. Kenneth Hsiang: Felix, you're asking for how we look at our overall market and whether we actually look into our customers' customers? Similar to... Junhong Pan: Actually, my question is there's any customer -- your customers' customer jump your customer to have the engagement with you guys, like to secure some critical capacity or something like that. Kenneth Hsiang: I don't know if we can talk about that. Joseph, if you want to take a step? Joseph Tung: Yes. I think we have a very, very close communication with both our direct customers as well as our foundry partners. Those dialogues are being conducted on a routine basis so that we can better prepare ourselves in terms of our capacity and also our technology roadmap. So in this regard, we do talk to them. And I think our information source is not just coming from our customer, but our customers will definitely keep us informed of what they're expecting from their own customers and how the overall market will shape up. So it's a constant dialogue among the industry players to make sure that the demand is sufficiently being supported by the supply. That's an ongoing process that has been going on for them, maybe forever. Operator: [Operator Instructions] Next question is from Gokul Hariharan of JPMorgan. Gokul Hariharan: First one, could you help us understand what is the progress on the full stack focus or CoWoS like kind of processes going into next year? When do we expect this to start becoming more meaningful contributor to revenues, to the LEAP total revenues? And are the applications still similar in terms of like AI accelerator? Or are the applications becoming more diverse in terms of networking or server CPU and other kind of stuff as well? Kenneth Hsiang: Gokul, you're looking for an update on our -- more on our full process type services, is that correct? Joseph Tung: I talked about this earlier. I think we are continuing our investment in full process, and we are currently engaging with multiple customers to plan for the capacity, and we expect that come later part of next year, we should start seeing some meaningful revenue coming from full process rather than just only from outsourced part of the business. In terms of the application, I think there will be AI accelerators. There will be other adoptions in different chips requiring such capability. But at this point, I think it's a little bit too early to say the exact revenue -- scale of the revenue or the composition of that -- of such revenue. We just have to continue to work very closely with our customers, multiple customers to better understand what their demands will be, and we'll prep ourselves for the necessary capacity for them. Gokul Hariharan: Got it. Maybe a slightly related question is on the CapEx. I think we are probably finishing this year above TWD 3 billion, well above TWD 3 billion in terms of machinery CapEx. How do we think about this investment cycle? Are we still going to be in this, like increased CapEx, likely to continue to increase CapEx over the next couple of years given the demand outlook that you're seeing from your customers and your customers' customers? Kenneth Hsiang: Gokul, you're looking for an update on our overall CapEx view. And also in the frame of the leading-edge advanced packaging, how it works? Gokul Hariharan: That's right. Yes. Joseph Tung: Like I said, we stay very close with our foundry partner, and they -- our foundry partner being the dominant player, they cover all the who's and who's in the -- whoever has any demand, they will be the one to supply. So they really have a very, very close connection with their customers and their customers' customers. Since we have a very close communication with them, so whatever information that they're gathering, we do have the benefit of sharing some of that information to better prepare ourselves for capacity expansion. And as I said earlier, again, we're not going to be shy of making the necessary investment for -- particularly for the leading edge, so as to secure and also to expand our dominance in this space. And as such, we believe, at least for next year, we will continue to see pretty heavy investments in our capacity as well as technology in this -- in the leading edge. Gokul Hariharan: So is it fair to say next year machinery CapEx is likely to be still higher than this year? Joseph Tung: We will give you better guidance once we complete our budget cycle, which is starting now. And we will reserve this question to next quarter. Operator: Next question is from Charlie Chan of Morgan Stanley. Charlie Chan: Yes, that question is about T-Glass resulting on the shortage of substrates. I'm not sure if you've heard, there would be kind of a risk factor for ASE Group to grow your revenue next year because we start to hear some customers' hard time to get the substrate sourced. And how would the ASE to help our customers to get a more sufficient supply? Kenneth Hsiang: Your -- Charlie, your second -- or your third question is regarding overall T-Glass supply and how it impacts our -- whether it would impact our overall supply chain going forward? Charlie Chan: Yes, yes. And how would the ASE manage or help your customers on this period of shortage? Joseph Tung: Like I said, there's a lot of uncertainties that's ahead of us, so -- like running any other business, there still is going to be ups and downs, there's going to be changes. But right now, I think whatever we're seeing today, maybe some of the materials or -- don't ask me what T-Glass is, but some of the materials may have a longer lead time. But at this time, we haven't seen any real disruptions on our service to our customers at this point. I think if anything else, being the dominant player, if there's any problem, we're the ones that our customers come to, and we certainly have the best leverage in trying to secure the needed materials or variable components that will be needed for the -- for serving them. Charlie Chan: Got you. So I would assume, for those materials or substrate, if there will be any cost or price increase, ASE would fully pass-through to customers? Is it right or you would charge some markup because those materials are getting harder to get? Joseph Tung: We will find the most suitable pricing for current situation. Operator: Next question is from Bruce Lu of Goldman Sachs. Zheng Lu: I think I asked this question last quarter, but I want to ask it again. What is the CapEx to revenue nowadays? Or is there any changes in terms of like how long does it take to see the revenue after you invest your CapEx? The reason I ask this is that you invest for TWD 1.8 billion CapEx last year and 3-point something billion this year, right? But you generate additional TWD 1 billion of revenue this year, but you also can only generate additional TWD 1 billion next year. Theoretically, should be able to generate a bit more than $1 billion next year, right? Is there any changes in terms of CapEx to revenue or trying to generate revenue? Kenneth Hsiang: Bruce, you're looking for the magic solution in terms of CapEx to revenue, right? Zheng Lu: Which Joseph used to give us. Joseph Tung: Well, first of all, the TWD 3 million plus CapEx is not entirely for leading-edge. I think -- for this year, I think 55% of that is for leading edge. And bear in mind that that's just a number. We don't make capacity expansion overnight. Equipment needs to be delivered. You don't have this equipment all delivered at once, right? Things move progressively. So just simple math, if it's TWD 1.8 billion worth of CapEx, that means now, on average, TWD 900 million worth of new capacity being put in. So this year, if it's a TWD 1 billion increase, that ratio seems to be still on track. Of course, the other half of the investment will start to generate revenue, but there is always a time gap between when the machineries -- or the CapEx being spent and when the revenue is being generated. I'm not saying that. I'm not giving you -- I'm not saying that we can only generate TWD 1 billion worth of new revenue coming in. I'm just saying that at this point, we are very, very confident that we can have at least TWD 1 billion worth leading edge revenue -- new revenue coming in next year. For the majority of the leading edge at this point, we're still in the earlier stage at this point, and we're still gathering data to come up with the more meaningful investment intensity on this kind of investment. But from the limited data that we've gathered so far, I think the traditional TWD 1 of investment creating TWD 1 of annual revenue seems still be the case for the main businesses that we are entering now, which is OS and test. Zheng Lu: So one to one. That's the major number. It still works. Joseph Tung: Still applies. But like I said, we are still in the process of gathering more data. And bear in mind that the -- our capacity is not in full ramp at this point. So it's going to take a little bit more time. Zheng Lu: My plan is simple, right? 45% of your TWD 3-point-something billion CapEx is USD 2 billion, right? I mean, you just mentioned that TWD 3.8-something billion, 55% is for matured technology. Let's say, 45% -- let's say, 50% of your TWD 3-point-something billion CapEx this year, that's close to TWD 2 billion for next year in terms of incremental new revenue from AI. That's how the math works. Kenneth Hsiang: No, that's not how the math works. We don't live on math. We live in the real world. Zheng Lu: Well, I only know math. Kenneth Hsiang: Well, if you're calling me conservative, well, call me conservative. Operator: There's no question on the floor. Kenneth Hsiang: Okay. I guess, time has pretty much run out. I would like to thank everyone for participating in the call. I look forward to seeing you all, either during the quarter or at the next earnings release. Joseph Tung: Okay. We are having a good run, and we'll continue to have a good run going into next year. And we're confident that we will continue to deliver good performances and good numbers for you. We'll see you next quarter. Thank you very much.
Operator: Ladies and gentlemen, welcome to the Befesa Third Quarter 2025 Results Conference Call. I am Jota, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rafael Perez, CFO of the company. Please go ahead. Rafael Perez: Good morning, and welcome to the Third Quarter 2025 Results Conference Call of Befesa. I am Rafael Perez, CFO of Befesa. This morning, I'm joined by our Group CEO, Asier Zarraonandia. Asier will start with an executive summary of the period, and then he will cover the business highlights of the Steel Dust as well as Aluminum Salt Slag Recycling businesses. I will then review the third quarter financials by business and we'll cover the evolution of commodity prices, our hedging program and finally, cash flow, net debt, leverage and capital allocation. Asier will close this presentation providing an update to the outlook of the rest of 2025 as well as an update on our growth plan. Finally, we will open the lines for the Q&A session. Before getting started, let me remind you that this conference call is being webcast live. You can find the link to the webcast of the third quarter 2025 results presentation on our website, www.befesa.com. Now let me turn the call over to our CEO. Asier, please. Asier Zarraonandia Ayo: Thank you, Rafa. Good morning. So moving to Page 5 of the business highlights. Befesa has delivered strong third quarter results, continuing the solid trend seen in the first half of the year. Our performance demonstrates once again the resilience of our business model and the benefits of our diversified operations. Adjusted EBITDA for the first 9 months of 2025 reached EUR 174 million, up 15% year-on-year. EBITDA margin improved significantly to 21.3% in Q3 2025 compared to 16.6% in the same quarter last year, reflecting a strong operational efficiency and disciplined cost management. Financial leverage was further reduced to 2.6x in September 2025 compared to [indiscernible] a year ago, highlighting our continued focus on deleveraging. Net income and earnings per share also increased sharply. EPS rose 143% year-on-year to EUR 1.52, reflecting strong profitability and improved financial performance. In our Steel Dust business, we achieved a strong recovery in Q3 volumes following the maintenance shutdowns carried out in the first half of the year. Performance was further supported by lower zinc treatment charges and favorable zinc prices. Our secondary aluminium business continues to be impacted by a persistently challenging environment, driven mainly by weak automotive market in Europe as well as the usual summer period maintenance activities in the auto industry. The Palmerton expansion project is developing as expected with the second kit successfully hot commissioned in July 2025. Looking ahead, we confirm our full year '25 EBITDA guidance in the lower part of the initial range of EUR 240 million to EUR 265 million, as we already commented in July. We expect a strong Q4 driven by higher EAF dust volumes across all markets. Our financial leverage is expected to fall below 2.5x by year-end, supported by solid cash generation and disciplined capital allocation. Growth CapEx will continue to focus on the Bernburg project following the substantial completion of the Palmerton expansion. I will comment on the outlook in more detail later. Going to the Page 6, Steel Dust business highlights. In Europe, steel production in the third quarter of 2025 remained depressed, down 4% year-on-year, mainly due to the weak manufacturing activity and soft demand in the automotive and construction sectors. Despite this, our steel dust deliveries from EAF steel customers continued to in line with the 2024 average and solid levels. Operationally, the European plants performed strongly, achieving a 94% load factor in the quarter. We expect strong volumes to continue into Q4, supported by healthy inventory levels and no major maintenance stoppage planned. In the U.S., steel production increased by 4% year-on-year in the third quarter, driven by infrastructure spending and tariffs supporting domestic steel demand. Our U.S. plants operated at an 80% load factor in Q3, the highest level since the acquisition and reflecting a gradual improvement. The 2 new kilns in Palmerton have been fully operational since July 2025 and new EAF steel supply contracts are ramping up progressively through the Q4 following some initial start-up delays. At the same time, cost reduction measures at the U.S. zinc refining plant continue to deliver the expected improvements in asset profitability. In Asia, volumes in Turkey increased by 40% year-on-year in Q3, recovering strongly after a weak second quarter affected by maintenance shutdowns. In Korea, the load factor reached 77% in the first 9 months of the year, up 11 percentage points year-on-year, driven by higher domestic deliveries and a strong operational evolution. In China, operation continued at low utilization levels with earnings around breakeven, reflecting ongoing market weakness. Moving on to Page 7, business highlights for the Aluminium Salt Slags Recycling business. In our aluminium business, performance has remained mixed in the third quarter, starting with the Salt Slag Recycling business, operations has continued to perform strongly, running in line with previous quarters. Utilization levels remained around 90% for the first 9 months, demonstrating the robustness and efficiency of our assets. As in the previous years, we carried out the scheduled maintenance stoppage during the summer months in Q3, and we expect a stronger operational performance in Q4, driven by higher volumes. In our secondary Aluminium segment, the market environment continues to be very challenged. The European secondary aluminium industry remains under pressure with tight metal margins and limited production activity, largely as a consequence of the ongoing weakness in the automotive sector. Q3 is typically a softer period due to seasonal maintenance shutdowns in the industry and this year was not exception. Despite these headwinds, we continue to focus on operational discipline, cost efficiency and customer diversification to preserve profitability and position the business for recovery once market conditions improve. Now Rafael will explain the financials in more detail. Rafael Perez: Thank you, Asier. Moving on to Page 9, the financial results for the Steel Dust segment. Steel Dust delivered EUR 154 million of adjusted EBITDA in the first 9 months of the year, which represents a 27% year-on-year improvement compared to the 9 months of the previous year. EBITDA margin improved from 20% to 26% in the period, mainly driven by better pricing environment on treatment charges and zinc hedging. The EUR 33 million EBITDA improvement has been driven by the following factors: the year-on-year impact from volume has practically no impact with similar plant utilization at a good level of around 69%. As we already highlighted, there are no major maintenance stoppages in the second part of the year in large assets. We enjoy high EAF gas inventory levels across all our assets, and we expect an increase in customers deliveries in the U.S.A. for new contracts that are gradually starting in this quarter. On price, strong positive EBITDA year-on-year impact of around EUR 28 million, with the 2 main price components being around EUR 15 million of positive impact from higher zinc hedging prices, 5% higher year-on-year; and secondly, EUR 13 million positive impact from the lower treatment charges, which was set at $80 per ton for the year 2025. On costs and others, a net EUR 4 million positive impact is largely driven by the lower operating cost in the zinc smelter in the U.S. as well as lower average coke price in the period. These 2 positive effects have been partially offset by higher inflation costs in the recycling business, as well as unfavorable FX. Moving on to Page 10, financial results of our Aluminum segment. Aluminum Salt Slag delivered EUR 23 million of EBITDA in the first 9 months of the year, which represents 26% year-on-year decrease compared to the EUR 30 million in the same period of the previous year. The year-on-year EUR 7 million negative EBITDA development was mainly due to the lower aluminum metal margin as well as slightly higher operating costs and energy prices. On volumes, overall marginally negative EBITDA year-on-year impact during the 9 months with a decrease of EUR 1 million. Our recycled volumes of salt slag remained pretty much in line with the previous year. With these volumes, we operated our plants at a strong capacity utilization rates of about 89% in salt slag and 77% in secondary aluminum. With regard to prices, negative EBITDA year-on-year impact of about EUR 4 million, as explained mainly driven by the pressure aluminum metal margins versus the previous year. This compression in the aluminum metal margin is caused by 2 factors. On the one hand, there is a scarcity of aluminum scrap in the European market, driven by lower overall industrial activity as well as higher exports of alu scrap away from Europe. And secondly, a very weak automotive industry in Europe, which impacts demand of secondary aluminum from automakers. However, this was partially offset by higher aluminum F&B price with an increase of 2%, averaging EUR 2,372 per tonne. On cost and others, increased pressure from higher operating energy-related expenses, mainly through the higher energy prices of electricity as well as natural gas. Moving to Page 11, zinc prices and treatment charges. Regarding zinc price during the 9 months of 2025, zinc has been trading in the range of $2,520 to $3,020 per tonne, showing particularly positive trend in the last months of 2025. The average of 9 months zinc LME prices have been $2,768 per tonne, which is 3% above the same period of the last year average, [ being ] the average of the Q3 $2,825 per tonne compared to $2,640 per tonne in Q2. On the right-hand side of the slide on treatment charges. In 2025, treatment charges for zinc was set in April at $80 per tonne for the full year 2025 compared to the $165 of the last year, marking an all-time low record level. This deduction is driving earnings significantly in 2025. Turning to Page 12 on hedging. Our hedging book covers until the first quarter of 2027, close to 15 months of hedges in our books at increasing hedging average prices of EUR 2,640 in 2025 and EUR 2,655 per tonne in 2026. This level of hedging represents an all-time high level of hedging for Befesa, providing stability and visibility over the coming quarters. We are taking the opportunity of the recent rally on the zinc price to close volumes for the first quarter of 2027, and we continue to monitor the market to close volumes for the remainder of 2027. Turning to Page 13, Befesa energy prices. The page shows the evolution of the 3 energy sources that we have in Befesa, coke, natural gas and electricity. With regard to coke price, which today represents around 60% of the total energy bill, the normalization that started in the second quarter of 2023 continues throughout the first 9 months of 2025. Average coke price in the third quarter was about EUR 153 per tonne, consolidating its downward trend compared to the previous quarters. Regarding electricity, which today accounts for around 30% of the total energy expense, prices have rebounded to EUR 103 per megawatt hour in the third quarter of 2025. after a significant correction in the second quarter of 2025. And gas prices continued their normalization in the third quarter of 2025 to EUR 46 per megawatt hour, reversing the upward trend observed in the last year. Now turning to Page 14, the cash flow results. Operating cash flow in the 9 months of the year has reached EUR 115 million, which represents a decrease of 3% compared to the same period of last year due to a positive tax effect that we enjoyed last year. On the EBITDA to cash flow bridge, starting with EUR 174 million of adjusted EBITDA and walking to the left. Working capital consumption amounted to EUR 42 million in the first 9 months of the year, mainly driven by the usual first quarter working capital consumption as well as the usual Q3 impact on secondary aluminum, driven by the slowdown in the auto industry. As in previous years, most of this working capital will [ revert ] into the fourth quarter. Taxes paid in the 9-month period came in at EUR 17 million as a result of the final tax assessment of previous year in comparison with the EUR 4 million collected in the period of last year, resulting in an operating cash flow of EUR 115 million in the first 9 months of the year. On CapEx, during the period, we have invested EUR 30 million in regular maintenance CapEx across the company, EUR 23 million of growth CapEx related to the refurbishment of Palmerton plant in Pennsylvania, which is now practically completed and [ Bencpur ] (sic) [ Bernburg ] expansion project in Germany. In summary, CapEx of EUR 53 million in the quarter. For the full year, we expect total CapEx to be around EUR 80 million, which is in the lower part of the range of EUR 80 million to EUR 90 million. Total interest paid amounted to EUR 26 million and the total borrowing amounted to EUR 22 million in the first 9 months of the year. For 2025, the EGM has approved in June to pay a dividend of EUR 26 million in July, equivalent to EUR 0.63 per share or 50% of the net income. In summary, final cash flow amounted to minus EUR 13 million in the first 9 months of the year. Cash on hand stood at EUR 90 million, which together with our EUR 100 million undrawn revolving credit line provides Befesa with almost EUR 200 million of liquidity. Gross debt at the end of September stood at EUR 700 million. Net debt stood at EUR 610 million compared to EUR 662 million in the same quarter of last period -- last year, resulting in a net leverage of 2.59x at closing of the quarter, a strong improvement compared to the 3.36x at September 2024. Turning to Page 15, debt structure and leverage. Following the refinancing back in July 2024 and the repricing in March this year, Befesa today has a long-term capital structure with optimized financial cost. We will continue reducing the leverage throughout 2025 to keep it between 2x and 2.5x by the end of the year and going forward. We expect net leverage to be below our target of 2.5x by the end of the year. To do so, we are prioritizing growth CapEx in those projects that are delivering immediate cash flow upon completion like the approved projects of [ Bernburg ] and other market opportunities that could appear. Also, we will keep the annual regular maintenance CapEx around EUR 40 million to EUR 45 million in the coming years. On dividend, we are committed to maintain our dividend policy to pay between 40% to 50% of the net income to shareholders. Now back to Asier on outlook and growth. Asier Zarraonandia Ayo: Thank you, Rafa. Looking at the full year, we confirm our EBITDA guidance in the lower part of the range of EUR 240 million to EUR 265 million, as we previously communicated and in line with the current market consensus. This will be achieved through increased utilization driven by a strong volume in EAF across all markets, along with currently favorable market conditions, low treatment charges, supportive hedging price, declining coal prices. Total CapEx in the year will be between EUR 80 million to EUR 90 million with around EUR 45 million on regular maintenance and the remaining on growth. Net leverage will be below 2.5x by the end of the year, and EPS is expected to be higher than 2, representing an increase of at least 57% in the year. Moving on to Page 18 on Palmerton. In the United States, our Palmerton plant has been successfully refurbished, marking a key milestone in our strategic growth road map. Both kilns are now fully operational, positioning Befesa to capture the significant growth expected in the U.S. EAF steel dust market over the coming years. U.S. electric arc furnace steel capacity is projected to increase by more than 20% by 2028, equivalent to around 18 million tons of new steelmaking capacity. This expansion translates into over 300,000 tons of additional steel dust, creating a substantial opportunity for Befesa's recycling operations. With a total installed capacity of [ 643,000 ] tons across our U.S. plants, we are now well positioned to leverage this growth. Our goal is to progressively ramp up utilization from below 70% today to around 90% by 2027, as new electric arc furnace capacity comes online. The combination of our [ modernized ] Palmerton facility, long-term customer relationships and strategic geographic footprint [ near key steel procedures ] ensures that Befesa is ready to capture this next phase of growth in the U.S. market. Bernburg, moving to Page 19. This is another important milestone in Befesa's growth journey, as we continue to strengthen our aluminium business and expand our recycling capacity in Europe. From a timing perspective, all permits have now been obtained and construction officially started in August 2025. We expect a 12-month construction period followed by a 6-month ramp-up phase in the second half of 2026. On the commercial side, we have already secured strong customer support. Overall, the Bernburg expansion is progressing fully in line with plan. Thank you very much. Rafael Perez: Thank you, Asier. We will now open the line for your questions. Operator: [Operator Instructions] The first question comes from the line of Shashi Shekhar with Citi. Shashi Shekhar: I have a couple of questions. My first question is on capital expenditure. Could you please guide us which project or projects are you planning to undertake post the Bernburg expansion project? And what is the total CapEx guidance for 2026? My second question is on China. Can we expect any improvement in the utilization rate in 2026? Rafael Perez: Thank you, Shashi. I will take the question on CapEx and Asier will explain you the China market environment. But on CapEx, as I said, Palmerton is almost completed or completed and the focus at the moment is on Bernburg. Bernburg is a EUR 30 million total CapEx. I would say probably 40% this year, 60% next year. On top of that, you have to consider the regular maintenance CapEx of EUR 40 million to EUR 45 million, okay? Still early to say a guidance for next year, but with these numbers, you can figure it out. Beyond that, there are 2 projects in Europe. One is the expansion of Recytech to capture the growth of the EAF market in Europe. And the other one is a brand-new salt slag plant in Poland. Those 2 projects, we still haven't got a time line. These are market opportunities that we are envisaging the market, but they still haven't been approved by the Board, and we still haven't got a time line for those. And Asier will comment on China. Asier Zarraonandia Ayo: Yes. Thank you for the question, Shashi. Yes, the question for China is always there. And well, we have to say that basically, the '25 year is coming basically the same than '24. The utilization level of the mini mills, the electric arc furnace at the areas are very, very low, and we are at a breakeven point. Question for '26. Again, it's early, as Rafa said, with the CapEx, but I think that it's not final, that is going to change a lot. But well, the year is long and probably we need a little bit more time to see if the real estate of the construction business start to grow a little and that means more volume. So it's still early, but I cannot say that it's going to be a change -- a very significant change in '26 right today. We will update further later. Operator: The next question comes from the line of Lasse Stueben with Berenberg. Lasse Stueben: Just a question on the secondary aluminum business, just to get a feeling for kind of the near-term outlook. It seems to have sort of rolled over in the third quarter. So I'm just wondering if -- is there going to be somewhat of an improvement in Q4 or also generally into '26 I guess, structurally, there's some problems with European automotive at the moment. So just wondering, want to get some comfort on the outlook also for '26 and beyond. And then also on Bernburg, following on from the weakness in sector aluminum, what are thoughts -- clearly, you're pressing ahead here, but I'm just wondering, given the issues in European automotive, can you give us some comfort here that that's kind of the right move and you're not investing into something which is going to struggle for years to come? Asier Zarraonandia Ayo: Thank you, Lasse. Fair question. Well, obviously, this year, the secondary aluminum business is a very challenged for us and is obviously affecting to our results. The fact is that the automotive sector in Europe is foreseeing this situation in the secondary aluminum because pressing the volumes, pressing the margins down and it's a difficult situation. It's not something new, has happened in the past as well. And well, finally, the market start to absorb this level and be back on better margins. And so starting for the 2 themes. Fourth quarter, well, we don't see a very strong quarter in terms of results, but I do think that probably it's going to be better than the Q3 because the volume even in the Q3 is lower because the maintenance stoppage and now we are going to have more volumes and the last part of the year normally for inventories and other matters is going to be better than the Q3, probably in line with the Q2 or something like that. I mean it's like we don't hope a big recovery. '26 is a different history. I think that '26 the situation is going to be definitely better, not like a very good year, but probably some recovery in the normal activity of the automotive. But linking with the question of Bernburg, which is a logical question is like the Bernburg project, the increase of capacity is linked to not automotive demand. It's linked to the food demand, cans and other with a customer, with a tooling contract with a new customer. So this is going to deliver positive results for sure, because the volumes are there. So all in all, Bernburg new contribution, even if it's going to be half year and some recovery. We do think that in the '26 year it's going to be clearly a better year than '25 in the secondary aluminum, not at the best of the series for sure, but it's going to help us to keep -- keeping with the good results in the global Befesa EBITDA and rest of the other matters. Rafael Perez: Just, Lasse just one additional comment on what Asier said regarding Bernburg, which is a logical question to have. Let's not forget that the demand for secondary aluminum in the long term is very positive and everybody agrees that there's going to be more than 50% growth demand of secondary aluminum over the next 10 years. This is a structural trend. And what we want to do with Bernburg is to capture on that trend. And Asier said very well, it's about diversification from the auto industry into the beverage cans industry, which is also a good thing to have in the company. Lasse Stueben: Understood. And if I may, just a follow-up on CapEx. I mean, based on your comments, I mean, could it be that CapEx next year is well below EUR 80 million just based on your comments? Or is there something potentially that could come through, which kind of pushes you up to that kind of EUR 80 million that you mentioned? Rafael Perez: Fully agree, Lasse. I think CapEx next year will definitely be lower than this year. We still are in the middle of the budgeting process for the next year, which we do bottom up, but clearly below this year. And I think, yes, EUR 80 million will be a cap on the CapEx for next year, definitely. Operator: The next question comes from the line of Olivier Calvet with UBS. Olivier Calvet: Hope you can hear me well. I have a couple of follow-ups. Firstly, on the CapEx budget from 2026. Can you help us think about your pecking order of projects for growth? Are we -- are you rather looking more to EAF expansion in Europe or salt slag expansion in Europe? Or are you rather looking at potentially using your cash flow for further deleveraging or returns to shareholders? That would be the first question. Rafael Perez: Thank you, Olivier. I think I have already tried to answer that. But yes, basically, the focus at the moment is on free cash flow generation and deleveraging and those growth projects that we have clear visibility, like Palmerton is almost completed and Bernburg, as we have been commenting before. On top of that, you have to consider the recurring maintenance CapEx. We don't envisage any investment in the expansion of EAF in France or in the salt slag plant in Europe in 2026, okay? So that's what we can say. That will definitely help deleveraging within our target of between 2 and 2.5x, and maybe we will get closer to 2x rather than 2.5x. Olivier Calvet: Okay. And then the second question would be on the EBITDA guidance for this year. I guess mostly on the high end of the EBITDA guidance. What would you need to see basically to get to that level? Asier Zarraonandia Ayo: Well, definitely the high end is really not realistic for today, I want to say like that. The question here is that we are going to be in the range of EUR 240 million to the midpoint depending on the final production, which are coming very strong in October. Of course, the pricing, I mean, you have seen the zinc prices in October. So depending on how they develop could help us to get more. And again, the recovery of aluminum that for sure, in the salt slag, which is another important business is coming for sure, better because they are not the maintenance stoppage. So well, we have to determine what is the final EBITDA level in this range. What is true is that you think in the very high part of the range, what we explained there is that at the beginning of the year when we do the guidance, well, depending on basically those things, how the aluminum business will perform, zinc prices during the year and other matters that are not happening. So at the end of the day, I think that that's why we are confirming the guidance and the guidance is the reference, but probably among the low part, between the low -- sorry, the low part and the medium part. This is the idea. Rafael Perez: Which is Olivier in line with the market consensus at the moment, as you know very well. There are 3 main elements that will make, as Asier explained, be on the higher part secondary aluminum is weaker than what we expected. Also, FX is unfavorable. And then obviously, in the higher part, we always consider a much higher zinc price environment, okay? Olivier Calvet: Makes sense. Okay, cool. And just the last one. Could you give us an update on the operating issues of one of your competitors in Mexico? Have you seen additional steel dust contracts as a result of their issues or --. Asier Zarraonandia Ayo: Well, yes, we listen about that and we cannot comment about the problems of those guys, but more than what we can treat the same than you. It's not a big effect at the beginning. They are more or less operating well and there are no changes in the market. If it is going to come more change because the problems persist or no, we will see. But in this moment, it's not a big issue and not affecting us in a positive way, obviously, not in the negative because it's not our task. Operator: The next question comes from the line of Fabian Piasta with Jefferies. Fabian Piasta: Just got a question on the treatment charge going forward. I mean, on the chart, you were showing zinc price is increasing or very favorable this year that points towards like more stable, stable treatment charge, but spot treatment charges have increased rapidly. Do you have any visibility on where we might move? So what would be the swing factor? Are we thinking about the 10% increase, 20% increase? What are you seeing in the zinc market? Second question would be, given the inventory levels, do you expect any spillover effects into the first quarter of 2026? That would be it for now. Asier Zarraonandia Ayo: Thank you for the question, Fabian. Treatment charge, well, I would like to know exactly what is going to be the figure for next year. What the rumors, salt, everything is commenting in the LME Week in London and so on is that, obviously, nobody knows what happens. But based on, as you say, in the spot and everything, perhaps levels of $120, $130, $150 max could be on the place there. We will see. I mean, our steel very good treatment charge for us for the miners position because obviously we are one of the lowest, but probably definitely are going to be higher than this year because it's the lowest ever, right? And probably to keep $80 will be very, very difficult. So we'll see. I mean, probably, as you say, 20%, 10%, 20%, more 20% of increase over this year probably is a headwind that we are going to have next year. And... Rafael Perez: Can you remind Fabian, the second question, please? Fabian Piasta: Yes. The second one was basically on your steel dust inventories, whether you're expecting some spillover effects into 1Q 2026? Because I mean, when I'm looking at consensus numbers on full year sales, that would imply a revenue increase of 27% in the fourth quarter. So is there still like some dry powder for 1Q, even if you get these volumes through in the fourth quarter? Asier Zarraonandia Ayo: Well, once again, we will see how we finish the year. But I think that the production of the steelmakers is still under pressure but depending on the geographies starting to be a little bit more positiveness for the next year in terms of orders and so. And the inventories are now normalized because we increased the level in the second quarter because the maintenance stoppage now are normalized. So I don't think the first quarter is going to be affected, but nothing very strange. So well, again, '26 is -- we were expecting question about '26 because we are in October that is logical. But at the end of '26, we need a little bit more time to develop, but no reasons to believe that there's going to be a big change over the normal production out of, we have to start to include some maintenance stoppages because yearly basis for those are normally affecting. So all in all, we will see what is the level, but nothing very, very crazy or very, very strong. Operator: The next question comes from the line of Jorge González with Hauck & Aufhaeuser Investment Banking. Jorge González Sadornil: I have a couple of questions. And the first one, Asier, on regards of the expectation for Q4, I think you have just mentioned that the stocks that you have are now normalized after the strong Q3. This means that we should not expect a Q4 above Q3 in terms of the works sold or the steel dust process for the quarter or Q4 could still be above Q3? That would be my first question, please. Asier Zarraonandia Ayo: Thank you, Jorge. Now clearly, it's going to be above Q3. I mean the fact the inventory history was affected more than the Q3 because normally, over the years, we have some maintenance stoppage. And you see the series, Q4 always is the strongest of Befesa, we hope the same. I mean now with the deliveries and the normal inventories, we are willing to run very strong in Q4. And the reason is as always because there are no maintenance stoppage. So the Q3 has been very strong. And I think that we think that the Q4 is going to be even more, not a lot because we are running at very high utilization rates. But no, no, definitely, it's going to be higher than the Q3 in steel dust. And as well, we have to consider that the maintenance stoppage in the salt slag, which is our other strong and profitable business is going to come higher, which is a different for the Q3 because it was some maintenance stoppage that are not going to happen in Q4. So you put together, it's going to be definitely the Q4. As usual, it's going to be our strongest EBITDA, our strongest activity period, and we can confirm that. That's why we expect a strong Q4 and to be where we are going to end in the range, but definitely a strong and higher utilization rate than the Q3. Jorge González Sadornil: Okay. And then my last question is on regard the secondary aluminum profitability. Can you help us to understand where the profitability could be for next year? Do you have any targeted range for the profitability, taking into account some stabilization in the auto industry and the new assets starting to contribute? That will be very helpful. Asier Zarraonandia Ayo: For me too. Now seriously, Jorge, it's a good question. Well, I think that probably you have in front of you the last years, getting an average could be a good reference. Other is to be back for the '24 level and then again, because it's a kind of cyclicity in the business. So you can take other probably the reference of the '24 or an average or something like that. That's what we see now. Probably we need a little bit more color as well on the market in the last months, but I think that is a good reference getting in the '24 or something like that, that is what we expect in '26 because it's difficult to see a full recovery because we know all of us read about the automotive sector with the problems and production levels that are showing European carmakers, especially. So not a full recovery, but some recovery and the levels of '24 or average of the last year probably could be a reference. Jorge González Sadornil: Are you expecting any adjustment of capacity in the sector that could help the margins to go up at some point or there is not any noise in this? Asier Zarraonandia Ayo: This is basically the point. This is basically the point. There are starting to be some players under troubles, financial troubles and probably the capacity is going to be, as always in the crisis periods adapted. It's not the case, obviously, of Befesa because we have this business, as always explained, that is for us is supporting the salt slag. Financially, we have no problems to survive there, but there are guys that probably they can get out of the market or reduce some capacity and everything is going to be more balanced. That's why the logic of the market that has to be organized as well and that's why we understand that it's going to happen better '26 outlook for the aluminum business. The level, early to say. But again, I think that probably a recovery '24 levels or average of the last 2, 3 years, probably would be a good level. Operator: [Operator Instructions] The next question comes from the line of Anis Zgaya with ODDO. Anis Zgaya: I have only 2. First one is on hedging. When we see the current zinc LME '27 forward prices, which are at $2,900 per tonne or slightly above. That's not bad. Why don't you accelerate hedging for the whole '27 year at this level? And my second question is on treatment charges. The current spot prices in China increased to around $120 per tonne after a very low level in the beginning of the year. Does this seem to you to be a good indicator for the future benchmark level of treatment charge to be set next March? Rafael Perez: Thank you, Anis. I will take the question on hedging. Obviously, we are doing that. Actually, this week, we have closed a very interesting volume of hedging for the first quarter of 2027. You cannot go at once all the way through to the entire year because the curve is in backwardation, which means that the forward prices are lower than the spot prices. So yes, you see the spot prices, but when you want to lock in prices 12 months, 1.5 years, 2 years ahead, the prices are decreasing, okay? And we have internally certain targets that we don't want to miss, okay? So -- but yes, we are taking the opportunity, and we are moving forward with the hedging in the first quarter. So we will take one quarter at a time. And Asier will be taking the question on treatment charges. Asier Zarraonandia Ayo: Yes. Thank you, Anis. Yes, I think it's a good reference, the spot normally in China because it's basically the only part of the world which runs on a spot basis in a massive way. Yes, it's a reference definitely, but always we can talk about reference. They have been periods where there is strictly the same of the spot TCs or the others is similar or not. As I said before in the previous question, yes, this is the $120, $130 is the level that now they are considering. So well, the reference and the trend, the spot is a good light to see what is going to come. But still, again, early to say. Operator: The next question comes from the line of Adahna Ekoku with Morgan Stanley. Adahna Ekoku: I've just got one follow-up on the 2026 EBITDA, especially for steel dust. And maybe could you help us with what utilization you're targeting in the U.S.? I think you've got 90% for 2027. And in Europe, would you expect any upside from the recently announced steel safeguard measures? Or is it still too soon to say on this front? Asier Zarraonandia Ayo: Thank you for the question. Yes, I think the answer is yes to both. I mean we have in pipeline for the U.S. more tonnages than this year, definitely. And one of the reasons, again, that we are not moving in the low part of the range as the volume in U.S. that we have already contracted because there are some delays in the ramp-up are coming later than we expected, but definitely are starting to come and we hope that next year are going to be on our facilities during the whole year. So yes, I think it's an intermediate year to capture the 90% utilization probably in '27, but next year it's going to be higher than this year and probably in the range of 80% or we will see exactly, but U.S. is one -- it's going to be the more volumes in U.S. is one of the boxes that we have in mind for '26, the headwind of the treatment charges probably is going to be compensated by higher volumes in U.S. and probably in other geographies like in Europe. In the case of Europe, the answer is yes, we are starting to capture some projects that are going to come into picture in '26, not many, but there are some in, one in Spain and others that we have under the contracting period now. And we -- that's going to help to be a little bit less pressure to keep the 90%. I think here in Europe to grow from the current levels is difficult because basically you have full capacity. And the only thing which is pressing is that probably transportation cost for the dust and other are going to be benefit. So if all those projects starting to see that are coming really, then we will start the increase of capacity in Europe probably in '27. So '26 is going to be a good year in Europe to see how the projects are delivering. But definitely, it's going to help and we are continuing with that to have more dust in 2026. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rafael Pérez for any closing remarks. Rafael Perez: Thank you all for your questions. You can also contact the Investor Relations team of Befesa for any further clarification. We will now conclude the conference call and the Q&A session. Let me remind you that you can find the webcast and the dial-in details to access the recording of this conference call in our website. Thank you very much and have a good day.
Operator: Good morning, and good evening. Thank you all for joining the conference call for the SK Telecom earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on SK Telecom's Third Quarter of Fiscal Year 2025 Earnings Results. Jun Chung Hee: Good morning. I am Chung Hee-Jun, IRO of SK Telecom. Let us begin the earnings conference call for Q3 of 2025. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situation. Let me now present our CFO. Yang-Seob Kim: Good morning. This is Kim Yang-Seob, CFO of SK Telecom. The third quarter of 2025 was the period where we renew our mobile business by implementing the accountability and commitment program to overcome the cybersecurity incident and reassess company-wide AI capabilities, thereby renew our goals and determination for the future. In this quarter, the accountability and commitment program has had a significant financial impact. The consolidated revenue posted KRW 3,978.1 billion, 12.2% decline year-on-year. The M&A revenue fell by approximately KRW 547.7 billion year-on-year due to 50% tariff discount in August for all customers with the customer appreciation package and series of team membership discounts. The significant sales decline led to 90.9% year-on-year drop in operating income to KRW 48.4 billion. The net income turned negative due to the penalties from the cybersecurity incident. Given the unprecedented deterioration in the financial performance, the company inevitably decided not to declare dividends for the third quarter. While the financial impact of the incident continues to weigh on the results, we are fully committed to restoring stability and resuming dividend payments going forward. Now let me report on business updates. The fixed and mobile business are showing gradual recovery from the cybersecurity incident. The number of 5G subscribers increased by approximately 240,000 Q-on-Q to 17.26 million, and broadband and IPTV subscribers also recorded positive net additions. As part of our mobile business innovation, the company recently launched Air, a digital communication service exclusively for unlock device. Designed with an emphasis on simplicity and practicality based upon in-depth analysis of the needs of the customers in their 20s and 30s, this service is expected to play a key role in broadening our mobile customer base. The AI business is bringing together previously distributed AI capabilities under one structure. Functions and organizations, including AI DC, A dot B for enterprises, A dot service for B2C and global AI partnerships and investment and AI R&D are being reorganized into the AI CIC, establishing a more cohesive and efficient business structure. Revenue from the AI business achieved a 35.7% year-on-year increase in revenue, further expanding the foundation for achieving its mid- to long-term goals. Driven by the acquisition of the Pangyo data center and the award of the GPU leasing support program, AI DC revenue posted KRW 149.8 billion, up 53.8% year-on-year. The company continues to expand the scale and profitability of its data center operations. The Ulsan AI data center poised to be a key driver of data center revenue growth, held its groundbreaking ceremony in late August and is now under full construction. In addition, the company recently signed a memorandum of understanding with OpenAI to jointly build an AI data center dedicated for OpenAI in Korea's Southwest region, positioning itself to capture new opportunities in the rapidly evolving AI infrastructure market. Revenue posted KRW 55.7 billion, up 3.1% year-on-year. Officially launched in late June, AIX an AI agent designed for enterprise use, has received positive initial feedback as workplace AI tools that helps employees focus more on their core tasks. In this quarter, the service was rolled out to about 10 SK Group affiliates, including the company and is planned to be expanded to a total of 25 affiliates by the end of this year. Through its latest upgrade this quarter, A. has integrated cutting-edge ALM such as AX 4.0 and GPT5 while introducing a new AI message feature that alerts users to potential spam or phishing text. In addition, with its recent integration into T Map in September, A. is now accessible to a broader base of users, allowing more people to experience the service firsthand. Building on its long-standing expertise in LLM, the SK Telecom Consortium was selected in August as a core team for the proprietary AI foundation model project led by the Ministry of Science and ICT. Through the project, the company aims to further strengthen its AI competitiveness, pursue new business opportunities, and contribute to the development of sovereign AI. The past 6 months have been the most challenging period for SK Telecom since its founding. The entire organization has been fully mobilized to respond to the cybersecurity incident. While it served as an opportunity to emerge as a stronger and more secure company, it also led to the loss of many customers and continued financial impact. To move beyond this crisis toward recovery and renewed growth, the company has set a clear goal of driving continuous innovation in information security. We will strengthen execution across key areas such as increased security investment, adoption of next-generation technologies, and enhancement of the external verification system. In the telecom business, we will place customer trust restoration at the highest priority and focus on reinforcing our core competitiveness to reclaim our position as Korea's leading telecom company. At the same time, in the AI business, we will focus on delivering tangible results. SK Telecom is determined to turn this crisis into an opportunity for renewed growth and to emerge as a stronger, more resilient company. We sincerely ask for the warm encouragement and continued support of our investors and analysts as we embark on this new beginning. Thank you. Now we'll begin the Q&A. Operator: [Operator Instructions] The first question will be provided by Jae-min Ahn, from NH Investment & Securities. Jae-min Ahn: I have 2 questions. The first question is about dividends. During the presentation, you said that you will not declare the dividend for the third quarter, which is regrettable. And I'd like to hear about your focus on the fourth quarter dividend. And it might be a bit too early to discuss about the 2026 dividend policy. Can you give us a heads up as to whether the dividend of 2026 will return to the level of '24? The second question is about the performance. The third quarter's poor performance is something to be expected. And I'd like to ask you about the fourth quarter outlook because the free offering of the 50-gigabyte data and the discount are still ongoing. So, there could be the potential for the tariff down selling. So, I would like to hear about your 4Q performance outlook. Yang-Seob Kim: Thank you for this question. I'd like to respond to your second question first, the impact of the incident on the third quarter performance. The financial impact from the cybersecurity incident in Q3 was mostly reflected on the revenue side. Mobile revenue declined about KRW 500 billion Q-on-Q, nearly all attributable to the incident. The largest factor was the 50% discount on August tariffs offered to all customers as part of the customer appreciation package, while enhanced membership benefits also contributed to the revenue decline. On the cost side, KRW 134.8 billion of fines imposed by the Personal Information Protection Commission was recognized as a non-operating expense in Q3. As the customer appreciation package, such as additional data and the membership benefits, will continue through the year-end. So, some decline in mobile revenue is expected to persist in Q4, but the impact should be significantly smaller than in Q3. That said, Q4 typically involves concentrated spending activities, so a cautious approach is warranted regarding operating profit. While it is too early to provide detailed guidance for fiscal year '26 before finalizing management plans, the company aims to drive a steady recovery in mobile revenue through restored customer trust while maximizing cost efficiency to return to pre-incident operating profit levels. The company's AI business, including AI DC, continues to show solid growth momentum, which is expected to contribute to a turnaround in overall performance. Further details on FY '26 guidance will be provided once management plans are finalized. Thank you. So let me respond to the question about dividends for the whole year FY'25 and FY'26. As mentioned earlier, following a resolution by the Board, the company has decided not to declare a dividend for the third quarter. This was an unavoidable decision, taking into account the financial impact of the cybersecurity incident, cash flow condition, and overall financial stability. We ask for your kind understanding. As for the Q4 dividend, it is difficult to make any definitive statement at this time, but the Board will review the matter once the full-year performance and cash flow are finalized, taking into consideration the company's growth investment capacity, financial structure, and overall capital allocation balance. As the impact of the cybersecurity incident will be mostly reflected in 2025, the operations are expected to normalize from 2026, and all the operational improvement measures will be fully implemented. And we will make every effort to restore the dividend to the pre-incident level in line with improved performance. Operator: The following question will be presented by Heejin Lim from Citi Securities. Heejin Lim: I have 2 questions. First, is that this is the first earnings call after the incident and the implementation of the rectification measures. So, the question is that how much of the customers that you have lost in the previous quarter, you have regained in this quarter? And what are your plans to win back this customer? And I'd like to learn about your marketing plans. The second question is about the Air that was mentioned during the earlier presentation. So, it seems that the Air is a smart service that is offered at an affordable price range. So, I'd like to understand its implications on the top line and ARPU. Yang-Seob Kim: Thank you for this question. And this question will be answered by the marketing strategy team. Unknown Executive: After the contract cancellation fee waiver period ended on July 14, the company focused on rebuilding customer trust to reverse the market trend. Through these efforts, the customer churn was successfully contained in August and September, resulting in a net neutral balance between additions and losses. Going forward, rather than focusing on numerical recovery of the customer churn, which could overheat the market, the company plans to pursue qualitative recovery centered on strengthening fundamental competitiveness and improving customer and revenue quality. Through granular customer analytics, we provide optimized products, subscription methods, rate plans, and value-added services tailored to customer needs across different distribution channels. The recently launched air service is a prime example designed to meet diverse customer demand. The company will continue to enhance customer satisfaction by offering segment-optimized products and services while strengthening its overall competitiveness in the market. Yang-Seob Kim: So let me respond to your second question about Air. On October 13, the company officially launched Air, a digital communication service exclusively for unlocked devices. AI represents SK Telecom's new initiative to respond to the shift in mobile usage patterns among customers in their 20s and 30s towards SIM-only and fully digital experiences. It allows customers to complete all service procedures directly through the app without visiting offline stores. The service offers 6 simple rate plans focused on the most commonly used data tiers. While it does not support teamwork, team membership, fixed mobile bundles, or family discounts, it provides only the essential features at more affordable prices. While existing pay service cater to customers seeking a wide range of benefits such as family bundle discounts or device subsidies, Air is designed for unlocked device users who value digital convenience and practical benefits. Through the launch of Air, the company expects to meet the needs of wider customer base and broaden its marketing reach. By offering a new telecom service for unlocked device users, Air is expected to gradually expand the overall wireless subscriber base and continue to top-line growth. In terms of its price, it will be in the same range as the chief direct plan, so its impact on ARPU will be minimal. Operator: The following question will be presented by Sohyun Park from UBS. Sohyun Park: Two questions I have. The first question is about the Ulsan DC, this is something that you are working together with AWS and understand that the groundbreaking ceremony was held sometime at the end of August. So, I'd like to understand the progress of the Ulsan AI DC project. And when do you foresee the completion of this construction and the beginning of the operation? And if you have any additional plans to add other data center facility, please do share? The second question is about A. service. You have recently surpassed the 10 million subscriber landmark and now was able to secure a quite sizable user base. So, I'd like to understand if you have any plan to actually charge the service. Yang-Seob Kim: So thank you for this question. First question will be answered by the AI DC development team. And the second question will be answered by the AI growth strategy team. Unknown Executive: So let me respond to you about the progress of the Ulsan AI DC project. Construction of the Ulsan AI data center began on September 1 and is progressing smoothly according to the plan. The revenue from the Ulsan AI data center will follow a ramp-up structure and increasing in proportion to the utilization. The profit generation is expected from '27 and expected to grow steadily thereafter. The Ulsan AI data center will also serve as a key reference case marking SK Telecom's successful attraction of global big tech partners to Korea and will act as an important catalyst for future expansion of the company's AI data center business. In addition, the company is in active discussions with global investment firms and other major technology companies considering AI data center projects in Korea and across the broader APAC region, exploring various form of collaboration. Next, I'd like to discuss our data center expansion plan. As mentioned in the previous earnings call, the company aims to achieve KRW 1 trillion level revenue by operating a cumulative 300 megawatts or more of data center capacity by 2030. To this end, we are currently pursuing the construction of an additional AI data center in Korea Seoul, and the design work has just begun. Given that this location represents the last valuable site in Seoul with secured power capacity for data center development, it offers ample land to accommodate large-scale facilities. We anticipate a strong demand for the project. We will provide further details to the market as the project progresses and plans become more concrete. Ji Hoon Kim: This is the Head of AI Business Strategy, Kim Ji Hoon. Let me respond to your second question of the plan to charge the A. service. As of the end of September, the cumulative subscriber for A. has surpassed 10,560,000, and that is a growth of 8.3% versus the end of June. When we include the other A. function users outside of the A. app, which mainly refers to the phone and the BTD, and the total MAU exceeded 10 million as well. So, we were able to achieve this performance within 2 years from the official launch, the achievement, meaning that subscriber over 10 million and the AU exceeding 10 million. That is thanks to the continuous service sophistication and active expansion into the external platform. Last June, we have launched note and briefing. In August, we offered 4.0 update on the agentic workflow function has been added, and this has garnered a strong response from the users. In September, A. is made available in T Map and contributed further to the increase in AU. The B2C paid model will be reviewed -- are under review, and that will be most likely in the form of the subscription or the branded products centering around A. pillar services, and our target launching period is the first half of 2026. Until that time, we will continue to focus on improving usability of A.'s core services and expand the customer base. So, regarding the B2B profit model, including the A. agentic workflow, that will be implemented into the T Map, and we expect the revenue generation from the fourth quarter, and that will be the beginning, and we expect a gradual expansion of the revenue. Operator: The last question will be presented by Hong-sik Kim from Hana Securities. Hong-sik Kim: I will have to ask some difficult questions. Then you have started the quarterly dividend payout. But this quarter, you have decided not to declare the dividend. And from the perspective of the investors who have been waiting for this cash flow from the dividend, we are at a loss, and I'd like to understand more visibility into the future. And according to the business report, there are some companies that are showing higher degree of the visibility or the productivity when it comes to the dividend. So, in that line, I'd like to ask the company, do you have any plan for the future dividend? And if so, please share. So, if you are not able to provide any dividend for the third quarter, I believe that there should be some sufficient response going forward. So please specify them. And at this point, this is, I believe the high time that you need to revisit the plan to provide dividend on a quarterly basis because you have made the disclaim or announcement some time ago, but you are not able to provide this quarterly dividend for this quarter. So, this is extremely a regrettable situation, I have to say. And the second question is that according to the report that the ground or the basis of providing the dividend is the 50% of the consolidated net income. And it is our existing understanding is that it is adjusted consolidated net income, but it turns out the decision to waiver the third quarter dividend is based upon not adjusted, but the net income of this quarter. So does that suggest that in case of any future incidents that might involve the significant onetime expenses, then there will be some wavering of the dividend for the particular quarter. So please share with us your dividend profile. Yang-Seob Kim: So let me respond to your question. This is the CFO. So, as you might understand and appreciate that we have been providing the stable provision of the dividend based upon the strong performance. But due to these unforeseeable incidents that we're not able to provide the dividend for this quarter. As a CFO, this is an extremely unsettling situation, and I'd like to extend my sincere apology to the investors. So, we take your question and the feedback with great heart and try to figure out the best way forward. And I'd like to give you this commitment as a CFO that we will make every effort to normalize our business environment, and this is something that I will share the commitment to you on behalf of every single employee of SK Telecom. So let me respond to your question about the 50% of the adjusted consolidated net income. So, in relation to our shareholder return policy, the company classified items such as operating revenue and operating expenses, which arise from its principal business activities, as recurring income or loss items. And conversely, nonoperating income and expenses are not directly related to the operating activities are categorized as nonrecurring items. The administrative fine imposed by the PIPC this year is classified as a nonrecurring item. The customer appreciation packages, and the SIM card replacement costs are directly associated with the company's core business activities and therefore, are not regarded as one-off or nonrecurring items. The company's shareholder return policy, which is returning 50% of adjusted consolidated net income, represent a symbolic lower bound. This threshold expresses our commitment to provide dividends at a higher level than the minimum target. And historically, our dividend payout ratio has remained above this level. For additional inquiries, please contact our IR organization, and we will make sure that you get the full response. Jun Chung Hee: This concludes our Q3 '25 earnings call. If you have any further questions, please contact us. Thank you.
Ann-Sofi Jönsson: Welcome to the presentation of Electrolux Q3 report. I'm Ann-Sofi Jönsson, Head of Investor Relations and Sustainability Reporting. I'm here with our CEO, Yannick Fierling and our CFO, Therese Friberg. We will run through the presentation. And after that, we will open up for the Q&A session. If you are viewing on the web, do feel free to put your questions in the chat throughout the presentation. And with that, I hand over to Yannick. Yannick Fierling: Thank you very much, Ann-Sofi. Good morning, and good day to all of you. Very happy to be with you for this third quarter report. I will start with very general comments. I mean, growth is 1 of our strategic pillar, and I'm very glad to say that we have been growing once again in the third quarter. We have been increasing our net sales by 4.6%, mainly driven by North America. I'm also very glad to share that we have been growing our market share in the 3 regions here with our main brands, Electrolux, AEG, and Frigidaire. We have been taking our operating margin to 2.8%, with a good progress on cost reduction. We have been adding to the SEK 2 billion we achieved in the first half of the year, an additional SEK 800 million. And afterwards, I've been sharing with you in the last quarters, the aim we have to get faster and more agile moving forward, and I'm very glad to announce some organizational changes, which would be putting us closer to the end consumer. Moving to the results. As I said, I mean, we have been growing our net sales by 4.6%, mainly driven by North America, where we have been gaining in terms of shop floor spaces, and we have been expanding in key channels like the contract channels. In Europe, Asia Pacific, Middle East and Africa, we have been growing slightly in a subdued market with quite a lot of price pressure. In Latin America, strong results once again here, stable net sales on the back of a very strong and hot 2024. In terms of operating margin in the EBIT bridge, we had 2 positives, which were volume and mix and these 2 positives were slightly offset by a price -- negative price development. In terms of external factors, as you can expect, we were hit mainly by tariff and currency. We are very glad to say that we made progress once again in terms of cost reduction by adding SEK 800 million on the SEK 2 billion we achieved in the first half of the year. Moving now to Europe, Asia Pacific, Middle East and Africa. Again, we had a slight organic growth in this quarter. We have been gaining market share with our 2 main brands, Electrolux and AEG, more than offsetting the ramp down we have on the Zanussi brand. Zanussi was an entry price point brand, and we are focusing today on core and premium brands. Quite a lot of pressure, again, in prices, and we saw a negative price development. On the operating income side of the equation, positive in terms of volume and mix, but these positives were slightly offset by a negative price development. The region has been benefiting by a good effect on the cost reduction side of the equation, and we kept on investing in the marketing side of the equation. And that's pretty important because we launched major innovations, especially in the kitchen area under AEG and Electrolux, and we are glad to be able to fuel these major innovations through marketing money. In terms of external factors, we had a negative impact of currency, mainly driven by a weak Australian dollar. Again, in terms of market development, this picture is very similar to the one I've been showing in the last quarters. We had a positive development in Western Europe of 1%. Western Europe represents 80% of the total volume for the region and a minus 1% for Eastern Europe, flat. And here, once again, we had minus 11% versus the third quarter 2019 back to levels we had in 2014. The construction market remains very subdued. I mean we are hoping it to rebound in the coming months due to the lower interest rate, but we don't -- we have not seen any sign of that in the third quarter. On the positive side of the equation, I just want to underline that we saw some sign of recovery in the region, in the month of September. We have been working very hard in the last months to really improve the brand image we have, defining more precisely the consumer targets we have and clearly define an identity card for our 3 brands, Electrolux, AEG and Frigidaire. And I'm very glad to share with you one of the latest campaign. You have seen some just before we have live. This campaign is called the Wash Life Balance, and it's featuring the product leadership we do have in care and garment care. We have been also very proud to announce the launch of our new dishwasher, the AEG FAVORIT dishwasher here, which has been focusing on fit, fill and finishing. It has leadership in terms of perceived quality. And we're also leading in terms of energy consumption, noise level and water consumption here. Let me share with you a short video. [Presentation] Yannick Fierling: Moving now to North America. And we're glad to say that we have been growing significantly in North America. We're announcing a double-digit growth in the third quarter here, thanks to, again, a higher penetration in terms of shop floor space and an enhanced presence in some of the channels we do have like the contract channel here. We're not buying market share. We're increasing the presence we do have in the different channels. We had a positive price impact. We were actually positive on the 3 dimensions, volume, mix and price in North America. As you all know, I mean, we are building our appliances in North America. We're one of the North American constructor. And the last tariff structure should certainly benefit the North American producers. Unfortunately, we have to say that we have not seen the expected price increase for our imported goods coming from basically Asia in this third quarter. We have been leading price increase, and that's very important. I'm very proud to say that we have been covering the vast majority of the tariff impact for the price increase. So it's a competitive situation we have in front of us, with in front of as well a pretty promotional time which would be a Black November in North America. However, I want to repeat that, I mean, the last tariff structure should be benefiting for North American producers. Negative impact as well from a currency side of the equation with a weak dollar in this quarter. The pressure about the picture about the market is very much unchanged versus last year. The market has been pretty resilient to the inflation we have seen in the market. Moving to Latin America here. Almost flat organic growth in the region on the back of a very strong 2024 where we had a heat wave, and where we're selling a significant level of air conditioning and refrigerator. Unfortunately, the summer is not very hot in 2025 here, which has been increasing slightly the stock level we have in products like air conditioning. The competitive pressure in the regions remains pretty high. However, we're delivering, once again, 5.7% in terms of EBIT. We had a bad impact in terms of currency because of the Argentinian pesos and the Brazilian real. The Argentinian market is opening up, which means that we have a high level of import products -- our imported products out of Asia. Cost reduction, we're glad to say that, I mean, we're delivering once again SEK 800 million in the third quarter, which is taking the total amount of SEK 2.8 billion for year-to-date here, and we're still confident to reach between SEK 3.5 billion and SEK 4 billion cost reduction for the full year. This cost reduction is mainly driven by product redesign, a better sourcing in terms of components and suppliers, a higher level of efficiency in our factories and a full leverage of our global scale as Electrolux. Next slide is a slide we're very proud about. In 2016, Electrolux has been funding the Food Foundation here. And the aim of this Food Foundation is twice. The first one is to educate children and adults to eat in the most sustainable manner, but we're also helping adults needs here by giving them cooking lessons given by chef in the different regions. Year-to-date, we have been educating more than 300,000 children and adults through the Food Foundation. And the aim, the target we do have by 2030 is to have more than 1 million people benefiting from this foundation. With that, I'm passing it to Therese. Therese Friberg: Thank you, Yannick. The organic sales growth that we had in the quarter of 4.6% generated a positive impact to earnings of SEK 384 million. This was mainly derived from volume, but we also had a positive mix contribution in the quarter. And this was, of course, offsetting the slight reduction that we did see in price. We are continuing to invest in innovation and marketing, as mentioned by Yannick to really support the strong product portfolio we have in the market. Cost efficiency was a saving of SEK 760 million in the quarter. And I would also like to mention here that in the quarter, we had the group common cost of SEK 50 million, which was SEK 84 million below last year. And this is a result of cost containment, but also a result of some timing between the quarters. We have very significant negative external factors. Of course, as you all know, the negative impact from tariffs, but also quite significant negative impact from currency in the quarter, mainly related to the weakening of the Argentinian piece, but also the strengthening of the Thai baht versus the U.S. dollar and the Australian dollar. And the negative effect we have in acquisitions and divestments is related to the divestment of the water heater business in South Africa that we did last year. The operating cash flow was positive SEK 600 million in the quarter, which was somewhat below last year. This is mainly a result of a negative impact -- a larger negative impact in working capital compared to last year. This -- and this is attributed to one seasonal effect related to receivables that are usually increasing in the third quarter, but this year increased even more substantially than a normal seasonality related to higher sales growth, but also quite a strong September month, as Yannick also touched upon earlier. As you also know, we came into the third quarter with quite high inventory levels from the second quarter from volatile market during the first half and also from that the Brazilian retailers were destocking during the first half or specifically in the second quarter. And this, in combination with weak or cooler weather in Latin America means that we're still sitting on some of that stock. As you know, we usually have a strong reduction of inventory in the fourth quarter according to our normal seasonality, and this is what we are looking for as well this year. CapEx, we are having slightly lower than last year. And then looking at our balance sheet and liquidity. We have a solid liquidity and a well-balanced maturity profile. In the quarter, we amortized long-term debt of around SEK 1 billion, and we issued 3 new bonds of a total of SEK 2.6 billion under our EMTN program. And this will mature in 2029. And for the remainder of 2025, we have borrowings maturing of approximately SEK 1.9 billion, which we will finance from our existing liquidity. We increased the financial net debt slightly in the quarter, but we still have a solid liquidity of SEK 29.4 billion by the end of September, including revolving credit facilities. And of course, we don't have any financial covenants and our target to maintain a solid investment-grade rating remains. And with that, I hand back over to Yannick. Yannick Fierling: Thank you very much, Therese. I will now move to the outlook and the summary. During the quarter, the market demand in Europe increased slightly. Consumer demand continued to be predominantly replacement driven. In Asia Pacific, consumer demand is estimated to have decreased slightly year-over-year. Promotional activity and competitive pressure increased across market. Geopolitical uncertainty negatively impacted consumer sentiment in Europe. This contributed to consumers continuing to shift lower price points and postponing discretionary purchases. Demand for built-in kitchen products in Europe remains subdued. In a longer perspective, it is important to remember that the European market is on a 10-year low. For full year 2025, we reiterate our neutral market outlook for core appliances in Europe and Asia Pacific. During the quarter, consumer demand in North America remained resilient. Industry market price adjustments did not reflect the implemented U.S. tariff structure and competitive pressure and promotional activity remain high. Demand continued to be mainly replacement-driven and consumers continue to prefer lower price points. For the full year demand outlook, economic uncertainties and inflation concerns risk having a dampened effect on consumer demand. Consequently, we maintain our outlook of neutral to negative market demand. Consumer demand is estimated to have increased in Latin America in the third quarter. Competitive pressure increased in the region, most notably in Argentina, where the strong growth was driven mainly by imported goods. Consumer demand grew in Brazil, although at a slower pace than in the third quarter 2024, mainly due to inflationary pressure and higher interest rates affecting consumer spending. These factors contributed to retail continuing to reduce inventories. For the full year, we reiterate our outlook of neutral market demand for core appliances in the region. Moving now to the outlook. We still expect the impact from volume, price and mix to be positive for the year. Previously, price was estimated to be a main positive driver. Now the main driver is estimated to be growth in focused category because of the market dynamics in the third quarter and especially the challenging prices environment in North America. We reiterate that we expect investments, innovation and marketing for full year 2025 to increase. New product launches provide us with a great platform to continue driving growth in our focused categories. Our focus on reducing costs remain high, and we stick to the outlook of SEK 3.5 billion to SEK 4 billion in earning contribution from cost efficiency in the full year 2025, with product cost out being the main driver for the cost reduction. External factors are expected to be significantly negative for the full year. The cost inflation related to increased tariff is included an external factor in our EBIT bridge. Currency remains a headwind and the impact from raw material costs expected to be slightly positive for the year. For the full year, we are lowering our outlook for capital expenditure from SEK 4 billion to SEK 5 billion to approximately SEK 3.5 billion to SEK 4 billion. Investments to strengthen our competitiveness through innovation and manufacturing efficiency are essential to support growth and improve efficiency. But also, we are looking at being as efficient as possible we can and are scrutinizing our priorities. This resulted in a lower CapEx outlook. Moving now to the strategy. And I think we have been hammering. That's our 5 strategic pillar, and we're improving on all of them here. In terms of North America, we have been increasing our market share. We have been increasing the penetration level we have in key channels. We have been increasing the number of shop floor spaces we have, thanks to innovation like the stone-baked pizza feature we presented last month. In terms of growth, we are growing in a challenging market. We are growing in core and premium segments with our brands like Electrolux and in AEG. We keep a very strong position in Latin America. The organic growth has been at the same level as last year, but again, it was on the back of a very strong 2024. We have been launching very strong innovations in kitchen in Europe. In North America with a big kitchen bake oven, and we have product leadership in Latin America. We made progress in terms of cost reduction, adding again, SEK 800 million on the SEK 2 billion we have been achieving in the first half of the year. And last, but not least, the environment is changing. We are in a very unstable market right now where we need to react very fast. We need to be better in terms of speed and agility. And that's why we're driving organizational changes, increasing customer centricity. The first announcement we're making today is we will be splitting Europe, Middle East and Africa and APAC in 2 different regions, 2 commercial regions. One, we'll be focusing on Europe, Middle East and Africa and the other one, we'll be focusing on APAC. As a result, Anna Ohlsson will be leaving the company. Leandro Jasiocha, who is currently in the LatAm region will be moving to Europe, and he will be heading the region. Patrick Minogue will be replacing Ricardo Cons who decided to retire from the company pursuing a family journey he has been starting. And Eduardo Mello will be replacing Leandro Jasiocha as the Head of Latin America. We are sure that with these organizational changes, we will be increasing speed agility and be more consumer-centric moving forward. That's concluding this presentation, and we'll be happy to take any questions. Ann-Sofi Jönsson: Great. Thank you, Yannick and Therese. With that, we will move over to the participants on the telephone conference. So Sarah, you could please go ahead and open up for questions. Operator: [Operator Instructions] We will now take our first question from the phone lines. And this is from Gustav Hagéus from SEB. Gustav Sandström: Congrats on a good result. If I may start on the comment on the U.S. market share gains. And as you mentioned, you take shelf space in the quarter. It appears as if you've had now 4 quarters in a row with some market share gains in the U.S., obviously, superseding a period where you've lost some market share. So interesting to hear now that you're starting to meet a little bit tougher comps in terms of market shares in the U.S. if you see this trend potentially continuing into Q4 and into next year? And if you could shed some light on who you're taking shelf space from, maybe not the name, but if it's domestic or nondomestic players or if it's private label or how you view that dynamic in the trade, that would be interesting to hear. Yannick Fierling: Thanks for the question, Gustav. I think we're taking share, I would say, across. And I think it's mainly due to -- and thanks to the innovation we have been launching mainly in kitchen. Let's not forget as well that we have been ramping up Springfield in the last months here. We have been launching through this ramp up, a new series of cooking products, for instance, which are feeding brands like Frigidaire Gallery. We have been launching the great innovation, which is the pizza stone-baked oven in North America here, which has been getting an excellent reception in the market. We have some new products as well in the food preservation side of the equation. So it is really across market share here. We have been entering, and I want to make sure everybody understands we are not buying market share, but we have been entering into new channels like the contract channels here, and we have been really gaining shop floor spaces in -- with our main customers. I mean Lowe's, Home Depot and Best Buy and others here in the last months. So it's not one specific competitor we're taking share from, but it's a wide range of competitors. Gustav Sandström: And the second part of that question, as you look into -- it appears as if comps on the market share gains in U.S. is a little bit tougher to meet now as you enter Q4 into 2026. Should we expect this trend to continue with some recovery of the market shares also as you enter 2026? Yannick Fierling: Yes. I think I would like to make 2 points going into the volume side of the equation. First, I want to insist on that. I mean that was our commitment. We have been leading price increase in North America in the last month, and that has certainly not been easy. And I think we were very fortunate to have all these innovations in order to compensate basically for this price increase because we are producing, as you know, in North America, we're among the 3 producers in North America. And the last tariff structure introduced at the beginning of the summer was certainly privileging or benefiting North American producers. So we were expecting a higher level of price increase for imported goods, especially coming out of Asia. Unfortunately, I have to say today that we did not see that happening. And I think we're entering into a promotional season in North America now with Black November. However, what I want to underline as well is that, I mean midterm, there is absolutely no doubt that, I mean, North American producers will be benefiting from the current tariff structure here and that import products will be handicapped significantly, and we'll have to increase prices. So we did not see that in the third quarter. We're entering into, of course, a promotional period, which is Black November here, but there is also no doubt in our mind that, I mean, the current tariff structure should be benefiting basically North American producers amongst who we are. We're not giving up on prices, not at all. Here, we're just expecting the market to be rational in North America as well. Therese Friberg: And I guess, a little bit more overall, of course, some of the effects that Yannick talked about with gaining additional shop floor and gaining traction within the contract channel, of course, this is not something that is just happening on and off. But we believe that those types of changes are structural changes that has come gradually during this year, which, of course, also should continue to be a positive going forward. Gustav Sandström: And if I may ask one question on Europe, too. It's interesting to hear that you see some improvement in September in terms of market volumes, if I understood you correctly. Companies tend not to raise these type of monthly data towards the end of the quarter if they haven't seen a similar pattern going into the month that we're in now. Is there any reason to assume that, that logic would not apply to you that October would not follow the September trends? Appreciate it... Yannick Fierling: Yes, I think that's a great question. Unfortunately, in all fairness, I mean, if you look at full 2025, I mean, we have not been going through normal type of patterns in most of the regions, but especially in Europe. Indeed, I mean -- and I think we're happy to say that. I mean, September, we have been mentioning has been a positive month here for us. And I think all we wish is that it will be continuing in the fourth quarter, but I mean the level of unpredictability and uncertainty we do have in the market today in Europe is pretty high. So it's -- I would say it's difficult to say. Certainly, I mean, we're entering as well into a Black November type of market in Europe. But we are confident that with the product we have been introducing, the innovation we have been introducing, with the plan we have in place. And I think the quality of the people we have facing the end consumer, I mean, we will be doing the right thing for what we can control. But unfortunately, I mean, the level of uncertainty is pretty high in the market. Gustav Sandström: I appreciate that. But the question was specifically on October. Is there any reason to assume that the trend reversed again in October? Yannick Fierling: I think I cannot give you any trend, of course, for October right now. But certainly, I mean, the fact that, I mean, September was a positive month is certainly a good indication for us. Therese Friberg: And this is also an important point when thinking about cash flow because as you've seen, we had a weaker cash flow this quarter compared to last year where a large part of this is really related to that we are tying up quite a lot more in receivables this year compared to last year. And this is really driven by that the September month was the very strong month in sales. And hence, we are tying up larger amount in receivables. So we don't see any changes in terms either in receivables or in payables. So it's important to understand, yes, that effect from a cash flow perspective. Operator: We'll now take the next question from the phone lines. And this is from John Kim from Deutsche Bank. John-B Kim: Two questions, if I may. Can you comment on what you're seeing in North America in terms of any potential inventory overhangs? My understanding is that some of your foreign competitors put extra inventory into the market ahead of anticipated tariff increases. I'm just wondering how that's absorbing. Yannick Fierling: John, thanks for your question here. And I would just be repeating the answer I gave last quarter, which is -- again, a very transparent answer. I mean, the fact that, I mean, we may have some of our competitors preloading in order to avoid tariff seems to be logical. However, we did not observe this phenomenon ourselves here. And I think this phenomenon was not reporting to us by our team basically in North America. So unfortunately, I mean, again, logical, but I mean it is something we cannot confirm. John-B Kim: Okay. And I was wondering if you could give us a little bit more color on the reorganization, particularly on the split on what looks like EMEA, Asia Pac and the different regions? Yannick Fierling: Yes, absolutely. I think again, we -- the aim we have in terms of organizational setup is really to get closer to the end consumer from the top to about to reverse basically the organizational pyramid here, and I have the entire organization supporting what we'll be delivering to the market. Having the Asian organization below the European region, I mean, has been adding one layer. What we want to do here is to be able to respond in a faster manner, in a more agile manner to the needs our customers do have as well in the Asia Pacific region. And that's why we have been carving out this commercial region. We will have the head of this commercial region, which we will be reporting directly to myself, the CEO here. And I think with this setup, we are convinced that, I mean, we would be able to support again the region in a better manner. Therese Friberg: Maybe one clarification from an external reporting. We will still hold it together from a back-end perspective across Europe, Middle East, Africa and Asia Pacific. So it will really be a commercial region. So externally, we will continue to have the same segment reporting as today. Operator: Next question today is from Akash Gupta, JPMorgan. Akash Gupta: I have a few as well. The first 1 is on -- again, going back on North America. One of your North American competitor mentioned earlier this week that they produce about 80% of their appliances in the region. And if I may ask, if what's the share of your local production in North America? And how does that compare with industry average if you have that figure? Yannick Fierling: Okay. Thanks, Akash, for the question. We're not giving any precise number here. What I can tell you, however, is that we have 5 factories in North America, 3 in the U.S. and 2 in Mexico, who are USMCA here. So the vast majority of our products are produced in North America today. And again, USMCA compliant. So we are among the 3 major North American producers for appliances here. And certainly, as I said previously, long term, and if the industry is behaving rationally, we should be benefiting from the latest tariff structure here. Unfortunately, that's not what we saw in the third quarter here because we did not see a price increase from import finished goods. Now in all fairness, I mean, the full tariff structure would be implemented beginning of October. So it would be interesting to witness what will be the movements in the coming quarter knowing again that we have Black November in front of us. Therese Friberg: And I think what we have said is that with the competitor you are referring to, we have a relatively similar footprint. So that we have been clear. Akash Gupta: And my second 1 is on the cost savings. You had SEK 2.8 billion in the first 9 months, SEK 800 million in third quarter. Your target is SEK 3.5 billion to SEK 4 billion. That would imply SEK 700 million to SEK 1.2 billion in Q4. But I think in Q4, you have a very tough comp because last year, half of the savings came in Q4 alone. So any indication like where are we trending towards this -- in this SEK 3.5 billion to SEK 4 billion range for cost savings this year? Yannick Fierling: Yes. A couple of stuff, Akash. The first one, I mean, we explained that. I mean it's very difficult to compare the SEK 4 billion we delivered last year with SEK 3.5 billion to SEK 4 billion we're delivering this year because last year, I mean, the saving was for a big part coming from restructuring we have been doing in the past. The SEK 3.5 billion to SEK 4 billion we're delivering in 2025 are much more coming from product redesign, better component sourcing, higher efficiency in terms of factory and better leverage of our global scale here. All what I can tell you today is that we are confident to deliver between SEK 3.5 billion and SEK 4 billion for 2025. Akash Gupta: And my last one is on free cash flow. So again, I mean, you don't provide bridge like your -- some of your competitors, but -- when we look at this change in CapEx outlook, which you have cut today, would that change your internal assumptions for full year free cash flow? Or are there any other element like working capital or something else that might offset? So any commentary on your own expectations for free cash flow? Does that change after CapEx outlook a bit? Therese Friberg: No, I would say that those are disconnected. So with the CapEx refocus that we've done, of course, we continuously do prioritization and reprioritization. And with the focus that we have on cost reduction, actually, that is also spilling over on the CapEx reduction. So of course, when we're looking at costs, we're also looking at how we buy equipment and so forth. So we're not doing the CapEx reduction really to offset other negatives in our cash flow. Those are disconnected. Yannick Fierling: That's very important to underline, and Therese said it. I mean, we are not delaying any launches. We're not delaying any programs. We're not delaying any footprint or whatever here. What we have been doing is, I mean we have been using our CapEx in a better manner in 2025 here. And as you know, we have been hiring about a year ago now, a new CPO, and I think we have been really focusing on buying better, cheaper from best cost countries in 2025. And that's reflected in the cost saving we're having, but also on how we are purchasing equipment and tooling. Akash Gupta: I mean that's fair. But I mean, in theory, like if your CapEx is going down and keeping everything else equal, your free cash flow should be better than before. So my question was that, is this the case that now we should expect keeping everything else equally better free cash flow? Or is there anything that might be offset this benefit that you may get from lower CapEx? Therese Friberg: I guess it depends on the time frame you are looking at. Of course, as we have been transparent about we are not having a strong cash flow this quarter as we did last year. And of course, also year-to-date, we have a weaker cash flow than last year. But the reductions we're doing in CapEx are not to compensate for the negative effects that we have been seeing in working capital. Of course, as we also said earlier, one part of that is really temporary or seasonal that we had a strong September with receivables being negative then in the quarter, more negative than last year and more negative than the usual seasonality. Of course, inventory, we have also been clear with that it is on a higher level already when we came in to the second quarter. And we are usually having a seasonality where we have large inventory reductions towards the end of the year, and this is what we are expecting as well this year. Maybe one additional point that we didn't touch upon. Again, this is not related to the CapEx, but if you look at the full free cash flow for the year, we have talked about earlier in the second quarter that the impact of tariffs is also impacting the working capital level since the terms of when you are having to pay for tariffs compared to when you're able to then reclaim them from price increases from the retailers, there is a time gap. So of course, we've been clear with that. Structurally, we have had a negative impact from that in our cash flow in the year. Operator: [Operator Instructions] We will now move to the next question. And this is from Johan Eliason from SB 1 Markets. Johan Eliason: I was wondering once again, North America. You say you are taking market share there. The brand you have in North America, Frigidaire is typically a mass market brand, which historically has sort of gained share when the consumers become more price conscious. Is that part of what we've seen over there? And could you also update me on how the progress is developing, moving your price points on the brand towards the higher price points like the Frigidaire Gallery issue that you have been focused on over the past few years. Would you say that you have been able, in general to move up the brand a bit on the pricing ladder? Yannick Fierling: Johan, thank you very much for your question. And yes, absolutely, I mean, for the first question, we are not targeting opening price point with Frigidaire, and that's exactly how we have been mixing up with Gallery and Pro. And in all fairness, the entire strategy developed over the last years as well with factories like Springfield or Anderson have been to mix up and have a higher offer in terms of products for Gallery and Pro. I just want to give you very concrete examples. I mean, back command on oven ranges are usually low end. I mean the -- most of the products we do have now, a big part of it out of Springfield has front command here, which is more mid- to high-end segments here. I could give you a similar example on the Anderson side of the equation. The pizza stone-baked oven is, again, a feature which is a big innovation, and we're pricing for this innovation as well in North America. So no, I mean, we're not fighting really for opening price points on Frigidaire. We're not buying market share. What we're really doing is, I mean we're occupying new shop floor spaces by entering new retailers by expanding in channels like the contract channels here, and we are mixing up actually our products here. We should not forget about the Electrolux brand as well in North America, which is a strong brand for front loader for instance, here, and it is a premium brand. So not at all. I mean, we certainly have a philosophy in North America, which is to mix up our product by offering better product and innovations moving forward. Therese Friberg: And I guess important to mention, as Yannick also said earlier, we are improving volume, price and mix in this quarter. And with the combination we're seeing of where we are taking share with what retailers and with what products, we don't really see that it's a -- that we are gaining share is not really a result of, as you're saying, what we have seen before, historically, Johan, that when the market is kind of trading down that we are absorbing that type of volume. That's not what we see in the quarter. Yannick Fierling: And clearly, I mean I want to repeat it. We have been leading price increase in a price pressure market in North America in Q3. Johan Eliason: Excellent. And on the -- can you say anything about the product category where you are sort of gaining more or less? I think historically, the hot products were your most profitable products in North America, but you've lost out on that segment because of the sales issue. But can you say that is the hot product gaining more share? Or is it sort of a broader range over your different categories? Yannick Fierling: I think we are gaining market share almost in every single product category. We're not going into detail. There is -- I mean, there are a couple, of course, where we're losing market share here and where we need to act here, and we have plans in place in order to increase it. But I mean, on the vast majority of the product ranges, we are gaining market share here. So I don't think we should be pointing out 1 specific range or whatever. It is an overboard market share gain. Johan Eliason: Excellent. And then just 1 final minor in the cash flow to Therese. Other noncash items had a negative delta of around SEK 500 million. What's that related to? It was positive SEK 399 million last year's Q3, and now it's negative SEK 104 million. I was just wondering what that cost related to... Therese Friberg: Yes, yes, yes. We -- I mean, with the LTI program that is included in the EBIT, we usually have a negative -- small negative every quarter as long as we continue to, of course, increase the provision of the long-term incentive program. Last year, it's related to the divestment of South Africa, where technically, that's where the change of the goodwill was booked in last year's cash flow. Operator: We'll now take the next question. This is from Martin Wilkie at Citi. Martin Wilkie: Thank you, Martin. I just want to come back to North America. So it sounds like you are making good progress there relative to the market, but obviously, the absolute level of profit is still quite subdued. When we think going forward about the levers to get that higher, is it a market volume question? Or is this all around price cost? I mean is it effectively that the sort of price increases linked to the tariffs and so forth has not yet come through? And I guess related to that, is there any sort of self-help story? I mean a lot of what you've done. at Anderson and other facilities, I guess, are already completed, but is there a self-help element also to getting that margin higher? Yannick Fierling: Yes. Thanks, Martin, for the question. I mean the first thing I would like to underline if you allow me is that, I mean, we are plotting in black for the second quarter in a row in North America in a market, again, which has been pretty price pressured. I mean North America is the first priority. The turnaround of North America is our first priority. And I think we have been making progress throughout the last quarters. Certainly, I mean, we have short-term actions, midterm actions and longer-term actions to take the regions where we believe it should be belonging 6% EBIT longer term. I think the big challenge, the main challenge we had in the third quarter is the one I've been mentioning. We have been making progress in terms of volume, mix and price. However, we were not able to price to extent, we wished simply because, I mean, the tariff structure did not impact the imported goods at the logical or rational level. Now for -- I mean, moving forward, certainly, I mean, we're entering into a Black November, where price pressure will certainly not go down. So the tariff structure would be entirely implemented started 1st of October. So if there is some rational in North America in terms of pricing, we should be benefiting. We should be benefiting mid- to long term out of the current tariff structure here as being a North American producer. So I think, again, I mean, we did not see, unfortunately, a level of rational we would have expected in terms of price increase for importing goods in Q3. I mean challenging month of November with the promotional pressure we'll have. But logically, I mean, moving forward, we should be benefiting from the current tariff structures in North America producing in North America. Operator: And your next question is from Uma Samlin, Bank of America. Uma Samlin: I have a follow-up on North America, if I may. So if we look at the AHAM data on the units for North America, it seems to be flat for the quarter. And you are gaining some share, and it seems like your domestic competitor have that similar things. So who is losing share there? So is there anything you can comment on that? Because given the -- you said like the imports have sort of similar pricing point, they have not been increasing prices. So what is the reason that it seems like the domestic -- you and the domestic peers are gaining share. So is there any comment you can give there? Yannick Fierling: Thanks. Tough question you're asking. I mean, first of all, we are very proud to have gained, to have increased our net sales by a double-digit amount in the third quarter. And again, I want to repeat it is not -- we have not been buying market share. We have been gaining market share here. And indeed, I mean, one of your local producer has been saying the same thing. Unfortunately, we don't buy competitive data in North America. I wish I could answer to what you're asking, but we have the same level of information you do have. So we have AHAM data, and we have our data relative to AHAM. So it's very difficult for us to comment beyond what you just have been mentioning with competitors reporting out as well their Q3 reports in North America. So I'm unfortunately not able to give you more details about who is losing in which product category. Uma Samlin: That's very helpful. So my second question is on Europe. It seems like the competitive pressure in Europe is still fairly strong. And -- but you are seeing some improvement in sentiment. Do you see any increased competition from your Asian peers here in Europe? Do you expect the pricing to bottom out potentially towards the end of the year or into next year? Yannick Fierling: Thanks for the question. Great question here. In all fairness, I mean, Asian penetration in Europe is not something new. I mean, Asian had been entering into Europe now several years ago. Certainly, I mean what I said previously is that, I mean, the cost difference to manufacture a product in Asia or to manufacture a product in North America and Europe has never been as big because of commodity prices, because of energy cost. So cost difference is really, really big. We opted very courageously in Europe a few years ago to step out of entry price points as Electrolux. So we have been ramping down the Zanussi brand, and we have been focusing on Electrolux and AEG. And we're proud to say today that we're winning more market share on Electrolux and AEG core and premium than we're losing on the Zanussi side of the equation here. So we are not exposed to the entrants on entry price point. However, what I need to underline is that, I mean, you're partly right. We see the market moving down into lower price points in Europe. We see cost pressure being more and more intense here, I think we feel slightly protected from that because of the consumer segments we are targeting in Europe. But I mean there is no doubt about that. The market has been moving to lower price points recently, and we see a significant level of price pressure. Operator: And the next question is from Björn Enarson from Danske Bank. Björn Enarson: First question on the U.S. again. And if you can give us some color on the factory load in the plants and what kind of absorption you have of fixed cost now when you gain some volumes, but still volumes are, I assume, quite low. And second question is a little bit on Europe. If you can give some regional comments within Europe where you're seeing this slightly positive trends? Yannick Fierling: Thank you very much for your question. I mean the -- as I mentioned previously, I mean, the most subdued market versus, I mean, the past years, I mean, I mentioned 2019, is certainly Europe. I mean, we are back at the level of 2014. And as I said in the previous call, I mean, usually, this industry in Europe had an organic growth of 2% to 3% a year. So if you put 2014, 2025, we're really missing 20% to 30%. The market is missing 20% to 30% of the volume, we should have expected logically out of the region here. And as a consequence here, the factories overall, which are suffering the most from underutilization are the European factories. That's where everybody is suffering today in terms of factory loading. I would say North America, I mean, a few good news. First, I mean, the Springfield factory, we were suffering end of last year in terms of ramp-up and additional cost. The ramp-up was basically inducing. I mean, Springfield has been reaching what I would be calling a cruising altitude. So the factory is there. And I think we don't have the same factory capacity or utilization issues we do see in Europe. I think certainly, we still have space because we just built this factory. So I think we have space in front of us here. But I mean, factory utilization rate is not the main handicap we may have in North America or the major challenge we do have in North America. Björn Enarson: And are there actions to deal with plant load in Europe? Or how are you dealing with that? What you have done by some divestments et cetera? Yannick Fierling: Absolutely. I mean, first, I mean, we're gaining market share in the core and premium segment. So we are fighting for volume. And I think in the EBIT bridge, as I said during the presentation, I mean we have been positive in volume and mix. And unfortunately, I mean, this advantage was slightly offset by the price pressure we see on the market. So we are really fighting. We're fighting on daily days. Our team is fighting is doing a great job on the market basically to win versus our competitors in Europe. I mean what would be helping us the most is simply to get back to a normal type of growth in Europe. And I think when I say a normal type of growth, I'm not speaking about the 20% to 30% we were expecting a few years ago, but I mean, getting back to 2% to 3% growth in this region here. And what will be helping Electrolux the most because of the strength we do have in kitchen channels is basically that the construction market will bounce back. And we believe it has been reaching bottom here. We're observing that interest rates are lower. So we're really hoping that I mean this market will be bouncing back, I mean, in the coming months. But I mean, right now, we don't have a clear sign it. Therese Friberg: And as you know, with the cost efficiency that we're having this year, it's mainly related to product cost efficiency, but we have 2 years behind us where, of course, we have taken down our staff and our workers in the factories drastically over the last 2 years prior to this one to cope with the factory utilization. Operator: We will now take the next question. This is from Timothy Lee from Barclays. Timothy Lee: Can you hear me clearly? Therese Friberg: Yes. Yannick Fierling: Yes. Absolutely. Timothy Lee: So I have 2 questions on Europe. So the first one is regarding the trend that you have seen in September, which is some improvement. Can I ask about the historical pattern within the first quarter, whether September is usually a strong month in the quarter or not? And so the pickup in September this time is more like a seasonal pattern? Or is really some improvement in terms of your overall business? That's the first question. And the second question is about the margin improvement in Europe on a quarter-on-quarter basis. What's the key driver for that? Is this just from -- mainly from the cost efficiency program or there's something -- some factors that drive the quarter-on-quarter improvement and how sustainable the improvement will be? These are the 2 questions. Yannick Fierling: Thanks for your question. The communication was not very good. So I hope I would be answering your questions correctly. About the month of September, first of all, I mean, we cannot speak about a pattern because, I mean, that was basically a month, and we have seen really quite a lot of unstability in Europe in the past month. And I think in all fairness, unexpected moves as well. So I think I've been in this business for 25 years in all fairness. I mean, it has been in the last years and months, a pretty unstable situation and a situation which is very difficult to predict. However, again, as Therese and myself stated, I mean, we had some positive signals in the month of September. And I think the only wish we have is to get back to a certain level of normality moving forward in this region. In terms of... Therese Friberg: And I guess if the question was more the historical pattern. I think what we can say, historically, of course, we had September, October, November are really the high season month in our industry. Then, of course, as you know, the last few years or quite many years now has been very volatile and not really following a normal seasonal pattern. And also, of course, with a very, very subdued kitchen retail channel in Europe, which is usually the boost as well in these 3 months. That's not really what we have been seeing being strong in the market in the last few years. So that's why we have not really had a normal seasonality. So of course, is September strong because we're coming back to that more positive momentum? I guess it's too early to say because it has been going up and down. But historically, of course, September, October, November are the high-season months. Yannick Fierling: In terms of sales. In terms of margin, if I can just take your question on margin here. As I mentioned previously, I mean, we are not targeting entry price points. Our war, our objective is not cost. I mean we want to introduce consumer-relevant innovations here, and we're extremely proud to have a high consumer 3-star rating across the 3 regions here to win awards like 7 Stevie Awards in Germany in laundry, which never anybody has been reaching before. So we're really trying to get and extract margin out of innovation and the quality of the products we do have over there, trying to escape the price pressure and cost pressure you may find in the enterprise point. However, I mean price pressure is big. Price pressure is big in every single quartile here. And certainly, I mean, reducing cost is one of our strategic pillar, and it is of prime importance to be cost conscious in every single line of our P&L, and that's what we are driving with a lot of intensity. Ann-Sofi Jönsson: Okay. Great. We will take one question from the webinar, which is from Swedbank from Timothy Becker. And that is if we can elaborate on the goal of maintaining a solid investment rating, and if we are okay with the rating or how -- if we have a goal to improve that, and if you could elaborate on that. Therese Friberg: Yes. Of course, I mean, as we stated in the call, our aim is really to maintain a solid investment-grade rating quarter-over-quarter. I mean compared to last year, we are improving on our net debt to EBITDA ratio. And quarter-over-quarter compared to the second quarter, we are stable. And of course, we're doing everything we can to remain a solid investment-grade rated. Yannick Fierling: Our focus remains delivering the year-end results on the profit side of the equation. Ann-Sofi Jönsson: Great. We have one more question on the call that I think we will try to take after we -- or before we close off. Operator: Final question is from John Kim from Deutsche Bank. John-B Kim: Follow up. I'm just wondering if you could comment a bit on wage inflation, sort of percentages are you experiencing? What's the cadence to it? Are there large upcoming negotiations with any unionized union organizations? Therese Friberg: No, I would say nothing extraordinary that we can mention. John-B Kim: Okay. And while I have the floor, is there anything you'd call out in the August developments around U.S. tariffs that are particularly, we should be mindful of, whether it's the metal content or the reciprocal? Yannick Fierling: You want to answer this one? Do you want me to take it? Nothing special on the -- of course, I mean, as I mentioned previously, John, I mean, tariff -- the latest tariff structure is certainly -- should certainly be benefiting the local producers here. The full tariff structure is implemented, I mean, starting beginning of October. And again, all what we're hoping as a North American producer is to see a rational price increase from -- for imported goods starting as soon as possible. That's what I would say. Ann-Sofi Jönsson: Thank you, John. And thank you, everyone, who has listened. With that, we will end this call. And I would like to remind you that we will have a capital market update on the 4th of December that will also be live webcasted. So thank you for viewing and listening in today. Yannick Fierling: Thank you very much.
Operator: Good afternoon. Thank you for attending the Guardant Health Q3 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] And I would now like to pass the conference over to your host, Zarak Khurshid with Guardant Health. You may proceed. Zarak Khurshid: Thank you. Earlier today, Guardant Health released financial results for the quarter ended September 30, 2025. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items, additional information regarding material risks and uncertainties as well as the non-GAAP financial reconciliation to most directly comparable GAAP financial measures are available in the press release Guardant issued today as well as in our 10-K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmy. Helmy Eltoukhy: Thanks Zarak. Good afternoon and thank you for joining our third quarter 2025 earnings call. Starting on Slide 3. Q3 was an exceptional quarter for Guardant with broad-based growth across our business. Oncology volumes grew 40% as year-over-year volume growth continued to accelerate driven by Guardant360 Liquid, Guardant360 Tissue, and Reveal. Our biopharma business grew nicely year over year with positive CDx momentum and screening volume accelerated with a sequential increase of 8,000 Shield tests. Importantly, screening has started to generate meaningful revenue tracking at an annual run rate of approximately $100 million roughly one year into the commercial launch of the FDA-approved product. Overall, we are very pleased with our performance this quarter delivering 39% year-over-year revenue growth and crossing over $1 billion in annualized revenue for the first time. Excluding screening, we reached a major milestone with the rest of the business becoming cash flow positive one quarter earlier than expected. Indeed, this quarter sets us up very well to deliver on the long-term plan that we laid out at our Investor Day last month. Lastly, we recently surpassed 1 million cumulative clinical patients tested by Guardant and as such we want to highlight one of these patients with a story that captures the profound impact our tests are having in everyday clinical practice. A 67-year-old man had gone unscreened for colorectal cancer for several years despite his physician offering colonoscopy or stool-based tests annually beginning in 2021. Each time the patient declined to be screened. In December 2024, the physician ordered a Shield blood test, and the patient agreed to complete the blood draw during the same visit. The result came back positive. When his physician explained that a positive Shield result required a follow-up colonoscopy, the patient agreed to have the procedure despite previously resisting. The colonoscopy was performed in January 2025 revealing colorectal cancer. The patient quickly began treatment, and at his most recent follow-up, he had successfully completed therapy and was doing well. This is a powerful example of how the Shield blood test can remove barriers to screening, provide a more pleasant and convenient option for patients, and ultimately improve outcomes. Now turning to top-line performance on Slide 4. Q3 revenue grew 39% year over year to $265 million with strong performance again across our oncology screening and biopharma and data businesses. Taking a closer look at our oncology business on Slide 5. Oncology revenue increased 31% to $184 million and oncology volumes increased 40% year over year to approximately 74,000 tests in the third quarter. Turning to Slide 6. We have seen a clear acceleration in volume since July of last year, following the introduction of Guardant360 Liquid on our Smart platform. Since then, we have launched 2 additional waves of applications, driving 5 consecutive quarters of accelerating volume growth and we look forward to future waves of Smart app introductions developed through the power of Infinity AI to help fuel future growth. In addition to Guardant360 Liquid, Guardant360 Tissue and Reveal volumes also experienced strong year-over-year growth. Moving on to Slide 7. As a reminder, our Infinity AI learning engine applies AI across our data treasury of over 1 million patient samples, including more than 350,000 epigenetic profiles across more than 100 tumor types to bring powerful insights and new products to market faster than ever. Infinity AI enables higher resolution mapping of tumor biology giving rise to not only entirely new products in the clinical business, but novel signatures for faster drug discovery relevant to our biopharma business and new commercial insights and decision support tools. Turning to Slide 8. To date, we’ve launched 15 groundbreaking Smart apps on Guardant360 Liquid with dozens more in development that we’ll roll out across Guardant360 Liquid, Tissue, and Reveal. Each new application builds towards what we see as a GPS for cancer care, guiding physicians with the right insights at every step of the patient journey. We believe these applications not only significantly expand the clinical utility of Guardant360 Liquid but further extend our technical leadership in the liquid CGP market. Looking more closely at some of the recent highlights within our oncology business on Slide 9. Guardant360 volume grew exceptionally with more than 30% year-over-year growth. Guardant360 Tissue also had a great quarter showing strong year-over-year acceleration following the major product upgrades released in the second quarter. Once again, Reveal contributed very nicely and continues to be our fastest-growing oncology product. In addition to the strong performance, we recently reached a major milestone with submission of our PMA application to the FDA for Guardant360 Liquid. This submission has the potential to streamline Guardant360 Liquid with a single flagship FDA-approved liquid biopsy for therapy selection, simplifying our portfolio, accelerating adoption, and further strengthening our leadership in this space. In addition, FDA approval would lay the foundation for ADLP designation which is an important mechanism for capturing the appropriate value for our expanded test offering in the future. We had a strong presence at ESMO 2025, with 15 abstracts spanning the cancer care continuum, from MRD detection and recurrence monitoring with studies such as PEGASUS to advanced stage tumor profiling and therapy response assessment. For Reveal, we’re making great progress with data generation and publications. We recently submitted our immuno-oncology therapy monitoring data package to MolDx to support Medicare reimbursement and submitted data from our chemotherapy monitoring study for publication. Turning to Slide 10 to take a closer look at our Reveal data pipeline. Over the last few months, we’ve made significant progress in MRD, generating and publishing compelling data across multiple cancer types. Earlier this year, we achieved Medicare coverage for CRC surveillance and have since submitted dossiers for breast surveillance as I just mentioned for immuno-oncology therapy monitoring. We plan to submit packages for chemotherapy and CDK4/6 inhibitor monitoring following those publications. Looking ahead, we have ongoing studies across more than 5 additional tumor types in both the adjuvant and surveillance settings. Together, this growing body of evidence will continue to strengthen the clinical utility and analytical validity of Reveal, supporting broader adoption in MRD. Turning now to Slide 11. I am proud of the progress we have made over the last few years in both driving demand and revenue growth across our portfolio. Looking ahead, we see multiple drivers across our oncology business that position us well for durable long-term growth. We will continue investing in commercial initiatives that make it easier for physicians to access our tests through portal enhancements, EMR integrations, and enhanced workflows. In our therapy selection business, transitioning to the Smart platform unlocks wave after wave of novel applications, many unique to Guardant that will help us differentiate and continue gaining market share. And in MRD, a redoubled commercial focus on Reveal supported by significantly lower COGS and Medicare coverage for CRC surveillance positions us for strong growth ahead. We’re also excited to introduce an Ultra-sensitive tissue-informed MRD assay that will complement our best-in-class tissue-free Reveal test. Looking more closely at some of the recent highlights within our biopharma and data business in Slide 12. We delivered another strong quarter with third-quarter revenue growing 18% year over year. We continue to deepen our relationships with large pharma and had 2 additional companion diagnostic approvals in Q3. In late September, Guardant360 CDx received FDA approval as a companion diagnostic to Inluriyo for the treatment of ESR1 mutated advanced breast cancer. This marks the second FDA-approved indication in breast cancer and the sixth overall CDx claim approved by the FDA for Guardant360 CDx. We also received regulatory approval in Japan for Guardant360 CDx as a companion diagnostic to Enhertu for non-small cell lung cancer patients with HER2 mutations. We now have 23 total CDx approvals across biomarker and tumor types. Our robust and growing pipeline of partnerships ensures that near-term revenue visibility remains high. With that, I will now turn the call over to AmirAli for an update on screening. AmirAli Talasaz: Thanks, Helmy. Moving on to Slide 13. We delivered $24 million of Shield testing revenue in Q3, driven by approximately 24,000 tests. It's been incredibly rewarding to see Shield volume take off and hear story after story of patients positively impacted by this pioneering test, such as the story Helmy highlighted at the beginning of our call. Now turning to Slide 14 to take a closer look at screening highlights for the third quarter of 2025. Starting with CRC screening, given the strong performance and growing demand, we have accelerated the building out of our commercial infrastructure beyond our original plan. In addition, the breakthrough nature of the Shield brand has provided us with strategic partnership opportunities, including our recently announced collaborations with Quest Diagnostics and PathGroup. Shield continues to generate strong demand from both patients and physicians with high adherence rates. As exemplified by the patient story we shared earlier, we are seeing Shield tests get completed with blood samples received for more than 90% of ordered cases. This demonstrate the simplicity of Shield as a routine blood test for CRC screening that can be implemented into routine PCP practice. We are encouraged by the performance of our Shield CRC V2, which demonstrated solid clinical performance with improved sensitivity for stage I colorectal cancer. Turning to our multi-cancer initiatives. We are very excited to announce that Shield Multi-Cancer is now available nationwide through our clinical data collection initiative. At our Investor Day last month, we shared strong real-world performance data for Shield MCD from a study of 9,251 individuals. Specificity was 99%, consistent with earlier NCI findings and positive predictive value was 41%, meaning that when Shield MCD is positive, there was a 41% likelihood of cancer being present. Lastly, we are proud to partner with the American Cancer Society and look forward to ensuring that everyone has access to convenient and timely cancer screening so we can detect cancer earlier and provide opportunities for better outcomes. Taking a closer look at our recent strategic partnerships to scale our commercial infrastructure on Slide 15. First, we were very excited to announce a strategic collaboration with Quest to expand and accelerate Shield access more broadly in the U.S. Quest's provider clients will be able to order Shield tests and receive the results directly through the Quest connectivity system. We believe this strategic collaboration is valuable in two ways. First, it enables a better ordering experience and brings forward our nationwide EMR strategy by several years. This will gives us immediate connectivity to 650,000 clinician and hospital accounts in the Quest system. We believe this accelerated connectivity will drive our scale. We will also have access to deep logistical infrastructure, including 2,000 patient service centers, and 6,000 in-office phlebotomists in the United States. Second, Quest's promotional activities using their nationwide field force in combination with our own multi-hundred person sales force will further strengthen our competitive position in the primary care market. Quest's national commercial sales team will proactively educate primary care physicians and OB-GYNs about the Shield test, accelerating awareness and adoption among their ordering providers. We expect Shield to be available for physician order through Quest in the first quarter of 2026. We will continue to process all Shield test and control client services and billing and reimbursement operations. In addition, we recently announced our partnership with PathGroup, which expands Shield's reach to more than 250 health system across 25 states representing another exciting accelerator for physician and patient access. We are looking forward to seeing the positive impact of our growing commercial infrastructure in 2026 and years to come. We also remain confident in the potential inclusion of Shield in the American Cancer Society guidelines in near future which should be a catalyst for broader patient access. Moving on to Slide 16. Our goal has always been to detect many cancer types early when they are most treatable. With that in mind, we developed Shield as a multi-cancer detection platform. Turning to Slide 17. And as I mentioned earlier, we have now broadened access to Shield multi-cancer detection. In order for a patient to access this result report, their physician will need to opt in to receive the multi-cancer report and the patient will need to authorize the release of medical records to Guardant Health. We successfully piloted this workflow in several accounts and following overwhelming positive feedback from physicians and strong participation by patients, we expanded this offering nationwide. Moving on to Slide 18. The launch of this initiative establishes a scalable platform for clinical data generation, enables assessment of the utilization of MCD results in patient care and provides a new avenue to expand patient access to multi-cancer detection, bringing this important innovation to a broader population. This nationwide initiative is expected to reach hundreds of thousands of participants, making it one of the largest prospective evidence generation initiatives for early cancer detection. Turning now to Slide 19. With the expansion of Shield to include MCD results together with patient authorization to release medical data, we are now well positioned to further strengthen our data moat. This high-quality data serves as a regulatory grade source of truth, providing details on each patient's cancer journey that were previously not accessible. We will generate large-scale prospective evidence about the performance, clinical value and safety profile. We believe this high-resolution data will power continuous improvement of Shield MCD and also lay the foundation to potentially expand into multi-disease detection. With that, I will now turn the call over to Mike for more detail on our financials. Michael Bell: Thanks, AmirAli. Turning to Slide 20. I will now review select financial highlights for the quarter ended September 30, 2025. Unless otherwise noted, all growth rates are year-over-year. Total revenue for the third quarter grew 39% to $265.2 million driven by strong performance across all 3 major revenue lines: oncology, biopharma and data, and screening. Oncology revenue increased 31% to $184.4 million primarily driven by another quarter of accelerated test volume growth. We reported approximately 74,000 oncology tests in the third quarter, representing 40% growth reflecting continued positive momentum across the portfolio. Guardant360 Liquid delivered its fifth consecutive quarter of accelerating growth, with volumes up more than 30%, supported by the expanding clinical utility enabled by Smart apps launched over the past year. Guardant360 Tissue also had an exceptional quarter, showing strong year-over-year acceleration following the major product upgrade released in the second quarter. Reveal remains our fastest-growing oncology product, benefiting from CRC surveillance reimbursement achieved earlier this year and continued strength across both breast and lung cancer indications. As a reminder, we do not include Guardant Hereditary Cancer testing or IHC volumes in our reported totals. We continue to expect minimal revenue contribution from these new offerings through 2025. Average selling prices remained stable compared to the prior quarter. Guardant360 Liquid was in the range of $3,000 to $3,100, Guardant360 Tissue was approximately $2,000, and Reveal was in the range of $600 to $700. We also recognized approximately $5 million of out-of-period oncology revenue in the third quarter compared to $12 million in the prior year period. Our biopharma and data business continued to perform well, with revenue increasing 18% to $54.7 million, which includes milestone revenue from 2 companion diagnostic approvals achieved during the quarter. The biopharma pipeline remains solid, providing confidence in both the near-term and long-term growth prospects. Screening revenue from Shield totaled $24.1 million generated from 24,000 tests reported during the quarter. Shield ASP was approximately $880 above expectations, reflecting our continued focus on Medicare-covered patients. We also recognized approximately $3 million of out-of-period screening revenue, driven by better-than-expected reimbursement from Medicare Advantage payers for tests performed in the first half of 2025. This positive trend reinforces our confidence in both near-term and long-term expectations for Medicare Advantage reimbursement rates and overall Shield ASP targets. Turning to Slide 21. We’re very pleased with the year-over-year improvement in non-GAAP gross margin, which increased to 66% in Q3 2025 compared to 63% in the prior year period. This improvement was primarily driven by a significant reduction in Reveal COGS, which have declined from over $1,000 per test in Q3 2024 to less than $500 per test, as well as strong progress in Shield gross margin. Shield's non-GAAP gross margin improved from negative levels at the launch just over a year ago to 55% in the third quarter of 2025. This improvement reflects strong ASPs under the Medicare ADLT rate of $1,495, disciplined focus on reimbursable tests, and continued COGS reduction. Shield's non-GAAP cost per test again trended lower sequentially and continues to be below $500 per test, consistent with our operational plan. These gains reflect the ongoing benefits of increased Shield volume and disciplined cost management. Turning to Slide 22. Non-GAAP operating expenses were $228.8 million in the third quarter, an increase of 22% in line with expectations. The increase was primarily driven by continued investments to expand our screening commercial infrastructure and scale sales and marketing for Shield. As we conclude 2025 and enter 2026, we will maintain focus on these investments to maximize our first-mover advantage in blood-based colorectal cancer screening. Adjusted EBITDA loss was $45.5 million, an improvement of $10.7 million compared to a loss of $56.2 million in the third quarter of 2024. We remain disciplined in our approach to cash management. Free cash flow burn was $45.8 million, improving by $9.5 million compared to the prior year period. Importantly, excluding the screening business, Guardant generated positive free cash flow during the quarter, a significant milestone achieved one quarter ahead of our stated target. We expect the core business to remain free cash flow positive in the fourth quarter as well as for the full year 2026 and beyond. We ended the quarter with approximately $690 million in cash, cash equivalents, and restricted cash. Turning to the full-year 2025 outlook on Slide 23. Based on our strong year-to-date performance, we are raising full-year 2025 revenue guidance for the third time this year to a range of $965 million to $970 million, representing approximately 31% growth compared to 2024. At the midpoint, this represents an increase of $47.5 million versus our prior range. We now expect oncology revenue to grow approximately 25% year over year, up from prior guidance of 20%, driven by stronger-than-expected oncology volumes in the third quarter and higher expected volumes for the remainder of the year. We now forecast total oncology test volume to grow more than 30% compared to our previous expectation of greater than 27%. Our biopharma and data business remains on track to deliver mid-teens growth for the full year. We’re also increasing our Shield revenue guidance to $71 million to $73 million, up from $55 million to $60 million, reflecting higher expected volume of 80,000 to 82,000 tests compared to prior guidance of 68,000 to 73,000 tests. With continued improvement in gross margins, we’re raising our full-year non-GAAP gross margin guidance to 64% to 65%, up from 63% to 64%. As previously outlined, we plan to reinvest incremental screening gross profit to accelerate commercial expansion. Accordingly, we now expect 2025 non-GAAP operating expenses to be in the range of $865 million to $875 million, representing a 14% to 16% increase compared to 2024. Finally, consistent with our long-term financial roadmap, we remain committed to reducing cash burn each year and achieving company-wide cash flow breakeven by the end of 2027. For the full year 2025, we continue to expect free cash flow burn of $225 million to $235 million, an improvement from $275 million in 2024. Turning to Slide 24. We began 2025 with an ambitious set of strategic and operational objectives. Through our strong execution, we’ve delivered on nearly all of them, and we expect continued momentum as we close out the year. Our progress this quarter positions Guardant for sustained success in 2026 with continued oncology volume growth and strong Shield adoption. With that, we will now open the call for questions. Operator: Thank you. [Operator Instructions] The first question comes from the line of Bradley Bowers with Mizuho. Bradley Bowers: A strong performance across the businesses, but I am going to focus on Shield here. I was wondering if you could walk us through the Shield ASP dynamics exiting the year. Continued strong pricing, I don't think it's surprising given the ADLT pricing, but that $900 we’re exiting the year at. It’s supposed to walk down to $700 by 2028. I know there are some mix implications there, but is it a steady degradation? Is there a fallout expected as ADLT pricing rolls off the initial phase at the end of this year? Any color on the phasing of that would be helpful. Thank you. Michael Bell: Yes, Brad. This is Mike. I can take that. Yes, I mean, to break down the -- what's in the Shield ASP, we have the Medicare rates at $1,495 that came into play at the start of the second quarter. We’re also receiving really good payment from Medicare Advantage payers. And so, when they are paying us, they are paying us at this $1,495 rate also. And at the moment, the majority of our volume is skewed towards Medicare and Medicare Advantage. And then we have a tranche of commercial patients, and we’re effectively getting paid more or less 0 for those. And so, as we look at over the next few years, we’re very confident in the $1,495 rate -- ADLT rate going forward. And in fact, we’ve just submitted our package back to Medicare on the date of submission of the pricing over the last six months, and that should help us maintain this $1,495 rate now, at least for the next 2 years. And going forward, also, we expect Medicare Advantage to continue to be strong. In fact, we would hope that it can get stronger than where it’s today. The fluctuation over the next couple of years is going to be the percentage of commercial payer patients that we have and how quickly we can ramp up the commercial reimbursement there. And so, we’re assuming in 2028, there’s just a higher proportion of commercial patients in the mix. And it’s going to take us time to establish that reimbursement rate. But overall, we’re really happy with where the ASP is today, and we think it bodes well for as we go into 2026 and beyond. Operator: The next question is from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: So another question on Shield. You mentioned at the Investor Day, and as well as in your prepared remarks that potential ACS guideline inclusion later this year could set the stage for commercial coverage and I think, at least 10 states. And we believe Anthem and other large Blues are watching closely. So to the best of our knowledge, ACS concluded their CRC screening guidelines review earlier this month. With that in mind, is guideline inclusion at this point a real possibility by year-end with ACS? And then once guidelines are in place, how long do you think it’s going to take for that to translate into you actually getting paid? And then the final component of the question is, beyond those initial 10 or so states, there are other states like Florida and Louisiana where mandates have been brought in to include ACS as well as NCCN in addition to USPSTF. So if we think about that broader universe of states, which I think maybe gets you closer to 17, is it likely that reimbursement could occur not just in the initial 10%, but closer to 20% over the next year or so? AmirAli Talasaz: Thank you, Doug, for your question. Yes, based on what we know, it appears that ACS research team is almost done with their work. So we remain confident about this potential for Shield to be included in near future. We are monitoring the situation very closely, but we are very optimistic about that. In terms of the guide, like, it’s not part of this year guide. We are not counting on any kind of upside associated with the ACS guideline and, it’s going to take some time. When we go into the guideline, it gives us initially some upper hand, and it should have a strong -- it should have a positive impact on our appeal success rate initially. And then at some point, that would result into product coverage and contracting successes. I am proud of what our team has achieved so far on trying to broaden access to Shield. You noted Florida now through a consortium of supporters of making sure that innovative technology becomes accessible. Now, for instance, Medicaid patient population in Florida have access to tests like Shield, and we are very proud of that. And in general, we are very pleased with some of the positive and regular dialogue that even we have with the administration about their priorities around cancer screening, around prevention, around making America healthy. And I am excited that looks like both the President and Secretary are looking for ways to see how maybe the rate of cancer can get reduced in the country and how could we try to bring innovations to patients in a faster way. But we'll see what happens. But, obviously, we are not counting on any of those successes in our drive at this time. Operator: The next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Really impressive quarter here and really strong guide. If I may, AmirAli, first one on Shield. Just growth is accelerating on volumes, rightfully so, new product and ASP is also up. How should we think about 2026 growth for Shield and any early reception details that you can talk about on the MCD side? What's the early attach rate? And for Helmy, it's been almost a decade since you launched G360 when it appeared on the market for the first time. It' really impressive to see 10 years later, this product is growing 30% plus. Maybe just talk to us about what's behind that and how should we think about the growth going forward here for the Liquid G360, which has been impressive? AmirAli Talasaz: Maybe I will make the Shield part quick so Helmy can talk to you about the oncology side. So as you have seen, we consistently raised our outlook throughout this year. We are very pleased with what we are seeing, the momentum that we are seeing. We want to be thoughtful and not get ahead of our skis. So, I think still it's too early for us to comment about 2026. At the right time, we will talk about it, but we continue to be very confident about the long-term outlooks that we shared in our Investor Day. Helmy Eltoukhy: Yes. No, we're very pleased with the performance. It's actually been 11 years and counting in from when we launched in 360 and so, to see it grow at this rate, I think at this point in the product cycle it's really pleasing, but I think it’s what we expected in the sense that many people think of this as a test and they pattern match it to other tests in the market. But it truly is an application platform. When you think about these Smart apps that we’re introducing and really the multiplication of clinical utility and ability and capabilities of this platform, this is just the beginning in terms of where liquid biopsy can go. I mean, that’s the point of liquid biopsy is you can come in, you can test many more patients, you can increase access. But you can test them longitudinally as well. And we’re still at the very, very early innings in terms of where this can go, where this technology can go just in oncology. So I think you are going to see a lot more, I think, of this trajectory in the coming years as we continue to expand on the capabilities of Guardant360 over the next decade. Operator: The next question comes from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: If you were to put a timeline -- if we were to put a timeline to NCD FDA approval based on Shield trajectory next year, would FDA submission for MCD in late 2027 be a reasonable expectation? AmirAli Talasaz: For MCD, we just actually broadened access, and we just actually started getting access to this clinical data that I talked about during our Investor Day and the prepared remarks. So we need to monitor it and see how quickly we can build that evidence. But we are very optimistic that potentially through the way that we are doing, we can get access to hundreds of thousands of patient data and monitor actually the impact of MCD testing in the clinical value, performance, safety. It’s still too early for us to specifically put a timeline for FDA approval. But we would monitor the situation closely and as we get more confidence, maybe we can talk about it at the right time. Operator: The next question comes from the line of Patrick Donnelly with Citi. Patrick Donnelly: Helmy, maybe one for you on Reveal. I know in the past, you've talked about driving the test per patient higher. Can you just talk about the traction there given the bigger push internally? What kind of progress you're seeing? Where can that go over the relative near term? And I know during the prepared remarks you talked about obviously the ongoing studies, the additional tumor types. Can you just talk about what we should be looking for and the key catalysts on the Reveal side here over the next couple of quarters to keep an eye on? Helmy Eltoukhy: Yes. Great question. I think we said at the beginning of the year, as we got the surveillance indication from a reimbursement point of view for Reveal that would be turning on a lot of the capabilities to be able to pull in subsequent test orders and so on. And I am pleased to report that, we’ve put a lot of those in place, and we’re seeing some of the benefits of that and the return on investment there. So we know we can pull in subsequent orders now in a very straightforward way and so that’s going to pay dividends across our blood-based portfolio as we think about the emergence and really, the place where longitudinal testing will sit in terms of management of patients in oncology with things like SERENA-6 in terms of ESR1 with the upcoming launch of our therapy monitoring based on Reveal. And then, obviously, with Reveal itself in the MRD setting, recurrence monitoring setting. So yes, really great progress. The number of tests per patient has gone up pretty nicely, and we’re still, I would say, very much in the early cycles of really capitalizing on that investment. Operator: The next question comes from the line of Tycho Peterson with Jefferies. Tycho Peterson: I would love to hear your views on the PEGASUS data and just how you think about that having any impact on just MRD-driven therapy management? And then how are you thinking about clinical utility evidence in general and NCCN guidelines? Helmy Eltoukhy: Yes, PEGASUS was a really interesting study. It was a Phase II signal finding study, and I think there are a few things that showed that I think were exciting to me, which is the fact that you could spare something like 75% of patients from chemotherapy, which meant, huge, huge reduction in terms of neurotoxicity and other toxicities related to such really harsh chemotherapy. And so I think PEGASUS was based on our previous version of Reveal. And so I think we’re really looking forward to TRACC, which is based on a newer version. And really, the field, having larger datasets to really understand exactly where the threshold should be in terms of escalation and de-escalation in terms of patients. But I think it’s clear that I think there can be a lot of benefit by using this additional data in terms of ctDNA in the adjuvant and surveillance settings. But I think this is a good foundation and one that we can build on as we continue investing in both clinical validity and clinical utility studies around our Reveal platform. Operator: The next question comes from the line of Bill Bonello with Craig Hallum. William Bonello: I just want to push a little deeper on [Suneet's] third question about the growth in Guardant360. Could you just give us some sense today? I mean, if we think about what’s out there that’s driving, there’s the underlying growth, there’s the fact that you are probably taking share. But I am also curious about where we stand today in terms of a paradigm shift to liquid first or perhaps to combination testing with liquid and solid tumor. And then to what extent were – we are seeing some of the repeat testing that you are talking about or the use of 360 for monitoring? Just trying to get a sense of what inning we’re at in terms of some of these new growth drivers and how much of that is still in front of us? Helmy Eltoukhy: Yes. Great, great question. So we’re still very early even in the penetration of liquid biopsy in terms of one test per lifetime. And so given, the capabilities of 360 right now, they are just mind-blowing to a lot of physicians just in terms of the depth, the sensitivity, the application space. We see that growth -- in just that initial setting. So that means not only market growth, but we’re seeing from what we can see, significant share gains as well as a result. Then there are other growth drivers we’re seeing. The fact that concurrent testing will likely become the standard of care of both tissue and liquid. And so that is also another growth driver and we're starting to see that really, really take off. And then finally, the test for patients. And so we estimate at maturation that we should be able to go from 1 test per patient per lifetime to something like 4.5 or 4 or 5 tests per patient per year which, obviously means more than, probably doubling of where the market is today – sorry more than a 10x in terms of where the market is today. And so that’s really exciting in terms of where things are going, and this is things like SERENA-6 in terms of ESR1, longitudinal monitoring, therapy monitoring, the data that we have with IO monitoring, with chemo monitoring, and so on. All of that will feed into essentially establishing this new paradigm of essentially monitoring patients with ctDNA. We’re already seeing our biopharma partners use this type of testing to -- in their Phase I, Phase II, Phase III studies using it to decide do they scale Phase I to Phase II, using it for dosing. And so that’s the other piece that I think is not very well appreciated is that a lot of tests you launch them they are used exactly the same way 10 years later or 15 years later and so on. They only have one function. The application space and utility of how you use the -- something like Guardant360 and Guardant Reveal is really multiplying quarter by quarter and year by year. And so, yes, this is a true platform. That word is often overused, but this is a true platform, and you are seeing what that means in terms of our volume growth and the trajectory that we laid out at our Investor Day. Operator: The next question comes from the line of Michael Ryskin with Bank of America. Unknown Analyst: This is Aaron on for Mike. I wanted to dive into Reveal volumes and specifically Reveal versus Ultra and how you guys are thinking about the R&D investment needed in both of those assets? And then the second part of that is MRD is still a fairly open space,10% penetrated, what people are saying. So I guess, how are you guys looking at the market? How are you guys looking at growth? And how should we be expecting both of those assets to grow over the next 3 years? Helmy Eltoukhy: Yes. We’re very excited about our MRD franchise. Reveal is the leading tissue-free MRD test in the market. We know that there will be essentially 2 parts of the market that will be important, the tissue-free side and the tumor-informed side of things. And we're very pleased in terms of where we sit in the tissue-free side. It’s our fastest-growing product in oncology. And the amount of data, the amount of investments, we have a 10x data generation planned as we presented before next year. And so that flywheel is really chugging away. And so we’re excited about that trajectory. And then in terms of the tumor-informed side I think we agree with you, there’s a lot of opportunity there in terms of a test that can really hit the needs of both biopharma and clinicians in terms of sensitivity that is really acquired for that setting. And, yes, we’re just very pleased with the technology that we’ve developed. If you think about it, just everything we’ve built as a company is at a really nice point. The fact that we’ve really chugging away on our tissue volumes and the capabilities we have with using very low amounts of input material, very fast turnaround times. The sensitivity we have on the liquid biopsy side and the capabilities, COGS down and the speed to results, all of that is coming together in Reveal Ultra. And I think it’s going to be a product that will, frankly, blow everyone away once we launch it. Very excited for that and making really good progress. Operator: The next question comes from the line of Daniel Markowitz with Evercore ISI. Daniel, your line may be muted. Our next question comes from the line of Mark Massaro with BTIG. Mark Massaro: The first one is for you, AmirAli. Just looking at the Shield, it’s great to see this trajectory. Is it reasonable to think in the near term that 1,000 sequential increase from the prior quarter is the right way to think about this just looking at the Q4 implied guide at the high end, it’s plus 9%. You just did plus 8% prior quarter plus 7%. Or -- so I guess I am asking if this is a reasonable run rate in the near term? Or do you think there’s obviously upside from partnerships with Quest, PathGroup, certainly guideline inclusion and potential DTC uplift? So that’s my first part. The second part is for Helmy. Helmy, can you just give us a sense for Reveal Ultra? I believe this is the tumor-informed that can go down to 1 part per million. Just give us a sense for -- maybe if you could clarify if that is commercially launched now and how we should think about the timing of CMS reimbursement and additional data readouts? Thanks. AmirAli Talasaz: Thanks, Mark. So in terms of sequential growth, like our guide, what has ended in the midpoint is like another 8,000 Q-over-Q growth in Q4. We are going to monitor the situation closely. And again, we don’t want to get ahead of our skis and see what’s going to happen and for next year, we are going to talk about it at the right time. There are a bunch of catalysts still in front of us. There’s Quest, PathGroup collaboration should be a positive thing. Guideline inclusion is definitely a positive thing. Continuous build-out of our own commercial team as we go into next year would be a positive thing. So -- and we are confident about the target that we put out there for 2028. So -- but we go at it one step at a time, and we are very excited to see what’s going to happen in Q4. Helmy Eltoukhy: Yes. In terms of Reveal Ultra, I think the nice thing is we built such strong capabilities around MRD. When you think about the R&D and all the clinical studies, tens of thousands of samples and many of those we’ve actually retained tissue. So it’s actually, not, very heavy investment for us to essentially leverage that to really come out with the Ultra technology, the tumor-informed technology we have. We’re seeing really good data, really excited in terms of where this can go. In terms of the sensitivity, we think it can bring it down to a much lower level than exists in the field or frankly, exists in the pipeline of companies we’ve seen out there. And I would say that in terms of timing, we’re keeping that close to the chest. So stay tuned, but making good progress and we wouldn’t be talking about it if it wasn’t something that was not in the too distant future. Operator: The next question comes from the line of Casey Woodring with JPMorgan. Casey Woodring: On the Shield performance in the quarter, maybe as a follow-up to Mark's question. Can you provide any KPIs around maybe average testing frequency per physician and whether volumes are coming from new time CRC screeners? And then just my second question here. Mike, if you can provide any color on gross margin for Shield and Reveal embedded in the updated guide of 64% to 65% for this year, that would be helpful? AmirAli Talasaz: Yes. Maybe some KPIs. Actually, it's exciting that the breadth of ordering continues to increase Q-over-Q. The depth of ordering continues to be very strong. So once the accounts actually start using Shield and we go through activation, the depth of ordering is very solid, which is really an endorsement of how deep this market is and mainly how many under screened cancer patients are out there in the accounts that we are going to. So we are seeing their doctors. We are successfully leading them and so forth. So the other KPI to share, which we are very excited about is we continue to see very high adherence rate when the doctors order their stuffs more than [indiscernible] gets converted to a sample received in our lab, which really gives us bunch of efficiencies in our S&M investments. Michael Bell: And Don on the gross margins which yield -- in the prepared remarks we mentioned that the Shield gross margin this quarter, Q3 was 55%. And so, ISPs are close to $900 and our cost per test now is consistently lower than $500. So we made really great progress with Shield’s gross margin. And then on the Reveal side, again we’ve made fantastic progress over the last 9 months or so. And just to bring that out a bit know how ISPs for Reveal continue to be in the $600 to $700 range. And again, since this part of the year Reveal cost per test are consistently below $500. So, we have a nice gross margin on Reveal. It’s a little bit lower than the 55% we’ve got on Shield. But there really what’s helping drive our overall cleanly gross margin and we see in that the positive impact in that we’re going from 63% in Q3 last year to 66%. So I think good progress across the board with gross margin. Operator: The next question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: Congrats on the quarter. On Reveal, is it still possible you get ADLT status and breast Medicare coverage by the end of this year? Is that more likely a '26 milestone? And then secondly, AmirAli, we had a competitor this week announced advanced adenoma sensitivity data for its colon cancer blood tests. The confidence interval lower bound was 15% and the study had a lot of very small lesions. Just curious if you think that a test with AA materially higher than the 13% for Shield would pose a threat and you would like, when they aim to improve upon your AA data still? Helmy Eltoukhy: Yes. I mean ADLT status is still a work in progress, obviously, with the government shutdown paused some of the discussions a little bit. And then we're still working in breast and IO. We've always said probably more likely early next year. And yes, we're still, I think, on track for that. AmirAli Talasaz: Regarding the data disclosures, we -- obviously, we applaud anybody who's trying to contribute in this difficult area. This is a hard science area. And we feel very comfortable with our leadership position. And our technology stack, our data, and what we are doing. We have seen similar results in this field now a few times. Again, this is a hard field. It is a hard science field. And we believe we have the best tech stack, very innovative technology at home brew that gives us confidence. We have a 3 year head start on CRC now. And know, probably even much longer on the multi-cancer side relative to some of these competitions. So we feel very good with our position at this time. And, definitely, there are some fine activities that we are working on. We will see what happens. Operator: The next question is from the line of Luke Sergott with Barclays. Luke Sergott: Just wanted to touch here on the step-up in OpEx that you guys have for the year and implied in 4Q. And really just dig in where that spend -- the incremental spend is going and where you guys think from an S&M perspective? Where you guys want to exit the year as a number of reps as you think about Shield and oncology and Reveal? And how that -- if you're able to pull forward any of those costs given the success you've had in some of these -- some of the other launches? Michael Bell: Yes. I mean for the OpEx step-up, it's pretty much all in the sales and marketing line. I think we've been consistent throughout the year, whereby we said we're going to be reinvesting any incremental gross profit in screening back into the sales and marketing line to really drive that commercial build-out. So -- and we'll continue to do that. I think it's the biggest focus for us as we look to scale. We said on the screening side, we've now got over 250 salespeople out in the field. So that's a significant ramp-up during the year, and we'll continue to look at how we build that out. On the oncology side, it's a little bit larger than that. And we've got a very sort of well-built out commercial infrastructure with oncology. But yes, as we look forward and go into 2026, I think you should expect to see a similar ramp in the sales and marketing line. We're very focused in the R&D line and the G&A line and keeping them relatively flat. And so I think that's the plan for the next 12 months. Operator: The next question comes from the line of Daniel Brennan with TD Cowen. Daniel Brennan: Congrats on the quarter. Maybe just on G360, just a couple. Maybe one for Mike and then one for Helmy. Just on the guide, I know that clinical oncology volume guide is now greater than 30. Does that contemplate like a big step down from the G360 line, which is accelerated tremendously year to date, obviously from the Q3 30%? And then B, more so for Helmy. I know you have given a lot of color on the excitement over the outlook for G360. But could you give a little more color on the acceleration you have seen year to date? Is it more share gains which you talked about? Like are you seeing like hospitals consolidate? Do you think it is more just penetration of CGP? Or do you think it is more like this test per patient pickup? Any way you can kind of dissect a little bit of this really strong acceleration? Michael Bell: Yes. Maybe I will just start on Q4 guide. So, we had a great Q3. I think our guide for Guardant360 volume and for overall oncology volume, it implies sequential growth in Q4. It implies a very strong year-over-year growth in volume. So yes, if you back into it, it’s over 30% year-over-year growth in Q4. So I think we have just continued to expect the momentum that we saw in Q3 continue to Q4. So I think for us, things are looking very strong as we get towards the end of the year. Helmy Eltoukhy: Yes. In terms of growth driver, I think what you are seeing really is the fact that it is just a very compelling test from a value proposition. So I think a lot of what you are seeing is some of the share gains from the other tests in the market from other hospitals and so on. So that’s been exciting. We are seeing a little bit of the increase in testing in terms of longitudinally, but I would say that’s a very minor part. I think that’s still a lot of -- that’s still another major growth catalyst for us in the future that we have not really tapped into. And then the third piece is this test has so many capabilities. Things like being able to determine the type of cancer, what someone who has a cancer of unknown primary, subtyping. So if you think about the long tail of cancers where liquid biopsies and even tissue -- tumor biopsies aren’t really utilized, the fact that we have this smart platform with epigenetics and so on that can give so much more insight into tumor biology. I think you are seeing penetration into some of these longer tail of cancers as well. Operator: Our last question comes from the line of Dan Arias with Stifel. Daniel Arias: Helmy, I just wanted to go back to Reveal. Can you maybe talk about where things are on the commercial side when it comes to reimbursement in colorectal? What’s a good ballpark number at this point for just the percentage of tests that are getting paid for, I guess, Stage II and Stage III patients would be the right subpopulation to ask about there? But really just trying to understand [indiscernible] side of CMS in your key indication there? Michael Bell: Yes Dan, it’s Mike here. It cut out a bit towards the end, but I think you're asking about Reveal reimbursements with CRC. CRC now is -- it's roughly 50% of our volume. It continues to be at that sort of level and the rest being made up at the moment from breast and lung and where we are getting reimbursed is for all of the -- now whenever we run a CRC test, we're getting reimbursed for all of these tests that we do for Medicare, and that's at the $1,640 rate. And we're getting good pull-through with Medicare Advantage. We're starting to see traction with commercial payers. That's improving all of the time. And so I think we're feeling good at where the reimbursement level is. And then as we look forward, we think there's continuous runway with Reveal. Again, more and more Medicare Advantage and commercial payments on the CRC side. But as we just mentioned, we are anticipating Reveal breast reimbursement. We've submitted the data package to MolDX for Reveal IO. And so hopefully, going forward, we're getting incremental Medicare reimbursement and incremental reimbursement from all of the payers as we move into '26. Operator: That was our last question. That concludes today's call. Thank you for your participation and enjoy the rest of your day.
Operator: Good morning, everyone. If you'd like to listen to this session in English, please click the interpretation icon at the bottom of screen and select English channel. Thank you very much for taking your precious time to attend Renesas Electronics 2025 Third Quarter Earnings Call. We thank you very much, indeed, for your attendance. Today, simultaneous translation is made available. Please click the translation button at the bottom of the screen and select the language of your preference. Now speakers, you are requested to turn on your video. For today's presentation, we have the attendance of President and CEO, Hidetoshi Shibata; as well as Senior Vice President and CFO, Shuhei Shinkai, as well as some other staff members. After this, we will hear some greetings from Mr. Shibata, and then Mr. Shinkai will follow with the explanation on the third quarter results, which will be followed by the Q&A session. We intend to finish the entire session in about 60 minutes. The materials to be used for today's presentation is already posted on the IR site of our home page. Mr. Shibata, please turn your microphone and begin your statement. Hidetoshi Shibata: Good morning, everyone. This is Shibata here. Today, I caught a cold. So maybe it might be difficult for you to hear my voice, but please excuse me. The temperature has come down quite suddenly, and school events, there are so many -- so much events. So there are many people around me catching cold, so please be careful yourself as well. Now the third quarter, maybe have already seen. In a sense, I think I would say the results have landed in line with the expectations. As you may recall, there might have been some upside, but we have declared to operate the business in a very diligent manner, and the numbers came in as anticipated. So the revenue came in as planned. The revenue from the channel, there were some upside. So the channel inventory is now becoming smaller. And that is the -- by and large, the highlights of the results of the third quarter. And so if things stay as is, we are not really assured. So towards that fourth quarter, we hope to further reinforce the channel inventory in the fourth quarter. So that's how we plan to manage the business. Overall, I would say, from the sell-through at the end demand. If I talk about the end demand, the sell-through, by and large, I think the performance has been flattish. There were some ups and downs depending on the elements, but by and large, it was flattish. Automotive, for some certain customers, the production and also inventory adjustment has been done. So there might be some decline on the -- there was some decline on automotive, but 28-micron and Gen 4 SoC, they are taking off steadily as planned, but the scale is still limited. And of course, the 28-nanomicron MCU, especially due to the China-specific element, we are going through some phase of adjustment. So it's not at a phase of achieving a significant growth, but we are enjoying steadfast increase. On the other hand, for nonautomotive, towards the fourth quarter, how should I put it? The outlook compared to the last time, I think, is more favorable, I would say. So -- I'm sorry for the ambiguous expression of favorable, but I think things are turning to the better. As for the industry overall, there are, of course, some ups and downs depending on each element. But overall, we are seeing a robust growth. At the third quarter, continuous after the third quarter in the fourth quarter as well, the AI infrastructure, there has been a very strong demand, and that has been continuing to be the case. And the production side, we are now making efforts on the production side rather, so that we can make sure to supply the needed demand, so we will produce and sell and produce and sell. So those are the areas that we are going to attach focus on in the fourth quarter. And consumer, consumer mobile and IoT, this segment, nothing strange. But third quarter, we have seen a significant increase. And the decrease in the fourth core, that kind of seasonality is already factored in. But there has been a share gain in this segment. So overall, we are seeing a general uptrend here. So IIoT overall, as a general trend, I think we are seeing a favorable trend. Automotive, next period, and there are some uncertainties there. But as always, we'll keep the same attitude of having a deliberate management, and we'll keep a close eye on the management, the inventory level and be cautious in our management. Especially when it comes to channel inventory management, this is some time ago already, but about 5 years ago, we have experienced a very bad situation. So learning from that lesson, we will continue to be cautious. So I would like you to keep an eye on our performance and evaluate as adequate. Then up until the last earnings call, because it's been than 1 year since we acquired Altium, so we have been listening -- we have been hearing some questions from the investors regarding Altium. So just today, I would like to give you a little bit of update on Altium. In a phased manner, we'll try to enrich our disclosure regarding the Altium. So I will just give some overview today. Just a little overview. So if you can put up the screen, please. Yes, this is Altium stand-alone. So far, as planned, cost synergy and organic growth, they are performing in line with our expectations, so steadfast progress has been achieved. So those are the 2 elements that you see on this slide here. The sales synergy takes longer time, definitely. And the so-called enterprise or the large accounts that's leading the world. The sales expansion to those clients have just started on a gradual basis. So that's what is meant by the box on the far left. Right now, we are making a focused effort to the middle section here, i.e., after the acquisition of Altium from a stand-alone basis, we are now -- that will not make sense if it's standalone. So we are now going through a major transformation. One thing, as it was already announced by Altium. And if you can look at the website, I think you'll be able to have a better understanding. So far, the PCB designer software and Octopart, those different products had been provided by Altium. But right now, we are making a transition to become a platform company. So we are in the middle of this effort. And in parallel to that, the user base is planned to be expanded. So we are now expanding our efforts to expand the user base as we had declared from before. So those efforts are now being propelled. And why Renesas? One of the pillars why Renesas is this Renesas 365. This is our own platform. And we -- the development is currently underway. And in the first half of this year, Embedded World, at that trade show, we demonstrated a demo. So by the end of the year, we plan to launch this and the progress -- the preparation is currently underway. As for the future, as you can see on the right-hand side of the slide, Renesas 365 is planned for launch within this year. At the point of launch, at that time, it's not going to be something splendid that will surprise you naturally. So in the past, Windows made a very silent debut, but then with Windows 95 made a huge takeoff with Windows 95. So that is the kind of avenue that we would like to follow with. So please expect for this Renesas 365, but not with a huge anticipation. The overall progress, as I mentioned, because we are in the middle of this major transformation, we don't want to set the KPIs everything from the beginning. So -- and because we don't want to change them later. So we are very cautious in setting the KPIs. So if things go as planned, I think we will be able to disclose what kind of KPIs will be set for this business during the next earnings call. And the progress will be reported at the Capital Markets Day next year with a more bird's eye view with more enriched data. So we would like to give you an update on the progress on that occasion. So from here, I would like to -- starting off with the Altium business and also the details of the earnings call will be handed over -- will hand over the microphone to Shinkai-san so that he can give some updates on those things that I just mentioned. Shuhei Shinkai: This is Shinkai, CFO. On the left-hand side of the previous slide, we have -- there was progress. I would like to give some more details regarding the progress so far. It's been 1 year since the acquisition. So I would like to talk about the progress thereafter. If you can look at the right-hand side, cost synergy. Cost synergy. There was the initial cost reduction immediately after the closing and also the cost suppression after that, absorbing the cost increases using Renesas resources. So we had been contemplating this 2-tiered approach. The first phase will be -- was completed by the end of the first quarter of this year. And the organic growth, the second point there. As you can see on the left-hand side, the ARR, annual recurring revenue, annual recurring revenue is the indicator that we have used here. This is based on term-based contract and subscription-based contract revenues. So the annual recurring revenues per 1 year is indicated by this indicator. So compared to third quarter 2024, we have achieved a year-on-year 15% increase in the ARR. This represents the same pace of growth prior to the acquisition. The sales synergy, we have started to see this. We are starting this with the cross sales measures for enterprises and the transformation to the platform business. Renesas Retail Supply development in addition to this line of development, in the finance and account area, as we discussed the other time, the revenue recognition policy was changed as we announced the other time -- the other day in view of this transformation into a platform business. So starting this year, we've changed the revenue recognition policy because of this. That was about the progress relating to Altium. From here, I would like to use your usual slides and explain the results for the third quarter of the year. If you can go to Page 6, please. This is the overview of the financial results. For the third quarter, if you look at the dark blue columns in the middle, revenue, JPY 334.2 billion; gross margin, 57.6%. Operating profit, JPY 103.2 billion. Operating margin, 30.9%. Profit attributable to the owners of parent, JPY 88.2 billion. EBITDA, JPY 122.5 billion, and foreign exchange, JPY 146 to the dollar and JPY 170 to the euro. Compared to the forecast, if you look at the 3 columns to the right, and I would like to explain them in more detail using the subsequent slides. That was the non-GAAP. And for the GAAP performance, I'll come back to you later. On the next page, please. This is the third quarter revenue, gross margin and operating margin and also the segment results. For the company total, first, compared to the forecast, operating revenue was 1.3% higher, 2/3 of this increase was the result of foreign exchange, a weaker yen and the remaining 1/3 is from other factors. Automotive was in line with the expectations, and the sell-through upside, we had planned for this shipment that can cater to sell-through. And sell-through was okay and shipment was almost in line with the expectation. And the IIoT compared to the forecast, we have achieved upside, AI server and PC and also memory interface, those were the major drivers behind this incremental performance. Now regarding gross margin, gross margin compared to the forecast came in 1.1% higher. The details of that. There are mix improvement and also utilization improvement. And mix improvement was due -- as I mentioned with the revenue increase, this was due to the memory interface, because they are higher in gross margin, they sold well, and that drove the growth and also utilization increase. I'll come back to this topic later, but input utilization came in higher than expected. We review the schedule and the input was increased in the -- towards the third quarter compared to the fourth quarter. OP margin, this increased by 3.9 percentage points. So the significant improvement compared to the forecast. As I mentioned earlier, because the revenue also increased and also in addition to the gross margin improvement, operating expenses also accounted for a major bulk of this improvement of operating profit. In actual numbers, operating expenses, OpEx ratio and also plus R&D, there was a reduction of JPY 6.3 billion. So almost half of this improvement was due to the timing difference of R&D projects and the remaining half has come from the net cost reduction, so the net reduction in costs. So those had a stronger impact than expected. And therefore, the timing difference of R&D because this is now postponed from the third quarter to the fourth quarter. So that has accounted for a major impact of the profit improvement. And I'll come back to this topic later. But in the second half, if you average out for the second half, I think the OP margin will reflect a more realistic number. Now on a Q-on-Q basis, if you look at the bottom box on the right-hand side, revenue came in 2.9% higher and automotive Q-on-Q decline and IoT Q-on-Q increase. Operating gross margin improved by 0.8 percentage points, on a Q-on-Q basis and mix improvement, utilization increase and cost reduction, those were the drivers behind this. OP came in 2.6% higher. OP margin came in 2.6% higher due mainly to the expense reduction and revenue growth, as I mentioned earlier. And also, I have one more thing regarding here. Regarding the segment, the -- as far as automotive is concerned, if you look at the very bottom, if you look at the OP margin there, OP margin Q-on-Q achieved a significant improvement because this -- in the second quarter, there was a one-off factor or one-off losses regarding litigation expenses. In reaction to that, there has been an increase. So on a Q-on-Q basis, it seems larger as an improvement. But the actual -- if you ask me if this is recurring, then if you even out the 3 quarters overall, then in the 9 months up to the third quarter, the automotive OP was 29.5% OP margin. So that I think, reflects the reality, I believe. As far as IIoT is consumed, nothing in particular that I have to note. So I can move on to the next page. So next is about the revenue. As a whole, year-on-year, 3.2% decrease Q-on-Q, 2.9% increase. As for by segment, this is as shown here. Next page, please. Now different trends of the different numbers. Nothing to be -- nothing remarkable. So moving on. About the inventories. Q-on-Q up and down and also the forecast are summarized here. First of all, in-house inventory. In Q3, Q-on-Q, the inventory and DOI, both of them increased as expected. In Q3, DOI was 111. Q4, Q-on-Q increase is expected. As for the work in progress, the internal production, mainly the die bank will be expanded or increased. At the same time, the strong demand for AI and data centers, we want to increase the die bank, but we are unable to do so, so far. As for the finished products at the beginning of the year, in order to prepare for the shipment at the beginning of the year, we will be increasing slightly for that. Next is the channel inventory. Q3, WOI and inventories decreased in real terms. And it was 8.9 weeks and then down to 8.1 weeks. So this is due to the higher sell-through and the channel inventory came down. Q4, overall, the slightly decrease is expected. For automotive, it will be aligned with the sell-through inventory will be flat. As for the IIoT, we will try to align with the sell-through. But for the AI data center, the sell-through will be brisk. And as a result, the channel inventory will decline. That is what we expect. Earlier, Shibata-san mentioned that we are trying to expand the channel inventory. But Q-o-Q from Q3 to Q4, sell-through is almost flat and sell-in is likely to increase. So in that sense, the channel inventory decline or decrease will be smaller. Next page is the front-end utilization. Q3, as I mentioned slightly, the expectation of 50% -- less than 50% and the actual was 50%. So slight increase of the utilization based on the input. This is not due to the fundamental, but we revisited the schedule for the holiday season and bringing the schedule from -- input schedule from Q4 to Q3. So because of that change, we expect a slight decrease in Q4. And we do not have any particular things about the CapEx. As for Q4 forecast, in the middle of the table, please refer to the dark blue. The gross margin median is JPY 340 billion -- sorry, the revenue median JPY 340 billion; and the gross margin, 57%; and operating margin, 27.5%. The ForEx expectations, dollar is JPY 150 to the dollar. JPY 175 to the euro. So this is a 3-year Q-on-Q, weaker yen for dollar and JPY 5 weaker in euro. So as for the revenue, median is JPY 340 billion. So this is the 16.2% increase year-on-year and 1.7% increase Q-on-Q. Now Q-on-Q increase, the ForEx impact is high and the device sales related is small. And the Q-on-Q for the device for mobile and IoT seasonality will lead to the decrease, but we will offset that with a strong DC, data center as well as the signs of the bottoming out of the customer inventory. As for the gross margin, 57%, it's down 59 basis points Q-on-Q, so slightly decreased. This is due to the mix deterioration. And the 338 basis points negative -- sorry, OP margin, 27.5%, down 338 basis points Q-on-Q. And from -- there was a shift from Q3. And also, there is a concentration towards the end of the term and the ForEx. So these are -- each represent 1/3 of the factors. So Q-on-Q increase of the operating expenses is JPY 11 billion. As for the 27.5% change of the OP margin in the second half -- in the first half, it was 27.7%, and there's been the improvement of the 100 basis points, and this is due to the progress of the top line and the higher expenses and others. At the bottom of the right-hand side, we added the ForEx sensitivity for the first time. The volatility of the ForEx is relatively high. And the constant currency, what would look like if the currency is JPY 100 to the dollar. So we wanted to add this so that you can see that. So what I can say here is that as sensitivity against the dollar and the euro, when there is a change of JPY 1, what will be the impact on the revenue and operating profit are shown. As for the dollars, with the JPY 1 change, JPY 1.7 billion impact on revenue and JPY 0.7 billion impact on operating profit. Based on this ForEx sensitivity, if I assume -- sorry, based upon the constant currency of about JPY 100 to the dollar and JPY 120 to euro, the forecast of the Q4 operating margin is 22.3%. And so that is from 28.5% to 23%. So going on to Page 19 in the appendix, the net income, JPY 106.3 billion Wolfspeed-related evaluation gain is included in the interest expenses, that is JPY 44.5 billion. The following page on the break down or how to think about this Wolfspeed-related number. On the left-hand side, originally, before going to the Chapter 11. At that timing, the securities that we held, we had the convertible bond and equity and the warranty for the shares. And then there was a Chapter 11 at the end of September. So these assets at the end of the quarter, we needed to evaluate that. So basically, this is equity-based assets. So we have to look at the market, the share price of the Wolfspeed, it would change. So as you can see in the middle, at the end of Q2, the market cap was the JPY 1.66 billion. And our stake for that is a JPY 0.575 billion. So after the Chapter 11, the market cap was updated. And then based upon the share price, we multiplied what we own, and we calculated the total amount. At the end of September, $28.6 was the share price, and we calculated $2.71 billion. And our stake based on that is the $0.874 billion. So in Japanese yen, that is JPY 130.1 billion. So here, we booked the gain of JPY 44.5 billion. So that is the impact on the finance up to Q3. So what would happen in the future is summarized at the bottom right. As of now, the CFIUS approval is not something that we have gained. So strictly speaking, the warranty and the share equities, those are something that we would obtain after the approval of CFIUS. So those are considered to be the similar right or the same level. But as for the CFIUS approval, we expect that this is something that we would have. But because of the shutdown of the U.S. government, the schedule of this approval is being delayed. And ultimately, this after the CFIUS approval and after getting the equity and converting the bond and so forth and about 30% is what we'll own. And let me turn this. We can separate this from the equity method, Wolfspeed financial impact. And with that, I would like to end my presentation. Thank you. Operator: Thank you. Now we'd like to move on to the Q&A session. Shibata-san, please turn on your video. So let me first explain how to raise a question. [Operator Instructions] In the interest of time, we would like to limit the number of questions to 2 questions per 1 questioner. Now first, Takayama-san from Goldman Sachs. Can you begin your question? Daiki Takayama: So let me ask a question. The first question is about the infrastructure business. Memory interface as well as NVIDIA PMIC. I think those are performing very strongly according to what I see. What are the requirements that are given to you towards next fiscal year because you said that you are not able to keep up with this demand. So what is the request from these companies? Are you receiving massive amount of orders? Or is there a very strong appetite among from these demands? And based on your position, the memory interface, your market share has come down, but is it coming up again? For NVDIA related, from 1/3, you said to 1/5. Have you been able to improve your position in the market as planned? Can you comment on those points as well? Hidetoshi Shibata: Yes. For memory interface and RDM, we keep a bullish forecast. And we -- there's no factors that will force us to change that outlook. So for the market share as well, we also maintain a bullish forecast. For power, for a specific customer, we cannot comment on a specific customer, but these matters, it's very difficult to forecast on a 1-year basis or for several quarters basis. The requirements from the market are very strong. They are giving us a very strong order amount as a request. But the suppliers that can qualify are also increasing on the other hand. So it should not be -- so reassured. For the time being, more than 1/3, I think we have an expectation that will be -- we will achieve much increases. So if I talk about the next quarter, a very high market share will likely be maintained. Beyond that, I think we cannot talk about that until we get into the next quarter. But the demand itself is quite strong. So it's all up to us whether we can execute. If we are able to execute properly, we shall be able to secure these. Daiki Takayama: All right. For the memory interface, recently, the DRAM memory, the outlook for that is quite strong recently. What was the expression you used for the January to March quarter and the April to June quarter, what is the likelihood of increase? What are the requirements or requests coming from the customers for this? Hidetoshi Shibata: Well, it's very difficult to predict up to that point. We cannot -- we don't have a very definitive number for that far out. But for -- if you look at the trends, recently, as of September end and also towards the end of October backlog, if you look at the backlog trend, as you mentioned, if I -- we are seeing a step increase like a staircase. It's not a crawl. It's a significant sudden increase. That's what we see. Daiki Takayama: All right. The second question, automotive by region. Can you talk about the performance by region? You mentioned a specific customer. I think that is about China. There might be some decline in the October-December period, but it's coming back again in January and beyond. What are the major -- the outlook for the major markets like Europe and Japan? What is the inquiries from the customers? Hidetoshi Shibata: To give you a comment on the recent performance. As far as Japan is concerned, because of the cycle, Japan is likely to be very strong. But for Europe, I think relative -- Europe I think, is relatively weaker. China. For China overall, compared to one time, we have seen a slight slowdown. Amid that, depending on the customer, there are customers who can expect a further increase or other customers that is going through an adjustment. So mixed performance when depending on the customer for China. So depending on exposure to the customer, the aggregate numbers may be affected. But overall, the market conditions, I would say, is slightly weaker, I think. That's my impression. Daiki Takayama: If I may supplement. So the overall tone, of course, the year-end profit margin may come down because of the expenses. But the operating profit bottoming out, can -- do you see signs of that towards the beginning of the year, next year? Or is that the message you want to get across? Or do you still maintain a cautious forecast? And will that stay flattish? Is that your message, Mr. Shibata-san? So what is the message, your main message today? Hidetoshi Shibata: Well, that is the point that I find difficulty with. Flattish, slight increase in terms of margin. I think if you can achieve that number, I'd be happy. I do understand the background where your question is coming from. But I, myself, we have to accelerate the investments for the longer term of the business. So if you consider that rather than continuously increasing the margin, we would like to achieve a gradual increase in line with the revenue. So that I think is the best scenario for us. Operator: Next, UBS Securities, Yasui-san. Kenji Yasui: I would also like to ask a question about the data center. That's my first question. Or GPU customers, in addition, there will be a custom ASIC increase next year. So the 1/3 or higher share and based upon the certain size, non-GPU, is that something that you think you can achieve? Hidetoshi Shibata: Well, that's a very good question. How can I say this? It is yes, but it's a custom -- so it has to do with our bandwidth. So doing everything is not possible. And if we try to do that, execution will deteriorate. So each one, choosing each socket is something that we will be doing. I will not mention the numbers, but in Q4 forecast, custom power number is coming in, and it's going to grow strongly next year. And custom platform for the hyperscalers, we have several different ones. So for example, try to do everything. Getting 50% or 100%, that is not realistic. So choosing some of them rather than 1/3 or going for a higher share. That would be our approach. Kenji Yasui: So in that sense, PMIC, digital power for different customers, I think that there will be differences? Hidetoshi Shibata: Not really, but depending on customers, the architecture that they want is different. And the generation change and the timing of that will be different. But having said that, wafers and back end, the production side would be the same. So it has to do with the capacity allocation and equipment facilities that we need, because of those factors, if you look at end-to-end, it's not just making one product and apply it to everything else. Kenji Yasui: I see. The second question is about automotive. In Q3, the gross margin is 55%. So I think this is the highest level that you achieved based on the disclosure. So do you think that this will go up further? Q3 was high. Is this sustainable? If you can comment on that. Hidetoshi Shibata: Yes. I would ask Shinkai-san to respond. Shuhei Shinkai: Yes, Q3 automotive the utilization rate increased and the production expenses coming down. So it has to do with the cost side improvements. And because of those, this is a Q-on-Q increase of 22.8%. So whether it's sustainable or not, it really depends on the utilization rate. So half of that will be changing based upon the utilization, and the remaining half will be the cost reduction, and the continuous progress of the cost reduction. Based on that, we might be able to continue. Thank you. Operator: Moving on to the next questioner. BofA, Hirakawa-san. Mikio Hirakawa: BofA, Hirakawa here. My first question. The noncore business write-off or the reorganization, what is the progress? By the media, you said that you're planning to sell timing-related business? I'm sure you cannot -- if you can comment to the extent possible, that would be appreciated. But rather than these specific names, I would like to talk about the overall progress, how that is positioned? And what kind of actions are being implemented together with the time horizon? That's my first question. Hidetoshi Shibata: Shinkai-san, can you talk about that? Shuhei Shinkai: Yes. The product portfolio review. We have an annual cycle and on a continual basis, we are reviewing this with that approach. So in that cycle, we decide whether to focus or which one to go for an alternative approach. At this point of time, it's not that we have decided everything, and this is in the portfolio for restructuring. We are looking at things on a continual basis. The criteria that we apply for that selection, is whether that is suited for our core embedded semi. How much they can offer a synergistic value inside the company, we look into that, the contribution to the core. And based on that, we decide whether to focus on the business or not to focus on that particular business. Mikio Hirakawa: Well, a follow-up question on that point. So the synergistic value, what kind of asset? So if you take the total asset of your company as 100, which -- what percentage of such -- do you have such kind of assets that can be synergistic to your core? Shuhei Shinkai: Well, it's very difficult to give a quantitative number as to this much is the synergistic asset. But we would like to conduct a continuous update and review the product line on a continuous basis. And because these changes -- these things changes on a relative basis based on these considerations. Mikio Hirakawa: All right. My second question. Relating to Altium Renesas 365. You said that you are working to expand the user base of Renesas 365. What kind of actions are you implementing in order to expand the user base? And if you can give us some quantitative indication as to the pace of increase of user base. And also, you said that you are taking a Windows-like approach. You're not going to be hasty. But when you launch this system in the end of the year, what are the features to be made available upon the launch? If you can comment on that, that would be appreciated. Hidetoshi Shibata: User base expansion has just started. It's just earlier. So we cannot comment on the pace of progress. By having this on the cloud, the pricing structure has changed significantly weak. So compared to before, for small users, I think it's easier to use. So we are going to provide an option that will make it easier for use for the smaller scale users. That's one thing. Another thing is that by region, we will apply more resources such as China and India. For those markets, we'll become more full scale, full scale in addressing these markets. So those are the 2 major pillars that we are working on in order to expand the user base of Renesas 365. And for Renesas 365, for one thing, at the Embedded World, we have demonstrated something that will serve as a benchmark for you. But beyond that, I think this is more effective and maybe not be a clear cut at site. That is about the cloud-embedded nature. Previously, we had provided many different tools. We thought that we had been providing good tools, but that can be downloaded from the website, but the version management was so complex. So we had taken that kind of classic approach. But this time around, everything will be cloud enabled from this time onwards. So when that happens, I'm sure you're using this, but Office -- if you use Microsoft Office 365, you don't have to care about the version difference of the software and all the bug fix will be done automatically. So in that way, in that kind of approach, all the latest versions are provided seamlessly through the cloud. That is the state that we would like to realize in this first phase of this product. So the functionality is not going to increase significantly, drastically. Rather, the ease of use compared to before will improve significantly. That is the first focus. And then from there, our philosophy is that we would like to work together with lead partner customers. The number of such customers will be limited. So together with them, we would like to discuss what are the futures that will -- that needs to be improved, that could be most effective for the customers. So we will work on that and then decide on the priority of our development. As you may be aware, in the cloud environment, the update cycle will change significantly compared to conventional products. So agile will be the key here. So we will constantly upgrade and update the product. So when you notice, the customers will notice that the ease of use has changed dramatically. So that is the initiative that we are contemplating. Operator: Next, Daiwa Securities, Okawa-san. Junji Okawa: Okawa from Daiwa. In the IIoT, the gross margin, the -- I think that the data center is brisk with the high profitability, but this is not growing as much as expected. So Q4, you mentioned that the deterioration of the product mix. Could you elaborate on that? IIoT and automotive, maybe it's for both. So if you can make some additional comments. Hidetoshi Shibata: Yes, Shinkai-san, please. Shuhei Shinkai: Well, first of all Q3, IIoT, there are differences. So gross margin relatively high, is for the data center, the memory interface grew. So for example, the same data center segment would have lower profitability. So we are trying to drive that mix. So right now, what is growing? And among them, the higher -- they're not always higher than the average gross margin. So there are some differences of the gross margin level. And so IIoT margin changes reflect those differences. So for example, high-density power compared with the average, gross margin is not so high. So if it grows, the overall margin will be pushed down. So margin, gross margin growth is muted, so to speak. It appears to be muted. So in Q4, the similar reason, Q3 was good. So there is a reaction from that. And as a whole, the low-margin products will grow. And as a result, the margin would come down. Junji Okawa: Second question is about the industrial prospect. Competitors, of course, they handle the different products, but the industrial, I think there are some conservative or prudent prospect by other companies. So for you, what is your prospect? And by different regions, do you see the differences of the recovery? So about the industrial? Hidetoshi Shibata: Yes. Well, maybe if I can categorize them into 3 groups. The first is traditional factory automation and energy management is another. And the third is the smart appliance or white goods. So if I categorize them into 3 energy management is strong, it appears. So by region or rather than differences by region, there are customers who are strong in energy management. And of course, there are regional differences. But regardless of the geography, energy management is strong. As for white goods, it is also quite good, quite strong. No differences of the region. Well, China is big in terms of volume. But rather than the regional differences, hitting the bottom and a recovery cycle has already started. As for the hardcore factory automation, there is a mixed view. The Japanese customers are not so strong. If you look at the world, they don't really look very strong. But in the past, there was a very difficult situation, but that is over. So gradual recovery is something that we expect. So by region, as I said, and in the short term, Japan Europe towards Q4, how can I say this, because of the comparison to Q3, the growth will be driven, but as an overall trend, it is not so strong. Operator: Now moving on to the next question. Citigroup Securities, Fujiwara-san. Takero Fujiwara: This is Fujiwara from Citigroup. I also have two questions. One, well, I'm just -- this just happened recently. So this is about the Nexperia supply issue. I just want you to remind us once again. I'm sure that you are now sorting things out at the customer side, but what is the likely impact on the fourth quarter performance according to your assumption? Or what are the potential outcome that is indicated by the customer? If you can share that with us to the extent possible. Hidetoshi Shibata: Shinkai-san, can you answer that question? Shuhei Shinkai: Yes. At this point of time, the current outlook does not factor in this impact. As far as the shipment is concerned, there won't be a significant impact according to our view because of the backlog -- in relation to the backlog. As far as the sell-through is concerned, we are anticipating a slight impact from this. We cannot rule out that possibility. Sell-through, we are going to ship things based on the sell-through. But if there's any downside to the sell-through, then the inventory may climb up. So that's a possibility that we have to foresee. But we don't have the details available. So that's the reason why we have not factored this in -- in the forecast. So the -- it's not -- unless there's a major adjustment, the October-December period will be landing as planned. And if there's any impact, you're going to adjust with the first quarter in the next year. Yes, if there's an impact in December, then we'll have to adjust and there may be a handover effect on the January to March quarter. Takero Fujiwara: Okay. The second question regarding the procurement attitude on the part of customers, if you can comment on that. Well, this year, you received many short-term orders, I believe. But when you look at the overall industry, the inventory level is quite slim. So customers are not increasing their inventory level according to what I see. So have you seen any changes in the customers' procurement attitude, if there's any indication that you can share with us towards 2026? What is the direction of customers purchasing or procurement attitude? If you can share with us, that would be appreciated. Hidetoshi Shibata: Well, a very good question. Well, at this point of time. As a general trend, the inventory buildup trend were increasing lead time, that's what we do not see at the moment. But if you think about the possibility, data center or AI-related components, some components relating to AI because they use a significant amount of certain components, like because the device die is so large, and therefore, that's the area where we have a shortage in terms of components and then our capacity. So then we cannot rule out the possibility of everybody trying to go secure that. So that may result in a longer lead time. If that is the case, then the inventory buildup trend and initially, I would say, may be difficult for us to distinguish whether that is a buildup of inventory. So we have to make sure that we have a close communication with customers and address what is happening there. So at this point of time, I would say we are not seeing any conspicuous changes. For the short term, there might be some customers narrowing down the inventory level too much and therefore, increasing, but we don't see a general trend across the board yet. Operator: We are getting close to the end. So we'd like to end the Q&A. Lastly, I'd like to ask Shibata-san to say the closing remarks. Hidetoshi Shibata: Yes. So we continue to see that strong AI and as a derivative of that, energy-related is strong, and also IoT, part of it, we are gaining market shares. And so it's strong. So those are the major parts and especially the execution, we want to make sure that we don't make any mistakes. We want to work on the internal initiatives. And as for automotive, there are some uncertainties. So we'd like to be careful, but we want to make sure that we capture the upside. So that is the attitude that we have had, and we would like to continue that. So I hope that you will continue to support us, and thank you for joining us today. Operator: So with that, I'd like to end the Q3 earnings call of Renesas Electronics. Thank you very much for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Greetings, and welcome to the Tenable Q3 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Erin Karney, Vice President, Investor Relations. Thank you. You may begin. Erin Karney: Thank you, operator, and thank you all for joining us on today's conference call to discuss Tenable's third quarter 2025 financial results. With me on the call today are Co-Chief Executive Officers, Steve Vintz and Mark Thurmond; and Chief Financial Officer, Matt Brown. Prior to this call, we issued a press release announcing our financial results for the quarter. You can find the press release on our IR website at tenable.com. We will make forward-looking statements during the course of this call, including statements relating to our guidance and expectations for the fourth quarter and full year of 2025, growth and drivers in our business, changes in the threat landscape in the security industry and anticipated shift towards preemptive security approaches, our competitive position in the market; growth in customer demand for and adoption of our solutions, including Tenable One, our exposure management platform, our ability to expand integrations with third-party tools and data sources and grow our ecosystem, planned innovation, research and development investments and new products, services and initiatives and our expectations regarding long-term profitability and free cash flow. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements. You should not rely upon forward-looking statements as a prediction of future events. Forward-looking statements represent our beliefs and assumptions only as of today and should not be considered representative of our views as of any subsequent date, and we disclaim any obligation to update any forward-looking statements or outlook. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recent annual report on Form 10-K and subsequent reports that we file with the SEC. In addition, all of the financial results we'll discuss today are non-GAAP financial measures with the exception of revenue. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalent. Our press release includes GAAP to non-GAAP reconciliations for these measures. I'll now turn the call over to Steve. Stephen Vintz: Thanks, Erin. Before we get started, I want to welcome Matt Brown to the Tenable team. Matt comes with tremendous experience and has hit the ground running since he joined us in August. With that, let's get into the quarter. In Q3, we exceeded all of our guided metrics, delivering 11% year-over-year revenue growth and 23% operating margin. We continue to see strong growth from Tenable One, our exposure management platform, which represented approximately 40% of new business during the quarter. We added 437 new enterprise platform customers in the quarter, a 13% increase compared to Q3 of 2024. Notably, half of all those customers are landing with exposure solutions with strong momentum globally. We believe our strong new platform traction reflects a fundamental shift in cybersecurity away from detection and response technologies and more toward a more preventative and preemptive approach. The reactive approach to cyber is where the tools, the budgets, compliance priorities have lived for many years, simply trying to detect breaches. In fact, more than 95% of all cybersecurity spend today is on post-breach technologies. So consequently, less than 5% is spent on preemptive security. Now the good news here is that, that mix is expected to change significantly over the ensuing years, and we're starting to see signs of that shift with Tenable One. The obvious question is, why is this happening now? The short answer is AI. AI is dramatically reshaping the threat landscape as attacks have become faster, more automated and more sophisticated, exposing the limits of traditional reactive defenses. The takeaway here is that it's no longer just about firefighting, it's about fireproofing and exposure management is helping customers make that shift. Market-leading exposure management starts with unified visibility, but it's more than just seeing assets, domains and systems across your environment. It demands intelligence, context and the ability to mobilize that insight into action. It's not just about knowing that a vulnerability exists, but understanding that it's on a critical asset that is actively exploited and sitting on a direct attack path to your crown jewels. It's also about using AI not simply to find flaws, but to anticipate how an adversary may move through your environment and to see your organization the way an attacker does and moreover, to mobilize before attackers do. We believe Tenable One is uniquely positioned to win in this next phase of security in this new AI world, given our roots in our strategic direction. Our foundation in vulnerability management gives us the data, the scale and credibility to lead the shift toward exposure management. And we're building on that strength with focused investment and innovation. Notably, R&D is up over 20% year-to-date, reflecting significant investments in Tenable One that unify visibility, insight and action across the full attack surface. In Q3, we launched Tenable AI Exposure, leveraging technology from Apex to give CISOs visibility into and control over the risk associated with generative AI. The solution helps organizations discover AI usage across their environments, understand how it impacts their attack surface and identify potential exposure stemming from AI-enabled applications, code and user behavior. It is a powerful example of how we continue to extend Tenable One to stay ahead of emerging threats. We also surpassed 300 validated integrations in the Tenable One platform, underscoring our progress in creating the most open and the most interconnected exposure management platform in the market. This open ecosystem is a key differentiator. These integrations go beyond technical connectivity to unified visibility and insight across tools and data and teams. By breaking down silos between vulnerability management, cloud security, identity, OT operations and the broader ecosystem of third-party tools, we are advancing how customers unify data, apply contacts and orchestrate faster in a more coordinated way. As we continue advancing this vision, we are building a platform where connectivity drives action, where customers don't just see risk, they can act on it. Finally, we advanced our vulnerability priority rating across different domains, allowing for higher levels of smarter orchestration and mobilization for exposure management. This gives organizations even sharper precision in determining which risks demand immediate action. Most enterprises are flooded with findings, and the challenge is not just seeing vulnerabilities, but knowing which ones matter. By combining real-world threat intelligence, contextualized asset data and AI-driven analytics, our enhanced VPR helps customers focus their remediation efforts on the exposures that matter most. We believe that these innovations across visibility, insight and action, combined with our growing open integration ecosystem and our focused investment on preemptive security and R&D are what differentiate Tenable among the many vendors now laying claim to the exposure management space and are core to why customers are turning to us. I'd now like to turn the call over to Mark to discuss how customers in the industry are responding to the shift to exposure management and how we are leading them through this change. Mark Thurmond: Thanks, Steve. We believe Tenable is leading the transformation to exposure management, and the industry is taking notice. We were recognized as a leader in exposure management by 2 of the industry's top analyst firms during Q3. In July, Tenable was named a leader in the Forrester Wave for Unified Vulnerability Management solutions. In August, we were recognized as a leader in the IDC MarketScape for exposure management platforms. And in September, IDC again reported Tenable ranked #1 in its latest market share report. As Steve mentioned, one of our defining strengths and what shines through in every customer story is Tenable One's ability to unify visibility, insight and action across the modern attack surface. We're now extending that power to include both Tenable native and third-party data, giving customers an even more complete view of risk. But exposure management is more than a technology. It's a journey that requires a new mindset. We're listening closely to our customers by helping them chart that path step by step. Our exposure management Leadership Council and our exposure management maturity model have become critical guides in that journey. The Leadership Council, which launched this quarter, brings together some of the most forward-thinking CISOs and security leaders to share insight and best practices from their own exposure management transformations. Their feedback helps shape our platform road map and ensures we're focused on solving the challenges that matter most. Our new exposure management maturity model gives organizations a framework to assess where they are today and what it will take to advance in their exposure management journey. It helps them measure progress, identify gaps and prioritize the investments that will have the greatest impact. Together, our exposure management Leadership Council and maturity model are helping customers turn exposure management from an abstract goal into a disciplined strategy for the future. Through these initiatives, we're helping customers evolve their approach from managing vulnerabilities to embracing a true preemptive security mindset. It's how they move from reacting to risk to staying ahead of it. That's what Tenable One is designed to deliver, the clarity, intelligence and context to see threats before they strike. As Steve highlighted, we're leading the way with the most comprehensive exposure management platform in the market, helping our customers build stronger, smarter defenses for the AI era. Let me give you some real-world examples from the quarter. First, we captured a major new logo with a global commercial real estate investment services firm, displacing the top cloud security provider and an incumbent vulnerability management player to consolidate onto the Tenable One platform. Like many large enterprises, this customer faced growing complexity of a hybrid environment with assets spread across on-prem infrastructure, multiple cloud providers and third-party systems. Tenable One was selected for its superior technical capabilities across cloud security and vulnerability management. It was also chosen for its ability to unify data and context across their entire ecosystem. This consolidation immediately filled critical visibility gaps, streamline operations and reduce the cost and complexity of managing risk across a fragmented landscape. We also had another major win this quarter with a national electric utility provider in EMEA to accelerate their critical infrastructure transformation. Like many in the energy sector, this organization is navigating the growing convergence of IT and OT environments with operational technology increasingly coming under the responsibility of the CISO. They selected Tenable as their exposure management partner for our ability to integrate complex technical requirements and deliver a cohesive, scalable OT security framework across their national distribution network. By unifying visibility and context across IT and OT assets, Tenable is helping them eliminate silos and protecting critical infrastructure at a national scale. We also secured a 6-figure expansion with a leading technology provider serving the public sector, converting them from our stand-alone crowd product onto the Tenable One platform. This is a strategic shift for the customer, driven by their need to unify visibility and control across a complex hybrid environment, supporting sensitive government workloads. This multiyear agreement enables them to consolidate on to Tenable One over time, simplifying operations, reducing vendor sprawl and strengthening compliance across both commercial and public sector deployments. These customer wins reinforce that our strategy is absolutely working. We are earning larger, longer-term commitments by delivering strategic value and deeper integration into our customer environments. At the same time, we believe these wins reflect the broader industry shift that is now underway from reactive post-breach defense to preemptive security. As this shift accelerates, we believe Tenable is exceptionally well positioned for sustainable growth with exposure management becoming the foundation of modern cybersecurity programs worldwide. With that, I'll turn the call back over to Matt to dive deeper into the results for the quarter. Matthew Brown: Thanks, Mark. I want to thank everyone for the warm welcome, and I'm really excited to be here. I look forward to seeing new and familiar faces over the next couple of months. With that, I'll jump into the results for the quarter. We're encouraged by the strong third quarter exceeding the high end of the range on every metric we guided to for the quarter. Revenue was $252.4 million, representing growth of 11.2% year-over-year. The year-over-year growth in revenue for the quarter as well as outperformance relative to guidance was underpinned by a solid foundation of renewal business, strong Tenable One adoption and better-than-expected contribution from professional services. Our percentage of recurring revenue remained high at 95% this quarter. We're continuing to see solid momentum in Tenable One as customers are increasingly turning to our platform to bolster their preemptive security programs. The strength in new platform growth in the quarter drove calculated current billings, or CCB, to $267.5 million, a year-over-year increase of 7.7%, while short-term remaining purchase obligations, or CRPO, grew 12.9%. These measures are beginning to diverge due to changes in upfront billings patterns and increasing contract durations, which we expect to persist in the midterm. Net dollar expansion rate was in line with expectations at 106%. Non-GAAP gross margin was 81.6% for the quarter, an increase from 81.4% in Q3 2024. We're encouraged by our ability to slowly but steadily increase non-GAAP gross profit year-over-year, both on a quarter and year-to-date basis. Year-to-date non-GAAP gross margin was 81.8% compared to 81.3% for the 9 months ended in the prior year. Non-GAAP income from operations was $58.9 million or 23.3% of revenue compared to $45 million or 19.8% of revenue in Q3 2024. Although we continue to make targeted investments during the quarter, including growth of more than 18% in research and development-related expenses year-over-year, we were able to drive continued leverage in the business as a whole. Our investment in innovation is a result of our focus on delivering the most comprehensive exposure management platform to our customers. On a year-to-date basis, non-GAAP income from operations grew to $155.3 million or 21.0% of revenue compared to $124.8 million or 18.8% of revenue in the comparable period last year. Non-GAAP earnings per share for the quarter was $0.42 compared to $0.32 in Q3 2024, an increase of 31.3%, reflecting the increase in profitability combined with a decrease in diluted shares outstanding. Turning to the balance sheet. Cash and short-term investments totaled $383.6 million. We generated $58.5 million of unlevered free cash flow during the quarter compared to $60.8 million in Q3 2024. This brings the year-to-date unlevered free cash flow to $189.6 million, a year-over-year increase of 24.7%, putting our annual guide well within reach. During the third quarter, we repurchased 2 million shares for $60 million. In total, we have now repurchased 8.3 million shares for $300 million since November 2023 and have $250 million of repurchase authorization remaining. We intend to continue to repurchase shares, which we believe is an effective use of capital. Turning to the financial outlook for the remainder of the year. With the results of the third quarter behind us, we've gained incremental visibility into the full year. And as a result, we are raising our full year guidance at the midpoint across most of our guided metrics. Specifically, we are increasing our full year guidance at the midpoint for CCB and now expect a range of $1.040 billion to $1.048 billion, representing a year-over-year increase of 7.7% at the midpoint. We expect revenue for the fourth quarter to be in a range of $249.1 million to $253.1 million, representing a year-over-year increase of 6.5% at the midpoint. For full year 2025, we are raising our revenue guidance range to $988 million to $992 million, representing a year-over-year increase of 10.0% at the midpoint. We expect non-GAAP income from operations for the fourth quarter to be in the range of $55.7 million to $59.7 million or 23.0% of revenue at the midpoint. For full year 2025, we are raising our non-GAAP operating income guidance at the midpoint and now expect a range of $211 million to $215 million or 21.5% of revenue at the midpoint, representing a year-over-year increase of 100 basis points. We remain committed to balancing top line growth with a steady increase in profitability. We expect non-GAAP net income for the fourth quarter to be in the range of $47.9 million to $51.9 million, representing a year-over-year decrease of 1.6% at the midpoint. For full year 2025, we are raising our non-GAAP net income guidance at the midpoint and now expect a range of $185 million to $189 million, representing year-over-year growth of 17.9% at the midpoint. We expect non-GAAP earnings per share for the fourth quarter to be in the range of $0.39 to $0.43, flat at the midpoint compared to Q4 2024. For full year 2025, we are raising our non-GAAP earnings per share guidance to $1.51 to $1.54, representing year-over-year growth of 18.2% at the midpoint. In closing, we'd like to thank the entire Tenable team and our customers and partners for a great result. We're very pleased with the steady execution the team has delivered this quarter and our incremental optimism for the rest of the year as reflected in the increased guidance ranges we've provided. Mark, Steve and I thank you all for joining, and we look forward to seeing you at the UBS and Barclays conferences in the coming weeks. We are happy to open the call up for questions. Operator? Operator: [Operator Instructions] Our first question is from Saket Kalia from Barclays. Saket Kalia: Welcome Matt. Matthew Brown: Thanks Saket. Saket Kalia: I'll just keep it to one question. Steve and Mark, maybe for you. U.S. federal is, of course, a really important vertical for Tenable. Can you just talk a little bit about how that performed this quarter? And given the current situation, maybe give us a little historical context of how the business has performed around prior shutdowns as we think about any potential impact going into Q4. Does that make sense? Stephen Vintz: It does, Saket, and thank you for your question. This is Steve. We have major market leadership in public sector and U.S. federal in particular, across a wide range of three-letter federal agencies spanning civilian, defense and intel. And CRs are not new and nor our government shutdowns. We have seen that before, and we've demonstrated an ability to execute in these environments. And we're particularly pleased with the results this quarter. Public sector and U.S. federal was in line expectations, which is very notable given the seasonally high mix of U.S. federal business. So overall, a good result for us for the quarter. Operator: The next question is from Brian Essex from JPMorgan. Brian Essex: And Matt, congratulations on the new role from me as well. Looking forward to working with you again. And nice consistency out of the gates as well. So certainly appreciate that. I guess maybe to follow on Saket's question for you, Matt. I was down in D.C. last week and that was at CISA, and it was clear that things were going to get incrementally uglier this week as agencies run out of money, particularly for essential employees where CISA is focused. But would love to hear from your perspective, given that I guess, deceleration that's baked into the 4Q, like just basically what's implied by your full year guide, the deceleration of revenue in 4Q. What are you contemplating within guidance? And what kind of scenarios might lead for upside to your expectations for the quarter and for the year? Matthew Brown: Yes. I think the first thing to note is just the steady execution that we had in Q3 under the current environment of uncertainty. And keeping in mind, Q3 is a higher proportion of Fed for us relative to other quarters in the year. So with that backdrop, we look ahead to Q4, which seasonally is a smaller Fed quarter for us and see relatively minimal exposure. Now of course, there's a couple of million dollars that could be at play here or there. But generally, we feel very positive about the pipeline that we see. Renewals continue to come in very strong. We think we've got good line of sight. So we think we're not especially exposed in this fourth quarter. Brian Essex: Got it. Maybe can I sneak in a quick follow-up for Mark? Just with regard to the impact of the expiration of CISA 2015 and what that might have on CVE reporting. Any impact that you might envision for the core VM portion of your business? Stephen Vintz: Yes. Right now, based on feedback with customers and talking to a bunch of partners and obviously, our employee base, we're not really projected to see any type of negative impact right now. As it plays out, we'll obviously be monitoring it closely. But right now, based on a lot of our conversations and contacts and relationships we've got going on in the federal government, we're not really anticipating any significant downside there. Operator: The next question is from Mike Cikos from Needham & Co. Michael Cikos: Congratulations to you, Matt. Looking forward to working together. Before I ask my second question, which is more tied to the billing, I just wanted to ask Matt, since this is your first earnings call here with the firm, can you help us think about if there were any changes to guidance philosophy or what you're bringing to the finance function here, now that you had a couple months in the seat? Matthew Brown: Yes. I think generally no substantial changes to our approach to guidance. I will say I was just extremely pleased to come in and see a very high functioning team, not just within finance, but across the entire organization. I feel like we're really focused on the right things and the team is all growing together. So I would say, no major shifts in the way that we're approaching guidance. Michael Cikos: Okay. And then the follow-up is again on that billings guide. Just trying to get a better sense of the different puts and takes here, right? If we have the, call it, $3 million-ish of upside this quarter versus where people were expected, we're nudging up the low-end of the guide by $2 million. You guys are talking about increased visibility into year-end. Can you just discuss how you guys thought about putting out this range and some of the different puts and takes there as it pertains to that visibility you're talking to? Matthew Brown: Sure. I think the very brief takeaway is, as we sit here today, we're feeling incrementally more positive about the year than we were 3 months ago. That's as a result of a strong Q3, but also visibility into Q4. So it represents a small guidance increase at the midpoint for CCB of $1 million, but that flows down too. So taking up the guidance to revenue and taking up the guidance in op income, all those things are things that we're happy we're able to do, which is as a result of us feeling better about the year on balance. Operator: The next question is from Rob Owens from Piper Sandler. Robbie Owens: Steve, really enjoyed the discussion upfront on fireproofing versus firefighting in terms of where things are going. To that end, if I look at your enterprise adds versus your 100,000 ACV customers, maybe you can parse what's going on there. And are you just -- are you seeing more new customer additions upfront and you're starting to see just velocity increase on that front as some of these trends are changing? And if that's the case, maybe you could add some color around the 100,000 ACV customers. Stephen Vintz: Sure. Well, as you noted, our mix of business can change from quarter-to-quarter. This quarter has higher concentrations with U.S. Federal. And as we mentioned, we were very pleased with the results there. We're also very pleased with a strong quarter for new business for us. We added 437 new enterprise platform customers, which was one of our strongest quarters, I would say, to date. And look, on a year-to-date basis, too, new lands have been strong. We're also, as we've talked about on the prior quarters is that we've demonstrated an ability with our exposure management platform to transact larger deals. We're delivering incremental value to customers. Transaction sizes and deal sizes are getting larger and on average, anywhere from 50% to 90% plus in comparison to stand-alone VM. So overall, we're pleased with the velocity of lands this quarter. We're pleased with our ability to continue to do larger deals. And there's always some interplay from one quarter to the other. And I think it really speaks to the continued momentum of the platform and the ability to help customers sort through all of this fragmented visibility, this overwhelming noise and alerts and all this manual remediation to help them unify visibility, insights and action to reduce risk. And so it's certainly something that we're pleased to see with the continued traction of the platform. Operator: The next question is from Meta Marshall from Morgan Stanley. Meta Marshall: Maybe a couple for me. Just first, in terms of noted commentary on the OT market. Just wanted to know if there's efforts underway kind of either with R&D or go-to-market to kind of better take advantage of some of those opportunities? And then second, just kind of noting the 18% increase in R&D, just in terms of kind of the answer to the previous question of trying to simplify kind of environments for customers. Just what are some of the other investments, whether that's professional services or go-to-market? Are you making to kind of help simplify the offering for customers? Mark Thurmond: Yes. Great question. I'll take the first part on the OT market and what we're seeing, and then I'll pass it over to Steve to talk about some of the investments from a research perspective. So we are seeing a dynamic in the market, and it's been happening really all year, but it's happening, I think, at a bit of a faster pace where you're seeing this convergence of the OT market and the CISO getting a lot more responsibility and visibility over those OT assets. And one of the deals that we referenced in the earnings announcement was that consolidation story. So we're seeing a lot of not only our installed base customers wanting to look at and be able to ingest those OT assets into Tenable One, but also new customers where they're saying, we don't want to have two distinct products and technologies, one looking at traditional IT assets and then another one looking at OT assets. So you're seeing that convergence and it is speeding up. When you also look at some of the market dynamics around the AI data center build-out, that is a big area for us. We're seeing a lot of demand. When companies and organizations are building out data centers, they need operational technology to monitor all of those different asset types. And we're starting to see significant pipeline growth in closing deals in that area. So we were very pleased and have been pleased all year with our OT performance, and we will continue to focus in on it from a go-to-market perspective. I'll pass it over to Steve now to talk about some of the R&D question. Stephen Vintz: Yes. With regard to R&D and the investments we're making, they're paired with increased confidence in our ability to execute in this big market that we call exposure management, and it's really centered around three things. Number one is the ability to unify visibility and in particular, ingest data from other security providers so we can help customers see any asset, whether it's on their factory floor, in their network or even in their cloud environment. And then moreover is the ability to normalize and dedupe all of that to tie it to mobilization and orchestration on the back end, so we can help customers reduce risk. And that's -- and then last, I would say, and really important is helping customers secure their AI attack surface and leveraging AI in a way where we're able to deliver greater insights to customers. And AI adoption of applications has dramatically expanded the attack surface and certainly made us all more successful to exploit. And Tenable plays a really big role there as we're able to discover all AI applications, whether they're internally developed or even shadow AI. And then we're able to assess those for risk, including determining vulnerabilities and misconfigs. And now with AI exposure, we can go and inspect and control at the prompt level the AI applications that enterprise use the most. So we have a lot of traction with AI. Pleased with the innovation we've done to date, but there's certainly a lot more to do. And we believe principally, the real winners in this new AI world will be companies that can assess a wide range of domains, ingest data from other security providers and then really combine all that proprietary exposure data with AI to anticipate tax, not simply to respond to them. And that's a foundational change in the security market, shifting away from detect and respond more towards preactive and preventative approaches. Operator: The next question is from Jonathan Ho from William Blair. Jonathan Ho: Congratulations on the strong results. Can you give us a sense of what percentage of your total base is now on Tenable One? And it seems to me like there would be some opportunity to upsell more into the base once they've adopted the platform. So can you also talk about maybe the potential for uplift going forward on the platform? Stephen Vintz: Yes. As you know, we have roughly 40,000 customers -- 40,000-plus, should I say, and approximately, we'll call it, 18,000 use one of our enterprise offerings. And of those, 3,000-plus are using Tenable One. So we've got good traction to date. It's 40% of our total new sales. And so there's a significant opportunity not only to expand within the existing customers who have adopted Tenable One, but moreover to continue to see further traction within our customer base. Operator: The next question is from Joseph Gallo from Jefferies. Joseph Gallo: Matt, congrats on the new role. Looking forward to working together. It was great to hear the exposure management momentum. As we start to get ready for next year, in your combos with customers, where is the prioritization for exposure management in their budgets? And then historically, I think you gave some sense of following your billings in 3Q. Just any commentary on what billings can look like in '26 or confidence in sustaining the current levels would be helpful. Mark Thurmond: Yes. I'll take down on the budget question from the customer perspective, from exposure management. I think one of the bright spots that we're really starting to see is we talked about all of the different analysts that are starting to cover the exposure management category. And coming out as the leader and the #1 player in that category has given us lots of visibility, especially at the CISO level. And so now when we're sitting down with customers, we're not actually having to educate a lot of the CISOs what exposure management is and how it is so different from vulnerability management. They're hearing about it, they're seeing it. And so you're starting to see budgets being allocated that way. You're starting to see budgets in regard to consolidation, which is really one of the biggest motions we have in regard to going after and talking about exposure management and justifying it is really looking at that consolidation play. So that momentum is there, and it's gaining traction, and that continues to play out in the market, not just with customers, but we're also seeing our resellers and our partner community around the globe start to build out exposure management practices and gain visibility there, too. Matthew Brown: Yes. And I can answer your second question. So what we're really happy about is that there is this move, in particular, to Tenable One, roughly 1/3 of our business now is in Tenable One. Increasingly, we're seeing new customers adopting Tenable One. That's exactly what we're focused on. And we think that sets us up well for the long term in going and really capitalizing on this exposure management environment. With respect to 2026, we're really focused on 2025 and closing out and continuing to execute there. And it's just too early to talk about 2026 at this point. But importantly, we feel like we're doing all the right things to put us in the right spot. Operator: The next question is from Patrick Colville from Scotiabank. William Vandrick: This is Joe Vandrick on for Patrick Colville. Steve, I think you mentioned earlier that there's a lot more to do on AI innovation. I was hoping you could expand a bit more on that. Maybe talk about how you're thinking about the road map, how you're planning -- and how you're planning to add these new AI security products or solutions? Would it be organically or through M&A? Stephen Vintz: I think we would certainly consider both and successful companies pull both levers here. And I think it's centered around the fact that the threat environment that we're experiencing today is unlike anything we've seen before. Adversaries are moving with incredible speed, scale and sophistication. And leveraging LLMs and AI to create flawless hyperrealistic phishing e-mails that bypass both human suspicion and traditional e-mail filters. We're also seeing executive cloning -- cloning of executive faces and voices for socially engineered attacks. So certainly, bad actors are moving with incredible speed. We're seeing the weaponization of AI, which is resulting in the discovery of more vulnerabilities. And perhaps more concerning is not just more vulnerabilities in this all new digital world of AI, but it's the exploitation of those have become much faster. Meantime from vulnerability, discovery to vulnerability exploitation has compressed dramatically. So this necessitates a completely new approach to security. Today, $0.96 on every dollar in cybersecurity is spent on detect and respond technologies. Consequently, 4% is on proactive security. Gartner estimates over the next 5 years that, that mix will change dramatically. And so we'll see a disproportionate amount of spend more towards proactive security. And the goal here is to move Tenable. Our role in this world is to evolve from not just providing visibility, but to be able to correlate vulnerabilities with threats and exploit chatter with criticality of those assets. So we can highlight likely path of exploit. So organizations can look at their enterprise through the lens of adversaries, and they can identify attack paths that are most meaningful to them. So exposure management is really at the epicenter of all of that. And it's a category that continues to grow. And we've received recognition from IDC and some of the others that Mark talked about earlier, given our traction with exposure management, and we're super excited about what's ahead for us. Operator: The next question is from Roger Boyd from UBS. Roger Boyd: You talked about the longer and more strategic deals, and it seems like that's been a consistent trend over the past couple of quarters and clearly evident in the nice acceleration on RPO and bookings this quarter. Can you just further quantify what you're seeing there, what you're doing there from a sales perspective? And with these longer contracts, just what's the overlap with customers adopting Tenable One Exposure Management? Mark Thurmond: Yes, you bet. I mean it's a really phenomenal dynamic that we're seeing, right? The great part of this, and you see it in the RPO numbers is we have customers not only new customers, but our installed base that want to get longer-term 3-year commitments, right? They're seeing the road map. They're seeing how we're evolving exposure management, right, how we're building this technology and building Tenable One on the platform. And when we are able to articulate that and explain to them where we're headed, the customers are buying in and they're buying it aggressively, and they're making long-term commitments. And so we're very, very focused on the installed base that Steve identified going after those 18,000 to 20,000 commercial and enterprise customers. Anyone that's on VM, getting them upsold to Tenable One, that is our motion. We are driving that aggressively. And then for the new logos, one of the very cool things when we identified, which is an extremely high number, 437 new logos in the quarter, a very significant portion of those customers were Tenable One, right? So that is a pretty cool trend. And we'll be able to then upsell those customers over time. And so I think that when you see customers willing to sign up for long-term contracts when they understand where you're headed and you're truly building an enterprise scale platform, that's an extremely positive sign for us. Operator: The next question is from Joshua Tilton from Wolfe Research. Joshua Tilton: Matt, it's good to hear your voice again. Two for me. First one, hopefully, kind of easy, more of a clarification. Is there any way you can just help us understand what the inorganic contribution to billings was in the quarter and how we should think about the inorganic contribution to billings for the full year? And then I have a follow-up. Matthew Brown: Yes. Very insignificant, Josh, for both the quarter and the year. Joshua Tilton: Okay. Very helpful. And then maybe just a follow-up, and I preface the question with not here to hold you to any numbers, but I think part of what was great about you in your previous role is you had a pretty predictable playbook on how you want the financial profile of the business to kind of unfold on an annual basis. And I think investors really appreciated that. So again, not here looking for numbers, but maybe how do you think about your ability to leverage some of the playbook from your previous role to kind of deliver or help deliver a more consistent message around the durability of the financial profile for Tenable going forward? Matthew Brown: Oh man, that is quite a setup. So I mean, here's the way that I look at it. Tenable has a really incredible business and is getting only better and more strategic with our move to exposure management. So when you look at the underlying fundamentals and the fact that 95% of revenue is subscription and recurring. There is an opportunity to make sure that we can continue to grow top line while also continue to add profitability. And I think there are some spots in the P&L where we've done that already over the past couple of years, but we'll continue to do that going forward into the future where we can continue to get more leverage out of the business. So I think there's a lot of opportunity to do some of the same things that I've done before. Operator: The next question is from Adam Borg from Stifel. Adam Borg: Of course, welcome and congrats to Matt. Maybe just on the macro, we talked a lot about the Fed is great to see in line with expectations. Any other color you could share just demand environment overall, be it at the upper end of the market, the mid-market, geography vertical? Any other color would be really great. Stephen Vintz: No, I think demand was pretty even really across the board. We talked about seasonally high mix in U.S. Federal, and we were pleased with the results there. I talked about strength in new lands and new logos, 437. And obviously, the continued traction with the platform. And I think that's really the highlight of the quarter here. The one takeaway is that the ability to close platform sales, the ability to assess a wide range of domains, the ability to unify action, unify insight and deliver increased visibility from both the things that we assess -- assets that we assess as well as ingest data from others is resonating. It's a big market opportunity. We believe we're the clear leader there, and it's good to see the validation and recognition from our customers. Operator: The next question is from Jonathan Ruykhaver from Cantor. Jonathan Ruykhaver: I'm curious to hear how conversations might be changing with the pending with Google deal? How much of a concern is multi-cloud support? And then just broadly looking at Tenable Cloud Security, how is it performing? I mean it does look like a market that is increasingly competitive. But when you look at your positioning relative to the broader exposure management opportunity, it seems like that could be a differentiating factor. So maybe you could just elaborate on those two questions. Mark Thurmond: Yes, you bet. No, absolutely. And yes, it is definitely an active conversation without a doubt, right? So a lot of CISOs are really looking at it. And we mentioned this on a couple of previous calls once the announcement was first out there, but you're really starting to see it pick up because now it's becoming a reality. Now customers are getting a true sense of how they're going to come together within Google. And we are doing a significant amount of presentations, demonstrations and POVs in Wiz accounts. When we look at Q3, we had a bunch of deals that we were able to go in and actually do displacements. One of the deals we highlighted on the call was a displacement of not just a Wiz account, but also an incumbent VM player. So to the point that you brought up in the question, this consolidation story around a platform that centers around exposure management, right, being able to ingest multiple different assets into a hybrid platform, so both on-prem and in the cloud and in OT and in identity and other areas, that absolutely resonates. And so we are -- I use the term getting invited to a significant amount of more dances, and we continue -- and we will continue to expect that to happen throughout Q4 and going into next year. So we are very, very optimistic about our cloud business centered around Tenable One. Operator: The next question is from Todd Weller from Stephens. Todd Weller: In the past, we've talked about kind of the growth equation to drive top line acceleration. I wanted to see if you could just kind of revisit that and give us an update. Continued momentum with Tenable One and exposure management is great, and that's much higher growth and then you have like the traditional VM piece. So how are you thinking about those components? How are you thinking about the VM kind of sustainable growth? And is it really just a math equation and time of the exposure piece continuing to get bigger? Or is there anything that can happen on the VM side that could drive kind of improved growth there? Matthew Brown: Yes. I think you've hit on the main components there. So we're 100% focused on Tenable One and driving customers to Tenable One. And our belief is that once they're there, they will continue to expand. So whether they're doing pretty much as core VM there today, we're seeing opportunities where they then expand within Tenable One to take on more EM-type activities. So that's encouraging. When you zoom out from Tenable One and you look just at VM versus EM, EM is obviously today a smaller part of our business, but it is growing much faster. So our expectation is that over time, while VM is a stable grower, EM is growing much faster, and that helps drive that growth algorithm overall. Operator: The next question is from Junaid Siddiqui from Truist. Junaid Siddiqui: You highlighted now supporting over 300 validated integrations. How are these integrations contributing to deal velocity and deal sizes? Stephen Vintz: Yes. Well, the -- it's centered around this belief that no one security company can secure all domains, all assets across the attack surface. We have today's attack surface is a sprawling ecosystem of traditional IT devices, cloud environments, identities, both human and machine as well as OT industrial control systems that power a lot of our critical infrastructure. So over the years, the attack surface has expanded, right? No longer about securing servers in a data center or laptops in an office. And so we think exposure management is really centered around this belief of assessing things that are foundational, like traditional IT devices, like cloud environments, both pre and post production, like OT assets and even looking at the important context around the identities of those, but also the ability to ingest data from others. We believe -- in an open platform, we believe we should be able to partner for this kind of data to deliver this kind of insight to customers, all centered around this notion of unified visibility and insight and action. So it's foundational to what we do. We think the connections matter. We think it gives us certainly more breadth, the ability to deliver more insights and more importantly, the ability to help our customers mobilize and orchestrate fixes on the back end, and correlate vulnerabilities with exploit chatter, with asset criticality. That's really important to do that in a very cohesive way. Operator: The next question is from Shrenik Kothari from Robert Baird. Shrenik Kothari: Congrats and welcome, Matt. So Mark, Steve, you cited Tenable One at 40% of new business, of course, improving ASPs and deal sizes. And it seems like the platform growth as a percent of new business is growing near that 40% mix. Just what do you think are going to be the biggest unlocks to further accelerate this platform mix as a percentage of new business? Are you thinking something along the lines of like pricing packaging, exploring something like Flex? Are you also thinking more sort of field enablement and increased S&M investments? Just curious and then a follow-up for Matt. Mark Thurmond: Yes. So you highlighted a couple of great areas right there, right? And so those are areas we're looking at. But I think one of the best things we've got in front of us is we've got the opportunity to expand in that installed base, right? So as Steve kind of highlighted the numbers, we've got phenomenal opportunity to go expand within our huge massive installed base. So that is like the #1 focus for us is getting that expansion. When you then look at the innovation that we've done around third-party ingest, right, we're now seeing here in Q4, a bunch of quotes going out to Tenable One deals that have third-party asset types, right? So we'll be able to monetize that third-party asset type. So that will start taking off. We talked about our AI strategy and what we did with Apex and how we'll be able to start monetizing that in Q4 and especially going into 2026. Now that is on the back of some of the things you highlighted, right? So obviously, evaluating pricing and packaging strategies and marketing strategies. Those are all things that we're very much on top of. But there is very tangible specific things that we're doing today that to get the growth and the expansion within Tenable One, and we're going to continue to march down that road. Shrenik Kothari: Great. Very helpful. And Matt, just very quickly from your perspective in terms of what you have seen so far. Like, how do you plan to now kind of balance all the priorities that just laid out versus incremental operating leverage just in terms of your strategy, your priorities, how should we expect 2026? Matthew Brown: Yes. I think we expect to continue to both grow top line and add incremental margin. And so when we look at places on the P&L where we can expect to go get that margin, it's a little bit like what you should have seen in this quarter's results actually, where you're going to get a little bit out of gross margin, you're going to get a little bit out of sales and marketing and G&A, and we are going to probably give a little bit back in R&D because we're continuing to invest in the platform. So -- and we're going to -- there's going to be, obviously, one quarter is going to be exactly like the next. We're going to continue to invest in sales capacity as well. But the point is as you grow revenue, you're able to just get a little bit more leverage. Operator: The last question is from Gray Powell from BTIG. Gray Powell: Okay. Great. A lot of good questions have been asked. Maybe I just had one on my list that has not. What kind of traction are you seeing with the Apex acquisition and AI exposure? And I'm not sure if you said this, but how should we think about it impacting ASPs with Tenable One or potentially driving just incremental adoption of the platform? Stephen Vintz: Sure. And so that's an acquisition that we announced, I think, the last quarter, several months ago. And really the plan from an integration perspective was to natively build those capabilities in the platform. And then come to market with a more expansive AI offering, which we're pleased to see us do at Black Hat. So we did that over the summer, we brought to market AI exposure. AI exposure gives us the ability to not only discover AI applications and shadow AI, but now gives us to -- the ability to inspect at the prompt level usage of AI. It is a foundational piece in our broader AI strategy, and the AI strategy is really centered around a couple of things. Number one, contextualize risk with AI, which we've been doing for some time, and we continue to do, and that's generate risk-based prioritization. That is really dynamic and constantly updated. So AI really is this risk copilot. The second thing is really a journey that we've been on, which is autonomous remediation agents. And right now, we're able to integrate bidirectionally with the CMDBs and the ticking systems. And the focus is really on generating tickets with precise remediation steps to orchestrate patch deployments and enforce configuration baselines. But really the goal here over the course of time is this continuous learning and adaptation and use AI as a means not only to deliver greater insight, but have customers benefit from this network effect of 40,000-plus customers, the global telemetry that we've collected over the last 20 years to do safer auto remediation. And so we can not only just -- not just respond to threats, but also anticipate them. So we're super excited about our place in this world with AI, EM. Exposure management is taking on greater importance. Obviously, we expect continued growth there and continued traction with the offering itself. Operator: This concludes the question-and-answer session and today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for standing by, and welcome to the IGO Limited First Quarter FY '26 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Ivan Vella, Managing Director and CEO. Please go ahead. Ivan Vella: Thanks, Darcy. Good morning, everyone. Thanks for joining, and thanks for those of accommodating our time change. We just wanted to avoid a clash. I'm sure you've all got a busy morning of calls lined up. Kath's with me again this morning, our CFO. She will cover some of the financials. I'll jump in and just run through a bit of a summary, and then we can get into some Q&A. First of all, on safety, look, we signposted last quarter that the results of the hard work we did through 2024 are starting to flow through, and we saw that again through the last quarter. We're delighted to see a period of over 90 days without an injury, and that for IGO is a record as far as I can see back in the history and an indication of that steady improvement in the way that we're managing safety and the maturity for our operation. The TRIFR has started to trend down, which we'd expect and that should continue as we keep the focus up. Still lots to do. There's no question you don't turn safety around and build a strong, mature set of systems and culture overnight, but I'm pleased to see that steady progress. In terms of the operations, I'll start on Greenbushes and what's very clear, obviously, is the production was well down from prior quarters, and that was a function predominantly of grade, and you'll see that in the fine details in the quarterly report. There was quite a step down from previous quarters. And that's a function of where we are in the mine plan. I'll come back and talk more to that in a minute, but a big impact from that. Of course, that was then compounded by weather. Many of you will know that Southwestern Australia had one of its wettest years in a very long time and particularly down in the Southwest, that's very impactful, both in terms of impacting ore movement or material movement, but also covering -- standing water covering parts of the ore body and the ability for us to access that was limited. So that flowed through into sales, obviously, unit costs, still great to see through the cycle. Right at the bottom here, we're generating nearly 60% EBITDA margins despite some of those challenges. On Nova, look, we -- tracking to plan, really, it's getting to the end of the ore body. We signposted that and said we've got a tight plan. And I think we had a couple of strong quarters to finish late last financial year, this first quarter. I'll talk to the misfire in a minute. But aside from that, actually tracked really well. The team is doing a good job managing the challenges. It is complex and more difficult as they have less options. And obviously, the ability for them to flex their schedules are much more limited, but they've managed through that well, and Nova is continuing to perform as expected. On Kwinana, look, a lift in performance there, and that's been a long time coming that step from what was done in the shutdown late last year. Naturally, that flows through into conversion costs and other factors. And for us, every bit of improvement is a real positive and something that does reduce the cash burn. So that's, I guess, how I look at it, the good work the team is doing, and I've been nothing but supportive and given them credit. They try extremely hard to work on the asset to try and get it stable to try and get it to perform, and that does reduce the cash impact. Ultimately, it doesn't change the long-term economics in our view, but it is nice to see those improvements. They're also being very frugal with cost and CapEx and so on. There's certainly no waste there. It's just a very challenged asset with a very difficult pathway to full production. More broadly, look, I won't get into the financials. Kath will cover those. But I mean, other key highlights to take away. I think the Forrestania transaction is progressing, and we expect that will close as sort of signposted later this year. And Cosmos, a big milestone, which is a sad moment, but we took the decision to stop dewatering the Odysseus mine, the underground nickel there after a pretty extensive technical economic assessment, hard call, but that's a function of where the nickel market is at and the challenges of extracting that ore economically. So those are some of the highlights. Let me just dig into Greenbushes in a bit more depth, cover a few things there. I mentioned the grade being obviously a primary driver of performance there. And there is a big pushback underway, which I've talked about in previous quarters. That's progressing. At the end of the day, that opens up that high-grade core, which is where all that critical value is. And that's still a work in progress, hence, why we're seeing this sort of step down in grade. Naturally, as we finish the work on that life of mine optimization and open up the mine plan, we'll try and look to stabilize grade. But ultimately, you want to drive value first and foremost. And the grade isn't consistent across the ore body. And so we'll work through that and determine what's the best schedule and sequence to get through that. The Talison team are doing some great work there. Speaking of that work, the life of mine optimization work is continuing, and we'll naturally see some real benefits from that as they get into that more deeply, understand what part of the ore body will be accessed through the surface mine, what part might come through underground and ultimately, how we get the best value from the ore body. In parallel to that, and I think you can almost consider it as 2 separate pieces of work is a broad productivity program. Adam Mallerspiener is up and running and doing a stellar job there as COO, working with Rob, and he got a deep pedigree in this kind of productivity program, got that stood up, looking at asset management, looking at throughput and recoveries, all of the different aspects that you'd expect. And again, we've talked about broadly in context in the previous quarters, he's getting those programs moving. And obviously, that will start delivering results quarter-on-quarter. So that's, I guess, the kind of the key headlines for Greenbushes. I mentioned that sales was lower quarter-on-quarter, which is a flow-through from production. And the last point to note is probably just pricing, and there was quite a lot of volatility through the quarter. And we, as you know, have a 1-month lag on our pricing, so as that washes through, we'll see the pricing play out. Overall, what we have seen though is the realized pricing that Greenbushes is achieving is actually really strong if we look back through the trend and compare it with our peers in the industry. So a very simple model. There's no big sales and marketing effort. It really is just a 1-month lag on the PRAs, and that actually delivers a pretty good outcome. On Nova, not too much more to add there, really. I think just to talk to the misfire, there was one stope there that had a misfire, which, I guess, first and foremost, didn't result in any safety concerns. And then in terms of recovering it, that's where the safety starts and the team did an extremely good job risk assessing that and working through how they'd recover it. They've done an outstanding job and effectively there's not going to be any long-term impact in our mine plan. There may be a small amount of tonnes that we don't recover, which we're assessing at the moment. But ultimately, the teams worked through that very effectively. The other point to note there is the closure planning. That's progressing well. We've got a very strong team on that. And as again, we've signposted our intent is to have the study work done, the approvals in place so that we can move directly to closure at the end of production late next year once the ore bodies run out. On the lithium production at Kwinana, I think I've covered the key points, step-up in production related step down in the unit conversion costs. CapEx was pretty modest. The team is into a shutdown this month, and there's obviously more projects focused around that. But overall, the team has continued to work extremely hard to try and get the asset to perform to lift production rates to continue to deliver high levels of battery-grade product, and I give them full credit for that. As I said, though, it doesn't change the degree of challenge on the economics for the asset as we look into the industry. I'm sure everyone on the call knows that the Chinese refineries are extremely competitive, running at about USD 3,000 a tonne, some actually below that, but that's kind of the benchmark of the industry. And it's very difficult to see Australian or to be honest, Western refineries getting anywhere near that level of performance, not dissimilar to other processes like copper or aluminum where China continues to demonstrate extremely capable downstream processing in the way that they operate. I might -- I'll hand off to Kath in a second. But maybe just a couple of other quick points on exploration. We put in a small update in the quarterly. I didn't put a slide in on it, but there's a number of lithium targets that we've been working through testing and will continue through this field season and probably some run into next year. Nothing more to report at that point, continuing to rationalize the ground and clean up the portfolio across our exploration team, the tenements. We've gone through the fine tooth and we're managing that quite well. There is some generative work going on around copper, again, which I've mentioned previously. Nothing material to report at this point, but the team has got some interesting things they're working through. And I've already covered Cosmos and Forrestania in terms of the key news there. So look, I might hand off to Kath to just run through some of the key highlights in the financials. Kathleen Bozanic: Good morning, everybody. Stepping through the financials this quarter, revenue was down with Nova having one less copper shipment and also realized prices being lower. The Nova EBITDA was lower on the back of lower revenues and underlying share of net profit from TLEA was also down from the lower sales at Greenbushes. It's important to note that we are expensing capital at Kwinana, having impaired the asset to 0. Underlying EBITDA was higher as it includes the movement in the mark-to-market listed investments with the prior quarter impacted by the expensing of rehabilitation provision, which increased last period. We remain laser-focused on cost noting that corporate costs continue to trend down, and you will see in the cash flow that it is a higher number. That's a timing issue around payment of short-term incentives only. There's a reduction in costs at our care and maintenance sites, including the decision to cease the dewatering at Cosmos and heading towards the completion of the sale of Forrestania, as Ivan noted. And we've got reduced capital spend at Nova, where we expect the run rate to continue to reduce as we head towards closure. Free cash flow was positive at $15 million, and this included $12 million of spend on care and maintenance at Cosmos and Forrestania sites. Finally, our balance sheet was further strengthened with net cash increasing to $287 million. I'll hand back to Ivan now to give a summary. Ivan Vella: Thanks, Kath. Well, let's -- I think let's jump into some Q&A from here. Operator: [Operator Instructions] Your first question comes from Hugo Nicolaci from Goldman Sachs. Hugo Nicolaci: I just wanted to dig into the grade and weather piece more at Greenbushes, particularly given the simplified disclosure, no longer has the mine physicals in it. Are you able to just give us some color on those physicals and whether this was more a mine or processing plant impact around weather and grade, just given, I think at last quarter, you had the better part of 5 months of ROM stocks there. So I presume it would be more of a mine and grade impact. So just any color there would be helpful. Ivan Vella: Yes. Thanks, Hugo. It is. Look, it's mine related. The processing plants are fine. I mean there's work to do on them in terms of maintenance and just asset performance, but the driver here is from the mine. The weather impacts, as I said, in 2 parts. One, just material movements. Trucks are moving slower, cycle times are longer. There's just more impacts because you lose productivity with all of the wet impact. The second is just standing water through the pit and access to that high-grade core, which means that we're drawing off either lower-grade stockpiles, in some case, oxidized material and, of course, some of the lower-grade material in the pit. So it's a confluence of events that affects us. But the core of this is that pushback on that western side of the main pit, which exposes that high-grade core as that's completed, and that's work that goes -- is ongoing through into early next calendar year. Once that opens up, of course, we have a nice runway looking forward. I know Rob is working to try and as you get through the life of mine optimization to just think through the pit sequence, the mining sequence and try and stabilize this as much as possible, value first, but equally just trying to get the very best out of the plants. We don't want to have to adjust those dramatically because that affects recoveries and overall throughput performance. Hugo Nicolaci: So then if I can just -- in terms of how you expect the rest of FY '26 to look, I appreciate that the calendar year is still going to be budgeted for the JV, but you've called this roughly in line with plan. So I guess relative to FY '26 guidance, should we expect production to pick up quarter-on-quarter from here? Or is December likely to still see some impacts and it's more of a second half story? Ivan Vella: Yes, it's more a second half story, Hugo. This quarter will be similar. Obviously, we have less of the wet weather. All that said, it's been raining again today. I don't know when we're supposed to be in this beautiful period of just 200 days of sunshine in WA and it keeps raining. But no, I think, the weather is less of an issue now. It's really just more about where they are in the mine sequence, and that will impact this quarter. So we're going to see that the second half of the financial year, i.e., the first part of 2026 is where we'll see that lift. We don't see any cause to change guidance. I mean we saw the mine plan. We saw what was coming and put that forward. I know everyone thought that, that was conservative. We don't know where CGP3, how quickly that will ramp up. That's probably still the wild card. We put in a view based on what we expect on the plan. But at this point, that guidance really looks quite sound. Hugo Nicolaci: Got it. And then just if I could just put some numbers around the mine piece in the quarter. Last quarter, you did 1.4 million tonnes at $1.86, I think where did that sit this quarter? Ivan Vella: Sorry, we just got a bit of background noise as you came through. Can you just repeat that? Hugo Nicolaci: Sorry, just on the mine physicals, just in terms of ore tonnage and grade, just able to give a little bit of color there? Ivan Vella: You mean just general material movements and so on. Hugo Nicolaci: Yes. Ivan Vella: Look, yes, it's down through this period just because of the weather. As I said, you're naturally not getting the same truck movements and productivity. But overall, Rob and Adam have been stepping that up on material movement. So I think as they get through winter, that productivity will improve. They're far from what you would call good, and that's -- I think I've been quite open and candid that the contractor performance there has not been at what I would call industry average or standard, and they're working on it. I think there's a great program. It's trying hard. Rob's had very intense focus on it, and they are making improvements. But look, it's -- in terms of progress to plan, I think we're comfortable in making the headway through the strip. Operator: Your next question comes from Daniel Morgan from Barrenjoey. Daniel Morgan: Just a question about market communication, I guess. So I mean, the grade in the mine sequence, obviously, you've outlined today, that's a big driver of the mining physicals that we've seen at Greenbushes in addition to weather, which can be unpredictable. But when you communicated with the market and gave guidance, why not just simply flag market, don't forget or just FYI, there's going to be a grade that's going to be a bit lower in Q1, Q2? Ivan Vella: Sure, sure, Dan. I mean we can do our best there. It's a function of what we can share through our JV. We'll keep that in mind and do our best to keep you guys informed so you can see the variability through the year. Daniel Morgan: And I guess the question is -- the second question I've got is just the intention with CGP3 and the collective JV mood on how you're going to ramp that up? And is that going to be very much subject to the speed of that ramp-up? Is that going to be subject to market conditions and the improvement there? Or -- and I guess, if the market is not sufficiently strong to run everything, might there be a decision to take down and do a big maintenance program at some of the other concentrators to have a look and go, well, let's see if we can improve, do recovery improvements or whatever it is to make them best-in-class so that when the market improves, you're running well? Ivan Vella: No. Look, we've got a clear plan as I sort of signposted last quarter as well. The plan is to ramp it up as quickly as possible. There's no change to that. The 2 customers who are also owners are very keen to see those tonnes flowing. That's the plan, and that's what we're working towards. So we're pushing the team on construction to hurry up and get finished and hand it off. The ops team are ready. They've already commissioned the dry plant. There's a bunch of material already crushed and waiting as a stockpile to start feeding the wet plant. As soon as that's finished, they can start commissioning and get on with it. Operator: Your next question comes from Jon Sharp from CLSA. Jonathon Sharp: Just a question regarding the dividend. So Windfield, they paid a $50 million dividend to JV partners in September. Just what -- when do you expect TLEA to pass these distributions on to IGO? Ivan Vella: Look, Jon, yes, with a relatively modest dividend from Greenbushes or Winfield. That said, nice to see that such a strong cash conversion at the site even through the bottom of the cycle. It's generating cash, and we're covering all of that growth CapEx and so on. The distribution to TLEA, obviously, we need to make sure we can fund the work at Kwinana, while there have been improvements there, it's still every tonne that's produced effectively cost us money. And I don't expect any of that money to flow back out to the shareholders of TLEA, i.e., TLC and IGO at this point. Jonathon Sharp: Okay. And just interested in your thoughts on there's been recent commentary about a floor price for lithium producers. another producer talked about the unintended consequences of such a policy. Just interested in your view, how you see this? Would it be good? Would it be bad? What your thoughts on unintended consequences are? Ivan Vella: Yes. Look, Jon, I mean, I'm not going to comment more broadly on the market positioning. I think the takeaway is that the Australian government, the U.S. government and the Western governments are recognizing the criticality of critical minerals and the need to support diversified production there. They're trying to find the best pathways to do that. And I think that's something we should all thank them for and recognize. It's great to see a little bit of sunlight and interest in our industry. There are various mechanisms, how they do it. I mean, I think there's a good consultation process they're going through to manage and come up with the best pathways and I support the work they're doing. Operator: Your next question comes from Matthew Frydman from MST Financial. Matthew Frydman: Ivan, maybe a bit of a high-level one for me. It's coming up on 2 years in the job for you. Clearly, a lot has changed in the business. But over that time, IGO has underperformed all the other Australian lithium producers. Compared to your peers, you haven't had a major governance crisis. You haven't had to raise capital. You've got the best asset, you're actually growing production. You've got a strong balance sheet. But clearly, the market is choosing not to value these attributes. Talking to investors, they might point to a lack of clarity over the life of mine plan and the value that's inherent in Greenbushes or maybe they might point to the poor performance at Kwinana which I guess, in my mind, both link back to the more fundamental issue, which is really a perceived lack of influence in the JV. So I know that's a lot of words, but really, the question is now 2 years into the role, the business had a strategy refresh a year ago. Looking forward now, what's the time line now for shareholders to expect a resolution to these issues? Ivan Vella: Okay. Thanks, Matt. And I think it's a good roundup of the key issues. And I've been, I think, quite open about that. Naturally, the ability to look through into, I guess, a full perspective on Greenbushes, its potential, its performance and so on, we're feeding it out more backward looking. And I know as Rob -- and he's only just a year in the job now, as he gets through that optimization work and he lays it out his ability to share that with us and inform the market, I think, is very important. So I think that will be a key factor. Secondly, I guess, is then just the overhang that Kwinana presents as a drag on those -- on the cash generation and the benefit that flows out of Greenbushes. I guess, 2 years ago or so when I started, there was probably still some optimism in the market around the refinery and the potential there, something that we spent time studying pretty hard and trying to deeply understand the economics and the potential there, and we came to a conclusion that both the asset itself and the positioning in the Australian context was pretty challenged, hence the view that we took on it. And that obviously then translates into some conversations that are ongoing with Tianqi about the JV and the structure there, which is not complete. I can't give you a time frame or a date for that. It's work that we're working through. And we expect that as that's resolved, that will unlock some of the discount or some of the anxiety that probably sits around the potential of Greenbushes. That said, I think also in a low point of the cycle, and no one's got a crystal ball to see how the lithium world plays out, but to expect that it continues at this level forever is probably not realistic. Naturally, when you're in that low end, those negatives are amplified. I can imagine that the price moves, the cash is flowing, things look very different because this is a very highly leveraged asset. And you can imagine with the extra production coming online from CGP3, when you flow that through, that's going to have a significant impact on the cash generation for all of the joint venture partners. So you've summarized the issues. We're working very hard on them. I think we've been quite transparent about that -- the work and the issues. And I see that as critical outcomes to unlock some of the discount on our equity. Matthew Frydman: Yes. I appreciate that. Maybe not so much a follow-up as a general comment. But I mean, myself and other analysts have asked repeatedly for, I guess, some more specifics around these ongoing optimization studies. I think your share price would tell you that, that's a little bit too general for the most material assets and the market is telling you that they want more clarity on the assets. So -- and additionally, arguably, you've got an obligation there to your shareholders, I guess, despite the commerciality elements of the JV. So I know you said you're not able to give it currently, but certainly, any specific time line of what you're wanting to capture in those studies and the timing of when you'd like to release them to the market would, I think, be very, very welcome. So thanks for that. Ivan Vella: Yes. I completely understand Matt, and we're working hard on that. So your point is well made. Operator: Your next question comes from Tim Hoff from Canaccord. Timothy Hoff: I was largely looking similar questioning to Matt's line of questioning. But just wanted to confirm that, that optimization study will come out to the market in some form. Like I know, obviously, it's not going to be as comprehensive as what you see, but we will get to see that and I presume this year. Ivan Vella: Well, yes, look, Tim, once the team has done their work and they're ready to share that, we'll work through that with the joint venture and then determine exactly what and how we share that. So I mean, naturally, everyone's got an interest in telling that story about Greenbushes. But I think letting the team work through and make sure they've got a comprehensive answer, and they've worked through all of the different questions is important. So I don't have a date for you. Naturally, we're eager, we're pushing. And Rob is, he's driving this really hard, but there's a bit more complexity than 100% owned asset, obviously, to work through that. Timothy Hoff: Yes, for sure. And then perhaps just around pricing. Obviously, that 1-month lag has impacted you guys picking up with the worst of the pricing in June. As you're looking at the profile now and as we're seeing pricing improve, I guess there's been some mixed commentary on pricing forecast, but we are seeing an improvement here. Is that translating to the shipments as you're watching them go out? Ivan Vella: Yes, for sure. I mean I think we took a bit of time to look at realized pricing over the last 18 months or 2 years. And to be honest, without a sales and marketing team, we're getting great outcomes. So I'm very comfortable that the model that we've got in place gives us equal best value, certainly better than a number of our peers in the market. So it's certainly delivering good outcomes for us. Timothy Hoff: Look forward to December quarter numbers. Operator: Your next question comes from Kaan Peker from RBC. Kaan Peker: Just on Greenbushes and Kwinana, it looks like CapEx spend is running below guidance rate. Could you maybe add some detail around that? And I'll with a second. Ivan Vella: Yes. Look, I mean, it's just starting to taper now, Kaan. I don't want to get into a debate on guidance. We've put that out. We think that still stands. Naturally, as I've signposted in previous quarters, Rob and the team are being very, very focused on CapEx spend, and there's a lot of scrutiny on the dollars that are being applied across the business. We don't want to obviously compromise the assets. So they'll put the investment into asset health and to asset performance. But all of the extras, all of the other nice to have, they're challenging. They're also challenging CapEx intensity to make sure that we're getting the best value for every dollar that is spent. So look, to be honest, if we get later into this financial year and we have a down step in guidance, that would be fabulous. But right now, we're saying, look, that's our guidance. We stick with it. We're just pleased to see that continued tension on capital spend. And again, I know back to Matt and Tim's comments, you'd love to have -- and I had this question 20 times, what is the sort of medium-term dollars per tonne of capacity and CapEx that we can guide on. And I'm chasing it, we'll get to it. That's the kind of thing that's helpful for you to do your modeling and see what that full value of Greenbushes will be. Kaan Peker: Sure. Maybe I'll ask another way in your words, the nice-to-have component of capital spend for both Kwinana and Greenbushes, what percentage of capital spend does that make up for this year? Ivan Vella: I'm not sure I can answer that. I mean, the point is we're -- every individual project is stress tested and challenged. I'll give you an example. I know in the plan, it's an anecdote, right? They had some car parks they wanted to pay with bitumen and they said, but we're not going to do that, and we're just going to leave it as crushed rock, was that nice to have or whatever. But the point is we're going to challenge and say safety, asset health, asset performance, these are the kind of things that need CapEx. Have we got a strong business case? Can we see what the NPV IRR on that particular project is? Can we see what the time for payback is? Can we see that we're getting good value for money? They're all the questions that the team are now asking in a consistent capital process. That was not the case just 2 years ago when I started. I can assure you it was a very different approach. And Rob's brought with his commercial team, a lot of discipline and focus there. And I don't sit there and go through and try and differentiate within those projects, they're making wise decisions. We have a committee that each of the JV partners have reps on that sits and works through that on a routine basis. And I think they're making good decisions to drive very careful capital allocation across the business. Kaan Peker: And then the second one, again, on Greenbushes is maybe around what specific actions could be included in that mining optimization program besides opening up the ore body. Any sort of detail around there, blending, tighter feed control, anything that you could sort of add to that conversation? Ivan Vella: Yes. And we go back to the last couple of quarters, we've had slides on this. There's kind of a list of the programs that are underway. And certainly, there's the -- looking at the ore body itself, or characterization, block model, the schedule, et cetera, which is the big picture. Then you do get into the different head grades and how we do blending and the run of mine feed into the plants. The asset health and asset performance of those plants and making sure you're getting lots of uptime that drives recoveries and throughput, product grades, the recoveries. I mean, it's a pretty full program. I don't think there's anything I've worked through in my experience in other mines that we're not tackling as a lever here. Rob's got a lot of fronts open he's working on to drive that uplift and improvement -- uplift and improvement in performance. So if you went through that list from prior quarters, and we can drop it in and maybe try and add a bit more color for next time, that's all in play. Operator: Your next question comes from Levi Spry from UBS. Levi Spry: I just come back to a couple of questions at the start. So just in terms of guidance, can you talk through what's embedded in your guidance for the ramp-up of CPG3? I think previously, you said a 12-month ramp-up, and this quarter is going to be the same as last quarter. So can you just walk us through that for the second half? Ivan Vella: Yes. I haven't -- we're not breaking that out specifically, Levi. We've got obviously the plan that the team has put together. We're not going to overpromise on a ramp-up because you never know how those things start. It should be a rapid ramp-up front-end loaded, but you don't want to bank that. We don't provide a breakout of the guidance or that detail at this point. So I can't give you any more detailed clarity. Once we start, we can probably give you an update and indicate how we're seeing that against what we anticipated. But at this stage, I guess the key takeaway is that we expected that the first half of this financial year would be softer given grades. And obviously, we'd have a stronger production rate through the second half of this financial year. Levi Spry: Okay. And then in terms of finished inventory, can you give us a feel for where that sits today, I guess, at the end of October, you built a bit during the quarter. Ivan Vella: I'm not sure what's the question? You're asking about inventories. Levi Spry: How much concentrate inventory you've got flowing around? Ivan Vella: I don't have the number on top of mind. I don't know if you do Kath. No. No, I don't have that, unfortunately, Levi. I think you saw through the last 2 quarters, I mean, sometimes timing of shipments can move and we'll get a build and then a drawdown. There was a big run out in July. I don't have the sort of at hand inventory number in front of me now. I mean I'd say, look, there's not much to see there. I mean the team they ship it as we produce it. So yes, I think it's pretty stable. Levi Spry: Okay. You built 20,000 tonnes for the quarter. Yes. All right. And then just in terms of conversion costs at Kwinana, just confirming that there's no cost for spot in there? Ivan Vella: No. That's just the product conversion costs. Operator: Your next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Just one question for me. Can you just quantify the financial impact of the lithium support program at Kwinana, please? Ivan Vella: Yes, we don't break out the specifics there. That's just a function of those agreements. I would say we are receiving benefits. They're very welcome that the West Australian government is contributing, but we don't actually carve out the quantum of that, and that's just a function of the agreement. Mitch Ryan: But that would be offsetting the conversion costs or helping to keep them. Ivan Vella: Yes. Sorry, yes, it does offset the conversion costs naturally. So things like our energy costs and other consumables, there's obviously a benefit there. Kathleen Bozanic: And just to add to that, it is not lumpy anymore. We had a catch-up in the last couple of quarters. So it's stabilizing now. Mitch Ryan: Okay. So does that mean you're receiving it on a monthly basis or similar? Kathleen Bozanic: Yes, or similar, balance through the quarter. Operator: Your next question comes from Ben Lyons from Jarden Securities. Ben Lyons: Just one question from me, a similar line of questioning to Frydman and Holf, I guess. Just noting the exploration costs of $10 million and the corporate and other costs of $20 million for the quarter, if I include the share purchases there. I mean, Kath called out short-term incentives as being a significant part of that. So what was the extent of those incentives given the sustained underperformance of this business? And when can we expect to see a meaningful reduction in the level of corporate costs given the relative lack of operated assets in the business? Ivan Vella: Well, Ben, we don't -- we didn't provide any detailed guidance on the breakout. I mean you can go through the rem report and you can sort of see that in the annual report has got all that background and detail in it. The corporate costs, I mean, if you -- and we've looked at the numbers, if you do the comparison, and we aggregate our corporate costs, we don't allocate a lot back to Nova. I think we've continued to trend those down. We've explained the work that's been delivered around Forrestania and Cosmos. So we've sort of addressed those assets. I feel like the team has made great progress reducing those costs quarter-on-quarter since I've been here. And they've been very frugal and focused on it. We've benchmarked that we feel like that work is -- where we're sitting is in good shape and a function of where we're at with Nova. Naturally, as Nova winds down, then we'll look at obviously what that needs to be in the context of the rest of the business. But I don't think that's out of step. The exploration spend, we've obviously made a massive change from where we were when I started in the business and signposted that, the work that's going on, targets we're pursuing, everything there is going through a lot more rigor in terms of the financial and economic assessments before we commit to it. And we'll continue to keep that challenge up, but we feel like that's an important part of our business and where we're investing for value. Operator: Your next question comes from Austin Yun from Macquarie. Austin Yun: First question on Kwinana. Just I note that your JV partner commissioned a new hydroxide plant in China in September and the commissioning and ramp-up seems to be working all right. Just wondering if there has been any discussions post that from the JV side for learning for Kwinana? Or would that serve as a wake-up call for them to really be more ready to work away on Kwinana. Circle back with the second one. Ivan Vella: Okay. Thanks, Austin. Look, you'd have to ask Tianqi for more on their views on Kwinana. But yes, certainly, we follow from a distance, probably don't have any more than you do. They've done an extremely good job ramping up their new asset in China, very good construction, commissioning ramp-up. It's been a great story. And it's parallel of what we see on many other refinery assets in this space in China. I think it just points to the nature of the challenge at Kwinana. It's fundamental to the design and construction and engineering of the asset here. The team are not doing their best. They're trying hard every day, but they are fundamentally challenged with the reliability and the underlying engineering and performance of the assets they're faced with, which is a pretty high bar to get over. Austin Yun: Second one, just on the Greenbushes, quite clear on the production profile, which will be second half weighted. Keen to understand the shipping profile if there is any flexibility for you to pump out a bit more in the second quarter. Just noting that the market is tightening now. We can see visible lithium carbonate inventory going down, the futures price is going up. So can you take any opportunity to sell more product? Ivan Vella: Well, I think, look, we basically work on a model of just selling and shipping whatever is produced. There at some points will be some congestion and challenges, just normal port operations. But you've seen in prior quarters, the team's ability to ship and sell materially higher volumes than this quarter, for example. So I don't think that's a big issue. I know Rob has been working through the plans for the ramp-up with CGP3, recognizing the extra volume they need to deal with. They've got a good plan in place. So I think we'll basically just continue to target a place -- a situation where our sales and shipping matches or broadly matches production quarter-to-quarter. Austin Yun: Okay. So the second quarter will still be production matching the sales number? Ivan Vella: Correct. Operator: There are no further questions at this time. I'll now hand back to Mr. Vella for closing remarks. Ivan Vella: Okay. Thanks, Darcy. Look, thanks for the questions. And I guess I'd just reflect on the drive or the pull for more information. I hear you, and we're doing our best. We will share what we can. Naturally, that's within the context of the joint venture. And I appreciate how important that is for you to get more visibility and more confidence in what is the best hard rock lithium asset in the world. Rob and the team are doing really, really good work improving that. They're working through a bunch of issues and challenges as they look at that long-term plan and really optimizing it. And naturally, that's a big part of what I know will also help build your understanding of where their focus is and what sort of improvements you can expect. To summarize key messages, look, first on safety, I'm really pleased to see the continued improvement there, and that's something that we'll keep focused on right to the end of Nova's life. Naturally, the lessons and the maturity that we build through our business will carry with us. Nova had an in-line quarter and delivered well against what we expected from our mine plan. We're tracking well for the life of mine nickel tonnes that we've indicated. And I think the last point was just I take your questions, Ben, but the team are managing costs very thoughtfully. We continue to challenge every dollar we spend, and we've generated positive cash flow through this quarter, which I was really pleased to see. We're very conscious that we don't want to spend beyond our means and ultimately protect the strong balance sheet that IGO has and prepare ourselves for the future on that basis. Thanks, everyone, for joining and listening in and covering some good questions. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the FinWise Bancorp Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Juan Arias. Please go ahead. Juan Arias: Good afternoon, and thank you for joining us today for FinWise Bancorp's Third Quarter 2025 Earnings Conference Call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website, as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward-looking statements represent management's current estimates, expectations and beliefs, and FinWise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements, including factors that may negatively impact them contained in the company's earnings press release and filings with the Securities and Exchange Commission. Hosting the call today are Kent Landvatter, Chairman and CEO; Jim Noone, Bank's CEO; and Bob Wahlman, CFO. Kent, please go ahead. Kent Landvatter: Good afternoon, everyone. Our strong third quarter results demonstrate that the strategic investments we have made over the past 2 years are starting to deliver meaningful results. During the quarter, we posted robust loan originations of $1.8 billion and credit enhanced balances reached $41 million. Revenue growth was solid, driven by both fee and spread income growth and disciplined expense management further supported profitability. Tangible book value per share continued to increase to $13.84 compared with $13.51 in the prior quarter, reflecting ongoing value creation for our shareholders. Following the close of the third quarter, we announced 2 additional strategic program agreements that we are very excited about. The first is with DreamFi, a start-up financial technology company that will provide financial products and services to under-banked communities. The second is with Tallied Technologies, a program manager and network issuer processor, which will bring FinWise a substantial credit enhanced portfolio balance in Q4 2025 to support both business and consumer credit card programs. As a reminder, while the credit enhanced loans acquired in the Tallied transactions will increase our balance sheet, the credit risk is low because of the guarantee provisions of the agreement supported by the cash loss reserve deposit account that Tallied must maintain at FinWise to absorb credit loss as well as the cash flows generated by the assets. We remain actively engaged in discussions with several other potential strategic partners to further expand our strategic initiatives, and our pipeline continues to be strong. Importantly, this partnership with Tallied underscores the uniqueness of our one-to-many business model, which we've outlined previously. While our model can appear lumpy as securing strategic agreements may sometimes take longer than anticipated, each completed agreement has the potential to unlock substantial value for us. These agreements can drive meaningful increases in portfolio balances and accelerate revenue growth, reinforcing the scalability and strength of our approach. As we discussed last quarter, we are carefully evaluating a measured increase in dollar balances of higher-yielding loans, particularly as our loan portfolio continues to grow. However, we will remain within the internal limits established in 2018 as our policy restricts these loans to less than 10% of the total portfolio. Overall, we are very pleased with our performance this quarter and the solid momentum we're seeing across the business. These results underscore the strength of our strategic execution and our unwavering commitment to long-term value creation rather than prioritizing short-term gains. As we move forward, we will continue to focus on disciplined growth and operational excellence, key drivers of sustained progress and meaningful returns for our shareholders. With that, let me turn the call over to Jim Noone, our bank CEO. James Noone: Thank you, Kent. The strong momentum from recent quarters continued into Q3 as evidenced by loan origination volume totaling $1.8 billion, a 21% increase quarter-over-quarter and a 24% increase year-over-year. Key drivers included a seasonal uptick from our largest student lending partner in line with the academic calendar and continued ramp and maturation from new programs we have launched over the past several years. While macroeconomic conditions and demand trends may shift intra-quarter, originations through the first 4 weeks of October 2025 are tracking at a quarterly rate of approximately $1.4 billion. This reflects the expected seasonal deceleration from our largest student lending partner and fewer business days in the quarter due to multiple holidays. We expect a 5% annualized rate of growth in originations from this $1.4 billion quarterly level during 2026 is appropriate based on organic growth right now. We are also pleased that credit enhanced balances reached $41 million at the end of the third quarter. To support the modeling efforts of these assets, let me provide an outlook for the remainder of 2025 and into 2026. Incremental organic growth in credit enhanced balances is running at approximately $8 million in October, and we are currently comfortable projecting $8 million per month in incremental organic balances for each November and December of 2025. Additionally, as previously mentioned, our recently announced agreement with program manager, Tallied Technologies, is scheduled to close on December 1. We anticipate this transaction to contribute approximately $50 million in credit enhanced balances late in the quarter. for a projected total of approximately $115 million in credit enhanced balances by the end of the fourth quarter. This compares to our prior expectations for $50 million to $100 million by the end of the fourth quarter this year. Looking ahead to 2026, we are currently comfortable with organic growth in credit enhanced balances of $8 million to $10 million per month right now. Quarterly SBA 7(a) loan originations declined 7.8% quarter-over-quarter and are up 68% year-over-year. The quarter-over-quarter decrease primarily reflects typical third quarter seasonality. Importantly, the recent federal government shutdown may impact FinWise's SBA lending operations in the following ways: First, loan approvals. While FinWise can work with applicants to prepare documentation and complete bank underwriting, all new loan approvals for the 7(a) and 504 loan programs are currently suspended. Second, loan closings. FinWise can close previously approved loans if there are no change actions requiring SBA approval, but some loan closings will be impacted until the government reopens. Third, secondary market sales. Loan sales require approval by the fiscal transfer agent, and this is currently suspended during the government shutdown. Loan servicing is not materially impacted by the shutdown, and we also do not anticipate the government closure will be detrimental to credit quality as FinWise does not need SBA approval for most of the actions we take in servicing and liquidation. While our SBA lending is impacted by the current government shutdown, this has happened in the past when Congress was unable to agree on budgetary matters. And FinWise was successful in managing its pipeline of loan applicants, loan closings and loan sales through similar periods. We continue to monitor the situation closely and remain focused on maintaining strong pipeline activity heading into Q4. During the past quarter, we continued to sell guaranteed portions of our SBA loans as market premiums remained favorable. We will continue to follow this strategy as long as market conditions remain favorable. That said, the current government shutdown may impact the amount of loans that we can sell in the fourth quarter. Importantly, our SBA guaranteed balances and strategic program loans held for sale, both characterized by lower credit risk, collectively represent 40% of our total portfolio at the end of Q3, underscoring the lower risk composition of our loan portfolio. Turning to credit quality. The total provision for credit losses was $12.8 million in the third quarter, of which $8.8 million is attributable to growth of credit enhanced balances in the quarter. This compares to a total provision of $4.7 million in the prior quarter, of which $2.3 million was attributable to growth of credit enhanced balances. As a reminder, the provision for credit losses associated with the credit enhanced loan portfolio is different from core portfolio provisions because it's fully offset by the recognition of future recoveries pursuant to the partner guarantee of an exact amount described as credit enhancement income in our noninterest income. Quarterly net charge-offs were $3.1 million in the third quarter versus $2.8 million in the prior quarter. For modeling purposes, we continue to believe that approximately $3.3 million is a good quarterly number to use. This level has remained consistent on a quarterly basis over the last 2 years, and it's in line with our expectations following the portfolio derisking initiative we implemented a little over 2 years ago. During Q3, only $3 million in loans migrated to NPL, bringing our total NPL balance to $42.8 million at the end of the quarter. This modest increase was mostly due to SBA 7(a) loans classified as NPL and compares to guidance on our prior call that up to $12 million in balances could migrate during the third quarter. The lower-than-expected migration reflects the team's proactive efforts in selling collateral, securing paydowns and receiving reimbursements on the guaranteed portions of SBA loans that have become classified. Of the $42.8 million in total NPL balances, $23.3 million or 54% is guaranteed by the federal government and $19.4 million is unguaranteed. Looking ahead, while we expect a gradual moderation in NPL migration as loans underwritten in lower interest rate environments continue to season, migration may remain lumpy. For the fourth quarter, we anticipate that approximately $10 million to $12 million in watch list loans could migrate to NPL. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results. Robert Wahlman: Thanks, Jim, and good afternoon, everyone. We reported net income of $4.9 million for the third quarter, representing a 19% increase from the $4.1 million reported in the prior quarter and a 42% increase year-over-year. Diluted earnings per share rose to $0.34, up from $0.29 in the previous quarter and $0.25 in the same quarter last year. These results reflect strong operational execution and sustained business momentum across our core segments. Our strong performance was driven by several factors, including a notable increase in loan originations and a significant rise in credit enhanced balances. These trends contributed to higher net interest income, reflecting increased average loan balances across both our held for investment and our held-for-sale portfolios. This was partially offset by the reversal of interest income on newly classified nonaccrual loans. We also posted solid noninterest income, largely driven by a substantial increase in strategic program fees and higher gain on sale of loans. As a reminder, for accounting purposes, credit enhanced income is an offset to the provision for credit losses on the credit-enhanced loan balances and net does not have an effect on net income. On the expense side, the increase in credit enhanced expenses is for the servicing and the guarantee on the credit enhanced loans, so reflects the growth in the credit enhanced loan portfolio. Excluding the credit enhanced expenses, we remain disciplined with our compensation and other operating expenses. Total end-of-period assets reached nearly $900 million for the first time in the company's history. This achievement reflects robust balance sheet expansion fueled by sustained loan growth and our disciplined approach to capital deployment. Average loan balances, including held for sale and held for investment loans totaled $683 million for the quarter compared to $634 million in the prior quarter. This increase included notable growth in strategic program loans with credit enhancements, commercial leases, residential real estate and owner-occupied commercial real estate. Average interest-bearing deposits were $524 million compared to $494 million in the prior quarter. The sequential quarter increase was driven mainly by an increase in wholesale time certificate of deposits, but we also had a modest pickup in other deposit categories, including demand, savings and money market deposits. Net interest income increased to $18.6 million from the prior quarter's $14.7 million, primarily due to an increase in credit enhanced balances and rates in the held-for-investment portfolio and the higher average balances in the strategic program loans in the held-for-sale portfolio, partially offset by higher average balances of brokered CD accounts. Net interest margin increased to 9.01% compared to 7.81% in the prior quarter, driven mainly by growth in the credit enhanced portfolio, offset in part by accrued interest reversals on loan migrating to nonaccrual during the prior quarter. As a reminder, the net interest margin can be affected by specific terms of each new credit enhanced loan program or by the mix of loan growth of existing credit enhanced portfolio. While generally, new credit enhanced agreements will expand the NIM from the current levels, some agreements could cause NIM to compress. In terms of a net interest margin outlook, for the fourth quarter, we could see some compression in the margin relative to Q3. This is primarily driven by the onboarding of a substantial volume of average balances through our new strategic partnership with Tallied. While this initiative supports overall revenue growth, the revenue contribution from these balances is bifurcated between net interest income and interchange fees. As a result, a portion of the revenue generated by this agreement will be captured in net interest income and a portion will be captured in noninterest income. As a portion of the economic benefit to FinWise will be captured in noninterest income, the resulting net interest margin from adding this program may be lower than expected. Looking beyond the fourth quarter, we suggest thinking about our net interest margin in 2 distinct ways, including and excluding credit-enhanced balances. When including credit enhanced balances, the margin is projected to increase, supported by the continued expansion of our credit-enhanced loan portfolio and strategic efforts to lower our cost of funding. This upward trend is expected to persist until growth in these balances begins to moderate. Conversely, excluding credit enhanced balances, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Fee income was $18.1 million in the quarter compared to $10.3 million in the prior quarter. The sequential quarter increase was primarily driven by the substantial increase in credit enhancement income, continued growth in strategic program fees due to stronger originations and gains on sale of loans. As noted earlier, credit enhancement income is fully offset by the provision for loan losses related to credit enhanced loans and increases as we grow our credit enhanced loan balances outstanding each quarter. Noninterest expense for the quarter totaled $17.4 million, an increase from $14.9 million in the prior quarter. The pickup was primarily driven by higher credit enhancement expenses, including the servicing and cost of the guarantees on the credit enhanced loans, reflecting the continued growth in the credit enhanced loan portfolios. Importantly, when excluding credit enhancement costs, operating expenses increased only modestly with the uptick largely concentrated in other operating expenses. This was mainly due to servicing expenses associated with the balance sheet programs of our strategic programs. The reported efficiency ratio is 47.6% versus 59.5% in the prior quarter. The decline was due mainly to the increase in credit enhanced fee income and gain on SBA loan sales previously discussed. Removing the income statement effects of the credit enhanced loans, a non-GAAP measure, the efficiency ratio was 59.7% versus 65.3% in the prior quarter, implying solid operating leverage in the quarter due to strong revenue growth and disciplined expense management. Although further improvement in the efficiency ratio may be less pronounced in future periods, we remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio. That said, there may be periods in which the efficiency ratio may increase. Our effective tax rate was 23.7% for the quarter compared to 24.5% in the prior quarter. The decrease in the prior quarter was due primarily to the increase in deferred tax assets related to restricted stock, increased allowances for loan losses and accrued bonuses. While multiple factors may influence the actual tax rate, we currently expect fourth quarter of '25 tax rate to be approximately 26%. With that, we would like to open up the call for questions and answers. Operator? Operator: [Operator Instructions] and our first question will come from Joe Yachunis with Raymond James. Joseph Yanchunis: So as you outlined in your prepared remarks, credit enhanced loan balances are going to exceed your year-end target, largely due to receiving the tallied loans. Given your outlook for credit enhanced loans, can you discuss what level of concentration you're comfortable with in your loan portfolio? Kent Landvatter: Yes. So some of the concentration policies, Joe, really are limited by percent of the portfolio by program. And I would tell you that they top out at about 15% per program. Joseph Yanchunis: Okay. That's per program, not for loan type. Kent Landvatter: That's correct. Joseph Yanchunis: And then can you talk a little more about the net reductions in FTEs and compliance and risk functions? I understand the percent of employees in these oversight roles remained unchanged, but is there any new systems that you put in place to automate certain functions to allow fewer employees to ever see more volume? Kent Landvatter: The employee right now, the number has dropped a little bit. It's not due to any AI or what have you in the system. It's just us being very disciplined about what we're doing here. However, we are analyzing as many other banks, our potential efficiency impacts from AI. Joseph Yanchunis: Okay. I appreciate it. And then just a couple kind of clarification questions for me. And forgive me if this has already been covered, but what is the difference between credit enhancement program expenses and credit enhancement guaranteed expenses? Robert Wahlman: So we're just being more specific. What was in previous periods referenced as credit enhancement expenses is referring to the actual amount that we're paying for guarantees on those credit enhancement programs. The other component piece that's included in the expense section but is not specified was not being included in what was previously described as credit enhanced expenses is a servicing costs related to those credit enhancement loans. But that's rather insignificant relative to the guarantee amounts that are being paid. Joseph Yanchunis: Okay. Perfect. And then just kind of last clarification question for me. You talked about some accrued interest reversals in the quarter. Can you quantify that impact? Kent Landvatter: Could you repeat the question, please? Joseph Yanchunis: The accrued interest reversals in the quarter that boosted loan yields and the NIM? Kent Landvatter: Yes. That was -- the accrued interest reversal during the period was about $175,000. So that is when a loan goes nonperforming, and we have to reverse the interest that had previously been accrued on the loan when it reaches 90 days past due. That was $175,000 in this quarter compared to $514,000 last quarter. Operator: Our next question comes from Andrew Terrell with Stephens Inc. Unknown Analyst: Just thinking about kind of net growth of the balance sheet into the coming year. Jim, I appreciate the guidance you gave around the credit enhance. That's really helpful. But should we expect the entirety of your loan growth going forward to come from that credit enhanced product or products? Or should we expect growth in any areas outside of that? James Noone: I think you'll see growth across the board, Andrew. I think that would be the primary driver, though. That's where you'll see the biggest tick up. If you look at our SBA portfolio, we've kind of been selling about as much production as we're putting on, on the guaranteed portions, at least in the last quarter or 2. You're getting -- in the equipment leasing, you see upticks each quarter. But yes, generally, the credit enhanced portfolio is where the meaningful growth on the portfolio side will come from. Unknown Analyst: Okay. Got it. And then you're going to outperform this $50 million to $100 million guide. It sounds like by the time we end this year. And if we kind of extrapolate the baseline you're talking of monthly growth for 2026, it implies just a little more than $100 million of credit enhanced growth in 2026. I'm just curious what could cause you to deviate either positively or even negatively versus kind of this established baseline we're thinking about for 2026? James Noone: Yes. So yes, we're looking at about $115 million by the end of the year, and that's above previous guidance of the $50 million to $100 million. So we're happy about that. Like you mentioned, we're currently comfortable with organic growth there, call it, starting January 1 of about $8 million to $10 million based on what we're currently seeing in trends. So what would cause us to outperform that? It would be an acceleration. There's 4 live programs today, Andrew, and then there's the fifth program coming online in December with Tallied. Of the 4 live programs, 2 have kind of good established trends month-over-month. I would say 2 are still kind of lagging as far as just growth. So if you have those 2 programs start to hit more of the stride, you could have upside. On the downside, I would say, really, if you have some material weakness in performance. When we underwrite these, we stress we stress them pretty highly, both with 50% and 100% stress on charge-off rates and then we look at high watermarks. But if we have meaningful deterioration in performance there and we have to stop originations for one of those programs, that's where you would see underperformance versus the kind of trend that we're talking about $115 million to start of the year and then $8 million to $10 million of organic growth monthly throughout the year. Unknown Analyst: Got it. Okay. And if I could clarify one on the expenses. I'm looking at the credit enhancement guarantee expense of $1.720 million in the quarter compared to in the adjustment section, you're breaking out the total credit enhancement program expense of $1.968. Is the delta of that what you're referring to is the kind the incremental servicing costs that I'm assuming would be kind of variable as this loan portfolio grows? James Noone: Yes, it is. That would be the difference. Unknown Analyst: Okay. And it is variable, so increases going forward? James Noone: The servicing cost is typically stated as a percentage of the assets. And so that will vary as the program matures and grows. Unknown Analyst: Yes. Okay. And so if I look at that, that was in kind of the other expense line in the third quarter that stepped up. It essentially implies the other expense stepped up $400,000 or so in the quarter. I'm just curious, any other specific drivers to the step-up in the other expense? I'm just trying to get kind of a clean run rate. James Noone: Well, the largest one that you noted there was the servicing expenses on these credit enhanced portfolios. The other changes that are included in there is deposits are higher. So we have a little bit higher FDIC deposit insurance assessment. And then just generally, data services and software costs are included in there that also increased. Operator: And we'll go next to Brett Rabatin with Hovde Group. Brett Rabatin: I wanted to ask a question on the credit enhancement. Some of the loans that you're adding through these programs are credit enhanced and some are not guaranteed. Can you maybe break apart the decision on what you're doing with the 2 pieces there and why there's 2 buckets? James Noone: Yes. So I think you're probably looking at the table on Page 5 of the earnings release, Brett. Is that right? Brett Rabatin: Yes. Yes. James Noone: Yes. Okay. So you've got 2 kind of sub-line items there under strategic program loans, one with credit enhancement, and that's the credit enhancement program that we've been talking about, and it's been a meaningful, starting to become a meaningful growth driver of assets in the portfolio. Without credit enhancement, those are -- you can call them like full risk retention programs that we have. We have 3 -- there's 4 active programs there. Most of them were retention programs that we've been active with really over the last 4 or 5 years. Those balances have been pretty stable. We talked in the last quarter or 2 about the fact that they may start ticking up here. And so you see them -- they were pretty flat in the June quarter versus the same period last year. But you did see them tick up a little bit, $3 million or so in this quarter. And we had talked about that. In that program, you're getting full yield, but you're taking full NCO exposure as well. And so with a few of our partners, we've got anywhere from 2% to 5% retention rates. So every loan that comes through that we originate at the bank, we will hold 2% to 5% of the receivable, and then we sell 98% to 95% of the receivable to an SPV or back to the partner. And then that loan balance will stay on our balance sheet through payoff or charge-off. And so we're capturing all of the yield. We're capturing all of the credit risk, but that it's been a fairly stable number. It's starting to tick up a little bit. And I think Kent, in some of his remarks over the last quarter or 2 has mentioned that we're looking at potentially growing that a little bit here. Does that help? Brett Rabatin: Okay. Yes, that's helpful. For some reason, I was thinking that you guys were going to transfer those programs into the strategic with credit enhancement. And so those balances were going to go down instead of up. That makes sense. James Noone: Yes, difference [indiscernible]. Brett Rabatin: Right, right. Wanted to ask, you mentioned the margin down in the fourth quarter with continued derisking. Can you maybe talk about the -- how much you're expecting? And then when I look at the CDs that cost $422 in the third quarter with rate cuts, I'm wondering if the CD book might be an opportunity on the margin. Kent Landvatter: Sure. Let me tackle that one. So what I was referring to in my comments was that we have Tallied coming on and during the fourth quarter, late in the fourth quarter. And Tallied is a little bit of a different structure of transaction where the revenue is in part related to interest income, which is a -- which is going to be only part of the revenue we collect from it, and then we're also going to collect from that portfolio, the additional fees, the Interchange fees, thank you. So depending upon when that program comes on and how quickly these other programs continue to wrap up, that could result in a little bit of a toss-up in regards to whether we end up with margin increase or margin decrease during the fourth quarter. Brett Rabatin: Okay. That's helpful. And then on money rails and payments, do we have to wait to January for some, maybe some thoughts on potential revenue in '26? And if we do, okay, but I was hoping for maybe any early color you could give? And then just particularly money rails and payments, just maybe any pipeline on potential partners from here? Kent Landvatter: Sure. So as far as cards go first, we just announced DreamFi and Tallied. We actually expect DreamFi will generate some deposits for us in latter half of 2026, especially. But also, we have the standard banking behind that. So we would be moving money back and forth on money rails with them. We also have additional partners that are -- that we expect to generate not only deposits, but money rails fee income as well as some BIN opportunities as well in the pipeline right now. So does that answer your question? Brett Rabatin: Yes, that's helpful. And then just -- I don't know if you want to give any kind of early thoughts around potential revenue magnitude, but that would be helpful as we think about the coming year. James Noone: I don't think we're ready at this time, but what we said before is it will become more meaningful in the latter half of '26, and we think you'll get more of a steady state in '27 that's more predictable. But as we get more information here, we'll share that with you. Brett Rabatin: Okay. Last one for me, just around expenses. And you mentioned earlier that AI was not a driver for 3Q. But I know 36% of your FTE count is in compliance, IT, et cetera. Is that an opportunity you guys think over the next year? Kent Landvatter: That's a great question. The way we kind of think of it is we have built a platform to continue to launch partners. And we really don't look at it in terms of headcount reduction. What we do look at it as is the ability to moderate headcount, especially production-related headcount as we grow. And so that's really where we see the lift there because we do have a lot of requirements and oversight and so forth that we think we're rightsized there, but future growth is where we see the opportunity. Operator: And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Parmjot Bains: We're using our new ImpediMed Investor Hub to host the webinar, and I'm pleased to be here with McGregor Grant, our CFO; and Scott Long, our SVP of Sales. We'll be referencing the 4C quarterly activity report and presentation we lodged this morning with the ASX. The presentation is a summary of the more detailed 4C. After our remarks, we'll be taking your questions. [Operator Instructions] A couple of opening remarks. I've just returned from 2 weeks traveling through the U.S., managed to get a cold, hence the voice is a bit weak. I've spent much of the time in Texas meeting with customers and potential customers in lymphedema, heart failure and in body comp. It's always been reinvigorating meeting with the clinicians who are using SOZO with their patients and also seeing the opportunity that is created through the lymphedema business to extend into other indications. The demand for SOZO and the value it generates for patients and clinicians is clearly very evident. I was especially encouraged by the heart failure meetings and the feedback we received for SOZO PRO and the level of information that the new device provides. And I think also what's happening with body comp in the United States is nothing short of astounding. We just don't have anything like it happening in Australia, although I say that yet. From med spas to longevity and hydration clinics, the entire space is exploding on the back of the GLP-1 drugs with many of these clinician -- clinics now prescribing GLP-1 drugs to provide weight loss management services with customers. It's something we'll talk about, but it's clear that ImpediMed has a bright future with lymphedema, heart failure and body comp. So let's move on to the presentation and begin on Page 3 with a quick overview of the agenda for today's call. Great. So we'll start with a business overview, including the key highlights and then take you through the updates for the 3 initial business segment updates. Scott Long, our SVP of Sales, is on the call, as you can see, to provide his perspective on the first 6 months at ImpediMed. I'll then hand over to McGregor to present the financials. And to finish, we'll cover the outlook for the balance of the calendar year before commencing the Q&A session. Now turning to Page 5. One clear insight that was reinforced on my trip for the last couple of weeks was the value proposition that the SOZO Digital platform provides. We have a best-in-class product that provides valuable patient information for clinicians. Clinicians find it quick and easy to use. And in the larger hospitals, they continue to add new devices across departments with different use cases. And we expect that will only continue with focus and effort. We're in a unique position. We have the only device of its type, a best device with multiple FDA clearances across the applications and have invested in the device so that it stands apart from the competition in terms of FDA clearances, its accuracy, usability and applicability. We have now over 600 devices now across the U.S. health care system, including SOZO is in 18 of the top 25 U.S. hospitals. And it's not just about the validation that this provides, but also the ability to leverage these relationships that we have built and leverage the time and effort in meeting the requirements for the security of patient data that enables us to extend the product. It's easy to underestimate the processes required to become established in these hospital systems. Getting a device approved at a hospital isn't quick. There's legal contracts, budget and IT approvals, and it can take months. But once these are completed, adding a second or third device within the hospital system is a much faster process because these hurdles have already been cleared. That's an exhaustive process. But once done, it applies to secondary devices in that hospital or other hospitals within the system irrespective of the application, i.e., lymphedema or heart failure or body composition. And we have multiple MSAs and master service agreements that open up the potential for expansion in over 1,500 related hospital networks. That's a big advantage. The opportunity for us is to leverage everything we have done and maximize the revenue across the cost base that is largely set. And thankfully, it's happening to coincide with some of the fastest-growing thematics in health care, cancer survivorship, GLP-1 therapy and the growing cost of treating heart failure. I remain very positive for the long-term outlook of ImpediMed. Now turning to Page 6, we will touch on the key highlights for Q4. So financial metrics, they remain positive, and I'll let McGregor go through the metrics in detail later in the presentation. Reimbursement. Now this was clearly the standout for the quarter. Reimbursement is absolutely critical for the success of U.S. med tech companies. And since June 30, we have seen a reacceleration of payers updating their policies to include BIS as medically necessary. In the last quarterly, we mentioned a large player commencing coverage. Since then, we've announced another top 10 player publishing positive policy. And even more recently, another 4 Blue Cross Blue Shield plans have updated their policies to include BIS. To put this into perspective, since the 30th of June, states with over 80% coverage have jumped from 25% to 42% and states with over 90% coverage has almost quadrupled from 7% to 27%. These -- and these aren't small states. The top 9 states in population in the United States now have more than 90% coverage. These changes are recent as we expect they will have a positive impact on sales over the coming quarters. In terms of sales, overall unit sales were up on the quarter prior, but U.S. sales were softer than we had anticipated. Even deep into the quarter, we're expecting a closer result to what we produced in the last quarter and in line with our own internal forecast. We track the opportunity through the process and a number reached the final sign-off, but were then held up, not denied, but not approved yet. Some have come through post the end of the quarter and some are still sitting on the CFOs and purchasing managers' desks. We do expect to see a bounce back this quarter, and the team is working hard to deliver. We've also brought Scott Long, our SVP of Sales to the call, and I'm looking forward to introducing Scott shortly to give you his perspectives. Now I'm going to touch base on the 3 applications for SOZO, lymphedema, heart failure and body comp. So first, over to the breast cancer-related lymphedema. I've touched on a number of these points earlier in the presentation, so I won't go through them again. But what I want to do is take away for you is that lymphedema is primed for growth, and we remain very optimistic about the opportunity. And what I'd like to do now is introduce Scott Long, our SVP of Sales. We were really pleased to have Scott join ImpediMed. He brings with him over 30 years of experience in breast cancer medical devices and with that, a deep understanding of the space. He spent his career building strong relationships with breast surgeons and he is used to working with sales teams in smaller companies. This means he not only knows how to get results, but he's got a great network of top-tier sales talent. I've asked Scott to talk about what he's seeing at the call phase as well as his first impressions of SOZO, the opportunity, the team and why he's optimistic. So Scott, over to you. Scott Long: Thank you, Parmjot. And thanks, everybody, for having me on the call, I do appreciate it. Just a little bit about my background. As Parmjot mentioned, I've got 30 years of experience here in the breast cancer field, working primarily in early-stage start-up companies, a number of them that eventually had successful exits. In addition, my big company sales management experiences with Ethicon Endo-Surgery, operating division of Johnson & Johnson and Hologic. So I feel like I bring a unique perspective to the company. As Parmjot mentioned, as a function of having been around for as long as I have, I have not only quite a network of physician friends that I've accumulated along the way, many of whom are either already our customers or are on the way to becoming our customers, but I also have a network of industry colleagues that I've worked closely with through the years. One of them, Lisa Prom, as everybody probably knows, is one of our cornerstone people here at ImpediMed. So what I've gleaned from my 7 months on board with the company now is that we've got a great opportunity at hand here. As Parmjot mentioned, we've got one-of-a-kind technology. We have no commercial competitor. We have a growing reimbursement network, and we have societal guideline support. So those are unique attributes that most companies don't really have as they go into their competitive markets. As she also touched on, this is a multilayered sale that involves various aspects of the hospital, different stakeholders, oftentimes siloed stakeholders that don't readily and often communicate with one another. So it is the very definition of a complex sale. And as a result, it does take quite a while to get these deals over the finish line. All that said, we have also some great work on Lisa Prom's part with our master service agreements. So we have an opportunity here as we enter into those systems to go deep into those systems. And I think as a result, once we get our foot in the door in those systems, I think the opportunity for us to sell 10, 15, 20, maybe even 30 devices is very real. Now upon coming into the company, the only person I knew here from my past lives was Lisa Prom. So I had to sort of size up the sales talent that I inherited here. And there were some really excellent people here, not just Lisa, but Adam Brown comes immediately to mind, and there are some very good, stable, solid people. We did have some holes and some weak links as we deem them to be, and we made some quick replacements and upgraded the profile of our sales team. We brought in 3 individuals that I had worked with previously, all of whom are A-List players in the breast cancer field, the oldest of which at this point has only been on board with us for 4 months. The newest has been on board less than 2 months. So they haven't yet really started to contribute the way that I know they will in this upcoming quarter, but I think that's one of the big opportunities for us. One of the things that was critical to me to do was to really change the culture of the sales organization and get people that were very results-oriented, very successful track records, people that were very positive, optimistic, self-starters and people that really wanted to be part of a winning team. We want to stabilize our sales team here. We've had an issue with turnover of key players in the past, some of which were very good players. We're going to bring that to a stop here under new leadership, and I'm very, very optimistic we can do that. As far as the market opportunities themselves, as Parmjot touched on, breast cancer-related lymphedema is a platform that I believe will grow steadily over time. And I think over time, it will be a tremendous business for the company that we can all look back and be proud upon. It's really the legacy of the company. Body composition is very exciting. There's this new emerging area called exercise oncology, that's garnering a lot of podium time at breast cancer meetings. So I think we're uniquely positioned to capitalize on that. It's a more competitive marketplace, but we've got best-of-breed technology. And although we don't have a CPT Category I code in that area, I think there are ways around that, and we've been creative in putting forth programs that I think the market will readily adopt as we get a little further into this. We're still very much in our infancy with Adam Brown heading it up for the company. Last but not least is heart failure, which -- certainly cardiovascular medicine is part of my background. I had a 7-year stint in CV medicine before I got into breast cancer care. And I think that SOZO PRO is really uniquely positioned to really have an impact and help heart failure patients everywhere. I think it's really going to be probably the greatest value driver for the company over time, and I think it will benefit patients, our employees and our investors alike. And I'm really looking forward to what I think the next couple of years will hold within the heart failure franchise. Parmjot Bains: Brilliant. Thanks, Scott. That was very comprehensive. So we go to Slide 8. Brilliant. We're just finishing up breast cancer awareness month. I think tomorrow is the last day. But around the world, there's such a coordinated effort to increase awareness around breast cancer and also breast cancer-related lymphedema and the side effects of breast cancer treatment. We continue to engage in activities that support our clinicians and help drive awareness of breast cancer and the longer-term challenges for survivorship, which include lymphedema, but also high-risk patients in body composition. This quarter, we attended several conferences that coincided with Breast Cancer Awareness Month, and we also participated in a number of events where clinicians hosted some very well-attended webinars, one of which was really focusing on the Lymphedema Prevention Program along with body composition by Dr. Weintritt, which is part of the U.S. Oncology Network in Virginia. These activities not only support our clinicians, but they also help raise awareness for SOZO and generate leads. Now turning on to Page 9, which is really around heart failure. It's one of my -- the focus areas of my recent trips to the U.S. and the meetings went extremely well. And I returned back to Australia, not only with a cold, but also knowing that the opportunity was very large. The data that we've had from recently completed investigator-led clinical trials has reinforced the clinical utility of SOZO through the potential to manage fluid levels as well as body composition within heart failure and was very well received. As I mentioned in the last quarterly, heart failure is one of the biggest issues that health care systems face. It affects over 64 million people globally, and it's one of the top causes of hospitalization. It's not just a clinical issue, but also places a significant burden on health care systems because of complexity of care, high readmission rates, costs and a sheer volume of patients involved. Each U.S. hospital readmission for heart failure costs between $10,000 to $20,000. And talking with clinicians across the U.S., some of these readmission rates can vary from 10% to up to 30% of patients that were discharged. A lot of hospitals are looking to see how they can address this and SOZO has a really great fit and opportunity. We have FDA clearances in place. SOZO is the only product of its type that can be used with patients with cardiac implantables. It fits into the standard model of care. So all of these heart failure patients will come into a clinic and get a weight. The new SOZO Pro has a built-in weight scale, so it can -- SOZO can actually fit in the pathway of care and the data can be integrated into EHRs for clinician review. There is Medicare coverage and private reimbursement available in some key states, and that's been the area of focus for the visits and the early pilots. We have a couple of investigator-initiated studies underway in the U.S. already, both exploring key heart failure markers alongside SOZO measurements to give us even more data to help support clinical adoption. And we're also looking at how we can increase this payer coverage. We're initiating key commercial pilots in the U.S. with key clinicians across different sites of care. And by that, I mean the inpatient, the outpatient and the private cardiology clinic. Now if I move on to Page 11 (sic) [ Page 10 ] of body composition, which is the other area of focus. So U.S. go-to-market activities have commenced with 2 new dedicated body compositions reps. We've initiated active sales with our current product offering. Initially, we talked about oncology as a natural adjacency and Scott referenced the exercise oncology space, and that continues to be a focus. But we're also looking at how we can leverage SOZO's unique position within hospitals to support clinically managed weight loss and cardiac rehab guidelines. What makes this especially compelling is our unique position in the market in terms of being the only BIS declared device at a time when leading medical societies are specifically calling for muscle mass monitoring during pharmacological weight loss using BMI -- using BIS rather than purely weight for BMI. Although we've highlighted the TAM on the slide to be just body composition [ analogs ] for U.S. health care and clinical market, we see a much larger opportunity being in the wellness market, which is the medical spas, longevity clinics, hormone replacement clinics and hydration clinics, which -- many of which are prescribing GLP-1s. My time in the U.S. was eye-opening. There was generational opportunity emerging around the rise of these weight loss drugs and the sheer number of facilities now prescribing and needing to manage muscle mass and body composition. We've begun a measured expansion into this space, assigning 2 dedicated sales resources to build out the market. And over the next couple of weeks, the team will be attending a couple of key conferences, including MedSpa Pro in Florida and the Lifestyle Medicine Conference in Dallas, and we'll gather early feedback from customers in terms of how we accelerate our go-to-market approaches and also the needs whether or not we need to optimize our current product outputs. In terms of feedback from the market, both in heart failure and body composition, the outputs that we provide are actually enough, particularly in heart failure space, but we're always looking to get feedback from customers. Now I'll turn the presentation over to McGregor, our CFO, to go through the financials. So McGregor, over to you. McGregor Grant: Yes. Thanks very much, Parmjot. So starting on Page 12, as Parmjot mentioned, the financials remain positive. Financial discipline continues to be a core of the business -- core goal of the business, and the company maintains an ongoing program of cost control as part of the target to reach cash flow breakeven. We continue to adjust our cost base as required. The previously announced one-off payment for key electronic components impacted some of the metrics this quarter, along with the continuing strengthening of the Australian dollar relative to the U.S. dollar. The company reported an operating cash flow of $5.6 million for the quarter. This number was inflated by the previously announced one-off $1.2 million (sic) [ $1.1 million ] payment for the electronic components that was originally planned for quarter 4 FY '25. Cash receipts from customers for the quarter were $3.4 million, down on the $3.8 million reported last quarter due to the timing of receipts. We expect this number to increase consistent with the overall growth in revenue. The company's cash balance at 30 September was $23 million, equating to 4.1 quarters of operating cash flow. Excluding the one-off payment, the normalized quarters of operating cash flow would be 5.3 quarters. With the expected increase in receipts from customers, the receipt of the company's R&D tax offset and no recurrence of the one-off payment, Q2 operating cash flow is expected to be approximately $3 million. As previously mentioned, the strengthening Australian dollar relative to the U.S. dollar, resulting in an unfavorable impact on cash of $700,000 as well as unfavorably impacting other items such as annual recurring revenue. We turn over to the next page, TCV and ARR. TCV for the quarter reduced from the record $6.3 million to $4.7 million. The reduction was a result of less devices sold in the quarter and a smaller number of contracts up for renewal compared with the larger number renewed in the previous quarter, which we had mentioned at that time. We continue to be very pleased with the quality of accounts initiated or renewed in the quarter, together with the continued solid price increases on renewals, averaging 10% for the quarter. As indicated, churn remains low below 3%. As we know, the ongoing sale of new contracts translates to growth in annual recurring revenue. Contracts in place at 30 September '25 are expected to generate core business annual recurring revenue or ARR of $14.4 million for the 12 months to 30 September 2026. That equates to a 24% year-on-year increase and a 3% increase on the prior quarter. The stronger Australian dollar reduced the increase in ARR as the FX effect is applied to the whole balance. Now turning to Page 14. Revenue for the quarter was a record at $3.6 million, up 33% year-on-year and 9% on quarter 4. This was despite the U.S. revenue result being affected by the impact of the Australian dollar. And Rest of World revenue was up significantly as a distributor reordered inventory at the beginning of the quarter. Cash receipts from customers of $3.4 million, significantly up on a year ago, but down 11% quarter-on-quarter. The reduction from Q4 was largely due to timing of customer receipts, as I've mentioned. And as previously stated, we expect to see this number increase in the coming quarters as our revenue grows. On to Page 15. Parmjot and Scott have already discussed sales. Testing continues to trend upward, up 4% on the prior quarter with a 3-year compound annual growth rate of 16%. We continue to monitor testing numbers closely. Program health is essential to patient outcomes and essential for renewals, so they remain a priority for the company. Like many things in this business, patient testing growth rates are also correlated to levels of reimbursement. As reimbursement increases, we believe the frequency of patient visits will increase until they more closely match the protocol used in the PREVENT trial. This will result in increasing patient testing growth rates over time. I'll now pass back to Parmjot to wrap up before we go to questions. Parmjot Bains: All right. Thanks, McGregor. Last quarter, we set the goals for the first half of the year and overall, we remain on track. The sales for BCRL were behind our expectation. But as I mentioned, we expect them to rebound this quarter. Reimbursement is ahead of expectations with 6 new payers reimbursing, and we've set ourselves a new target of 100% reimbursement for breast cancer-related lymphedema. Heart failure and body composition are on track, and we're working hard to progress these opportunities rapidly and convert them into early sales. We'll do this while driving our financial discipline and constantly refining our cost base. Now we'll open up the webinar for questions. Unknown Executive: [Operator Instructions] we will endeavor to get through as many questions as possible. If we don't get answer your question, then we'll follow up offline. The first question comes from John [ Hardy ]. And John's question was, what steps are you taking to increase sales and reduce costs? Breakeven seems to be unachievable on the current trajectory. What is your plan to raise more capital? Have you explored interest in the sale of the company? If so, what result? If not, why not? Parmjot Bains: Yes. Thanks, John. So I'll pass McGregor -- that question to McGregor. McGregor Grant: Sure. Thank you. Thanks, John, for your question. Look, everything we've done to date has been about increasing sales. As you saw in last quarter's presentation, we've started by building a pipeline of leads and opportunities. You can't accelerate sales without growing these opportunities, and we've invested in systems and in our marketing that is now well developed to support that. As we know, reimbursement is key. We need critical levels of reimbursement across the states. That's taken time, but we are seeing that come through now strongly. Regarding breakeven, clearly, on the current trajectory, that's a challenge. We need to see sales accelerate, and we're confident that that's what we're going to see. We have no plans to raise capital. And if you look at the current numbers, the operating cash flows are running at over 4 quarters. And with the expectations that we've just communicated, next quarter, we should see that increase. We have supportive shareholders and the message that we get is to focus on sales. So that's exactly what we're doing. There are no plans to sell the company. We think the company is undervalued currently. Not many companies have the kinds of opportunities that we have in front of us in terms of FDA approvals, large markets, growing reimbursement. And at this stage, we just do not think that's in the interest of shareholders to pursue that. Unknown Executive: Thank you. The next question comes from Paul. Read the new areas of expansion, heart and wellness, how much investment do you see that requiring? Parmjot Bains: So I'll take that question. Both heart and wellness, the product exists and the data is there to basically go out and capture that market opportunity. So really, the investment is just getting out to the customers and out with the field force. So we've already done a measured expansion into a couple of body composition reps that are focusing on driving those sales and adoptions underneath Adam Brown who is one of our existing reps in that space. Heart failure, we are currently working on very small clinical pilots to drive adoption in a couple of key states. And then we'll reassess that, but it will need to be done. And -- so it will be around sales team growth. But we are working on that go-to-market model for how we capture that cardiovascular market opportunity, which may include partnerships or other ways of capturing that growth with probably minimal investment. So from a product perspective, we really don't see a lot of need for investment. If there's additional data required, we are generating it through investigator-initiated grants, which generally are funded by investigators and we provide the device. Unknown Executive: Thank you. Question from Ian. Cash receipts have fallen for 2 quarters in a row. Can you provide details as to why with sales renewals increases this has occurred, particularly since previous quarter had a record TCV? Parmjot Bains: I'll pass that to McGregor. McGregor Grant: Yes. Thanks, Ian. The answer to the variation in receipts from customers is down to timing. We've looked very closely at that. Some customers pay for a significant portion of their contract in advance and others pay over time. So it is ultimately a question of timing. Internally, we also track days sales outstanding. That metric continues to improve, which gives me confidence that overall, we're managing our receivables correctly and well, and that receipts from customers -- therefore, the fluctuation of receipts from customers really is just a function of the timing of invoicing and payment and the nature of invoices. So we have seen variation in mix from quarter-to-quarter, which is the result that you see. Unknown Executive: Next question comes from John. Has the Board considered listing on NASDAQ where the market has a better knowledge of how to value a tech business such as IPD? McGregor Grant: I'll take that. So yes, John, thanks again for your question. This is something that has been discussed in the past. The issue with U.S. markets, you need to be considerably larger than we are to attract the kind of interest that's necessary. There are many Australian companies that have tried that with limited or no success. We have a very supportive shareholder base here. And when a med tech company like ours starts to perform, the share price performance can become very meaningful. So it's not something we're considering at this time. Unknown Executive: Thank you. Next question comes from [indiscernible]. He has 2 questions. Good to see ImpediMed progressing well with the expansion of SOZO. These expansions, including body composition and heart failure being 2 such examples. Can you please confirm if there are further proposed SOZO expansions into areas such as sarcopenia and frailty screening, pediatric growth and fluid disorders, liver disease and pregnancy monitoring, just to mention a few. If expansion beyond body composition, heart failure and lymphedema, how challenging would hardware and software be? And the second question, it would seem that the expansion potential for the SOZO device and software platform are numerous, which could add significant opportunities moving forward. If the organization has addressed the potential for SOZO expansion beyond the current capabilities, how cost prohibitive, if at all, would it be to affect the necessary hardware and software changes? Parmjot Bains: Okay. Great. Thanks for your question. So sarcopenia and frailty come under body composition and also in heart failure and are definitely on our radar and our device can -- does actually measure that. One of our clinical sites that's using it for heart failure is actually measuring frailty under the frailty index for heart failure patients. And we've got clinicians in NYU using sarcopenia and frailty as they look at doing transplant patients. So it's definitely there under the radar, and we are working on how we kind of tweak or adjust the outputs on the SOZO software to do that. Pediatrics was difficult and we've kind of -- we keep an eye out on other opportunities like venous insufficiency and end-stage renal disease. But as a very small business, we have focused and prioritized ourselves on lymphedema, body composition and heart failure based on the major trends that we're seeing and the likelihood of clinical adoption within the U.S. health care system. In terms of these growth opportunities, hardware and software aren't limiting factors. The devices now already exist. SOZO is a current device and SOZO PRO is a new device, both are now in the market and are being used and adopted. So we don't need any devices. From a software team perspective -- or software perspective, we don't actually need any new applications. We've already got these software screens developed. We have a new Head of Product, our Chief Product Officer, Scott Savage, who joins us from a very long history at Google and Mable and ResApp more recently, and he has built a recreate mindset and capability around any software development that we need in terms of streamlining and accelerating that. So really don't -- we're not aiming on investing a lot of work on software development. Really right now, it's just tweaking and refining the outputs with the team that we've got and the data that we've got. So hopefully that answered questions. Unknown Executive: Next question from Peter. Every day, there are thousands of decisions made by caregivers as they receive breast cancer survivors, whether to SOZO test or not. If each of these daily decisions will be determined whether our company's success, it should be. Therefore, for shareholders needing to understand how well the company will do, it is some baseline tests completed and the sum of the follow-up tests completed is the most important indicator of the future for our company. Can you please share the number of baseline and number of follow-up tests this last quarter split into U.S. and the rest of the world? And can you commit to providing this on a continuing basis? McGregor Grant: Yes. Thanks, Peter. Look, monitoring patient numbers, as we've mentioned, is a very important part of what we do. And -- we monitor very closely, and it's really tied into monitoring the health of the programs that our customers are deploying, which we call our Lymphedema Prevention Program. And so our clinical sales specialists work very closely with our customers to -- once the devices are installed, get the first measurement and then to monitor progress against the protocols. And as the reimbursement improves, we will see hospitals continue to develop and implement and comply with these protocols, and we'll see an improvement in the overall utilization of the devices. It's the information we track internally and the slide that we provide gives a very good idea of how overall measurement use is growing. Unknown Executive: Thank you. A question from Tom. Scott, how long for your team to hit their strides? And do you have a target of U.S. units per quarter? Scott Long: Yes. Thanks for the question, Tom. As I mentioned, we are in the process of building out our team, and it always takes time even for highly pedigreed experienced people with relationships in their areas to really start to hit their stride. So it will be a little bit staggered as a function of when people have come along and when we get them up to speed. But I think -- in round numbers, I think it's realistic for people to land in that 8 to 10, perhaps even 12 on the upside number for devices sold per quarter. I think that's a reasonable target. I think it's achievable. It may take a quarter or 2 to get there, but I'm confident we can. Unknown Executive: Yes. Thanks, Scott. A question from Paul. Read all the new areas of expansion, heart and wellness, how much investment do you see that requiring? Parmjot Bains: So heart and wellness, heart failure, really, as noted, it's going to be around field force and getting reps out to the market. In terms of heart failure, we are doing, as I said, measured commercial trials because there's already reimbursement coverage, Medicare coverage, Medicaid coverage. Many of these heart failure patients are over the age of 65 and are generally covered by Medicare, Medicaid across the United States. The clinical data already exists. We know from previous study that was done by the organization that -- there is a measure that we call HF-Dex which is a measure of extracellular fluid over total body water, which is high in heart failure patients. And a number over 51 has a fourfold increase -- likelihood of readmission and that we have also shown that our HF-Dex is twice as sensitive as weight, which is really kind of one of the key measures that's used to date in terms of managing or decompensation for heart failure and decondition for heart failure. So the data exists. We've checked it out and validated it with the cardiologists and have had a number of discussions with the teams around that. The reimbursement pathway exists. What we are doing now is just starting the commercial pilot. So from a heart failure perspective, I think we've got what we need. There's always opportunities to add more data, and we're looking at investigator-initiated trials to do that and also talking with payers to see where we don't have some payers covered, how can we get that extended in partnership with a number of clinicians who are very, very interested in using the device and actually reached out to us around that. In terms of the body composition space, we're looking at building this out and building out the teams. A lot of our existing reps already called in that space. So within the hospital space, it's about taking that current sales force and moving into the next department. So taking on those adjacencies, both lymphedema [indiscernible] bariatrics, weight loss and other clinics. In terms of that med spa and lifestyle medicine space, that's where we've put the additional dedicated reps. A lot of these are actually large chains in the United States. And so really, it's not about going out and targeting the one-to-one kind of individual clinics, but really looking at these kind of corporate deals. And so the attendance of these conference is actually critical, particularly these ones that are coming up over the next couple of weeks to really look at how we build up those relationships and do that fast. So it's a big area of focus for us. In terms of product, I noted we don't actually need to do anything else with our product. We've got a great product. The software already exists. We will continue to kind of tweak some of these measures, particularly as we look to get that sarcopenia indication and make sure that we continue to differentiate ourselves in the market. But that's really leveraging the existing software team that [ re-exists ]. Unknown Executive: Thank you. Another couple of questions for Scott. I'll take them one at a time. First one, as a result of receiving greater than 90% coverage in the 9 largest states, can you speak of, one, likely improvements in the efficiency of customer conversion, e.g., the number of sales visits required before conversion; and two, the likely percentage of customers signing from their own inbound inquiry versus your sales team outbound sales? Scott Long: Yes. I think, look, the improving reimbursement landscape certainly is a bit of wind in our sales. It's very helpful. In the end, is sort of a supplemental question that the hospital needs to do their own due diligence on and decide the value of it. And what I mean by that is that the sale, first and foremost, is really a clinical sale. The clinical stakeholders have to believe that lymphedema is a legitimate problem in their facilities. It's one that they want to address, and they want to make sure they validate our technology as the best solution to address it. That's really kind of the long pole in the tent in terms of how long everything takes. Reimbursement, certainly having it does retire a key objection, but I don't know to what degree that will accelerate sales. It certainly won't hurt, but it's hard to put a value on how much and how fast it will accelerate the process. And I'm not sure I caught the second question. Unknown Executive: No, I haven't given it to you yet. So it was a follow-up from Andrew. Is that 8 to 12 units per sales exec? And how many sales personnel are there now? Scott Long: Yes, that would be the number that we're going to shoot for each one of our people. Right now, we've got 8 people. We have 2 openings. We did have the loss of a key person who've been with us for 6 years, our Denver-based [ Rocky Mountain Kae ] just a couple of weeks ago. We have a strategy in terms of how we're going to cover that area. We do have a Southern California candidate in the queue that we like. Parmjot actually just got done interviewing him within the hour. So hopefully, we'll have that key slot filled here before too long. And then we've got one more opening we need to fill. Unknown Executive: A question from Ian. As Texas has now broken 80% reimbursement and McKesson's are based there. Any feedback on activity there and also with IDNs in general? Parmjot Bains: Absolutely. So let me answer this one. So absolutely, U.S. oncology is kind of one of our key customers in the U.S. health care landscape. And we actually have Lisa Prom as coordinating all of our U.S. oncology activities. We are attending the McKesson Accelerate Conference next week. So we are going to be presenting at the U.S. oncology at this conference. And they have a program that they have initiated around managing the high-risk patient. And so the SOZO product, both in terms of lymphedema and body composition fits really well. That webinar that I highlighted in the presentation deck was actually given by U.S. oncology surgeons and the PA who manage this high-risk patient population. In terms of Texas, it is one of the biggest U.S. oncology areas and one of our top sales reps focuses on the Texas market. So with the addition of the Blue Cross Blue Shield provider that has now provided coverage, we are getting a lot of positive momentum in that market. And this is a market where reimbursement does matter. And we are seeing that. I was actually -- have been in Texas for the last couple of weeks ago and meeting with these surgeons. And so this -- they're in that program where they need to see that adoption and that reimbursement come through for them to grow out and expand that opportunity, but very much an area of focus with a dedicated project manager of the organization and also a dedicated key accounts executive, Lisa Prom, our most experienced exec taking the lead on getting those sell through. In terms of the other IDNs, we had -- as noted in the deck, we've got a couple of additional MSAs. We've got 27 in total. A couple of them like Ascension combined and Indiana combined with Indiana reimbursement going up to 90%, along with an amazing new rep, Julie Davis, gives us a lot of cause to be very optimistic that we will be able to get out there and drive sales. But I might just let Scott add in. I think you probably got the same, right? A lot of these IDNs are starting to come on board. We got some big ones sitting there where they've got 1 or 2 devices and really we just need to kind of grow. But I don't know, Scott, do you want to add? Scott Long: Yes. No, you're right. I think you referenced Ascension, Julie Davis had worked with me with the past company where she did a really nice job in Ascension facilities throughout the Midwest, particularly in her home state of Indiana. I do think we also have a big opportunity out in the Western U.S. in the Intermountain Health area, where we've got 1 device in play right now, pending a successful implementation and associated reimbursement. We have every expectation that we can grow that number to double digits, perhaps within the next quarter or 2, certainly before the end of the fiscal year. So I think the key to our success is going to be really going deep into those IDNs where we have MSA agreements. Again, Lisa Prom has done a masterful job of providing us with that entry point, and it's really a sales execution issue now. Unknown Executive: So a follow-up on the same topic. While it would not be the same for all, what is the level of cover that IDNs look to, to start their programs? Parmjot Bains: A lot of MSAs have been started without the coverage, right? So high level of coverage. And so -- because a lot of it, as Scott said drove around clinical need and clinical adoption. But what you find is that when you're at the call phase, there are those IDNs that -- these assessments go to a value committee, right? And so they do look at that reimbursement and they do look at the financials coming in. And we're not hearing a lot around the cost in the U.S. health care system and if there's an impact, but it does matter. And so that reimbursement does matter. They will vary on what they're doing. But in terms of when we start to see outreach from clinicians, particularly around some states like Texas, they are -- when the reimbursement change, we got the outreach, more outreach. So it kind of varies, right? I might leave it at that. Unknown Executive: Okay. A question from Gary. Do you have a value of the number of units in the sales pipeline? Parmjot Bains: We did put that out last quarter actually, and didn't come in this one. It's over 700 in the opportunity pipeline. We didn't actually put it out this current quarter. So we do track that very closely. And the goal for us is to get those opportunities converted to sales a lot faster. And that's been the big area and Scott is out in the field most days, helping the team get that over there. And so just in terms of the ones where we've got active opportunities under management, that's high. And then as we noted in this current 4C where we've got these IDN networks and master services agreements in place, they represent over 1,500 devices that can be put into these systems. So the opportunity is there and the opportunity is large. It's a matter of trying to accelerate this execution with the new sales team, with this higher reimbursement coverage and some more urgency of action. Unknown Executive: And just a question again from Paul. You mentioned that sales can take time. Respectfully, you highlighted this a number of quarters ago and that the time line seems to be extending. As a shareholder, this is concerning, how many more quarters do you believe we need to wait and see meaningful sales come through? Parmjot Bains: We started to see adoption and pick up. And so we were looking at this quarter, like the previous quarter, we had record number of sales and record number of TCV in the U.S. system. We actually thought we were on track to get the same and continued growth. And I think as Scott has highlighted, with the new reps, we will -- we are expecting this to accelerate and to get all these reps to get on board and get some meaningful adoption. Unknown Executive: So a question from Andrew. Probably, we've missed one of these questions, but I'll get back to that. Follow-up I refer back to my initial question about linear versus exponential growth. Are we expecting 80 to 100 units per quarter static or growing? And are we expecting any sales as they were mentioned in the previous briefings, i.e., 10-plus single sales point -- single point sales? Parmjot Bains: Yes. So if you kind of add up the numbers, it should be at that run rate when everybody gets up to speed. And there are definitely some multisystem deals sitting in that in those offerings. We had the big one that went across the legacy in the last quarter with the 9 system deal, which is now an active implementation going into a very healthy program, which the rep actually sent us a note, Kevin sent us an update note around that this morning. There's a number of them where they are starting with 4 to 5 and then they will grow out. So what we typically see is they'll start with a smaller number and then they will keep adding them on. And that's what we saw with Robert Johnson, started with 1 or 2 and then basically, by the end of the last quarter, they had 9 to 10 across the whole system. So it's unusual to get all 10 at once just because it takes time to get all the adoption set up and each clinician often needs to get buy-in. It typically tends to be more a smaller number that kind of grows out within the system. But that's in breast cancer-related lymphedema, but we do see body comp really picking up and then heart failure also picking up into the next quarters, but body comp definitely. Unknown Executive: Question from Andrew. Are you looking into data from test results in mining for research and how can that be utilized? Parmjot Bains: Absolutely. So as we look at -- so we've got, gosh, over 1 million tests and a significant data set that sits in behind. And with Scott as part of the new team, we've restructured our team so that the data R&D and data analytics that we're now reporting to Scott at least from a Product perspective. So we basically both look at our existing data set, but we also work with clinicians that are using the SOZO device to look to see how we can refine offerings. So some of the areas that we're working on that we're using our data and correlating with DEXA as around trying to build a bone mineral density because that is one thing that we think would add value as we kind of build out the offering. So we absolutely look at that. We also look at that data when we're looking at creating a proposition towards customers and one that we're in discussions with is around Kaiser, where we've got clinicians already using the device. And so we can show them what the lymphedema program looks like, the rates of lymphedema that have occurred within the system and then the savings that they get from early detection and prevention. And we've used that as part of a pitch towards the corporate head office. So we absolutely take a look at our data both from a development perspective, but also from a sales and marketing perspective. And so that one site that Scott is referencing in terms of Intermountain will look at that data as well. So they will get the program going and then they'll look at what -- from a real-world evidence perspective, how successful have the program been, and therefore, look at how they roll that out across the network. And so we have a whole team that goes in and can support that from a data and analytics perspective. Unknown Executive: Part of this question has been answered, but there's a second part that hasn't. This is from Andrew. This is a disappointing quarter. What can we expect in the next quarter, which I think you've answered. And where can you see future savings occurring? Parmjot Bains: I might just pass that to McGregor in terms of savings. But noting that we are constantly looking at our cost structure very constantly and very tightly managing that cash burn. But McGregor I'll get you to jump in. McGregor Grant: Yes, sure. I think just to reemphasize the fact that we are constantly looking to manage our costs very carefully. It's important we don't go too much into the specifics of that, but to be assured that wherever the opportunity presents itself to achieve savings through perhaps increasing the number of roles in where it makes sense like in Australia, as we've done, we'll continue to do that and to ensure that we're focused on only incurring costs on things that are really directed towards driving sales in the near term. Unknown Executive: And a question for Scott. Can you explain the sales process? Given the complicated nature of the sale and the long lead times, how do you monitor the sales progress on a weekly basis? Scott Long: Yes, it's a great question. It really begins with a breast surgeon champion. Typically, the breast surgeon is the quarterback of the care team. They're the ones who are most inclined to get behind a lymphedema prevention program and use their political capital in the hospital to start the process. Really, that's the clinical check box. We have what we call a clif process, CLIF, it's clinical, finance, IT and -- legal, IT and finance. And we sort of walk through those steps progressively. We have that documented on a dashboard that Mike Bassett, Parmjot and I view religiously. We have green, yellow and red in terms of where we are in the process with each one of those key stakeholders. They can take varying amounts of time, but we are very much on top of where we are with each and every one. And we don't graduate an account from the upside or a long shot category as we have it laid out into the forecast until we have all those boxes checked and we have 4 greens across the board. So that's sort of the methodology we use to track our targets. Parmjot Bains: That's all automated. It all that comes out of the CRM. And we do regular kind of calls with each of the sales team just to make sure that it's tracking through. We have a dedicated IT person that supports all these IT assessments within each customer and then contracts and legal person that accelerates that legal process and finance, is really making sure that each system has their budget approved as we work through the value analysis committees. Unknown Executive: A question from Andrew. Is there any plan for recurring revenue from Rest of World markets as I don't see a pathway to profitability from single unit sales for Rest of World sales? Parmjot Bains: In terms of recurring revenue, we did -- we are constantly kind of looking at that market. It's a non-reimbursed market. It's particularly for lymphedema. So a lot of it is really around that capital sales model. Right now, we've kind of kept it as a focus on a capital sales model because it's done through a distributor. And -- but we do look at that. The challenge is particularly in Australia is it's -- lymphedema is kind of reimbursed under the Chronic Care Management code under Medicare, it's really not available to be reimbursed because it's all covered under the state-based health care system rather than the Medicare-based system at the national level. So we constantly keep kind of reviewing it, and we would love to get it to that. But right now, it's really -- the capital sales is the key kind of area of focus. We are looking at that body composition space to see if there are opportunities to work with providers, distributors and potential customers around getting it to a recurring revenue kind of SaaS business model in that space. But the U.S. really at the end is the core market for us, that's really where a lot of that growth is. Unknown Executive: A question for Jonathan. Do you expect to separately report revenue on body comp and heart failure? Parmjot Bains: I'll pass that to McGregor. McGregor Grant: As the revenue from these other indications become material, I think we will look at the best way to reflect that revenue. Unknown Executive: And I think that covers all the questions we have. And given it's 3 minutes to the hour, I'll pass back to Parmjot for closing remarks. Parmjot Bains: Okay. Thank you, everybody. Thanks for the questions and your continued support. Hopefully, today was a good experience with the new Investor Hub and webinar function. Keep an eye on our updates on Investor Hub. We will look to put more regular updates and a lot more narrative so that you can better understand some of these new market opportunities like heart failure and body composition and why we're so excited about this space. We look forward to catching up again on the next quarter. And Scott, it's over to you to get those sales going. Thank you. Unknown Executive: Thank you very much. That concludes our call for today.
Ann-Sofi Jönsson: Welcome to the presentation of Electrolux Q3 report. I'm Ann-Sofi Jönsson, Head of Investor Relations and Sustainability Reporting. I'm here with our CEO, Yannick Fierling and our CFO, Therese Friberg. We will run through the presentation. And after that, we will open up for the Q&A session. If you are viewing on the web, do feel free to put your questions in the chat throughout the presentation. And with that, I hand over to Yannick. Yannick Fierling: Thank you very much, Ann-Sofi. Good morning, and good day to all of you. Very happy to be with you for this third quarter report. I will start with very general comments. I mean, growth is 1 of our strategic pillar, and I'm very glad to say that we have been growing once again in the third quarter. We have been increasing our net sales by 4.6%, mainly driven by North America. I'm also very glad to share that we have been growing our market share in the 3 regions here with our main brands, Electrolux, AEG, and Frigidaire. We have been taking our operating margin to 2.8%, with a good progress on cost reduction. We have been adding to the SEK 2 billion we achieved in the first half of the year, an additional SEK 800 million. And afterwards, I've been sharing with you in the last quarters, the aim we have to get faster and more agile moving forward, and I'm very glad to announce some organizational changes, which would be putting us closer to the end consumer. Moving to the results. As I said, I mean, we have been growing our net sales by 4.6%, mainly driven by North America, where we have been gaining in terms of shop floor spaces, and we have been expanding in key channels like the contract channels. In Europe, Asia Pacific, Middle East and Africa, we have been growing slightly in a subdued market with quite a lot of price pressure. In Latin America, strong results once again here, stable net sales on the back of a very strong and hot 2024. In terms of operating margin in the EBIT bridge, we had 2 positives, which were volume and mix and these 2 positives were slightly offset by a price -- negative price development. In terms of external factors, as you can expect, we were hit mainly by tariff and currency. We are very glad to say that we made progress once again in terms of cost reduction by adding SEK 800 million on the SEK 2 billion we achieved in the first half of the year. Moving now to Europe, Asia Pacific, Middle East and Africa. Again, we had a slight organic growth in this quarter. We have been gaining market share with our 2 main brands, Electrolux and AEG, more than offsetting the ramp down we have on the Zanussi brand. Zanussi was an entry price point brand, and we are focusing today on core and premium brands. Quite a lot of pressure, again, in prices, and we saw a negative price development. On the operating income side of the equation, positive in terms of volume and mix, but these positives were slightly offset by a negative price development. The region has been benefiting by a good effect on the cost reduction side of the equation, and we kept on investing in the marketing side of the equation. And that's pretty important because we launched major innovations, especially in the kitchen area under AEG and Electrolux, and we are glad to be able to fuel these major innovations through marketing money. In terms of external factors, we had a negative impact of currency, mainly driven by a weak Australian dollar. Again, in terms of market development, this picture is very similar to the one I've been showing in the last quarters. We had a positive development in Western Europe of 1%. Western Europe represents 80% of the total volume for the region and a minus 1% for Eastern Europe, flat. And here, once again, we had minus 11% versus the third quarter 2019 back to levels we had in 2014. The construction market remains very subdued. I mean we are hoping it to rebound in the coming months due to the lower interest rate, but we don't -- we have not seen any sign of that in the third quarter. On the positive side of the equation, I just want to underline that we saw some sign of recovery in the region, in the month of September. We have been working very hard in the last months to really improve the brand image we have, defining more precisely the consumer targets we have and clearly define an identity card for our 3 brands, Electrolux, AEG and Frigidaire. And I'm very glad to share with you one of the latest campaign. You have seen some just before we have live. This campaign is called the Wash Life Balance, and it's featuring the product leadership we do have in care and garment care. We have been also very proud to announce the launch of our new dishwasher, the AEG FAVORIT dishwasher here, which has been focusing on fit, fill and finishing. It has leadership in terms of perceived quality. And we're also leading in terms of energy consumption, noise level and water consumption here. Let me share with you a short video. [Presentation] Yannick Fierling: Moving now to North America. And we're glad to say that we have been growing significantly in North America. We're announcing a double-digit growth in the third quarter here, thanks to, again, a higher penetration in terms of shop floor space and an enhanced presence in some of the channels we do have like the contract channel here. We're not buying market share. We're increasing the presence we do have in the different channels. We had a positive price impact. We were actually positive on the 3 dimensions, volume, mix and price in North America. As you all know, I mean, we are building our appliances in North America. We're one of the North American constructor. And the last tariff structure should certainly benefit the North American producers. Unfortunately, we have to say that we have not seen the expected price increase for our imported goods coming from basically Asia in this third quarter. We have been leading price increase, and that's very important. I'm very proud to say that we have been covering the vast majority of the tariff impact for the price increase. So it's a competitive situation we have in front of us, with in front of as well a pretty promotional time which would be a Black November in North America. However, I want to repeat that, I mean, the last tariff structure should be benefiting for North American producers. Negative impact as well from a currency side of the equation with a weak dollar in this quarter. The pressure about the picture about the market is very much unchanged versus last year. The market has been pretty resilient to the inflation we have seen in the market. Moving to Latin America here. Almost flat organic growth in the region on the back of a very strong 2024 where we had a heat wave, and where we're selling a significant level of air conditioning and refrigerator. Unfortunately, the summer is not very hot in 2025 here, which has been increasing slightly the stock level we have in products like air conditioning. The competitive pressure in the regions remains pretty high. However, we're delivering, once again, 5.7% in terms of EBIT. We had a bad impact in terms of currency because of the Argentinian pesos and the Brazilian real. The Argentinian market is opening up, which means that we have a high level of import products -- our imported products out of Asia. Cost reduction, we're glad to say that, I mean, we're delivering once again SEK 800 million in the third quarter, which is taking the total amount of SEK 2.8 billion for year-to-date here, and we're still confident to reach between SEK 3.5 billion and SEK 4 billion cost reduction for the full year. This cost reduction is mainly driven by product redesign, a better sourcing in terms of components and suppliers, a higher level of efficiency in our factories and a full leverage of our global scale as Electrolux. Next slide is a slide we're very proud about. In 2016, Electrolux has been funding the Food Foundation here. And the aim of this Food Foundation is twice. The first one is to educate children and adults to eat in the most sustainable manner, but we're also helping adults needs here by giving them cooking lessons given by chef in the different regions. Year-to-date, we have been educating more than 300,000 children and adults through the Food Foundation. And the aim, the target we do have by 2030 is to have more than 1 million people benefiting from this foundation. With that, I'm passing it to Therese. Therese Friberg: Thank you, Yannick. The organic sales growth that we had in the quarter of 4.6% generated a positive impact to earnings of SEK 384 million. This was mainly derived from volume, but we also had a positive mix contribution in the quarter. And this was, of course, offsetting the slight reduction that we did see in price. We are continuing to invest in innovation and marketing, as mentioned by Yannick to really support the strong product portfolio we have in the market. Cost efficiency was a saving of SEK 760 million in the quarter. And I would also like to mention here that in the quarter, we had the group common cost of SEK 50 million, which was SEK 84 million below last year. And this is a result of cost containment, but also a result of some timing between the quarters. We have very significant negative external factors. Of course, as you all know, the negative impact from tariffs, but also quite significant negative impact from currency in the quarter, mainly related to the weakening of the Argentinian piece, but also the strengthening of the Thai baht versus the U.S. dollar and the Australian dollar. And the negative effect we have in acquisitions and divestments is related to the divestment of the water heater business in South Africa that we did last year. The operating cash flow was positive SEK 600 million in the quarter, which was somewhat below last year. This is mainly a result of a negative impact -- a larger negative impact in working capital compared to last year. This -- and this is attributed to one seasonal effect related to receivables that are usually increasing in the third quarter, but this year increased even more substantially than a normal seasonality related to higher sales growth, but also quite a strong September month, as Yannick also touched upon earlier. As you also know, we came into the third quarter with quite high inventory levels from the second quarter from volatile market during the first half and also from that the Brazilian retailers were destocking during the first half or specifically in the second quarter. And this, in combination with weak or cooler weather in Latin America means that we're still sitting on some of that stock. As you know, we usually have a strong reduction of inventory in the fourth quarter according to our normal seasonality, and this is what we are looking for as well this year. CapEx, we are having slightly lower than last year. And then looking at our balance sheet and liquidity. We have a solid liquidity and a well-balanced maturity profile. In the quarter, we amortized long-term debt of around SEK 1 billion, and we issued 3 new bonds of a total of SEK 2.6 billion under our EMTN program. And this will mature in 2029. And for the remainder of 2025, we have borrowings maturing of approximately SEK 1.9 billion, which we will finance from our existing liquidity. We increased the financial net debt slightly in the quarter, but we still have a solid liquidity of SEK 29.4 billion by the end of September, including revolving credit facilities. And of course, we don't have any financial covenants and our target to maintain a solid investment-grade rating remains. And with that, I hand back over to Yannick. Yannick Fierling: Thank you very much, Therese. I will now move to the outlook and the summary. During the quarter, the market demand in Europe increased slightly. Consumer demand continued to be predominantly replacement driven. In Asia Pacific, consumer demand is estimated to have decreased slightly year-over-year. Promotional activity and competitive pressure increased across market. Geopolitical uncertainty negatively impacted consumer sentiment in Europe. This contributed to consumers continuing to shift lower price points and postponing discretionary purchases. Demand for built-in kitchen products in Europe remains subdued. In a longer perspective, it is important to remember that the European market is on a 10-year low. For full year 2025, we reiterate our neutral market outlook for core appliances in Europe and Asia Pacific. During the quarter, consumer demand in North America remained resilient. Industry market price adjustments did not reflect the implemented U.S. tariff structure and competitive pressure and promotional activity remain high. Demand continued to be mainly replacement-driven and consumers continue to prefer lower price points. For the full year demand outlook, economic uncertainties and inflation concerns risk having a dampened effect on consumer demand. Consequently, we maintain our outlook of neutral to negative market demand. Consumer demand is estimated to have increased in Latin America in the third quarter. Competitive pressure increased in the region, most notably in Argentina, where the strong growth was driven mainly by imported goods. Consumer demand grew in Brazil, although at a slower pace than in the third quarter 2024, mainly due to inflationary pressure and higher interest rates affecting consumer spending. These factors contributed to retail continuing to reduce inventories. For the full year, we reiterate our outlook of neutral market demand for core appliances in the region. Moving now to the outlook. We still expect the impact from volume, price and mix to be positive for the year. Previously, price was estimated to be a main positive driver. Now the main driver is estimated to be growth in focused category because of the market dynamics in the third quarter and especially the challenging prices environment in North America. We reiterate that we expect investments, innovation and marketing for full year 2025 to increase. New product launches provide us with a great platform to continue driving growth in our focused categories. Our focus on reducing costs remain high, and we stick to the outlook of SEK 3.5 billion to SEK 4 billion in earning contribution from cost efficiency in the full year 2025, with product cost out being the main driver for the cost reduction. External factors are expected to be significantly negative for the full year. The cost inflation related to increased tariff is included an external factor in our EBIT bridge. Currency remains a headwind and the impact from raw material costs expected to be slightly positive for the year. For the full year, we are lowering our outlook for capital expenditure from SEK 4 billion to SEK 5 billion to approximately SEK 3.5 billion to SEK 4 billion. Investments to strengthen our competitiveness through innovation and manufacturing efficiency are essential to support growth and improve efficiency. But also, we are looking at being as efficient as possible we can and are scrutinizing our priorities. This resulted in a lower CapEx outlook. Moving now to the strategy. And I think we have been hammering. That's our 5 strategic pillar, and we're improving on all of them here. In terms of North America, we have been increasing our market share. We have been increasing the penetration level we have in key channels. We have been increasing the number of shop floor spaces we have, thanks to innovation like the stone-baked pizza feature we presented last month. In terms of growth, we are growing in a challenging market. We are growing in core and premium segments with our brands like Electrolux and in AEG. We keep a very strong position in Latin America. The organic growth has been at the same level as last year, but again, it was on the back of a very strong 2024. We have been launching very strong innovations in kitchen in Europe. In North America with a big kitchen bake oven, and we have product leadership in Latin America. We made progress in terms of cost reduction, adding again, SEK 800 million on the SEK 2 billion we have been achieving in the first half of the year. And last, but not least, the environment is changing. We are in a very unstable market right now where we need to react very fast. We need to be better in terms of speed and agility. And that's why we're driving organizational changes, increasing customer centricity. The first announcement we're making today is we will be splitting Europe, Middle East and Africa and APAC in 2 different regions, 2 commercial regions. One, we'll be focusing on Europe, Middle East and Africa and the other one, we'll be focusing on APAC. As a result, Anna Ohlsson will be leaving the company. Leandro Jasiocha, who is currently in the LatAm region will be moving to Europe, and he will be heading the region. Patrick Minogue will be replacing Ricardo Cons who decided to retire from the company pursuing a family journey he has been starting. And Eduardo Mello will be replacing Leandro Jasiocha as the Head of Latin America. We are sure that with these organizational changes, we will be increasing speed agility and be more consumer-centric moving forward. That's concluding this presentation, and we'll be happy to take any questions. Ann-Sofi Jönsson: Great. Thank you, Yannick and Therese. With that, we will move over to the participants on the telephone conference. So Sarah, you could please go ahead and open up for questions. Operator: [Operator Instructions] We will now take our first question from the phone lines. And this is from Gustav Hagéus from SEB. Gustav Sandström: Congrats on a good result. If I may start on the comment on the U.S. market share gains. And as you mentioned, you take shelf space in the quarter. It appears as if you've had now 4 quarters in a row with some market share gains in the U.S., obviously, superseding a period where you've lost some market share. So interesting to hear now that you're starting to meet a little bit tougher comps in terms of market shares in the U.S. if you see this trend potentially continuing into Q4 and into next year? And if you could shed some light on who you're taking shelf space from, maybe not the name, but if it's domestic or nondomestic players or if it's private label or how you view that dynamic in the trade, that would be interesting to hear. Yannick Fierling: Thanks for the question, Gustav. I think we're taking share, I would say, across. And I think it's mainly due to -- and thanks to the innovation we have been launching mainly in kitchen. Let's not forget as well that we have been ramping up Springfield in the last months here. We have been launching through this ramp up, a new series of cooking products, for instance, which are feeding brands like Frigidaire Gallery. We have been launching the great innovation, which is the pizza stone-baked oven in North America here, which has been getting an excellent reception in the market. We have some new products as well in the food preservation side of the equation. So it is really across market share here. We have been entering, and I want to make sure everybody understands we are not buying market share, but we have been entering into new channels like the contract channels here, and we have been really gaining shop floor spaces in -- with our main customers. I mean Lowe's, Home Depot and Best Buy and others here in the last months. So it's not one specific competitor we're taking share from, but it's a wide range of competitors. Gustav Sandström: And the second part of that question, as you look into -- it appears as if comps on the market share gains in U.S. is a little bit tougher to meet now as you enter Q4 into 2026. Should we expect this trend to continue with some recovery of the market shares also as you enter 2026? Yannick Fierling: Yes. I think I would like to make 2 points going into the volume side of the equation. First, I want to insist on that. I mean that was our commitment. We have been leading price increase in North America in the last month, and that has certainly not been easy. And I think we were very fortunate to have all these innovations in order to compensate basically for this price increase because we are producing, as you know, in North America, we're among the 3 producers in North America. And the last tariff structure introduced at the beginning of the summer was certainly privileging or benefiting North American producers. So we were expecting a higher level of price increase for imported goods, especially coming out of Asia. Unfortunately, I have to say today that we did not see that happening. And I think we're entering into a promotional season in North America now with Black November. However, what I want to underline as well is that, I mean midterm, there is absolutely no doubt that, I mean, North American producers will be benefiting from the current tariff structure here and that import products will be handicapped significantly, and we'll have to increase prices. So we did not see that in the third quarter. We're entering into, of course, a promotional period, which is Black November here, but there is also no doubt in our mind that, I mean, the current tariff structure should be benefiting basically North American producers amongst who we are. We're not giving up on prices, not at all. Here, we're just expecting the market to be rational in North America as well. Therese Friberg: And I guess, a little bit more overall, of course, some of the effects that Yannick talked about with gaining additional shop floor and gaining traction within the contract channel, of course, this is not something that is just happening on and off. But we believe that those types of changes are structural changes that has come gradually during this year, which, of course, also should continue to be a positive going forward. Gustav Sandström: And if I may ask one question on Europe, too. It's interesting to hear that you see some improvement in September in terms of market volumes, if I understood you correctly. Companies tend not to raise these type of monthly data towards the end of the quarter if they haven't seen a similar pattern going into the month that we're in now. Is there any reason to assume that, that logic would not apply to you that October would not follow the September trends? Appreciate it... Yannick Fierling: Yes, I think that's a great question. Unfortunately, in all fairness, I mean, if you look at full 2025, I mean, we have not been going through normal type of patterns in most of the regions, but especially in Europe. Indeed, I mean -- and I think we're happy to say that. I mean, September, we have been mentioning has been a positive month here for us. And I think all we wish is that it will be continuing in the fourth quarter, but I mean the level of unpredictability and uncertainty we do have in the market today in Europe is pretty high. So it's -- I would say it's difficult to say. Certainly, I mean, we're entering as well into a Black November type of market in Europe. But we are confident that with the product we have been introducing, the innovation we have been introducing, with the plan we have in place. And I think the quality of the people we have facing the end consumer, I mean, we will be doing the right thing for what we can control. But unfortunately, I mean, the level of uncertainty is pretty high in the market. Gustav Sandström: I appreciate that. But the question was specifically on October. Is there any reason to assume that the trend reversed again in October? Yannick Fierling: I think I cannot give you any trend, of course, for October right now. But certainly, I mean, the fact that, I mean, September was a positive month is certainly a good indication for us. Therese Friberg: And this is also an important point when thinking about cash flow because as you've seen, we had a weaker cash flow this quarter compared to last year where a large part of this is really related to that we are tying up quite a lot more in receivables this year compared to last year. And this is really driven by that the September month was the very strong month in sales. And hence, we are tying up larger amount in receivables. So we don't see any changes in terms either in receivables or in payables. So it's important to understand, yes, that effect from a cash flow perspective. Operator: We'll now take the next question from the phone lines. And this is from John Kim from Deutsche Bank. John-B Kim: Two questions, if I may. Can you comment on what you're seeing in North America in terms of any potential inventory overhangs? My understanding is that some of your foreign competitors put extra inventory into the market ahead of anticipated tariff increases. I'm just wondering how that's absorbing. Yannick Fierling: John, thanks for your question here. And I would just be repeating the answer I gave last quarter, which is -- again, a very transparent answer. I mean, the fact that, I mean, we may have some of our competitors preloading in order to avoid tariff seems to be logical. However, we did not observe this phenomenon ourselves here. And I think this phenomenon was not reporting to us by our team basically in North America. So unfortunately, I mean, again, logical, but I mean it is something we cannot confirm. John-B Kim: Okay. And I was wondering if you could give us a little bit more color on the reorganization, particularly on the split on what looks like EMEA, Asia Pac and the different regions? Yannick Fierling: Yes, absolutely. I think again, we -- the aim we have in terms of organizational setup is really to get closer to the end consumer from the top to about to reverse basically the organizational pyramid here, and I have the entire organization supporting what we'll be delivering to the market. Having the Asian organization below the European region, I mean, has been adding one layer. What we want to do here is to be able to respond in a faster manner, in a more agile manner to the needs our customers do have as well in the Asia Pacific region. And that's why we have been carving out this commercial region. We will have the head of this commercial region, which we will be reporting directly to myself, the CEO here. And I think with this setup, we are convinced that, I mean, we would be able to support again the region in a better manner. Therese Friberg: Maybe one clarification from an external reporting. We will still hold it together from a back-end perspective across Europe, Middle East, Africa and Asia Pacific. So it will really be a commercial region. So externally, we will continue to have the same segment reporting as today. Operator: Next question today is from Akash Gupta, JPMorgan. Akash Gupta: I have a few as well. The first 1 is on -- again, going back on North America. One of your North American competitor mentioned earlier this week that they produce about 80% of their appliances in the region. And if I may ask, if what's the share of your local production in North America? And how does that compare with industry average if you have that figure? Yannick Fierling: Okay. Thanks, Akash, for the question. We're not giving any precise number here. What I can tell you, however, is that we have 5 factories in North America, 3 in the U.S. and 2 in Mexico, who are USMCA here. So the vast majority of our products are produced in North America today. And again, USMCA compliant. So we are among the 3 major North American producers for appliances here. And certainly, as I said previously, long term, and if the industry is behaving rationally, we should be benefiting from the latest tariff structure here. Unfortunately, that's not what we saw in the third quarter here because we did not see a price increase from import finished goods. Now in all fairness, I mean, the full tariff structure would be implemented beginning of October. So it would be interesting to witness what will be the movements in the coming quarter knowing again that we have Black November in front of us. Therese Friberg: And I think what we have said is that with the competitor you are referring to, we have a relatively similar footprint. So that we have been clear. Akash Gupta: And my second 1 is on the cost savings. You had SEK 2.8 billion in the first 9 months, SEK 800 million in third quarter. Your target is SEK 3.5 billion to SEK 4 billion. That would imply SEK 700 million to SEK 1.2 billion in Q4. But I think in Q4, you have a very tough comp because last year, half of the savings came in Q4 alone. So any indication like where are we trending towards this -- in this SEK 3.5 billion to SEK 4 billion range for cost savings this year? Yannick Fierling: Yes. A couple of stuff, Akash. The first one, I mean, we explained that. I mean it's very difficult to compare the SEK 4 billion we delivered last year with SEK 3.5 billion to SEK 4 billion we're delivering this year because last year, I mean, the saving was for a big part coming from restructuring we have been doing in the past. The SEK 3.5 billion to SEK 4 billion we're delivering in 2025 are much more coming from product redesign, better component sourcing, higher efficiency in terms of factory and better leverage of our global scale here. All what I can tell you today is that we are confident to deliver between SEK 3.5 billion and SEK 4 billion for 2025. Akash Gupta: And my last one is on free cash flow. So again, I mean, you don't provide bridge like your -- some of your competitors, but -- when we look at this change in CapEx outlook, which you have cut today, would that change your internal assumptions for full year free cash flow? Or are there any other element like working capital or something else that might offset? So any commentary on your own expectations for free cash flow? Does that change after CapEx outlook a bit? Therese Friberg: No, I would say that those are disconnected. So with the CapEx refocus that we've done, of course, we continuously do prioritization and reprioritization. And with the focus that we have on cost reduction, actually, that is also spilling over on the CapEx reduction. So of course, when we're looking at costs, we're also looking at how we buy equipment and so forth. So we're not doing the CapEx reduction really to offset other negatives in our cash flow. Those are disconnected. Yannick Fierling: That's very important to underline, and Therese said it. I mean, we are not delaying any launches. We're not delaying any programs. We're not delaying any footprint or whatever here. What we have been doing is, I mean we have been using our CapEx in a better manner in 2025 here. And as you know, we have been hiring about a year ago now, a new CPO, and I think we have been really focusing on buying better, cheaper from best cost countries in 2025. And that's reflected in the cost saving we're having, but also on how we are purchasing equipment and tooling. Akash Gupta: I mean that's fair. But I mean, in theory, like if your CapEx is going down and keeping everything else equal, your free cash flow should be better than before. So my question was that, is this the case that now we should expect keeping everything else equally better free cash flow? Or is there anything that might be offset this benefit that you may get from lower CapEx? Therese Friberg: I guess it depends on the time frame you are looking at. Of course, as we have been transparent about we are not having a strong cash flow this quarter as we did last year. And of course, also year-to-date, we have a weaker cash flow than last year. But the reductions we're doing in CapEx are not to compensate for the negative effects that we have been seeing in working capital. Of course, as we also said earlier, one part of that is really temporary or seasonal that we had a strong September with receivables being negative then in the quarter, more negative than last year and more negative than the usual seasonality. Of course, inventory, we have also been clear with that it is on a higher level already when we came in to the second quarter. And we are usually having a seasonality where we have large inventory reductions towards the end of the year, and this is what we are expecting as well this year. Maybe one additional point that we didn't touch upon. Again, this is not related to the CapEx, but if you look at the full free cash flow for the year, we have talked about earlier in the second quarter that the impact of tariffs is also impacting the working capital level since the terms of when you are having to pay for tariffs compared to when you're able to then reclaim them from price increases from the retailers, there is a time gap. So of course, we've been clear with that. Structurally, we have had a negative impact from that in our cash flow in the year. Operator: [Operator Instructions] We will now move to the next question. And this is from Johan Eliason from SB 1 Markets. Johan Eliason: I was wondering once again, North America. You say you are taking market share there. The brand you have in North America, Frigidaire is typically a mass market brand, which historically has sort of gained share when the consumers become more price conscious. Is that part of what we've seen over there? And could you also update me on how the progress is developing, moving your price points on the brand towards the higher price points like the Frigidaire Gallery issue that you have been focused on over the past few years. Would you say that you have been able, in general to move up the brand a bit on the pricing ladder? Yannick Fierling: Johan, thank you very much for your question. And yes, absolutely, I mean, for the first question, we are not targeting opening price point with Frigidaire, and that's exactly how we have been mixing up with Gallery and Pro. And in all fairness, the entire strategy developed over the last years as well with factories like Springfield or Anderson have been to mix up and have a higher offer in terms of products for Gallery and Pro. I just want to give you very concrete examples. I mean, back command on oven ranges are usually low end. I mean the -- most of the products we do have now, a big part of it out of Springfield has front command here, which is more mid- to high-end segments here. I could give you a similar example on the Anderson side of the equation. The pizza stone-baked oven is, again, a feature which is a big innovation, and we're pricing for this innovation as well in North America. So no, I mean, we're not fighting really for opening price points on Frigidaire. We're not buying market share. What we're really doing is, I mean we're occupying new shop floor spaces by entering new retailers by expanding in channels like the contract channels here, and we are mixing up actually our products here. We should not forget about the Electrolux brand as well in North America, which is a strong brand for front loader for instance, here, and it is a premium brand. So not at all. I mean, we certainly have a philosophy in North America, which is to mix up our product by offering better product and innovations moving forward. Therese Friberg: And I guess important to mention, as Yannick also said earlier, we are improving volume, price and mix in this quarter. And with the combination we're seeing of where we are taking share with what retailers and with what products, we don't really see that it's a -- that we are gaining share is not really a result of, as you're saying, what we have seen before, historically, Johan, that when the market is kind of trading down that we are absorbing that type of volume. That's not what we see in the quarter. Yannick Fierling: And clearly, I mean I want to repeat it. We have been leading price increase in a price pressure market in North America in Q3. Johan Eliason: Excellent. And on the -- can you say anything about the product category where you are sort of gaining more or less? I think historically, the hot products were your most profitable products in North America, but you've lost out on that segment because of the sales issue. But can you say that is the hot product gaining more share? Or is it sort of a broader range over your different categories? Yannick Fierling: I think we are gaining market share almost in every single product category. We're not going into detail. There is -- I mean, there are a couple, of course, where we're losing market share here and where we need to act here, and we have plans in place in order to increase it. But I mean, on the vast majority of the product ranges, we are gaining market share here. So I don't think we should be pointing out 1 specific range or whatever. It is an overboard market share gain. Johan Eliason: Excellent. And then just 1 final minor in the cash flow to Therese. Other noncash items had a negative delta of around SEK 500 million. What's that related to? It was positive SEK 399 million last year's Q3, and now it's negative SEK 104 million. I was just wondering what that cost related to... Therese Friberg: Yes, yes, yes. We -- I mean, with the LTI program that is included in the EBIT, we usually have a negative -- small negative every quarter as long as we continue to, of course, increase the provision of the long-term incentive program. Last year, it's related to the divestment of South Africa, where technically, that's where the change of the goodwill was booked in last year's cash flow. Operator: We'll now take the next question. This is from Martin Wilkie at Citi. Martin Wilkie: Thank you, Martin. I just want to come back to North America. So it sounds like you are making good progress there relative to the market, but obviously, the absolute level of profit is still quite subdued. When we think going forward about the levers to get that higher, is it a market volume question? Or is this all around price cost? I mean is it effectively that the sort of price increases linked to the tariffs and so forth has not yet come through? And I guess related to that, is there any sort of self-help story? I mean a lot of what you've done. at Anderson and other facilities, I guess, are already completed, but is there a self-help element also to getting that margin higher? Yannick Fierling: Yes. Thanks, Martin, for the question. I mean the first thing I would like to underline if you allow me is that, I mean, we are plotting in black for the second quarter in a row in North America in a market, again, which has been pretty price pressured. I mean North America is the first priority. The turnaround of North America is our first priority. And I think we have been making progress throughout the last quarters. Certainly, I mean, we have short-term actions, midterm actions and longer-term actions to take the regions where we believe it should be belonging 6% EBIT longer term. I think the big challenge, the main challenge we had in the third quarter is the one I've been mentioning. We have been making progress in terms of volume, mix and price. However, we were not able to price to extent, we wished simply because, I mean, the tariff structure did not impact the imported goods at the logical or rational level. Now for -- I mean, moving forward, certainly, I mean, we're entering into a Black November, where price pressure will certainly not go down. So the tariff structure would be entirely implemented started 1st of October. So if there is some rational in North America in terms of pricing, we should be benefiting. We should be benefiting mid- to long term out of the current tariff structure here as being a North American producer. So I think, again, I mean, we did not see, unfortunately, a level of rational we would have expected in terms of price increase for importing goods in Q3. I mean challenging month of November with the promotional pressure we'll have. But logically, I mean, moving forward, we should be benefiting from the current tariff structures in North America producing in North America. Operator: And your next question is from Uma Samlin, Bank of America. Uma Samlin: I have a follow-up on North America, if I may. So if we look at the AHAM data on the units for North America, it seems to be flat for the quarter. And you are gaining some share, and it seems like your domestic competitor have that similar things. So who is losing share there? So is there anything you can comment on that? Because given the -- you said like the imports have sort of similar pricing point, they have not been increasing prices. So what is the reason that it seems like the domestic -- you and the domestic peers are gaining share. So is there any comment you can give there? Yannick Fierling: Thanks. Tough question you're asking. I mean, first of all, we are very proud to have gained, to have increased our net sales by a double-digit amount in the third quarter. And again, I want to repeat it is not -- we have not been buying market share. We have been gaining market share here. And indeed, I mean, one of your local producer has been saying the same thing. Unfortunately, we don't buy competitive data in North America. I wish I could answer to what you're asking, but we have the same level of information you do have. So we have AHAM data, and we have our data relative to AHAM. So it's very difficult for us to comment beyond what you just have been mentioning with competitors reporting out as well their Q3 reports in North America. So I'm unfortunately not able to give you more details about who is losing in which product category. Uma Samlin: That's very helpful. So my second question is on Europe. It seems like the competitive pressure in Europe is still fairly strong. And -- but you are seeing some improvement in sentiment. Do you see any increased competition from your Asian peers here in Europe? Do you expect the pricing to bottom out potentially towards the end of the year or into next year? Yannick Fierling: Thanks for the question. Great question here. In all fairness, I mean, Asian penetration in Europe is not something new. I mean, Asian had been entering into Europe now several years ago. Certainly, I mean what I said previously is that, I mean, the cost difference to manufacture a product in Asia or to manufacture a product in North America and Europe has never been as big because of commodity prices, because of energy cost. So cost difference is really, really big. We opted very courageously in Europe a few years ago to step out of entry price points as Electrolux. So we have been ramping down the Zanussi brand, and we have been focusing on Electrolux and AEG. And we're proud to say today that we're winning more market share on Electrolux and AEG core and premium than we're losing on the Zanussi side of the equation here. So we are not exposed to the entrants on entry price point. However, what I need to underline is that, I mean, you're partly right. We see the market moving down into lower price points in Europe. We see cost pressure being more and more intense here, I think we feel slightly protected from that because of the consumer segments we are targeting in Europe. But I mean there is no doubt about that. The market has been moving to lower price points recently, and we see a significant level of price pressure. Operator: And the next question is from Björn Enarson from Danske Bank. Björn Enarson: First question on the U.S. again. And if you can give us some color on the factory load in the plants and what kind of absorption you have of fixed cost now when you gain some volumes, but still volumes are, I assume, quite low. And second question is a little bit on Europe. If you can give some regional comments within Europe where you're seeing this slightly positive trends? Yannick Fierling: Thank you very much for your question. I mean the -- as I mentioned previously, I mean, the most subdued market versus, I mean, the past years, I mean, I mentioned 2019, is certainly Europe. I mean, we are back at the level of 2014. And as I said in the previous call, I mean, usually, this industry in Europe had an organic growth of 2% to 3% a year. So if you put 2014, 2025, we're really missing 20% to 30%. The market is missing 20% to 30% of the volume, we should have expected logically out of the region here. And as a consequence here, the factories overall, which are suffering the most from underutilization are the European factories. That's where everybody is suffering today in terms of factory loading. I would say North America, I mean, a few good news. First, I mean, the Springfield factory, we were suffering end of last year in terms of ramp-up and additional cost. The ramp-up was basically inducing. I mean, Springfield has been reaching what I would be calling a cruising altitude. So the factory is there. And I think we don't have the same factory capacity or utilization issues we do see in Europe. I think certainly, we still have space because we just built this factory. So I think we have space in front of us here. But I mean, factory utilization rate is not the main handicap we may have in North America or the major challenge we do have in North America. Björn Enarson: And are there actions to deal with plant load in Europe? Or how are you dealing with that? What you have done by some divestments et cetera? Yannick Fierling: Absolutely. I mean, first, I mean, we're gaining market share in the core and premium segment. So we are fighting for volume. And I think in the EBIT bridge, as I said during the presentation, I mean we have been positive in volume and mix. And unfortunately, I mean, this advantage was slightly offset by the price pressure we see on the market. So we are really fighting. We're fighting on daily days. Our team is fighting is doing a great job on the market basically to win versus our competitors in Europe. I mean what would be helping us the most is simply to get back to a normal type of growth in Europe. And I think when I say a normal type of growth, I'm not speaking about the 20% to 30% we were expecting a few years ago, but I mean, getting back to 2% to 3% growth in this region here. And what will be helping Electrolux the most because of the strength we do have in kitchen channels is basically that the construction market will bounce back. And we believe it has been reaching bottom here. We're observing that interest rates are lower. So we're really hoping that I mean this market will be bouncing back, I mean, in the coming months. But I mean, right now, we don't have a clear sign it. Therese Friberg: And as you know, with the cost efficiency that we're having this year, it's mainly related to product cost efficiency, but we have 2 years behind us where, of course, we have taken down our staff and our workers in the factories drastically over the last 2 years prior to this one to cope with the factory utilization. Operator: We will now take the next question. This is from Timothy Lee from Barclays. Timothy Lee: Can you hear me clearly? Therese Friberg: Yes. Yannick Fierling: Yes. Absolutely. Timothy Lee: So I have 2 questions on Europe. So the first one is regarding the trend that you have seen in September, which is some improvement. Can I ask about the historical pattern within the first quarter, whether September is usually a strong month in the quarter or not? And so the pickup in September this time is more like a seasonal pattern? Or is really some improvement in terms of your overall business? That's the first question. And the second question is about the margin improvement in Europe on a quarter-on-quarter basis. What's the key driver for that? Is this just from -- mainly from the cost efficiency program or there's something -- some factors that drive the quarter-on-quarter improvement and how sustainable the improvement will be? These are the 2 questions. Yannick Fierling: Thanks for your question. The communication was not very good. So I hope I would be answering your questions correctly. About the month of September, first of all, I mean, we cannot speak about a pattern because, I mean, that was basically a month, and we have seen really quite a lot of unstability in Europe in the past month. And I think in all fairness, unexpected moves as well. So I think I've been in this business for 25 years in all fairness. I mean, it has been in the last years and months, a pretty unstable situation and a situation which is very difficult to predict. However, again, as Therese and myself stated, I mean, we had some positive signals in the month of September. And I think the only wish we have is to get back to a certain level of normality moving forward in this region. In terms of... Therese Friberg: And I guess if the question was more the historical pattern. I think what we can say, historically, of course, we had September, October, November are really the high season month in our industry. Then, of course, as you know, the last few years or quite many years now has been very volatile and not really following a normal seasonal pattern. And also, of course, with a very, very subdued kitchen retail channel in Europe, which is usually the boost as well in these 3 months. That's not really what we have been seeing being strong in the market in the last few years. So that's why we have not really had a normal seasonality. So of course, is September strong because we're coming back to that more positive momentum? I guess it's too early to say because it has been going up and down. But historically, of course, September, October, November are the high-season months. Yannick Fierling: In terms of sales. In terms of margin, if I can just take your question on margin here. As I mentioned previously, I mean, we are not targeting entry price points. Our war, our objective is not cost. I mean we want to introduce consumer-relevant innovations here, and we're extremely proud to have a high consumer 3-star rating across the 3 regions here to win awards like 7 Stevie Awards in Germany in laundry, which never anybody has been reaching before. So we're really trying to get and extract margin out of innovation and the quality of the products we do have over there, trying to escape the price pressure and cost pressure you may find in the enterprise point. However, I mean price pressure is big. Price pressure is big in every single quartile here. And certainly, I mean, reducing cost is one of our strategic pillar, and it is of prime importance to be cost conscious in every single line of our P&L, and that's what we are driving with a lot of intensity. Ann-Sofi Jönsson: Okay. Great. We will take one question from the webinar, which is from Swedbank from Timothy Becker. And that is if we can elaborate on the goal of maintaining a solid investment rating, and if we are okay with the rating or how -- if we have a goal to improve that, and if you could elaborate on that. Therese Friberg: Yes. Of course, I mean, as we stated in the call, our aim is really to maintain a solid investment-grade rating quarter-over-quarter. I mean compared to last year, we are improving on our net debt to EBITDA ratio. And quarter-over-quarter compared to the second quarter, we are stable. And of course, we're doing everything we can to remain a solid investment-grade rated. Yannick Fierling: Our focus remains delivering the year-end results on the profit side of the equation. Ann-Sofi Jönsson: Great. We have one more question on the call that I think we will try to take after we -- or before we close off. Operator: Final question is from John Kim from Deutsche Bank. John-B Kim: Follow up. I'm just wondering if you could comment a bit on wage inflation, sort of percentages are you experiencing? What's the cadence to it? Are there large upcoming negotiations with any unionized union organizations? Therese Friberg: No, I would say nothing extraordinary that we can mention. John-B Kim: Okay. And while I have the floor, is there anything you'd call out in the August developments around U.S. tariffs that are particularly, we should be mindful of, whether it's the metal content or the reciprocal? Yannick Fierling: You want to answer this one? Do you want me to take it? Nothing special on the -- of course, I mean, as I mentioned previously, John, I mean, tariff -- the latest tariff structure is certainly -- should certainly be benefiting the local producers here. The full tariff structure is implemented, I mean, starting beginning of October. And again, all what we're hoping as a North American producer is to see a rational price increase from -- for imported goods starting as soon as possible. That's what I would say. Ann-Sofi Jönsson: Thank you, John. And thank you, everyone, who has listened. With that, we will end this call. And I would like to remind you that we will have a capital market update on the 4th of December that will also be live webcasted. So thank you for viewing and listening in today. Yannick Fierling: Thank you very much.
My Vu: [Presentation] Good morning, and welcome to Höegh Autoliners Third Quarter Presentation. My name is My Linh Vu, Head of Investor Relations. And with me today, we have CEO, Andreas Enger; and our CFO, Espen Stubberud, who will walk you through the last quarter performance. We have a Q&A session at the end of the presentation, and you can ask questions by sending e-mail to our Investor Relations mailbox at ir@hoegh.com. So with that, I will leave the stage to you, Andreas. Andreas Enger: Thank you. Opening this presentation with a photo of beautiful Höegh Moonlight at the quay in Gothenburg, where we had a naming ceremony while loading cargo together with valued customers in Gothenburg. This quarter, we are once again presenting a strong result. We have a good -- have good underlying earnings and profitability driven by our strong contract backlog and an operation as previously noted, we have some more imbalances than others, but fundamentally, we're running full vessels out of Asia and are basically serving customers to the full and executing our backlog. I will open this presentation to basically respond to an issue of a slight change in the payment schedule for dividends that may require some explanation. And I want to do that by starting with reiterating how we operate as a company. We have focused a lot on creating value through the cycle by building backlog, focusing on a cargo strategy being overweight cargo. We have basically operated in the market now there is persisting market imbalances with strong growth in Asia, not so much opportunities elsewhere in the world. Charter market is starting to provide opportunities for short-term capacity, which we are using at the cost to develop our -- and be able to maintain a strong backlog. And we are now faced with, I think, a totally new level of geopolitical uncertainty coming from things like U.S. port fees and taxes and whatever. And while we are fully committed to remain -- keep our dividend policy of distributing excess cash flow, we have found that the unusual geopolitical situation is requiring a slight modification. And it's really triggered by the fact that the implementation of the tripling of the USTR fees that came a couple of weeks ago has resulted in the biggest change in our short-term cash forecast as long as I've ever been to the company. And that period includes the shutdown during the pandemic where we lost a large part of our cargo share. And adapting to a world where governments choose to introduce or increase cash payable taxes with it in reality, 2-day notice is really putting an extra requirement for securing the cash balance that has made us conclude it is prudent to do a small change. And without going into too much details, but the U.S. port fees, and we don't know exactly what's happening with them and the tripling and the retaliation from China is creating a situation where we suddenly get an additional cost of $60 million to $70 million per year effective immediately. And that is totally unprecedented, and we can have all kinds of ideas and theories of what will happen. But in our financial and liquidity management, I think we'll have to work on a worst-case scenario and basically say that we have to be prepared for these kinds of shocks in a situation where our business is drawn into a geopolitical space where we don't think we belong, but we are still pulled in. But I think I also want to emphasize that this is not reflecting a fundamental change in our business operations. I mean coming to that sort of when we have the guiding for the next quarter, but it is to make our -- make sure that we are resilient to type of shocks that we haven't seen before, not because we have any expectations that there will be further shocks, but we think it's prudent to be capable or make sure that we can handle it comfortably. And -- so what we're doing is that we are reiterating, reconfirming our dividend policy of paying out excess cash. We are adjusting the calculation method that basically results in a one-off and nonrecurbable impact to the Q3 distribution. And the way we do it is simply that instead of paying the dividends based on the running sort of outlook of cash, we are changing it to actually do it on the cash balance we are reporting at the end of the quarter -- in this case, the end of Q3. And that creates, in many ways, one quarter gap in the dividend payments. Just to remind, we have a track record of paying out dividends. We paid out NOK 1.5 billion in cash dividends since our IPO. That is more than 3x the equity value of the company at the IPO. So it's quite substantial. And again, we are committed and we have reviewed our financial resilience requirements. We have concluded that the current strategy, the current cash balance is sufficient and that we intend to continue to pay all excess cash in dividends. But we have changed the liquidity policy from a forward-looking one to ensuring that we actually have that cash balance at any time in order to be robust against those types of shocks. And that then leaves us to the headline figures, $155 million of EBITDA, slightly down. Espen will come into more detail, mostly a result of combination of the imbalances in the system and charter costs to keep up the volume. We have 2 further newbuilds at the end of the year, and we have -- so we are -- but we do -- due to our vessel sales, have a capacity gap to fill that is creating some charter costs in the near term. $132 million profit after tax, $92.3 million in gross rate. And then what we talked about, the $30 million dividend, which is then not related to this quarter's free cash, but produced out of this onetime change in the timing of payouts. We have taken delivery of one purchased previously bareboat chartered vessel, Höegh Copenhagen. It's the last one, I think now we have exercised all the purchase options, and we have a strong equity ratio of 54%. If you take into -- going into the market, I think one very important thing is that shipments from Asia continue to grow and expand despite U.S. tariffs and despite the kind of environment, I said, increased geopolitical risks. So we have a very, very strong activity. It's mostly driven out of China. And as we see it, Chinese growth and Chinese exports of vehicles and equipment is basically continuing to grow. And that is a trend that has been driving this industry for a while, continues to drive it. And Chinese share of exports from Asia or actually even the world is strengthening. High and heavy market is also after some flat years going into a good growth pattern. But again, we have a stronger market out of Asia than we have out of the U.S. and Europe. But the market is generally strong and supportive. We have, as we said, a strong contract backlog being fully booked in 2026. And we have a number of -- and we are continuing to add contracts, although I think both capacity and the market cycle, the big contract renewals for the next couple of years is -- or next year is behind us. But we have signed a long-term significant contract during September with substantial value and a 15-year duration actually. We have a contract share that is now up at 81% and a duration of the backlog of approximately 3 years. We do have rate agreements mostly 1 year fixed pricing, but noncommitted, that is a product that is mostly towards freight forwarders and secondhand vehicles. But -- and we do have sort of long-standing relationships also in that area that basically creates stability. And also reiterating that when it comes to what we call spot, it's not the kind of same cargo in the spot contract. New vehicles OEM business is almost entirely on contract and 60% of the spot volume is high heavy and break bulk, which is cargo that has a different -- has more variability in volumes and trades. Espen, should you take over on the capacity side? Espen Stubberud: Yes. On the capacity side, there is still a significant order book in the industry. Net fleet growth is up 12% in 2025 and another 8% is expected in 2026. As we've talked to a few times, we have expected the charter market to normalize in terms of pricing, and we are using that market to a larger extent than we have in the past with 5 actually short-term charters in the third quarter. We see pricing is stabilizing around $40,000 to $45,000 for a large ship at the moment. Andreas Enger: If I take in a short word on sustainability, we showed you Höegh Moonlight. We have 6 of our newbuilds now in operation. We have had an intense docking schedule, which is sort of somewhat variable, but we had a large amount of dockings of all the vessels in the 5-year cycle in 2025. We do have a committed program to use every dry docking to upgrade existing vessels for better fuel economy and efficiency. We have then taken development of delivery now in total of 6 vessels in operation of, I think, the most -- both carbon and fuel and cargo-efficient vessels on the water. And that is now also materializing in a clear downward trend on our carbon intensity. We're also continuing to use 100% biofuel and have 100% biofuel available as a product to our customers. And we have 3000 tonnes bunkered in the quarter. So we have a continued effort on decarbonization, both in improvement of our existing fleet in taking delivery on modern efficient fleets and obviously, also in our path to zero, looking at future fuel options. And that drives us into a carbon intensity -- clear carbon intensity road map. Just reiterating from 2008 to 2024, we have improved our carbon intensity more than 40%. And we do have a clear path to 0 where half of that -- the remaining voyage is on improvements to sort of non-zero carbon fuel-related improvements. The last half of this in our plans will basically have to be covered by clean ammonia and e-fuels, and we believe we are with that on track to be able to deliver zero-carbon transportation by 2040. With kind of the uncertainties creating by the delay of the IMO framework and others, I think it's also prudent to reiterate that in all our decarbonization efforts, we are ensuring dual fuel, multi-fuel capabilities. And we are 100% committed to be able to offer our customers zero carbon transportation by 2040. We are also committed to offering the option to billing customers on zero carbon transportation before 2030, but we are not underwriting the decarbonization cost of our customers. So it has to be aligned with regulations and the customer demand. And we have the ability to deliver, but we will obviously run our vessels in a matter that is economic and profitable in whatever regulatory market that exists. Then back to financials. Espen Stubberud: Yes. Turning to the financials. The [ fourth quarter ] volume came in at 4 million CBM. That's up 4% from the second quarter, but up 17% year-over-year. And we are particularly pleased with our volume development out of Asia. The first 3 quarters this year is up 48% last year, so very strong volumes. The volume we loaded out of Asia in the third quarter is the highest volume we loaded since we IPO-ed back in 2021. We talked to it a couple of times that we took on some -- a couple of large contracts at the end of last year at somewhat lower rates to add to our contract backlog. That lowered the rates that came into 2025. But we've seen very stable rates in '25 with a net rate drop of 2% from second quarter to the third quarter, mainly related to changes to cargo and trade mix. Revenues are moving flat on higher volume, quarter-on-quarter. EBITDA is down about 6% from $166 million to $155 million as our operating margin is being reduced. And as Andreas already mentioned, we talked to the increased imbalance this year, basically reduced network efficiency. We also see somewhat lower utilization of our fleet in the third quarter. That's not so unusual, particularly in August when production is closing down, so which is reducing the efficiency somewhat in the third quarter and we're also using some more charter costs as we talked to. Net profit before tax came in at $132 million in the third quarter. That includes the $20 million book gain of selling Höegh Beijing. Turning to the EBITDA bridge. In the first -- from the first to the second quarter, we added revenues of $38 million. And with that revenue followed the increased voyage costs and charter costs, but we increased EBITDA to $166 million in the second quarter. We also added volume from the second to the third quarter of $15 million in revenue. However, that was fully offset by increased voyage costs and charter costs. And with the rate net rate dropping about 2%, we come in at $155 million for the third quarter. Our balance sheet is robust with healthy ratios. We have seen net interest-bearing debt being increased over the last few quarters as our newbuilds have been delivered. No newbuilds delivered in the third quarter, so moving flat quarter-on-quarter. And as Andreas said, we're looking forward to ship -- sorry, #7, newbuild #7 being delivered now in a few weeks in December and newbuild #8 to be delivered in January, which will reduce our capacity cost going forward. Cash balance and undrawn liquidity from our revolver is moving basically flat over the last few quarters. So it's another strong quarter with strong cash generation with somewhat improved working capital, we have $173 million in cash from operating activities. We have $27 million in dry docks and CapEx, which includes $10 million newbuild installment on vessel #7 -- we have $42 million in proceeds from selling Höegh Beijing in the quarter, and we've drawn $46 million in debt, that's the $10 million for the newbuild installment, and it's $36 million for the purchase of Höegh Copenhagen. That was -- the purchase option was exercised in the first quarter, but the delivery took place in August. Then we had normal mortgage repayment and interest of $31 million, and we paid leases of $43 million, which includes the purchase of Höegh Copenhagen. And we paid dividend of $137 million, ending then the third quarter with cash of $230 million. That only leaves us with the outlook. And I think we need to have -- we need to put in the cautionary note that tariffs may, over time, lower volumes transported. I think it's fair to say that, that has so far not really happened in the sense that the Asian market has continued to grow and remains strong. But clearly, it is a friction and we'll have to look carefully at that over time. The changes to the U.S. port fees that was announced on the 10th of October with implementation from the 14th of October was, as I mentioned in the beginning, quite a substantial shock adding cost of $60 million to $70 million. And we are working diligently to mitigate the impact. We have close dialogues with all affected customers. We are basically have strong beliefs that we will both be able to get unlikely full, but substantial compensation of the U.S. port fees from customers. We will also change our trade pattern in the U.S. to optimize versus the port fees. So we are continuously working on mitigating. But given the kind of erratic, kind of decision-making in this field, it's basically hard for us to provide much guiding beyond the fact that we are clearly working to optimize around it. We are working with customers to recover the cost. And we have, as we said, chosen to have a slightly more conservative cash retention policy by changing not the amounts over time, but the timing of paying dividends to make sure that we are resilient against these types of shocks. When it comes to the Q4 performance, we expect the operational performance to be slightly below the Q3 EBITDA level and that the USTR fees are expected to be around $20 million for the quarter. And on the last one, I would also say that we don't -- we are intending through our mitigating actions to do everything we can to avoid that number being multiplied by 4 for next year. But given that it was introduced at a surprise on a 4-day notice, we obviously had cargo on the water and vessels on the way into the U.S. that strongly significantly reduces our mitigation options during the fourth quarter, but we are working on adjusting and seeking recovery to reduce the impact going into 2026. So that concludes our presentation. We have open for questions. And My Linh, is there anything to answer. My Vu: Yes, there are a few questions for the Q&A session. And the first set of question coming from analyst Jorgen Lian, DNB Carnegie. The first one on the dividend policy. With the quarter end cash balance, would simulate around $200 million based on the declared dividend in this quarter be a constant or a function of certain assumptions? Andreas Enger: Basically, we have said again that we will distribute excess cash. And with that, that is -- and I think you can -- and we have said we're going to be on the reporting quarter. So I think using that number as an anchor point is useful. And we have reconfirmed in the Board, both that we consider that cash level to be -- give us sufficient resilient, and we have reconfirmed our commitment to pay out excess cash in dividends. But I think we should also remind that we do have, obviously, and the Board has the responsibility to make a complete assessment of the total situation at any quarter, and that will obviously be the basis. But in the current environment, and we have reconfirmed our dividend policy, and we are -- but we are using the last reported quarter as a reference for [indiscernible] surplus. My Vu: Thank you, Andreas, for the clarifications. And the next set of question is about port fees. I think we already briefly touched upon that during the outlook sessions. But we mentioned the guided impact for U.S. port fees of around $60 million to $70 million for yearly -- annual impact for HAUTO. And how does this relate to the last quarter guide of around USD 30 million for full year impact, given that now the modified port fee is now 3.3x higher. Espen, you want to. Espen Stubberud: Yes. Now we guided on $30 million earlier, and then the increase in fees now is 3.3x. So when we're saying $60 million to $70 million, this is based on us optimizing our voyages into the U.S., and that's basically about minimizing number of voyages into the U.S. and looking at how we can do that from various angles. We have deep sea vessels going into the U.S., and we try to consolidate as much cargo to the U.S. as possible on those vessels. We also have activity in the Caribbean with smaller feeder vessels that are calling on the U.S. that we will look differently upon and reroute. And of course, we also need to avoid any marginal calls to the U.S. that we have done in the past. So the $60 million to $70 million is more of a -- is an estimate on the cost for the company after we have optimized the voyages into the U.S. My Vu: And it seems we also guide $20 million impact for Q4 out of the $60 million, $70 million for gross impact for the full year. So I guess for Q4, I guess, also takes into consideration the shorter lead time between the modification... Andreas Enger: Yes, yes. Basically, we have no time to optimize. So the impact will be lower going into next year is what you're saying, yes. My Vu: Yes. And the next question is asked by a few analysts as well. Another clarification on the Q4 guidance. Is it correct to assume that the underlying operational result is slightly below Q3 and that the additional $20 million port fee will be added on top of that? Espen Stubberud: Yes. What we're saying is that the performance is continuing strong, third quarter is strong, and we're seeing also good volumes into the fourth quarter. I can repeat what we said earlier, we basically have more cargo than we can carry very strong growth in Asia. So the underlying performance is strong also into the fourth quarter, but slightly below the third. And then on top of that, all of a sudden, we've had this extra $20 million that is reducing the performance in the fourth quarter. My Vu: Thank you Espen. The next question is about capacity management. Höegh Autoliners is chartering in more capacity. So what is the future consideration requirement we have for additional vessels -- additional vessels at this point? Andreas Enger: I think first, we just said we have 2 vessels coming in, in the next couple of months, which are welcome additions to the fleet. And these are large vessels, 9,100 CEU. They're much more effective. And with our attractive both cost and financing on those vessels, they will come in on -- at a capacity cost for us that is substantially lower than the charter market. So we welcome that. But beyond that, I think it's fair to say that our -- looking at the charter rates that Espen showed without speculating too much, we were selling vessels to leverage and utilize a tight charter market. And high asset valuation, that asset valuation is coming down, and I think that is probably reducing our -- the likelihood of future vessel sales. But we are in a fleet renewal -- we have a fleet renewal strategy, and we have a decarbonization strategy. So this is something we will always look at, but they will be done based on specific opportunities rather than any kind of predecided thing. But when it comes to investments in new capacity, our program is fixed. We are getting those 2 vessels now. And then there is a gap until mid-2027, where we will then from mid-2027 into 2028, get the last 4 of the Aurora class vessels then coming at as dual fuel ammonia vessels that will have the option of running zero carbon fuels. It will also have the possibility to run entirely on traditional fuels if the sort of worst thing should happen with the IMO process. I think I also want to reiterate, it's our belief that even without -- with delays in the IMO process, we believe a system will come in place. And in the absence of an IMO system, I think it's also likely that the EU's scheme will continue. It's likely that other regions will copy that and have similar, so carbon taxes in our scenario will come in the years to come. We would have preferred to get them in a level playing field in a uniformed IMO structure. We still hope that, that will get in place. But even if it is further delayed, it doesn't mean that there will not be taxes and fees and costs of emitting carbon in our trade system. So we believe that, that trajectory is still in place. But for CapEx, we don't have any additional vessel CapEx plans that are not already announced and financed and handled. My Vu: Thank you so much, Andreas. And I guess part of your answer already answered the question from one of our audience regarding the plan -- if we have any plan to sell further vessels next year. So the next question is back into the topic of U.S. port fees, and this is asked by several analysts and other investors that follow webcast as well. So how do we plan to handle the U.S. port fee or possible future -- similar future tax with our customer? And how much do you expect to recover or pass on these costs to customers? Andreas Enger: I don't think we can answer that specifically. But clearly, we are introducing those fees in full for our sort of liner business, and we are in dialogues, and we will get substantial compensation for our existing customers. But I think it's also quite clear that this is now a cost that we expect to be embedded in all future contracting in and out of the U.S. And our expectation is that these fees will gravitate to basically become an additional cost for American consumers and American exporters. So -- but there will be a transition period where we will get some compensation, but not full compensation for those fees. My Vu: Thank you, Andreas. I see this question coming in just now. The next question is about the Suez Canal and the opening of Red Sea. When do we expect -- when do we expect the reopening of Red Sea? And how will that affect our operations and earnings? Andreas Enger: I mean I think it is -- I don't think it makes sense for us, I mean, to speculate about opening. It's, again, a geopolitical issue. It's a disturbance that we believe will have to come to an end. But -- and clearly, a reopening will allow us a more efficient trade system. It will also add capacity into our system. But I think we are -- with our sales of vessels with the newbuilds with the current short-term charters, we are fairly well placed in terms of also optimizing that situation, and it gives us more carrying capacity. So in that sense, I think that is an optimization that we are fully prepared for. We have, I think, created some things in our -- a solid structure in order to deal with it, and we will deal with it when it comes. But I don't think we will try to speculate or provide any guiding on the timing. It doesn't seem to be imminent. But when you look half year out, a lot of things can happen. And if you look a couple of years out, we are assuming that the Red Sea will eventually open. But more than that, I think we will refrain from providing -- I mean, there will be not any valid insight into our speculations and that timing because that's driven by totally external factors. My Vu: Thank you for detailed answers, Andreas. I think that's the last question we have for now, and we can give around 15 to 30 seconds more to see if we have more questions coming in. I guess that's the last question we have for now. And of course, if you have further questions, feel free to reach out to us at Investor Relations mailbox at ir@hoegh.com. Thank you for watching, and we look forward to seeing you next quarter.
Operator: Good day, and welcome to the Jerónimo Martins First 9 Months 2025 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Ana Luisa Virginia , Chief Financial Officer of Jerónimo Martins Group. Please go ahead, madam. Ana Virgínia: Thank you, Sharon. Good morning, ladies and gentlemen, and thank you for joining this call dedicated to our first 9 months results. As usual, in our corporate website, you can find the results release, a slide presentation and a fact sheet for the period. The first 9 months of 2025 continue to be defined by the ongoing global geopolitical uncertainty that is also shaping consumer sentiment and fostering a more cautious value-driven approach among shoppers. Against this challenging context, price remains at the heart of our strategy across all banners. Every team worked hard to uphold our promise of price leadership and to create an attractive quality assortment, securing customer preference and driving sales growth. The reinforced commitment to cost discipline, operational efficiency and productivity paid off and ensure that EBITDA margins remained robust despite the tough combination of low basket inflation with high cost inflation in extremely competitive backdrops. Meanwhile, our ambitious CapEx program is being executed as planned, reaching EUR 816 million in the period with the opening of 274 new stores and the renovation of 170 locations. The balance sheet kept its robustness, closing September with a net cash position, excluding capitalized leases of EUR 467 million. All in all, our 9 months results are solid and show that our banners' business models are agile and prepared to adjust and respond to the current circumstances. Looking now at the P&L, I'm going to focus on the 9 months figures and flag a couple of things. On sales, our banners delivered well overall, driving the group's top line to grow by 7.1% or 6.6% at constant exchange rates to EUR 26.5 billion. EBITDA reached EUR 1.8 billion, 10.9% up on the same period of the previous year or a 9.9% growth at constant exchange rates. EBITDA margin was 23 basis points up versus the 9 months of 2024, reaching 6.8%. This performance is the result of good sales delivery combined with cost management and productivity measures, which more than compensated for price investment and cost inflation. The execution of the investment program is reflected in the evolution of both depreciation and net financial costs as the later also includes the interest expense of capitalized leases. The other profit and losses heading incorporates indemnities, write-offs and provisions as well as the allocation of EUR 40 million from the 2024 results to the Jerónimo Martins Foundation. Cash flow for the period, excluding the dividends paid in May, was at EUR 128 million. The 2 most important things to highlight here are the improved funds from operations following the solid sales and EBITDA delivery and enhanced working capital flows, which reflect the different growth dynamics compared with the same period of prior year and stricter stock management. As already mentioned, by the end of these first 9 months, thanks to the good sales performance and despite the execution of our ambitious CapEx plan, the balance sheet remains solid, including a positive cash position of EUR 467 million. Looking now into the detail of the performance, I will start with the top line. Group sales grew by 7.1%, 6.6% at constant exchange rates to EUR 26.5 billion, including a like-for-like of 2.4% and a solid contribution from expansion. All banners did well with Biedronka in particular, adding EUR 1 billion of sales at constant exchange rate in the 9-month period. In Poland, the market context continued to be highly competitive and consumer behavior remained cautious, focusing on low prices and promotional offers. Throughout its 30 years history in the country and in a meaningful way also this year, Biedronka has kept Polish families' needs and expectations at the heart of its offering. The banner maintained its price leadership and continue to offer the best savings opportunities while working to constantly evolve its assortment and improve its store network, having opened 111 new stores and remodeled 110 in the 9 months. Sales grew by 7.4% to EUR 18.8 billion, or 5.8% in local currency, with like-for-like at 1.8% despite the challenging comps. The like-for-like growth and the expansion of the store network resulted once again in market share gains. HeBe operated in a context that became increasingly price competitive, which combined with muted consumer demand strongly pressured like-for-like growth. Sales increased by 6.9% or 5.3% in local currency to reach EUR 451 million. Over the period, HeBe opened 13 stores in Poland, net -- 10 net additions and 2 in the Czech Republic. The banner is focused on reinforcing its offer differentiation and competitiveness while protecting its price positioning in the current context. In Portugal, consumers remain promotion oriented. Pingo Doce kept its intense commercial strategy, guaranteeing its leading price positioning. This dynamic, together with the contribution from the All About Food stores drove solid like-for-like growth. The banner opened 5 stores and steadily advanced in its remodeling program, having renovated 38 stores throughout the 9 months. The renewed store concept enhances the differentiation and uniqueness of the assortment, particularly in perishables and ready-to-eat meals. Sales grew by 5.4% to EUR 3.9 billion and like-for-like, excluding fuel, was up 4.1%. Recheio enlarged its client base and benefited from the competitiveness of the offer designed for the HoReCa channel, which combines price with quality of the assortment and a special emphasis on fresh and on the service provided to clients, particularly the Amanhecer partners. Against the difficult comparison with the same period in the prior years, our wholesale banner grew sales by 2.6% to reach EUR 1 billion with like-for-like at 2.4%. In Colombia, despite some improvement in consumer demand, Ara continued to face a difficult backdrop and maintained an intense commercial dynamic, offering the best saving opportunities for the Colombian families. With like-for-like growth at a solid 5.6% and a strong contribution from store network expansion, sales in local currency increased by 16.9%. In euros, sales reached EUR 2.3 billion, 9.6% up on the 9 months of 2024. This performance reflects our Colombian company's strong focus on growth that fueled its top line through intense promotional dynamics on one hand and the delivery on its expansion ambition on the other. This expansion included the opening of 135 stores over the period, of which 70 resulted from the integration of stores previously operated by Colsubsidio. Consolidated EBITDA grew by 10.9% or 9.9% at constant exchange rates to reach EUR 1.8 billion. This solid performance was driven by increased sales and effective cost and productivity management. All companies managed extremely well the challenging combination of price investment and cost inflation, particularly in wages. Never losing sight of our growth ambition and working efficiently and productively, all banners delivered good margin performance despite the muted consumer context, particularly in Poland. Group EBITDA margin was at 6.8%, up from the 6.6% registered in the 9 months of 2024. At Biedronka, EBITDA margin performance was driven by an assertive combination of sales growth, cost control and efficiency gains. At HeBe, while like-for-like was impacted by the market context, the focus on tightening cost discipline and working to shield product mix allowed for EBITDA margin protection. In Portugal, an effective promotional strategy drove sales growth, which together with reinforced productivity measures also preserved EBITDA margin. In Colombia, Ara's good performance benefited both from sales growth and the work initiated in 2024 to protect gross margin and mitigate the impact of inflation on costs. Wrapping up, amidst a backdrop of global geopolitical uncertainty, consumer behavior remains somehow restrained and predominantly price focused, contributing to intense competitiveness in food retail. During this period, we also continued to face cost inflation, particularly in wages. Despite these challenging conditions, we achieved solid sales growth. On top of the positive contribution of like-for-like, a recognition of our unwavering commitment to offer leading prices, the strategic expansion of our store network also played a decisive role. The combination of robust sales, cost discipline and operational efficiency translated into strong EBITDA delivery. With the Christmas and New Year season approaching, we will stay focused on offering the best saving opportunities and ensuring an agile responsiveness to the needs and wants of our customers so that they keep choosing our stores every time. Thank you for your attention. Operator, I am now ready to take questions. Operator: [Operator Instructions] And your first question today comes from the line of William Woods from Bernstein. William Woods: When we look shorter term, why do you think you can't pass on basket inflation in a normalized way just yet? And I suppose, have you seen any improvement in that basket inflation over the last few months? And also, when you look at your market share gains, are you able to give us any idea in Poland, how much market share you've been gaining either over the last year or 2 or something like that? And then when you look longer term in Poland, in particular, how confident are you that you can see margin recovery in that midterm view? Is there any reason why you don't think you could get back to 8.5%, 9% like you were achieving a couple of years ago? Ana Virgínia: So on basket inflation, of course, we are not alone in the market. The Polish market continues to be very, very competitive. And this -- it's true that this comes a long way but we know that considering the context and the fact that we are and we keep operating in a low basket inflation versus a still high cost inflation. This means that all players are more pressured, and this tends to intensify really the competition in the market. So I think that's what Biedronka intends to do is to keep its price leadership, as we said. This is really relevant in the current context. So currently, what we have to work for really is to make sure that we are and we continue to be the leaders in price. This being said, of course, it's a different situation, as I've been saying this year, it's a completely different situation to work even with low inflation than to work in deflation, which was the case last year. And of course, this really drives the performance, not only on the margins but particularly and also on the balance sheet, considering our business model, the way that it is crafted. So I think that we are not so keen in passing the whole inflation. The idea here is to really become or continue to be the most competitive to maintain the preference of consumers to make sure that through sales, we are able to dilute the costs and of course, to protect our profitability because growth is also important, as I said, for the return on invested capital as a whole. On market share gains, according to JFK, so it's the base and the source that we have, we continue to gain market share. Up to August, we gained 0.2 percentage points of market share. And I believe that in September, we even gained a little bit more than that but the numbers are not still out. So I think this -- and I have to say, it's an incredible performance by Biedronka's team, considering that we are growing on top of growth. And it's true that EUR 1 billion is not the same percentage when you are delivering EUR 25 billion in sales than when you were delivering billion EUR 20 million but it's really a terrific performance by our Polish banner. On the margin recovery, of course, this, as I said, I think that we are -- we know that we are becoming more leveraged from the P&L point of view when we work with lower margins. But the fact is that we had to prepare to work with high cost inflation and of course, still being in a collection move considering the low inflation of 2022 and 2023. So what -- if it's possible, this will really depend on the whole market. And what we are seeing, as I flagged, is still a consumer that is cautious, a consumer that doesn't see reasons to trade up in food. And of course, it's possible, but I don't think at this point will be our main priority. The main priority is really to protect profitability considering the whole business model and the -- as I said, the return on invested capital more than just the EBITDA margin or EBIT margin. Operator: And the next question comes from the line of Jose Rito from CaixaBank. José Rito: Sorry if I didn't get if you comment anything related with weather. We had some other players calling attention to the weather impact in Q3. Can you quantify how much was this impact for Jerónimo in Poland, please? That will be the first question. And then the second question I have is related to this OpEx evolution. OpEx as percentage of sales has been evolving well. What has been the main contributors to this? So what has been the cost lines that have been evolving below sales? Ana Virgínia: Thank you, Jose. So on the weather, we do not quantify, of course, the impact as we also don't quantify when the weather is good. So it's a circumstances that affects all players. And of course, we have to deal with that. It's true that affects some categories that usually are margin driven. But this being said, we don't isolate the effect in our performance. It's something that we have to deal with. On OpEx, so this has 2 main reasons, of course. One was all the measures in terms of cost control that were taken. And this a little bit in anticipation of what we were seeing in the market. So as you know, and having as a proxy, the minimum wage increase that has happened in our main markets, which was basically a very high single digits and knowing that it would be almost impossible to grow at that pace, all the banners started to implement a series of different initiatives to increase productivity and to make sure that regardless of the sales growth, they would somehow protect the profitability without losing, as I said, the competitiveness and losing the consumers' preference. And of course, the fact that we performed, in my opinion, well at the top line also helped to dilute and this was across, in fact, all banners, even in HeBe that had a more difficult context and is still operating with a high deflation, in fact, even -- he took some measures but that were already being prepared because of the context that we knew we would face this year. José Rito: Okay. Understood. So on the weather and I understand your answer on -- there is always positives and negatives. But can you at least say if now what we are seeing is more neutral relative to the weather in October? That will be the first. And the second one as a follow-up on the efficiency gains and be remind how much was the minimum wage increase this year. So the minimum wages next year will be much lower than this year if the efficiencies are there. So I would say that if top line momentum remains, so operating leverage could be even more in 2026, right? Ana Virgínia: Okay, Jose. So still on the weather. So what I know is that it continues to be challenging but it's now the season of bad weather. So I think that we should not depend very much on the weather to assess our full year results, to be honest. On the -- still on the OpEx. So it's true that the announcement, at least in Poland, because in Portugal, it's a little bit higher than that. And probably in Colombia, where there will be elections, we will see also an increase in salaries that is higher than the 3%. But this being said, we have to notice that it's not just a question of the increase in the minimum wage. We are facing very tight labor markets. We know that the immigration is also a question to see how we will deal with some constraints or some restraints in the different countries. So I think that we face still a very challenging backdrop in terms of wage increases or not. So if it's going to be 3%, this will also depend on the market dynamic and on making sure that we have the proper teams in place to continue to deliver our value propositions to our customers. The rest, of course, growing -- even growing in Poland at 3%, which would be -- and usually, you do that relation with the increase in costs. The question is that this will depend a lot as we are -- first of all, we have a very challenging base to grow from. And on the other hand, this will also depend on the consumer background and on how things evolved. And we continue to see a lot of volatility and still a lot of, let's say, muted consumer demand all across. So I wouldn't say that, yes, we are facing a more or less challenging context because the minimum wage increase or just because the minimum wage increase is lower this year than it was last year. In fact, we are growing from a much higher base than it used to be. Operator: [Operator Instructions] We will now take the next question and your next question today comes from the line of António Seladas from A|S Independent Research. António Seladas: Just a quick question in terms of working capital. It seems that figures are now stabilizing. So should we expect a more normal pattern from now on in terms of working capital? Or do you think that pressure that we saw in the recent quarters will continue? Ana Virgínia: Thank you, António. So on working capital, of course, as I mentioned, we are highly leveraged from the operational point of view. It is the nature of our business model. And of course, when we have growth and particularly when there is no deflation, the working capital goes or works in favor of us as a tailwind. And so I think that the correction move that there was in the market last year was penalized the working capital. At this point, what we are seeing, of course, is a different situation. So as I said, the growth dynamic is different and the working capital is better in this sense. This being said, I have to say that there was also a very significant work, particularly by the teams in Portugal and in Poland at the stock levels to make sure that overall, our profitability model works also on the working capital. So I think that's we can consider stabilized but it will depend again on the level of growth to continue to have the working capital being positive. And at this point, I wouldn't see that there wouldn't be working for us in the last quarter of the year. Operator: [Operator Instructions] There are currently no further questions. I will hand the call back to Anna Luisa. Please go ahead. Ana Virgínia: These 9 months results translate our banner's commitment and hard work to deliver against a very volatile geopolitical context whose impacts on the economic agents, including consumers are still far from being totally visible. Entering now the last quarter of the year and the crucial Christmas and New Year's period, we remain focused in responding to our customers' needs while continuing the key investment projects that are still to be concluded before the year-end. Thank you for your questions and for attending this conference call. I wish you all a nice day. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to the 2025 9 months results announcement conference call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair of the Board; and Mr. Ignacio Lares, Chief Financial Officer. The results for the 9 months ended 30th September 2025 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange's and Budweiser APAC's websites. Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call may contain statements and future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that the Budweiser APAC's actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise. For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, see risk factors in the company's prospectus dated 18th September 2019 and the 2024 Annual Report published and any other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated. Percentage changes refer to comparisons with the same period in 2024. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized figures are non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2025 9 months results can also be found in the press release. It is now my pleasure to pass the time to YJ. Sir, you may begin. Yanjun Cheng: Thank you, Rick, and good morning, everyone. Thank you for joining our call today. Our performance in China has been challenged over the past few quarters, as our results have not delivered on the full potential of our brand and organization. While the overall industry has been impacted by soft economic cycle, which had been even more pronounced in our footprint and mix of channels, we have recognized clear opportunities to enhance our route to market and portfolio execution to better align our results to our capabilities. As a company of owners who struggle every day for operational excellence with our customers and consumers, we have been working in China to rightsize inventories and allocate resources. We have a clear view of where to improve. Our priority is to reignite growth and rebuild our market share momentum. We are moving with speed, focus and discipline to ensure that our business turns stronger, more efficient and better positioned to improve over time to outperform for the long term. I will now hand it over to Iggy to provide more on our performance in the first 9 months and the third quarter for 2025. Thank you. Ignacio Lares: Thank you, YJ, and good morning, everyone. In the first 9 months of 2025, total volumes decreased by 7%. Revenue decreased by 6.6%, while revenue per hectoliter increased by 0.4%. Our normalized EBITDA decreased by 7.7%, and our normalized EBITDA margin contracted by 37 basis points. In the third quarter, total volumes and revenue decreased by 8.6% and 8.4%, respectively, with ongoing challenges in China, partially offset by our performance in India. Revenue per hectoliter increased by 0.1%, driven by a positive geographic mix in India and revenue management initiatives in APAC East, partially offset by our performance in China. Our normalized EBITDA decreased by 6.9%, impacted by our top line performance, while our normalized EBITDA margin expanded by 46 basis points. Now let me discuss some highlights for each of our major markets. In APAC West, in the first 9 months of the year, volumes and revenue decreased by 7.9% and 8.7%, respectively, while revenue per hectoliter decreased by 0.8%. Normalized EBITDA decreased by 9.7%. In China, volumes in the third quarter decreased by 11.4%, impacted by continued weakness in our footprint and on-premise channels. Revenue decreased by 15.1%, while revenue per hectoliter decreased by 4.1%, impacted by increased investments behind innovations and brand activations as well as efforts to expand our in-home presence coupled with an adverse brand mix as we managed inventories. Normalized EBITDA decreased by 17.4%, impacted by our top line performance and operational deleverage. On that note, as YJ mentioned earlier, we have a clear view of where we look to improve in China and how to achieve this. Accordingly, we are focused on improving our top line performance through the following areas: further strengthening our route to market with an elevated focus on the in-home channel across online, offline and O2O; increasing investment in our mega brands, such as Budweiser, Harbin and Corona, to win in the Premium, Core+ and Super Premium segments now and as the industry recovers; leading innovation within the industry across packaging, brands and liquids to increase category participation and develop new consumption occasions; expanding our footprint through targeted geographic expansion; and restoring our excellence in execution. We made further progress in our channel expansion strategy in the third quarter, focused on premiumizing the in-home channel as in-home consumption occasions continue to develop. In the first 9 months of the year, the contribution of the in-home channel to our volumes and revenue increased as we began to extend our distribution within this channel. On the portfolio side, we continue to invest in diverse marketing campaigns and innovations to further increase the brand power of our portfolio, connect with consumers across more occasions and increase sales momentum. Corona expanded its signature Drinking with Lime ritual from bottles to cans with the launch of a full open-lid can design, which further reinforces the brand's differentiation and appeal. This innovation is now rolling out across online and retail channels to expand Corona's reach in in-home drinking occasions. Budweiser introduced Budweiser Magnum in a 1-liter can, broadening its consumer reach with a greater in-home presence while retaining its striking black and gold design. The new packaging format further highlights the brand's distinctive brewing and aging process as well as its unique flavor. On the digitization front, the usage and reach of BEES, our B2B wholesaler and customer engagement platform, continued to expand. As of September 2025, BEES was present in more than 320 cities across China. We continue to leverage technology to further enhance our commercial capabilities, optimize our route to market and strengthen our customer relationships. While our performance in China has been disappointing, our businesses in South Korea and India have continued to deliver solid results. In India, in the third quarter, we delivered double-digit revenue growth, which translated into a strong EBITDA performance, further compounded by the lapping of additional costs incurred in the third quarter of last year on projects to enhance the digitization and integration of both financial and nonfinancial information. In the first 9 months of the year, the Budweiser brand continued to grow ahead of the industry with the volume and revenue of our Premium and Super Premium portfolio increasing by double digits. In APAC East, in the first 9 months of the year, volumes decreased by 0.5% with revenue and revenue per hectoliter increasing by 1.8% and 2.3%, respectively. Normalized EBITDA increased by 0.3%, with our EBITDA margin decreasing by 46 basis points. In the third quarter, volumes in South Korea were flattish as we continue to offset ongoing industry weakness by outperforming the industry in both on-premise and in-home channels. Revenue and revenue per hectoliter both grew by mid-single digits, driven by our ongoing revenue management initiatives and a positive brand mix. Meanwhile, our EBITDA and EBITDA margin expanded substantially supported by a strong commercial performance and commodity tailwinds. We increased our commercial investment to bolster our competitiveness in the lead-up to Chuseok, one of the key selling periods in South Korea. From a portfolio perspective, we also unveiled recently Cass ALL Zero, South Korea's first nonalcoholic beer to emphasize a 4 Zero concept of 0 alcohol, 0 sugar, 0 calories and 0 gluten. And with that, YJ and I are here to answer any questions that you may have. Operator: [Operator Instructions] Our first question is coming from Lillian Lou from Morgan Stanley. Lillian Lou: Can you hear me? Ignacio Lares: Yes, very well, Lillian. Lillian Lou: I have 2 questions. One is about China. In particular, you mentioned in-home mix has been increasing but underlying -- and I would like to get more color about the brand performance, in particular, the major mega brands' performance relatively in third quarter. And also, what's the latest trend for Budweiser, Harbin Super Premium segments? That's my first question. I will ask the second one after that. Yanjun Cheng: Okay. This is YJ, Lillian. Thanks for your question. In terms of brand performance, let's talk about it by channel. By channel, on-premise got impacted by the industry in the past few years' weakness. We also got impacted as well. And also the new trend for the channel, which is in in-home O2O, that's one we have a gap, and we are working with the vendors, retailers to build a platform to fill the gap, what we have and which linked to the brand portfolio we have. The brand portfolio we have, which the consumer knows and love, we have rich portfolio. For the -- we've also focused on innovation to meet the consumer needs by channels, for example, Budweiser, fits the in-home channel, it created a 740 ml, a bigger can, which is a quite good performance in the in-home channel. And also in terms of O2O, we also create a Bud Magnum 1-liter can to fill the gap and the channel, O2O. And for the Super Premier, we see the O2O trend, the performance is quite good. We have a rich portfolio of Super Premier as a company we are. And give example, Corona, we also developed a full open-lid can, not only bottle with lime but also able to allow the consumer to drink Corona with lime in a full open-lid can. So those are -- talk about brand linked to the channel with the innovation. See the gap we have. See the soft weakness that we have in the Premier. Those are the actions we see -- we take in terms of channel investment, cooperation and also the innovation we develop. We see good trend on this. And also for the Core+, we are working hard on it. And we do have a very good example, the benchmark in Korea. You see the cost, so priority, I think to the innovation. There's a big innovation, big best practice we're going to apply and learn within the APAC. So -- but I try to break this by channel linked to the innovation and the gap we have, the action we take, investment we take, best practice we learn from Korea to be able to answer your question. Thank you. Lillian Lou: Thanks, YJ. My next question is about Korea. In Korea, we understand that the whole industry demand is still pretty weak and Budweiser and Cass are gaining market share. I'm trying to understand what is the latest demand trending into fourth quarter and next year and reacting to that, what the competition dynamic could shift to. Ignacio Lares: No, thank you for the question, Lillian. I'll take that one on Korea. So you're correct that the total industry remains soft, right, given the macroeconomics. The demand has been soft now for several quarters. If you take a look at maybe the economic indicators, we've seen CPI stabilized, so inflation has stabilized and consumer sentiment actually has been improving sequentially over the past few months. However, by the same token, the savings rate, right, for consumers has been on the rise, and that's despite inflation being under control and actually, interest rates being cut in Korea as well. So consumers are effectively acting as if they're under some level of pressure, and they're prioritizing essential spending, which, of course, includes food and utilities within that category. So this consumer frugality trend or kind of short-term effect is currently, of course, impacting overall alcohol consumption as well as the natural structural trade up, right, that you often see from lower-priced alternatives, such as Soju, of course, into beer, which has been long standing in Korea. But even within this context, right, you still see pockets of growth within Korea. And so we see nonalcoholic beer growing. We see flavored beer growing. We see RTDs outperforming. So these are also gaining popularity as they are in other developed markets or more developed markets, right, which presents, of course, opportunities for us as well. Then from a competition perspective, the way I would look at it is, I mean, the summer and the Chuseok selling periods are usually the most active, right, in terms of promotional activity, investment innovations, and this year really has been no exception. In this context, we're very pleased with the commercial results from the South Korea team in the third quarter. They continue to gain market share in both the on-premise and in-home channels, and that was led, of course, by the Core portfolio and by Cass, which helped to offset, of course, the soft industry, right, the soft demand, as we just discussed. But I think most importantly, perhaps the fact that the brands are very healthy there, the innovation pipeline has been very effective at solving consumer needs, right, in the last couple of years. In Core specifically, of course, we've continued to increase consumer participation in the category via nonalcoholic beer, flavored beer and several other liquid innovations, including Cass 0.0, the Cass ALL Zero, of course, that I discussed in my comments earlier, and then different variants, of course, the Cass Lemon Squeeze as well, not to mention, of course, HANMAC's Extra Creamy Draft can as well. On top of that, we're still focused, of course, on continuing to lead premiumization, which we see as an opportunity as well given it remains under-indexed in Korea relative to other more developed markets. So I think as we move into this last quarter of the year and into 2026 with our brand portfolio healthy, with it being very well supported by the route to market we have there and by the very strong team in Korea, we see ourselves as ready to continue to lead beer industry growth across Korea for the future. So I hope that answers your question. Thank you so much, Lillian. Operator: Our next question is coming from Wenbo Chen from CICC. Wenbo Chen: I have 2 questions. First is about channel inventory. We have seen ongoing progress with destocking in the third quarter. So could you please share what's our outlook for the China market in the fourth quarter and the coming year? And do we expect a rebound in the selling performance? Ignacio Lares: Wenbo, no, thank you for the question. I mean you're correct. We've been proactively taking steps, right, to adjust or manage our inventory in the current business environment, and that's with the intent, of course, of ensuring the health of our route to market, right? And we've been doing that since about the late third quarter of 2024. Our inventories as of the end of the third quarter this year, third quarter '25 are now actually lower than they would have been in the same period of last year. And that's both in terms of absolute inventory and days of inventory, and we would expect this, of course, to be lower than the industry average. So we've made good progress, I think, on the inventory front thus far. Going forward, we'll continue to manage our inventory very attentively, so we don't give an explicit outlook, but we always want to make sure that we're on top of inventories and managing it very attentively. And there will be adjustments, of course, based on sell-out trend changes as we move forward. However, we wouldn't expect these to be necessarily as significant as what we have done, of course, over the past year. So I hope that answers your question, Wenbo. Wenbo Chen: Okay. And my second question is about the in-home channel. We have made great progress in the in-home channel this year, and you just mentioned our optimized product mix. Could you also share the current penetration level of the in-home channel across the business in the first 3 quarters? And also, what are the plans for the further expansion in the fourth quarter in the next year? Ignacio Lares: Yes. First, thank you for the kind words. We've been working very hard, as YJ also mentioned, right, on making progress in the in-home, which is a big priority for us. And of course, you can see that in many of our markets. Maybe the way we tackle this is, I mean, first and foremost, with increasing disposable income and market maturity across China, we would expect both the in-home channel to continue to grow and the premiumization trend to take more root there over time. And this, of course, offers us one of the largest opportunities to expand our business moving forward. When we look at the current -- to your point on penetration, current level of the off-trader in-home channel in China, it's directionally 60-plus percent of the industry. However, it only accounts for a little bit more than 50% of our channel mix, right? So we still have a big opportunity to expand our presence closer to the industry average. And we know that the in-home will continue to grow its share of industry, as I mentioned, as the market continues to mature. So we'll hopefully catch both, right? Close the percentage mix here and its weight will increase rather over time. Then from a brand and portfolio perspective, and YJ was alluding to this earlier, right, in retail, it's essential to have a full portfolio, right? And you need to have various packages at each critical price point to fulfill different consumer demands. We're very fortunate, right, to have the portfolio that we have available to us. And the brand power of that portfolio is actually significantly higher than our market share, right? So we know that it offers the potential to drive far more penetration that we have today. We have solid plans here, and we're going to continue to invest behind our mega brands with the strong mega platforms we have to achieve that. The teams also continued to make progress on the right packs, right? So it's important to have the right assortment, as we were discussing, at the point of sale and to have key price points covered. And the biggest remaining opportunity, as we've shared before and YJ mentioned earlier on the call, is really on Core+, right, which is particularly relevant in the in-home channel. Then from a route-to-market perspective, the key to successful in-home expansion is really to expand the high-quality distribution network to be able to cover more points of sale. We've been doing that over the past couple of quarters going wider and deeper even in geographies where we already have a well-established presence. So we're developing new Tier 1 and Tier 2 wholesalers to help us expand to more points of sale. This takes time, of course, as you need to recruit wholesalers and build capabilities, right, to ensure that you have the right picture of success in every in-home point of sale. But the teams are very encouraged with the progress here and maybe 2 proof points I would probably give are: one, the contribution of the in-home channel to our total volume and revenue has continued to increase, so that focus is driving us in the right direction; and second of all, when we look at the in-home channel, actually, Premium and Super Premium's contribution within in-home is now outpacing that of Chinese restaurants, right? So we're seeing the in-home channel premiumize as the teams exert their energy and their efforts there. So I would echo YJ's points, right? I would say the team has the right plan and the right initiatives in mind. There's progress already on several of the portfolio and route-to-market areas, and now there's just a lot of work to do, a lot of work to be done, right, to scale this with consistent execution in the quarters to come. So thank you so much for the question, Wenbo. Operator: Our next question is from Chen Luo from Bank of America. Chen Luo: So I've got 2 questions. Both of them are on China. The first question is about our branding strategy. Early this year, we heard about our commitment to developing the Harbin brand nationwide, and most recently, channel [ checks ] seem to suggest that we are making even further commitment to the same strategy. Considering the rise of the local and regional brands and the very niche brands in China recently, do we think Harbin is strong enough to compete, especially to compete in Guangdong province. So this is our stronghold province, but we now see big pressure of share losses to local brands. Do we believe local consumers are willing to switch from Zhujiang or Liquan to Harbin, which originated from Northeast in China? Are we going to develop some regional brands to bond with local consumers given the success of Sedrin [ Lychee ] in Fujian province? So maybe I'll stop here. Later, I will ask my second question. Ignacio Lares: Okay. No, thank you for the question, Luo Chen. Maybe let me start here. I think if we didn't have confidence in Harbin, right, we wouldn't have prioritized it for our first offering in the Core -- in the RMB 8 price point, right? So if you think about it, Harbin has been a national brand for years and has a broad presence nationwide across different channels, right? It's -- given the amount of time the brand has existed for, given the presence in multiple provinces, it's one of the few truly national brands in China. In Guangdong specifically, the brand has been there for a long time, and we've been developing the brand, particularly in the on-premise channels but also, of course, in the in-home more recently, focusing historically more on the RMB 6 price point. As we expand into the in-home, we chose Harbin Icy GD Zero Sugar priced at that RMB 8 price point [ in CR ] to kind of leverage the brand power of Harbin, both nationally but also in Guangdong, which actually stacks up very well versus other local brands. So we're, of course, bullish on Harbin overall in Icy GD, in particular, based on that starting point from a brand power perspective. And then as YJ mentioned earlier, based on the superiority framework we have in place, where we test liquid, packaging, positioning, communication and value with consumers, we know that we have a superior offering, right, one that should outperform other offerings in the market at the price point at which its being offered. So we know we have a strong horse in the race. From that perspective, the sales volume of Harbin Icy GD Zero Sugar, we also actually tested with consumers where the volume would come from. And actually, most of that volume is either sourced from existing consumers trading up within our portfolio, so moving up from RMB 6 such as Harbin Icy into RMB 8 or also successful conversions from other local competitor brands, right? And so the fact that it has both a functional benefit and a specific partnership behind it, right, with the NBA, so zero sugar plus NBA partnership, made it a superior offering, which is explaining a bit that advantage that it has against other brands. By the same token, you're right. China is a very large country, and you need more than one brand to be successful. Harbin Icy GD Zero Sugar represents our first offering in that RMB 8 price point, and it is a priority for us to capture growth opportunities with this brand, but we know that we will need a portfolio over time. In other places, we might complement our portfolio with other Harbin innovations. We, of course, have local brands that have innovation opportunities, as you mentioned as well. Beyond Harbin, of course, we've got Sedrin in Fujian, which is doing very well, and I'm sure you would have seen it during your most recent visit there, Nanchang in Jiangxi, Big Boss in Jiangsu, Double Deer in Wenzhou and so on and so forth, right? So we can also invest behind some of these local brands, and we have a very solid innovation pipeline across different regions, which is designed to be tailored for local consumer needs and should be complementary to what we're doing on the Harbin brand today. So I think from a brand and portfolio perspective, we're in a good place. I think the key element, going back to YJ's point, will be the expansion of our in-home coverage and distribution and the enhancement of our trade execution. So I think the better those 2 things are done, the more we will get it at the portfolio that I just mentioned. So lots of work to do but the teams are committed to the brands, and they're actually quite excited about the growth potential that they show at this point. So I hope that answers your first question. Chen Luo: That's very helpful. The second question is about the channel in China. Despite our progress with the in-home channel, the on-trade channel is still witnessing quite big declines. How are we going to sustain the sales momentum in the on-trade channel? How are we going to cope with the rise of the new channels amid the increasing channel fragmentation? Ignacio Lares: Well, thank you for the question. Yes. So I think there's a couple of things. It's more of a question of the magic of the and versus or, right? We need to do well in both channels. We've been somewhat conservative on our expectations on on-premise recovery because, of course, the trend for consumer occasions growing in the in-home continues, and it's been taking place at a similar rate for a while. So in terms of on-premise recovery, we haven't really seen a significant improvement yet. By the same token, we continue to sustain our investment in the channel. This is still a critical place, right, to do brand building, to have effective innovation launches, et cetera. And it's very important for the health of many of our wholesalers. It will be very important for us to continue to invest here, particularly for when the on-trade begins to recover as well. In the interim, though, we're focusing on the factors that are more inside of our control, right? We're closely working with the distributors to optimize packaging assortment, right? And so the launch of different packaging examples like the ones YJ gave before on Budweiser and Corona and also Blue Girl are tailored for that current consumption environment. We're also investing significantly in trade execution, so I think brand promoters, targeted food streets, essentially things that allow us to elevate the consumer drinking experience and promote on-premise consumption in the areas and sub-channels that have been more resilient within there. But you're right, in terms of emerging channels, right, the instant retail, O2O and e-commerce channels continue to grow. They're a big focus for us moving forward. The O2O channel actually conveniently skews more premium, which is beneficial, right, to our in-home premiumization efforts, and we benefit from having a full portfolio there. And of course, the contribution of O2O to our in-home sales mix is also increasing. So yes, we're engaged with our wholesalers to utilize these platforms to drive traffic, to promote different drinking occasions for our full portfolio and to capture growth opportunities. So I don't think we can choose one or the other. I think we need to do a good job of maintaining the on-premise, while building a stronger in-home presence, which we're doing very actively today. Thank you for the question, Luo Chen. Operator: Our next question is coming from Mavis Hui from DBS. Mavis Hui: My first one is on low-alcohol beer. On the back of rising health awareness, what could be our impending strategies on product innovation and advertising and promotion to further seize market share in low-alcohol products? And do we have some expectations on -- or the targets on the proportion of our sales coming from light beers or alcohol-free products in 5 years' time? Ignacio Lares: Thank you for the question, Mavis. Yes. So where I would start is, I mean, we constantly interact with consumers to get feedback on their needs, and then we innovate, right, to ensure that our portfolio is providing balanced choices that meet these needs. And we're seeing nonalcoholic and low-alcohol beers gaining popularity in many markets. If you look at APAC overall, the development of both nonalc and low alc is actually quite different by market. So maybe I'll cover it by country. I think if you go to China, nonalc and low-alc beer is still a niche market today, right? And consumers have many different nonalcoholic options, which can serve as great alternatives in nonalcohol-appropriate occasions. However, when consumers drink beer, they generally still prefer to consume alcohol, right? So we're here present with Budweiser 0.0, with Corona Cero as well here in China, but it's more with the intent of growing the nonalcoholic beer segment in the right way and preparing for the future as the China market matures. If you move to South Korea, it's a bit different, right? Nonalcoholic beer is gaining popularity, and we expect, of course, that momentum to continue. There, we have several nonalcoholic product innovations behind Cass, right? So we have Cass 0.0. We have the all-new Cass ALL Zero, which we mentioned earlier, and we have flavored variants, right, like the Cass Lemon Squeeze 0.0 as well. So we're seeing success with different offerings there, and all of these offerings are actually quite helpful because in both the nonalcoholic and low-alcoholic space, they're increasing consumer participation in the category. They're providing incremental volumes, right, to the team there, so they're helping us to offset some of that industry softness we discussed before. And they're actually also incremental to our profitability as well. So it kind of serves all 3 purposes. And then if we move to India, right, the beer market has been traditionally dominated by hard liquor and very high alcohol percentages, right, so 40-plus percent ABV products. Beer is growing in India and strong beer, so think 6% to 8% ABV are a big part of the India beer market today. However, there's a growing trend, right, towards lower alcohol products, which favors, of course, the growth of the beer category overall in India. And yes, within this context, nonalcohol beers have a role to play. They'll help to provide consumers in India more choices, right, to match their needs and their lifestyles. And our leading nonalcoholic offerings in India today include Budweiser 0.0, flavored Budweiser, which is Green Apple and Hoegaarden 0.0, right? So I think each of the markets is in a different place. We haven't shared targets at a -- by market level, but we have high growth ambitions across the board. It's just a question of taking advantage of market maturity to make sure we have the right offerings in the right place, and we lead the development of the nonalcoholic segment as well. Thank you for the question, Mavis. Mavis Hui: And my second question is about India. Can we have some more updates on the biggest barriers to scaling up faster in India aside from religious or cultural diversity? For example, would it be the route to market, regulatory hurdles or maybe consumer education? And where do we see the most untapped growth opportunities in the market over the next 1 to 2 years? Ignacio Lares: Thank you for the question, Mavis. Look, in India, we're focused on consistent and sustainable top line growth, first and foremost, particularly given the maturity level of our India business. And of course, we want it that to translate both to bottom line and cash flow growth as well. In India, we have strong growth momentum. The Premium, Super Premium revenue, which is roughly 2/3 of our business in India today, grew by double digits, both in the quarter and year-to-date, right, first 9 months of the year. And the Budweiser brand, of course, continues to grow ahead of the industry. Premiumization continues to be the most critical driver, right, of EBITDA performance as well. We delivered strong results with double-digit revenue growth and significant EBITDA margin improvement, which you would have seen in our APAC West results. And of course, admittedly, this was on a softer base in the second quarter last year, but we still see the benefit of strong premium growth in our quarterly results. In terms of the industry overall, year-to-date, it continues to grow, which is also helpful, of course. As you'll recall, India has very low per capita consumption, so that's what makes the opportunity so enticing long term. The industry is expected to continue growing, and that's both in volume and revenue terms, and that's actually even before we consider the impact of moderation initiatives, which we see as an opportunity to unlock an even more exciting future for India. And I mean we're encouraged by a few things we've seen in the last few quarters, right? So the number of points of sale in some states, including Uttar Pradesh, for example, have increased. In Uttar Pradesh, they actually roughly doubled the number of outlets that are allowed to sell beer, so there's more than 10,000 points of sale of beer now. Some states are experimenting with low-alcohol bar retail vans, which can serve beer or wine. And as these become allowed and they're introduced in some key cities like Noida and Lucknow, we see, of course, that picks up consumer demand. And then in Maharashtra, we've also actually seen positive changes for both excise as well as how beer distribution can be done. So we see some signs in different places that help to advance the industry moving forward. And then among things we can control even through that period, productivity is also an important driver, right, of our ambitions in India. That will help us to drive EBITDA margins. And the way we're doing it is the supply chain teams continue to make progress here by benchmarking our best-in-class small breweries in China, which are referenced, looking at initiatives that they can replicate there in India, and we see very good progress on these initiatives that are helping us to accelerate profitability. So it's a bit of these different buckets, but hopefully, that answers your question as well, Mavis. Thank you so much. Operator: Our next question is coming from Anne Ling from Jefferies. Kin Shun Ling: I have 2 questions, 1 for China and 1 for Korea and Taiwan. So first, on the China side, on the commercial investment, how do you allocate resources between the on-trade and off-trade currently? And management mentioned previously the mega platform investment in third quarter '25. So would you share with us what is the ROE when you compare to like some of the previous initiatives? And looking ahead, how do you plan to allocate ad spend or marketing spend across different channels, for example, digital platform, entertainment or sports events? That's my first question. Ignacio Lares: Okay. Thank you for the question. A few things to unpack here, so let me maybe try and break it down into components. I think the first piece on mega platforms, I think we're very fortunate, right, to have access to the mega platforms. That's one of the big benefits that we have. And these, of course, would not necessarily make sense to pursue on an individual country basis, right? So here, we're very lucky that they're relevant with consumers in many markets, and we benefit from 2 things. We benefit from, of course, a more manageable cost by taking on these mega platforms at a global level and if we undertook them, of course, ourselves for 1 or 2 markets. But then we also get the opportunity to activate them with different brands in different markets based on consumer preferences and needs, right? So that's helped a lot to make the mega platforms high ROI initiatives in general. And then, of course, good examples of that would be things like FIFA, the Olympic partnership and many music platforms, right, a good example being Tomorrowland, which we'll be doing in Shanghai, right, later in November. In terms of commercial investments by channel and how we think about them, going back to maybe the question earlier, right, we're sustaining our investment in the on-premise channels because we still see them as critical for route to market, critical for brand building. So despite, of course, the pressure on the on-premise channels, they still play a critical role. By the same token, the incremental investments that we're making are going more towards the in-home channels, right, and especially as YJ was saying before, the emerging sub-channels, so to all instant retail, e-commerce, right? So as in-home occasions continue to develop, we're putting a larger proportion of our spend in that direction. And then given, of course, the market, right, has been shifting quite a bit, we look to continue to remain agile in the context of that macro environment. So as channels recover, et cetera, we're actually in quite an easy position to increase or adjust our spend accordingly. Then in terms of marketing spend or marketing investment specifically, the brand power of our portfolio is the critical element for driving premiumization, right? So that's our reference for market share growth potential. And from that perspective, we look to continue to give differentiated offerings to our consumers and drive more value, right, for our premium brands with unique experiences. In the kind of 9 months of '25, our investment as a percentage of revenue increased, and that was driven mainly by marketing investment on our mega brands and behind our mega platforms, right? So they're the FIFA focus, right, for Budweiser, the music focus for Budweiser, the NBA sponsorship and campaigns for Harbin have been the places where we look to continue to create premium and kind of trend-setting experiences. And these need to be rooted, of course, on consumer passion points. The second piece has been around innovations, right? So launching the Budweiser Magnum 1 liter that YJ mentioned, the Corona full open-lid can as well that YJ mentioned, which give us a chance to increase category participation and develop new consumption occasions as well, right? So if you think about the Corona full open-lid can, it allows consumers to have a lime experience in a can in in-home setting, which is something that, of course, is a much nicer experience than without it. And then the third area of focus is increasing direct consumer communication, right, so with differences from media channels and points of contact, making sure we increase our consumer reach and contact frequency to deliver that innovation and that mega platform messaging in the right way. So we'll continue to invest in diverse marketing campaigns and innovations, and the goal will be to further bolster the brand power of the portfolio to continue to connect with consumers, obviously, across more occasions and then, of course, to increase our sales momentum as we move forward. Thank you for the question, Anne. Kin Shun Ling: Got it. Got it. And my second question is on -- back to the Korea and also like the Taiwan custom update. And so would you give us an update on the status on the 2 -- these 2 recent event? Number one is that the current customer tax dispute, first reported in Feb '24 and then like in June, you also have an update on that. So I would like to get an update on the Korean dispute. And the second is the impact from the antidumping duties in Taiwan for the 4 months from July. So we understand both are like small events but would love to hear some comments from you. That's all my question. Ignacio Lares: Thank you for the question, Anne. So on the Korea customs tax side, I mean, the dispute is ongoing. What I can share is what we shared via the press release, which is obviously in 2023, right, during the year ending 2023. Oriental Brewery, which is a wholly owned subsidiary in South Korea recorded USD 66 million nonunderlying charge, and that related to a customs audit claim, right, which is reported in our financial statements that year. During the third quarter of this year, right, so the period ending 30th of September of 2025, OB recorded an USD 18 million nonunderlying charge, and that was related to these same customs audit claims but for the remaining audit periods. So accordingly, the aggregate amount of nonunderlying charges that are related, right, to such claims is now USD 84 million, and we shared that the potential penalty exposure was not expected to be material to the company. As you're well aware, we continue to vigorously defend against the customs tax dispute, which, as we mentioned in the past, can be a lengthy and potentially multiyear process. And we remain committed to upholding the highest standards of compliance across all our operations as well. On Taiwan, specifically, the -- there was a provisional tariff, which, you're correct, which is more than 33%, which was announced back in June. Since then, the rate has been slightly adjusted by 2.5 percentage points down to 31.3% in the third quarter. And of course, we're closely following the situation and continue to monitor for further updates in the months to come. But that's the only update thus far, right, a small adjustment down in the tariff rate in the third quarter. I think the point for us on Taiwan is we value the Taiwan market, and our priority there is ensuring that our consumers and our customers have full access, right, without any disruption to our portfolio of beers, the full portfolio of beers, right, they choose from. So we continue to carefully assess actions to support our wholesalers and local consumers with that perspective in mind. So I think that's all I have for those 2 topics, Anne. Operator: Our next question is coming from Leaf Liu from Goldman Sachs. Ye Liu: Can you hear me? Ignacio Lares: Yes, very well, Leaf. Ye Liu: I also have 2 questions. The first one is on the product innovation in Korea. We indeed deliver quite strong results in Korea, especially with ASP up 5%. So won't you discuss how to look at your future premiumization strategy in Korea? Also, any specific color on the performance of all the great new products launched in the recent 2 years, as you mentioned, Cass Zero and -- 0.0, Cass Lemon Squeeze? And also, will we continue to see strength in ASP and product mix in Korea going ahead? Ignacio Lares: Thank you for the question, Leaf. I mean South Korea, as we discussed previously, it's one of the more mature markets we have in Asia and the Premium segment is still quite underdeveloped, right, versus other similar markets. And the price and margin ladders in Korea are historically much more compressed than in other countries, so consumers have been less aware of the reasons really to pay a premium price for premium products. And this, of course, means that the premium mix growth in the past was not as pronounced as it could be. So I mean, we've been making an extensive effort, right, to drive premium experience at an expanded price, Premium to Core. We've been doing that in the on-premise channel, leading with Stella Artois, but the rest of the Premium portfolio has been helping there, too. And you've probably seen, right, the Perfect Serve program that the teams have been executing with Stella draft. So the toolkits that we provide there to bars and restaurants make the consumption experience far more elevated than historically would be the case. They strengthened our Premium brand equity and they allow consumers to pay more, right? And so in the on-premise channel, of course, the weight of premium beer has increased as a result. And actually, more recently, Stella Artois has taken the #1 position in premium draft as well, which the team is very proud of there. So in the past 3 years, it's really been about helping consumers to see the value of premium products, and this helps to expand the price ladder for premium products moving forward. And in terms of innovation or new products, right, we share your excitement about innovation in Korea. So thank you for the kind words. HANMAC Creamy Draft, which is priced at a premium to Cass, is gaining popularity in the on-premise channel. So the teams are quite pleased with that as well, and we continue to expand its presence in bars and restaurants. In the third quarter, actually, HANMAC grew by double digits, so it's reinforcing its position within the portfolio there. We also continue to increase consumer participation, as I was saying earlier, via non-alcoholic beer and some of the other flavored innovations, so Cass 0.0, Cass ALL Zero and the different variants of Cass Lemon Squeeze are doing very well there, too. So yes, we're very pleased with the healthy brand portfolio, the strong route to market and the people capabilities we have there, and we're excited to continue to lead the beer industry growth in Korea moving forward. Thanks for the question, Leaf. Ye Liu: That's very clear. And my second question is on group level cost. So how to look at any potential cost-benefits into next year with our 12-month rolling hedging scheme? Ignacio Lares: I mean, through the first 9 months of the year, our cost of goods on a per hectoliter basis has roughly been flattish, right, remained largely flattish. In fact, it decreased by 0.4%. So we've been taking advantage of commodity tailwinds this year, right, which is a product of 2024 hedged pricing, right, versus 2023 as well as the efficiency improvements that you count on us to do, and that's been partially offset by country mix, right, with Korea outperforming relative to China -- Korea and India performing relative to China. We've not really made any changes to our commodity hedging strategy, so you can still think directionally speaking around packaging material cost trends in the context of a roughly 12-month hedging policy. If you look at spot pricing, right, for the last few months, barley has continued to decline or been softer than the previous year even if in a more muted rate, so I think more like low single-digit decline. If you look at aluminum pricing in the market, it's continued to increase in 2025 versus 2024, so that one presents a bit of a headwind. It's now sitting in the high USD 2,000s per ton, whereas it was more low to mid-2,000s, right, at kind of bottom. Energy is a bit harder to predict and to hedge, but it's been mostly neutral thus far, right? So we don't really give a guidance, but if you just took a look at 2025 pricing versus 2024 pricing and you used a fairly simple view of hedging, you'd expect probably a slight headwind, right, in commodity pricing. As, of course, given we're already late in '25, we would be mostly hedged for next year. But I think the reality is the way we structure our business, and we've said this in the past, is to leverage our efficiency improvements and cost management initiatives to be able to manage, right, these types of changes. And given commodity escalations fairly moderated, it wouldn't be a stretch for us to ask our operations, right, to do their best to offset as much of the impact of commodities moving forward. So if everything goes this way, that should leave us a premiumization as ideally the most meaningful driver or variable, right, for cost of goods escalation as we move forward and look into 2026. So thank you for the question, Leaf. Operator: In the interest of time, our final questions will come from Linda Huang from Macquarie. Linda Huang: I have 2 questions regarding China. The first one is regarding for the net revenue per hectoliter because during the third quarter, we found that it's under the bigger pressure compared to the first half. So can you give us some of the context what is driving this? And then how do you see this trend going forward? Ignacio Lares: Yes. Thank you for the question, Linda. I mean, in the third quarter, our net revenue per hectoliter decreased approximately 4 percentage points, and this was a consequence of increased investments behind brand activations and our innovations with a focus, of course, on expanding our in-home presence, coupled with an adverse brand mix, particularly as we managed inventories as well. I mean we remain very agile in our investments, and within the context of the current consumption environment, that means where, how and how much we invest. If we look at the third quarter specifically, a greater proportion of our investments actually went to through-the-line campaigns, which were designed to provide as much value as possible to our consumers, to drive traffic for the in-home and to support our route to market in that regard as well. So you would have seen a lower net revenue per hectoliter with, on the other side, kind of a reduced sales package investment at the same time. So you could think of it as a bit of a switch in kind of investment mechanisms or areas of focus, right, with maybe more above-the-line or gross profit investment and less sales and marketing or SG&A investment. Despite the increased investment, though, both behind brands and innovations, the contribution actually of our Premium and Super Premium segments to our total revenue continued to increase in the quarter. And yes, equally important, I mean, we continue to maintain pricing discipline while investing, right? So we'll look to lead and grow the category and drive value for our consumers in a disciplined way. And so yes, as we move forward, we still expect premiumization will continue to be the primary driver for both top line growth and for margin expansion as well. Thank you for the question, Linda. Linda Huang: Yes. So the second one is regarding for industry because I also noticed that the private label trend is taking off in China, and there's many retailers right now, they also have their own beer brands. So does the company have any plan to work as an OEM with those retailers? Yanjun Cheng: Yes, Linda, this is YJ. Let me take this question. In terms of OER, I think the major thing that are linked to the people who like to have retail, like to have OEM is why is the consumer want to have a differentiation of the beer. And second one is with the current industry, the extra capacity and the efficiency in the breweries. So thanks for everybody really to our Fujian market and Fujian brewery back in the week of September 15. So you already see we are the company, how a rich portfolio can provide consumers the differentiation of the brand and package. So we have a big advantage in terms of differentiation that can meet consumers' needs. And second one, see the capability in the brewery and the efficiency we have in Fujian and also linked to the new technology, linked to the high quality growth. So we do have this kind of advantage in terms of differentiation of the brand and also efficiency improvement, the excellent program and the high technology we have. So that's all the advantage we have regard to make this happen. And let me summarize what we just talked about. First, in terms of brand portfolio, we have rich -- we got to strengthen this further to the consumer. And our route to market not only on-premise but also the new channels, in-home and O2O, that are going to invest and build our platform. And third one is the most important for us, after we have a plan, we have our initiative, the key is execution. So the execution, I'm talking about across 3 R: responsibility, resources and recognition. We're going to have the team on the field to own the plan and initiative, which is a very clear target and KPI to be able to track it. In terms of the resources, we're going to further invest the channel and also the brand. So we're going to use an excellent program to develop the best practice and the toolkit to help people to be able to implement the target we have. And at the end of the day, we're going to recognize people who's better, who's not good and recognize people and to reward and consequent people clearly. So those are the 3 I talked about. We also developed a platform we call [ One Bud ] platform between commercial and the supply chain to work together to make this happen. We are on the stage to build a 1-year plan for next year, so our direction is quite clear, keep the momentum and build -- see the gap we have, build a plan and the portfolio, the route-to-market execution and to have the next quarter as a bridge to bring our performance to be stabilized and further get -- improve time by time. So I want to use this opportunity to thank the analysts, investor for your attention to our performance. We're going to speed up the speed, focus and the discipline of the execution. Thank you. Operator: This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks. Yanjun Cheng: Thank you, Rick. As discussed on the call today, we recognize that our results are out of sync with the quality of our brand portfolio, route to market and people. We are actively correcting this by focus on strengthening our key portfolio offerings, speeding our in-home route to market and enhance our execution to capture future growth opportunities in China. We are pleased with the results of our business outside of China and looking forward, continue their momentum as we improve our results to be more in line with the potential of our business. Thank you all for joining us today, and I'm looking forward to speaking to you again soon. Operator: This concludes today's results call. Please disconnect your lines. Thank you.
Parmjot Bains: We're using our new ImpediMed Investor Hub to host the webinar, and I'm pleased to be here with McGregor Grant, our CFO; and Scott Long, our SVP of Sales. We'll be referencing the 4C quarterly activity report and presentation we lodged this morning with the ASX. The presentation is a summary of the more detailed 4C. After our remarks, we'll be taking your questions. [Operator Instructions] A couple of opening remarks. I've just returned from 2 weeks traveling through the U.S., managed to get a cold, hence the voice is a bit weak. I've spent much of the time in Texas meeting with customers and potential customers in lymphedema, heart failure and in body comp. It's always been reinvigorating meeting with the clinicians who are using SOZO with their patients and also seeing the opportunity that is created through the lymphedema business to extend into other indications. The demand for SOZO and the value it generates for patients and clinicians is clearly very evident. I was especially encouraged by the heart failure meetings and the feedback we received for SOZO PRO and the level of information that the new device provides. And I think also what's happening with body comp in the United States is nothing short of astounding. We just don't have anything like it happening in Australia, although I say that yet. From med spas to longevity and hydration clinics, the entire space is exploding on the back of the GLP-1 drugs with many of these clinician -- clinics now prescribing GLP-1 drugs to provide weight loss management services with customers. It's something we'll talk about, but it's clear that ImpediMed has a bright future with lymphedema, heart failure and body comp. So let's move on to the presentation and begin on Page 3 with a quick overview of the agenda for today's call. Great. So we'll start with a business overview, including the key highlights and then take you through the updates for the 3 initial business segment updates. Scott Long, our SVP of Sales, is on the call, as you can see, to provide his perspective on the first 6 months at ImpediMed. I'll then hand over to McGregor to present the financials. And to finish, we'll cover the outlook for the balance of the calendar year before commencing the Q&A session. Now turning to Page 5. One clear insight that was reinforced on my trip for the last couple of weeks was the value proposition that the SOZO Digital platform provides. We have a best-in-class product that provides valuable patient information for clinicians. Clinicians find it quick and easy to use. And in the larger hospitals, they continue to add new devices across departments with different use cases. And we expect that will only continue with focus and effort. We're in a unique position. We have the only device of its type, a best device with multiple FDA clearances across the applications and have invested in the device so that it stands apart from the competition in terms of FDA clearances, its accuracy, usability and applicability. We have now over 600 devices now across the U.S. health care system, including SOZO is in 18 of the top 25 U.S. hospitals. And it's not just about the validation that this provides, but also the ability to leverage these relationships that we have built and leverage the time and effort in meeting the requirements for the security of patient data that enables us to extend the product. It's easy to underestimate the processes required to become established in these hospital systems. Getting a device approved at a hospital isn't quick. There's legal contracts, budget and IT approvals, and it can take months. But once these are completed, adding a second or third device within the hospital system is a much faster process because these hurdles have already been cleared. That's an exhaustive process. But once done, it applies to secondary devices in that hospital or other hospitals within the system irrespective of the application, i.e., lymphedema or heart failure or body composition. And we have multiple MSAs and master service agreements that open up the potential for expansion in over 1,500 related hospital networks. That's a big advantage. The opportunity for us is to leverage everything we have done and maximize the revenue across the cost base that is largely set. And thankfully, it's happening to coincide with some of the fastest-growing thematics in health care, cancer survivorship, GLP-1 therapy and the growing cost of treating heart failure. I remain very positive for the long-term outlook of ImpediMed. Now turning to Page 6, we will touch on the key highlights for Q4. So financial metrics, they remain positive, and I'll let McGregor go through the metrics in detail later in the presentation. Reimbursement. Now this was clearly the standout for the quarter. Reimbursement is absolutely critical for the success of U.S. med tech companies. And since June 30, we have seen a reacceleration of payers updating their policies to include BIS as medically necessary. In the last quarterly, we mentioned a large player commencing coverage. Since then, we've announced another top 10 player publishing positive policy. And even more recently, another 4 Blue Cross Blue Shield plans have updated their policies to include BIS. To put this into perspective, since the 30th of June, states with over 80% coverage have jumped from 25% to 42% and states with over 90% coverage has almost quadrupled from 7% to 27%. These -- and these aren't small states. The top 9 states in population in the United States now have more than 90% coverage. These changes are recent as we expect they will have a positive impact on sales over the coming quarters. In terms of sales, overall unit sales were up on the quarter prior, but U.S. sales were softer than we had anticipated. Even deep into the quarter, we're expecting a closer result to what we produced in the last quarter and in line with our own internal forecast. We track the opportunity through the process and a number reached the final sign-off, but were then held up, not denied, but not approved yet. Some have come through post the end of the quarter and some are still sitting on the CFOs and purchasing managers' desks. We do expect to see a bounce back this quarter, and the team is working hard to deliver. We've also brought Scott Long, our SVP of Sales to the call, and I'm looking forward to introducing Scott shortly to give you his perspectives. Now I'm going to touch base on the 3 applications for SOZO, lymphedema, heart failure and body comp. So first, over to the breast cancer-related lymphedema. I've touched on a number of these points earlier in the presentation, so I won't go through them again. But what I want to do is take away for you is that lymphedema is primed for growth, and we remain very optimistic about the opportunity. And what I'd like to do now is introduce Scott Long, our SVP of Sales. We were really pleased to have Scott join ImpediMed. He brings with him over 30 years of experience in breast cancer medical devices and with that, a deep understanding of the space. He spent his career building strong relationships with breast surgeons and he is used to working with sales teams in smaller companies. This means he not only knows how to get results, but he's got a great network of top-tier sales talent. I've asked Scott to talk about what he's seeing at the call phase as well as his first impressions of SOZO, the opportunity, the team and why he's optimistic. So Scott, over to you. Scott Long: Thank you, Parmjot. And thanks, everybody, for having me on the call, I do appreciate it. Just a little bit about my background. As Parmjot mentioned, I've got 30 years of experience here in the breast cancer field, working primarily in early-stage start-up companies, a number of them that eventually had successful exits. In addition, my big company sales management experiences with Ethicon Endo-Surgery, operating division of Johnson & Johnson and Hologic. So I feel like I bring a unique perspective to the company. As Parmjot mentioned, as a function of having been around for as long as I have, I have not only quite a network of physician friends that I've accumulated along the way, many of whom are either already our customers or are on the way to becoming our customers, but I also have a network of industry colleagues that I've worked closely with through the years. One of them, Lisa Prom, as everybody probably knows, is one of our cornerstone people here at ImpediMed. So what I've gleaned from my 7 months on board with the company now is that we've got a great opportunity at hand here. As Parmjot mentioned, we've got one-of-a-kind technology. We have no commercial competitor. We have a growing reimbursement network, and we have societal guideline support. So those are unique attributes that most companies don't really have as they go into their competitive markets. As she also touched on, this is a multilayered sale that involves various aspects of the hospital, different stakeholders, oftentimes siloed stakeholders that don't readily and often communicate with one another. So it is the very definition of a complex sale. And as a result, it does take quite a while to get these deals over the finish line. All that said, we have also some great work on Lisa Prom's part with our master service agreements. So we have an opportunity here as we enter into those systems to go deep into those systems. And I think as a result, once we get our foot in the door in those systems, I think the opportunity for us to sell 10, 15, 20, maybe even 30 devices is very real. Now upon coming into the company, the only person I knew here from my past lives was Lisa Prom. So I had to sort of size up the sales talent that I inherited here. And there were some really excellent people here, not just Lisa, but Adam Brown comes immediately to mind, and there are some very good, stable, solid people. We did have some holes and some weak links as we deem them to be, and we made some quick replacements and upgraded the profile of our sales team. We brought in 3 individuals that I had worked with previously, all of whom are A-List players in the breast cancer field, the oldest of which at this point has only been on board with us for 4 months. The newest has been on board less than 2 months. So they haven't yet really started to contribute the way that I know they will in this upcoming quarter, but I think that's one of the big opportunities for us. One of the things that was critical to me to do was to really change the culture of the sales organization and get people that were very results-oriented, very successful track records, people that were very positive, optimistic, self-starters and people that really wanted to be part of a winning team. We want to stabilize our sales team here. We've had an issue with turnover of key players in the past, some of which were very good players. We're going to bring that to a stop here under new leadership, and I'm very, very optimistic we can do that. As far as the market opportunities themselves, as Parmjot touched on, breast cancer-related lymphedema is a platform that I believe will grow steadily over time. And I think over time, it will be a tremendous business for the company that we can all look back and be proud upon. It's really the legacy of the company. Body composition is very exciting. There's this new emerging area called exercise oncology, that's garnering a lot of podium time at breast cancer meetings. So I think we're uniquely positioned to capitalize on that. It's a more competitive marketplace, but we've got best-of-breed technology. And although we don't have a CPT Category I code in that area, I think there are ways around that, and we've been creative in putting forth programs that I think the market will readily adopt as we get a little further into this. We're still very much in our infancy with Adam Brown heading it up for the company. Last but not least is heart failure, which -- certainly cardiovascular medicine is part of my background. I had a 7-year stint in CV medicine before I got into breast cancer care. And I think that SOZO PRO is really uniquely positioned to really have an impact and help heart failure patients everywhere. I think it's really going to be probably the greatest value driver for the company over time, and I think it will benefit patients, our employees and our investors alike. And I'm really looking forward to what I think the next couple of years will hold within the heart failure franchise. Parmjot Bains: Brilliant. Thanks, Scott. That was very comprehensive. So we go to Slide 8. Brilliant. We're just finishing up breast cancer awareness month. I think tomorrow is the last day. But around the world, there's such a coordinated effort to increase awareness around breast cancer and also breast cancer-related lymphedema and the side effects of breast cancer treatment. We continue to engage in activities that support our clinicians and help drive awareness of breast cancer and the longer-term challenges for survivorship, which include lymphedema, but also high-risk patients in body composition. This quarter, we attended several conferences that coincided with Breast Cancer Awareness Month, and we also participated in a number of events where clinicians hosted some very well-attended webinars, one of which was really focusing on the Lymphedema Prevention Program along with body composition by Dr. Weintritt, which is part of the U.S. Oncology Network in Virginia. These activities not only support our clinicians, but they also help raise awareness for SOZO and generate leads. Now turning on to Page 9, which is really around heart failure. It's one of my -- the focus areas of my recent trips to the U.S. and the meetings went extremely well. And I returned back to Australia, not only with a cold, but also knowing that the opportunity was very large. The data that we've had from recently completed investigator-led clinical trials has reinforced the clinical utility of SOZO through the potential to manage fluid levels as well as body composition within heart failure and was very well received. As I mentioned in the last quarterly, heart failure is one of the biggest issues that health care systems face. It affects over 64 million people globally, and it's one of the top causes of hospitalization. It's not just a clinical issue, but also places a significant burden on health care systems because of complexity of care, high readmission rates, costs and a sheer volume of patients involved. Each U.S. hospital readmission for heart failure costs between $10,000 to $20,000. And talking with clinicians across the U.S., some of these readmission rates can vary from 10% to up to 30% of patients that were discharged. A lot of hospitals are looking to see how they can address this and SOZO has a really great fit and opportunity. We have FDA clearances in place. SOZO is the only product of its type that can be used with patients with cardiac implantables. It fits into the standard model of care. So all of these heart failure patients will come into a clinic and get a weight. The new SOZO Pro has a built-in weight scale, so it can -- SOZO can actually fit in the pathway of care and the data can be integrated into EHRs for clinician review. There is Medicare coverage and private reimbursement available in some key states, and that's been the area of focus for the visits and the early pilots. We have a couple of investigator-initiated studies underway in the U.S. already, both exploring key heart failure markers alongside SOZO measurements to give us even more data to help support clinical adoption. And we're also looking at how we can increase this payer coverage. We're initiating key commercial pilots in the U.S. with key clinicians across different sites of care. And by that, I mean the inpatient, the outpatient and the private cardiology clinic. Now if I move on to Page 11 (sic) [ Page 10 ] of body composition, which is the other area of focus. So U.S. go-to-market activities have commenced with 2 new dedicated body compositions reps. We've initiated active sales with our current product offering. Initially, we talked about oncology as a natural adjacency and Scott referenced the exercise oncology space, and that continues to be a focus. But we're also looking at how we can leverage SOZO's unique position within hospitals to support clinically managed weight loss and cardiac rehab guidelines. What makes this especially compelling is our unique position in the market in terms of being the only BIS declared device at a time when leading medical societies are specifically calling for muscle mass monitoring during pharmacological weight loss using BMI -- using BIS rather than purely weight for BMI. Although we've highlighted the TAM on the slide to be just body composition [ analogs ] for U.S. health care and clinical market, we see a much larger opportunity being in the wellness market, which is the medical spas, longevity clinics, hormone replacement clinics and hydration clinics, which -- many of which are prescribing GLP-1s. My time in the U.S. was eye-opening. There was generational opportunity emerging around the rise of these weight loss drugs and the sheer number of facilities now prescribing and needing to manage muscle mass and body composition. We've begun a measured expansion into this space, assigning 2 dedicated sales resources to build out the market. And over the next couple of weeks, the team will be attending a couple of key conferences, including MedSpa Pro in Florida and the Lifestyle Medicine Conference in Dallas, and we'll gather early feedback from customers in terms of how we accelerate our go-to-market approaches and also the needs whether or not we need to optimize our current product outputs. In terms of feedback from the market, both in heart failure and body composition, the outputs that we provide are actually enough, particularly in heart failure space, but we're always looking to get feedback from customers. Now I'll turn the presentation over to McGregor, our CFO, to go through the financials. So McGregor, over to you. McGregor Grant: Yes. Thanks very much, Parmjot. So starting on Page 12, as Parmjot mentioned, the financials remain positive. Financial discipline continues to be a core of the business -- core goal of the business, and the company maintains an ongoing program of cost control as part of the target to reach cash flow breakeven. We continue to adjust our cost base as required. The previously announced one-off payment for key electronic components impacted some of the metrics this quarter, along with the continuing strengthening of the Australian dollar relative to the U.S. dollar. The company reported an operating cash flow of $5.6 million for the quarter. This number was inflated by the previously announced one-off $1.2 million (sic) [ $1.1 million ] payment for the electronic components that was originally planned for quarter 4 FY '25. Cash receipts from customers for the quarter were $3.4 million, down on the $3.8 million reported last quarter due to the timing of receipts. We expect this number to increase consistent with the overall growth in revenue. The company's cash balance at 30 September was $23 million, equating to 4.1 quarters of operating cash flow. Excluding the one-off payment, the normalized quarters of operating cash flow would be 5.3 quarters. With the expected increase in receipts from customers, the receipt of the company's R&D tax offset and no recurrence of the one-off payment, Q2 operating cash flow is expected to be approximately $3 million. As previously mentioned, the strengthening Australian dollar relative to the U.S. dollar, resulting in an unfavorable impact on cash of $700,000 as well as unfavorably impacting other items such as annual recurring revenue. We turn over to the next page, TCV and ARR. TCV for the quarter reduced from the record $6.3 million to $4.7 million. The reduction was a result of less devices sold in the quarter and a smaller number of contracts up for renewal compared with the larger number renewed in the previous quarter, which we had mentioned at that time. We continue to be very pleased with the quality of accounts initiated or renewed in the quarter, together with the continued solid price increases on renewals, averaging 10% for the quarter. As indicated, churn remains low below 3%. As we know, the ongoing sale of new contracts translates to growth in annual recurring revenue. Contracts in place at 30 September '25 are expected to generate core business annual recurring revenue or ARR of $14.4 million for the 12 months to 30 September 2026. That equates to a 24% year-on-year increase and a 3% increase on the prior quarter. The stronger Australian dollar reduced the increase in ARR as the FX effect is applied to the whole balance. Now turning to Page 14. Revenue for the quarter was a record at $3.6 million, up 33% year-on-year and 9% on quarter 4. This was despite the U.S. revenue result being affected by the impact of the Australian dollar. And Rest of World revenue was up significantly as a distributor reordered inventory at the beginning of the quarter. Cash receipts from customers of $3.4 million, significantly up on a year ago, but down 11% quarter-on-quarter. The reduction from Q4 was largely due to timing of customer receipts, as I've mentioned. And as previously stated, we expect to see this number increase in the coming quarters as our revenue grows. On to Page 15. Parmjot and Scott have already discussed sales. Testing continues to trend upward, up 4% on the prior quarter with a 3-year compound annual growth rate of 16%. We continue to monitor testing numbers closely. Program health is essential to patient outcomes and essential for renewals, so they remain a priority for the company. Like many things in this business, patient testing growth rates are also correlated to levels of reimbursement. As reimbursement increases, we believe the frequency of patient visits will increase until they more closely match the protocol used in the PREVENT trial. This will result in increasing patient testing growth rates over time. I'll now pass back to Parmjot to wrap up before we go to questions. Parmjot Bains: All right. Thanks, McGregor. Last quarter, we set the goals for the first half of the year and overall, we remain on track. The sales for BCRL were behind our expectation. But as I mentioned, we expect them to rebound this quarter. Reimbursement is ahead of expectations with 6 new payers reimbursing, and we've set ourselves a new target of 100% reimbursement for breast cancer-related lymphedema. Heart failure and body composition are on track, and we're working hard to progress these opportunities rapidly and convert them into early sales. We'll do this while driving our financial discipline and constantly refining our cost base. Now we'll open up the webinar for questions. Unknown Executive: [Operator Instructions] we will endeavor to get through as many questions as possible. If we don't get answer your question, then we'll follow up offline. The first question comes from John [ Hardy ]. And John's question was, what steps are you taking to increase sales and reduce costs? Breakeven seems to be unachievable on the current trajectory. What is your plan to raise more capital? Have you explored interest in the sale of the company? If so, what result? If not, why not? Parmjot Bains: Yes. Thanks, John. So I'll pass McGregor -- that question to McGregor. McGregor Grant: Sure. Thank you. Thanks, John, for your question. Look, everything we've done to date has been about increasing sales. As you saw in last quarter's presentation, we've started by building a pipeline of leads and opportunities. You can't accelerate sales without growing these opportunities, and we've invested in systems and in our marketing that is now well developed to support that. As we know, reimbursement is key. We need critical levels of reimbursement across the states. That's taken time, but we are seeing that come through now strongly. Regarding breakeven, clearly, on the current trajectory, that's a challenge. We need to see sales accelerate, and we're confident that that's what we're going to see. We have no plans to raise capital. And if you look at the current numbers, the operating cash flows are running at over 4 quarters. And with the expectations that we've just communicated, next quarter, we should see that increase. We have supportive shareholders and the message that we get is to focus on sales. So that's exactly what we're doing. There are no plans to sell the company. We think the company is undervalued currently. Not many companies have the kinds of opportunities that we have in front of us in terms of FDA approvals, large markets, growing reimbursement. And at this stage, we just do not think that's in the interest of shareholders to pursue that. Unknown Executive: Thank you. The next question comes from Paul. Read the new areas of expansion, heart and wellness, how much investment do you see that requiring? Parmjot Bains: So I'll take that question. Both heart and wellness, the product exists and the data is there to basically go out and capture that market opportunity. So really, the investment is just getting out to the customers and out with the field force. So we've already done a measured expansion into a couple of body composition reps that are focusing on driving those sales and adoptions underneath Adam Brown who is one of our existing reps in that space. Heart failure, we are currently working on very small clinical pilots to drive adoption in a couple of key states. And then we'll reassess that, but it will need to be done. And -- so it will be around sales team growth. But we are working on that go-to-market model for how we capture that cardiovascular market opportunity, which may include partnerships or other ways of capturing that growth with probably minimal investment. So from a product perspective, we really don't see a lot of need for investment. If there's additional data required, we are generating it through investigator-initiated grants, which generally are funded by investigators and we provide the device. Unknown Executive: Thank you. Question from Ian. Cash receipts have fallen for 2 quarters in a row. Can you provide details as to why with sales renewals increases this has occurred, particularly since previous quarter had a record TCV? Parmjot Bains: I'll pass that to McGregor. McGregor Grant: Yes. Thanks, Ian. The answer to the variation in receipts from customers is down to timing. We've looked very closely at that. Some customers pay for a significant portion of their contract in advance and others pay over time. So it is ultimately a question of timing. Internally, we also track days sales outstanding. That metric continues to improve, which gives me confidence that overall, we're managing our receivables correctly and well, and that receipts from customers -- therefore, the fluctuation of receipts from customers really is just a function of the timing of invoicing and payment and the nature of invoices. So we have seen variation in mix from quarter-to-quarter, which is the result that you see. Unknown Executive: Next question comes from John. Has the Board considered listing on NASDAQ where the market has a better knowledge of how to value a tech business such as IPD? McGregor Grant: I'll take that. So yes, John, thanks again for your question. This is something that has been discussed in the past. The issue with U.S. markets, you need to be considerably larger than we are to attract the kind of interest that's necessary. There are many Australian companies that have tried that with limited or no success. We have a very supportive shareholder base here. And when a med tech company like ours starts to perform, the share price performance can become very meaningful. So it's not something we're considering at this time. Unknown Executive: Thank you. Next question comes from [indiscernible]. He has 2 questions. Good to see ImpediMed progressing well with the expansion of SOZO. These expansions, including body composition and heart failure being 2 such examples. Can you please confirm if there are further proposed SOZO expansions into areas such as sarcopenia and frailty screening, pediatric growth and fluid disorders, liver disease and pregnancy monitoring, just to mention a few. If expansion beyond body composition, heart failure and lymphedema, how challenging would hardware and software be? And the second question, it would seem that the expansion potential for the SOZO device and software platform are numerous, which could add significant opportunities moving forward. If the organization has addressed the potential for SOZO expansion beyond the current capabilities, how cost prohibitive, if at all, would it be to affect the necessary hardware and software changes? Parmjot Bains: Okay. Great. Thanks for your question. So sarcopenia and frailty come under body composition and also in heart failure and are definitely on our radar and our device can -- does actually measure that. One of our clinical sites that's using it for heart failure is actually measuring frailty under the frailty index for heart failure patients. And we've got clinicians in NYU using sarcopenia and frailty as they look at doing transplant patients. So it's definitely there under the radar, and we are working on how we kind of tweak or adjust the outputs on the SOZO software to do that. Pediatrics was difficult and we've kind of -- we keep an eye out on other opportunities like venous insufficiency and end-stage renal disease. But as a very small business, we have focused and prioritized ourselves on lymphedema, body composition and heart failure based on the major trends that we're seeing and the likelihood of clinical adoption within the U.S. health care system. In terms of these growth opportunities, hardware and software aren't limiting factors. The devices now already exist. SOZO is a current device and SOZO PRO is a new device, both are now in the market and are being used and adopted. So we don't need any devices. From a software team perspective -- or software perspective, we don't actually need any new applications. We've already got these software screens developed. We have a new Head of Product, our Chief Product Officer, Scott Savage, who joins us from a very long history at Google and Mable and ResApp more recently, and he has built a recreate mindset and capability around any software development that we need in terms of streamlining and accelerating that. So really don't -- we're not aiming on investing a lot of work on software development. Really right now, it's just tweaking and refining the outputs with the team that we've got and the data that we've got. So hopefully that answered questions. Unknown Executive: Next question from Peter. Every day, there are thousands of decisions made by caregivers as they receive breast cancer survivors, whether to SOZO test or not. If each of these daily decisions will be determined whether our company's success, it should be. Therefore, for shareholders needing to understand how well the company will do, it is some baseline tests completed and the sum of the follow-up tests completed is the most important indicator of the future for our company. Can you please share the number of baseline and number of follow-up tests this last quarter split into U.S. and the rest of the world? And can you commit to providing this on a continuing basis? McGregor Grant: Yes. Thanks, Peter. Look, monitoring patient numbers, as we've mentioned, is a very important part of what we do. And -- we monitor very closely, and it's really tied into monitoring the health of the programs that our customers are deploying, which we call our Lymphedema Prevention Program. And so our clinical sales specialists work very closely with our customers to -- once the devices are installed, get the first measurement and then to monitor progress against the protocols. And as the reimbursement improves, we will see hospitals continue to develop and implement and comply with these protocols, and we'll see an improvement in the overall utilization of the devices. It's the information we track internally and the slide that we provide gives a very good idea of how overall measurement use is growing. Unknown Executive: Thank you. A question from Tom. Scott, how long for your team to hit their strides? And do you have a target of U.S. units per quarter? Scott Long: Yes. Thanks for the question, Tom. As I mentioned, we are in the process of building out our team, and it always takes time even for highly pedigreed experienced people with relationships in their areas to really start to hit their stride. So it will be a little bit staggered as a function of when people have come along and when we get them up to speed. But I think -- in round numbers, I think it's realistic for people to land in that 8 to 10, perhaps even 12 on the upside number for devices sold per quarter. I think that's a reasonable target. I think it's achievable. It may take a quarter or 2 to get there, but I'm confident we can. Unknown Executive: Yes. Thanks, Scott. A question from Paul. Read all the new areas of expansion, heart and wellness, how much investment do you see that requiring? Parmjot Bains: So heart and wellness, heart failure, really, as noted, it's going to be around field force and getting reps out to the market. In terms of heart failure, we are doing, as I said, measured commercial trials because there's already reimbursement coverage, Medicare coverage, Medicaid coverage. Many of these heart failure patients are over the age of 65 and are generally covered by Medicare, Medicaid across the United States. The clinical data already exists. We know from previous study that was done by the organization that -- there is a measure that we call HF-Dex which is a measure of extracellular fluid over total body water, which is high in heart failure patients. And a number over 51 has a fourfold increase -- likelihood of readmission and that we have also shown that our HF-Dex is twice as sensitive as weight, which is really kind of one of the key measures that's used to date in terms of managing or decompensation for heart failure and decondition for heart failure. So the data exists. We've checked it out and validated it with the cardiologists and have had a number of discussions with the teams around that. The reimbursement pathway exists. What we are doing now is just starting the commercial pilot. So from a heart failure perspective, I think we've got what we need. There's always opportunities to add more data, and we're looking at investigator-initiated trials to do that and also talking with payers to see where we don't have some payers covered, how can we get that extended in partnership with a number of clinicians who are very, very interested in using the device and actually reached out to us around that. In terms of the body composition space, we're looking at building this out and building out the teams. A lot of our existing reps already called in that space. So within the hospital space, it's about taking that current sales force and moving into the next department. So taking on those adjacencies, both lymphedema [indiscernible] bariatrics, weight loss and other clinics. In terms of that med spa and lifestyle medicine space, that's where we've put the additional dedicated reps. A lot of these are actually large chains in the United States. And so really, it's not about going out and targeting the one-to-one kind of individual clinics, but really looking at these kind of corporate deals. And so the attendance of these conference is actually critical, particularly these ones that are coming up over the next couple of weeks to really look at how we build up those relationships and do that fast. So it's a big area of focus for us. In terms of product, I noted we don't actually need to do anything else with our product. We've got a great product. The software already exists. We will continue to kind of tweak some of these measures, particularly as we look to get that sarcopenia indication and make sure that we continue to differentiate ourselves in the market. But that's really leveraging the existing software team that [ re-exists ]. Unknown Executive: Thank you. Another couple of questions for Scott. I'll take them one at a time. First one, as a result of receiving greater than 90% coverage in the 9 largest states, can you speak of, one, likely improvements in the efficiency of customer conversion, e.g., the number of sales visits required before conversion; and two, the likely percentage of customers signing from their own inbound inquiry versus your sales team outbound sales? Scott Long: Yes. I think, look, the improving reimbursement landscape certainly is a bit of wind in our sales. It's very helpful. In the end, is sort of a supplemental question that the hospital needs to do their own due diligence on and decide the value of it. And what I mean by that is that the sale, first and foremost, is really a clinical sale. The clinical stakeholders have to believe that lymphedema is a legitimate problem in their facilities. It's one that they want to address, and they want to make sure they validate our technology as the best solution to address it. That's really kind of the long pole in the tent in terms of how long everything takes. Reimbursement, certainly having it does retire a key objection, but I don't know to what degree that will accelerate sales. It certainly won't hurt, but it's hard to put a value on how much and how fast it will accelerate the process. And I'm not sure I caught the second question. Unknown Executive: No, I haven't given it to you yet. So it was a follow-up from Andrew. Is that 8 to 12 units per sales exec? And how many sales personnel are there now? Scott Long: Yes, that would be the number that we're going to shoot for each one of our people. Right now, we've got 8 people. We have 2 openings. We did have the loss of a key person who've been with us for 6 years, our Denver-based [ Rocky Mountain Kae ] just a couple of weeks ago. We have a strategy in terms of how we're going to cover that area. We do have a Southern California candidate in the queue that we like. Parmjot actually just got done interviewing him within the hour. So hopefully, we'll have that key slot filled here before too long. And then we've got one more opening we need to fill. Unknown Executive: A question from Ian. As Texas has now broken 80% reimbursement and McKesson's are based there. Any feedback on activity there and also with IDNs in general? Parmjot Bains: Absolutely. So let me answer this one. So absolutely, U.S. oncology is kind of one of our key customers in the U.S. health care landscape. And we actually have Lisa Prom as coordinating all of our U.S. oncology activities. We are attending the McKesson Accelerate Conference next week. So we are going to be presenting at the U.S. oncology at this conference. And they have a program that they have initiated around managing the high-risk patient. And so the SOZO product, both in terms of lymphedema and body composition fits really well. That webinar that I highlighted in the presentation deck was actually given by U.S. oncology surgeons and the PA who manage this high-risk patient population. In terms of Texas, it is one of the biggest U.S. oncology areas and one of our top sales reps focuses on the Texas market. So with the addition of the Blue Cross Blue Shield provider that has now provided coverage, we are getting a lot of positive momentum in that market. And this is a market where reimbursement does matter. And we are seeing that. I was actually -- have been in Texas for the last couple of weeks ago and meeting with these surgeons. And so this -- they're in that program where they need to see that adoption and that reimbursement come through for them to grow out and expand that opportunity, but very much an area of focus with a dedicated project manager of the organization and also a dedicated key accounts executive, Lisa Prom, our most experienced exec taking the lead on getting those sell through. In terms of the other IDNs, we had -- as noted in the deck, we've got a couple of additional MSAs. We've got 27 in total. A couple of them like Ascension combined and Indiana combined with Indiana reimbursement going up to 90%, along with an amazing new rep, Julie Davis, gives us a lot of cause to be very optimistic that we will be able to get out there and drive sales. But I might just let Scott add in. I think you probably got the same, right? A lot of these IDNs are starting to come on board. We got some big ones sitting there where they've got 1 or 2 devices and really we just need to kind of grow. But I don't know, Scott, do you want to add? Scott Long: Yes. No, you're right. I think you referenced Ascension, Julie Davis had worked with me with the past company where she did a really nice job in Ascension facilities throughout the Midwest, particularly in her home state of Indiana. I do think we also have a big opportunity out in the Western U.S. in the Intermountain Health area, where we've got 1 device in play right now, pending a successful implementation and associated reimbursement. We have every expectation that we can grow that number to double digits, perhaps within the next quarter or 2, certainly before the end of the fiscal year. So I think the key to our success is going to be really going deep into those IDNs where we have MSA agreements. Again, Lisa Prom has done a masterful job of providing us with that entry point, and it's really a sales execution issue now. Unknown Executive: So a follow-up on the same topic. While it would not be the same for all, what is the level of cover that IDNs look to, to start their programs? Parmjot Bains: A lot of MSAs have been started without the coverage, right? So high level of coverage. And so -- because a lot of it, as Scott said drove around clinical need and clinical adoption. But what you find is that when you're at the call phase, there are those IDNs that -- these assessments go to a value committee, right? And so they do look at that reimbursement and they do look at the financials coming in. And we're not hearing a lot around the cost in the U.S. health care system and if there's an impact, but it does matter. And so that reimbursement does matter. They will vary on what they're doing. But in terms of when we start to see outreach from clinicians, particularly around some states like Texas, they are -- when the reimbursement change, we got the outreach, more outreach. So it kind of varies, right? I might leave it at that. Unknown Executive: Okay. A question from Gary. Do you have a value of the number of units in the sales pipeline? Parmjot Bains: We did put that out last quarter actually, and didn't come in this one. It's over 700 in the opportunity pipeline. We didn't actually put it out this current quarter. So we do track that very closely. And the goal for us is to get those opportunities converted to sales a lot faster. And that's been the big area and Scott is out in the field most days, helping the team get that over there. And so just in terms of the ones where we've got active opportunities under management, that's high. And then as we noted in this current 4C where we've got these IDN networks and master services agreements in place, they represent over 1,500 devices that can be put into these systems. So the opportunity is there and the opportunity is large. It's a matter of trying to accelerate this execution with the new sales team, with this higher reimbursement coverage and some more urgency of action. Unknown Executive: And just a question again from Paul. You mentioned that sales can take time. Respectfully, you highlighted this a number of quarters ago and that the time line seems to be extending. As a shareholder, this is concerning, how many more quarters do you believe we need to wait and see meaningful sales come through? Parmjot Bains: We started to see adoption and pick up. And so we were looking at this quarter, like the previous quarter, we had record number of sales and record number of TCV in the U.S. system. We actually thought we were on track to get the same and continued growth. And I think as Scott has highlighted, with the new reps, we will -- we are expecting this to accelerate and to get all these reps to get on board and get some meaningful adoption. Unknown Executive: So a question from Andrew. Probably, we've missed one of these questions, but I'll get back to that. Follow-up I refer back to my initial question about linear versus exponential growth. Are we expecting 80 to 100 units per quarter static or growing? And are we expecting any sales as they were mentioned in the previous briefings, i.e., 10-plus single sales point -- single point sales? Parmjot Bains: Yes. So if you kind of add up the numbers, it should be at that run rate when everybody gets up to speed. And there are definitely some multisystem deals sitting in that in those offerings. We had the big one that went across the legacy in the last quarter with the 9 system deal, which is now an active implementation going into a very healthy program, which the rep actually sent us a note, Kevin sent us an update note around that this morning. There's a number of them where they are starting with 4 to 5 and then they will grow out. So what we typically see is they'll start with a smaller number and then they will keep adding them on. And that's what we saw with Robert Johnson, started with 1 or 2 and then basically, by the end of the last quarter, they had 9 to 10 across the whole system. So it's unusual to get all 10 at once just because it takes time to get all the adoption set up and each clinician often needs to get buy-in. It typically tends to be more a smaller number that kind of grows out within the system. But that's in breast cancer-related lymphedema, but we do see body comp really picking up and then heart failure also picking up into the next quarters, but body comp definitely. Unknown Executive: Question from Andrew. Are you looking into data from test results in mining for research and how can that be utilized? Parmjot Bains: Absolutely. So as we look at -- so we've got, gosh, over 1 million tests and a significant data set that sits in behind. And with Scott as part of the new team, we've restructured our team so that the data R&D and data analytics that we're now reporting to Scott at least from a Product perspective. So we basically both look at our existing data set, but we also work with clinicians that are using the SOZO device to look to see how we can refine offerings. So some of the areas that we're working on that we're using our data and correlating with DEXA as around trying to build a bone mineral density because that is one thing that we think would add value as we kind of build out the offering. So we absolutely look at that. We also look at that data when we're looking at creating a proposition towards customers and one that we're in discussions with is around Kaiser, where we've got clinicians already using the device. And so we can show them what the lymphedema program looks like, the rates of lymphedema that have occurred within the system and then the savings that they get from early detection and prevention. And we've used that as part of a pitch towards the corporate head office. So we absolutely take a look at our data both from a development perspective, but also from a sales and marketing perspective. And so that one site that Scott is referencing in terms of Intermountain will look at that data as well. So they will get the program going and then they'll look at what -- from a real-world evidence perspective, how successful have the program been, and therefore, look at how they roll that out across the network. And so we have a whole team that goes in and can support that from a data and analytics perspective. Unknown Executive: Part of this question has been answered, but there's a second part that hasn't. This is from Andrew. This is a disappointing quarter. What can we expect in the next quarter, which I think you've answered. And where can you see future savings occurring? Parmjot Bains: I might just pass that to McGregor in terms of savings. But noting that we are constantly looking at our cost structure very constantly and very tightly managing that cash burn. But McGregor I'll get you to jump in. McGregor Grant: Yes, sure. I think just to reemphasize the fact that we are constantly looking to manage our costs very carefully. It's important we don't go too much into the specifics of that, but to be assured that wherever the opportunity presents itself to achieve savings through perhaps increasing the number of roles in where it makes sense like in Australia, as we've done, we'll continue to do that and to ensure that we're focused on only incurring costs on things that are really directed towards driving sales in the near term. Unknown Executive: And a question for Scott. Can you explain the sales process? Given the complicated nature of the sale and the long lead times, how do you monitor the sales progress on a weekly basis? Scott Long: Yes, it's a great question. It really begins with a breast surgeon champion. Typically, the breast surgeon is the quarterback of the care team. They're the ones who are most inclined to get behind a lymphedema prevention program and use their political capital in the hospital to start the process. Really, that's the clinical check box. We have what we call a clif process, CLIF, it's clinical, finance, IT and -- legal, IT and finance. And we sort of walk through those steps progressively. We have that documented on a dashboard that Mike Bassett, Parmjot and I view religiously. We have green, yellow and red in terms of where we are in the process with each one of those key stakeholders. They can take varying amounts of time, but we are very much on top of where we are with each and every one. And we don't graduate an account from the upside or a long shot category as we have it laid out into the forecast until we have all those boxes checked and we have 4 greens across the board. So that's sort of the methodology we use to track our targets. Parmjot Bains: That's all automated. It all that comes out of the CRM. And we do regular kind of calls with each of the sales team just to make sure that it's tracking through. We have a dedicated IT person that supports all these IT assessments within each customer and then contracts and legal person that accelerates that legal process and finance, is really making sure that each system has their budget approved as we work through the value analysis committees. Unknown Executive: A question from Andrew. Is there any plan for recurring revenue from Rest of World markets as I don't see a pathway to profitability from single unit sales for Rest of World sales? Parmjot Bains: In terms of recurring revenue, we did -- we are constantly kind of looking at that market. It's a non-reimbursed market. It's particularly for lymphedema. So a lot of it is really around that capital sales model. Right now, we've kind of kept it as a focus on a capital sales model because it's done through a distributor. And -- but we do look at that. The challenge is particularly in Australia is it's -- lymphedema is kind of reimbursed under the Chronic Care Management code under Medicare, it's really not available to be reimbursed because it's all covered under the state-based health care system rather than the Medicare-based system at the national level. So we constantly keep kind of reviewing it, and we would love to get it to that. But right now, it's really -- the capital sales is the key kind of area of focus. We are looking at that body composition space to see if there are opportunities to work with providers, distributors and potential customers around getting it to a recurring revenue kind of SaaS business model in that space. But the U.S. really at the end is the core market for us, that's really where a lot of that growth is. Unknown Executive: A question for Jonathan. Do you expect to separately report revenue on body comp and heart failure? Parmjot Bains: I'll pass that to McGregor. McGregor Grant: As the revenue from these other indications become material, I think we will look at the best way to reflect that revenue. Unknown Executive: And I think that covers all the questions we have. And given it's 3 minutes to the hour, I'll pass back to Parmjot for closing remarks. Parmjot Bains: Okay. Thank you, everybody. Thanks for the questions and your continued support. Hopefully, today was a good experience with the new Investor Hub and webinar function. Keep an eye on our updates on Investor Hub. We will look to put more regular updates and a lot more narrative so that you can better understand some of these new market opportunities like heart failure and body composition and why we're so excited about this space. We look forward to catching up again on the next quarter. And Scott, it's over to you to get those sales going. Thank you. Unknown Executive: Thank you very much. That concludes our call for today.
Kenneth Hsiang: Hello. I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our third quarter 2025 earnings release. I am joined today by Joseph Tung, our CFO. Thank you for attending our earnings release today. Please refer to the safe harbor notice on Page 2. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please do not ask questions or you may leave the session at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk, and our actual results may differ materially. For the purposes of this presentation, dollar figures are generally stated in New Taiwan dollars unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. For today's presentation, I will go over the financial results, and Joseph will give the company's guidance. Afterwards, we will be available to take your questions during the Q&A session. With that, let's get started. During the third quarter, both our ATM and EMS businesses outperformed our original sales and profitability expectations. Packaging and testing utilization percentages were in the high 70s. Loading on LEAP and traditional advanced packaging lines were generally full. Our wire bond utilization also showed some improvement. Our test business continues to grow faster than our assembly business, with our chip probe testing leading the way. From a profitability perspective, with our factory loading being better than anticipated, we were able to extract higher operating leverage. However, the company's performance was still impacted significantly by foreign exchange. Despite the NT dollar's near-term decline in value against the U.S. dollar, for much of the third quarter, the NT dollar traded at a relatively appreciated level when compared with the second quarter. During the quarter, the NT dollar moved from an average exchange rate of TWD 31.2 to TWD 29.7 per U.S. dollar, strengthening by 4.6%. Simplistically, we estimate that for every percentage point appreciation of the NT dollar relative to the U.S. dollar, we see a corresponding 0.3 percentage point negative impact to margins at the holding company level and a 0.45 percentage point negative impact to margins at the ATM level. Using this simplified approach, foreign exchange had negative sequential impacts to our holding company and ATM margins of 1.4 and 2.1 percentage points, respectively. And annually, negative impacts to our holding company and ATM margins of 2.4 and 3.6 percentage points, respectively. Heading into the fourth quarter, we expect a more stable NT dollar environment with an average exchange rate of TWD 30.4 per U.S. dollar. Please turn to Page 3, where you will find our third quarter consolidated results. For the third quarter, we recorded fully diluted EPS of TWD 2.41 and basic EPS of TWD 2.50. Consolidated net revenues were TWD 168.6 billion, representing an increase of 12% sequentially and 5% year-over-year. On a U.S. dollar basis, our sales increased by 17% sequentially and 14% year-over-year. We had a gross profit of TWD 28.9 billion, with a gross margin of 17.1%. Our gross margin improved by 0.1 percentage points sequentially and 0.6 percentage points year-over-year. The sequential improvement in margin is primarily due to higher loading and our ATM business, offset in large part by foreign exchange. The annual improvement is primarily due to higher utilization and beneficial product mix, offset by foreign exchange. We estimate that foreign exchange had a negative 1.4 and 2.4 percentage point impact to our gross margins on a sequential and annual basis, respectively. Our operating expenses increased by TWD 0.2 billion sequentially and TWD 0.7 billion annually to TWD 15.7 billion. The sequential and annual increases in operating expenses are primarily due to higher R&D costs. Our operating expense percentage declined 1 percentage point sequentially to 9.3% and was flat annually. Operating profit was TWD 13.2 billion, up TWD 3 billion sequentially and TWD 1.7 billion year-over-year. Operating margin was 7.8%, up 1 percentage point sequentially and up 0.6 percentage points year-over-year. During the quarter, we had a net nonoperating gain of TWD 0.8 billion. Our nonoperating gain for the quarter primarily consists of net foreign exchange hedging activities, offset in part by net interest expense of TWD 1.4 billion. Tax expense for the quarter was TWD 2.6 billion. Our effective tax rate for the quarter was 19%. Net income for the quarter was TWD 10.9 billion, representing an increase of TWD 3.4 billion sequentially and TWD 1.2 billion annually. On the bottom of the page, we provide key P&L line items without the inclusion of PPA-related expenses. Consolidated gross profit, excluding PPA expenses, would be TWD 29.4 billion, with a 17.4% gross margin. Operating profit would be TWD 14 billion, with an operating margin of 8.3%. Net profit would be TWD 11.6 billion, with a net margin of 6.9%. Basic EPS, excluding PPA expenses, would be TWD 2.68. On Page 4 is a graphical presentation of our consolidated quarterly financial performance. On Page 5 is our ATM P&L. The ATM revenue reported here contains revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses. For the third quarter of 2025, we had record revenues for our ATM business of TWD 100.3 billion, up TWD 7.7 billion from the previous quarter and up TWD 14.5 billion from the same period last year. This represents an increase of 8% sequentially and a 17% increase annually. On a U.S. dollar basis, our ATM revenues were up 13% sequentially and 27% annually. Our test businesses growth as a whole continues to outpace our assembly business as a whole, growing 11% sequentially and 30% annually. Gross profit for our ATM business was TWD 22.7 billion, up TWD 2.5 billion sequentially and up TWD 2.9 billion year-over-year. Gross profit margin for our ATM business was 22.6%, up 0.7 percentage points sequentially and down 0.5 percentage points year-over-year. The sequential gross margin increase was due to equipment utilization rate improvement, offset in large part by NT dollar appreciation. The annual gross margin decline was primarily due to NT dollar appreciation, and to a much lesser extent, higher electricity rates, offset in large part by higher loading. On a constant currency basis, relative to our first quarter, we estimate our gross margin would be roughly 4.2 percentage points higher during the quarter. This difference would have put our adjusted third quarter gross margin of 26.8% in the middle of our previously stated structural ATM gross margin range. During the third quarter, operating expenses were TWD 11.8 billion, up TWD 0.4 billion sequentially and TWD 1.2 billion year-over-year. The sequential increase in operating expenses was primarily related to higher overall R&D costs, including labor, equipment and factory supplies. The annual increase is primarily the result of R&D ramp-up and labor-related expenses. Our operating expense percentage for the quarter was 11.8%, decreasing 0.5 percentage points sequentially and down 0.5 percentage points annually. The decline was primarily the result of higher revenues during the quarter. As we previously have mentioned, we believe our spending in R&D, on an absolute dollar level, will continue to increase. But as the associated LEAP revenue syncs up with the R&D spending, our operating expense percentage should continue to moderate. During the third quarter, operating profit was TWD 10.9 billion, representing a sequential increase of TWD 2.1 billion and an annual increase of TWD 1.7 billion. Operating margin was 10.8%, up 1.3 percentage points sequentially and up 0.1 percentage points year-over-year. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 23.1% and an operating profit margin would be 11.6%. On Page 6, you'll find a graphical representation of our ATM P&L. Please note the generally upsloping revenue bars. Using the first quarter's foreign exchange rate, we estimate the gross margin percentages for the second and third quarters would be 24.1% and 26.8%. On Page 7 is our ATM revenue by the 3C market segments. You can see here that the Computing segment continues to become a relatively larger component of our business. This was largely driven by a higher percentage of LEAP based revenues. On Page 8, you will find our ATM revenue by service type. Here, you can see the 2 service types containing LEAP services, bump and flip-chip and testing. Both are becoming a larger component of our overall business. We expect continued momentum in these areas heading into 2026. On Page 9, you can see the third quarter results of our EMS business. The annual seasonality of our EMS business has been inconsistent over the last few years due to differing device ramp-up schedules. As such, we believe the annual comparability of our quarterly results may be impacted. During the quarter, EMS revenues were TWD 69 billion, increasing 17% sequentially, while down 8% year-over-year. The sequential increase in annual decline were both primarily the result of differing underlying device seasonality. Sequentially, our EMS business's gross margin declined 0.2 percentage points to 9.2%. This slight change was principally the result of product mix. Operating expenses within our EMS business decreased by TWD 0.2 billion sequentially and declined TWD 0.5 billion annually. The sequential decline is primarily the result of lower compensation and professional fees. While on an annual basis, the decline is primarily related to lower compensation expenses. Our third quarter EMS operating expense percentage of 5.6% was down 1.3 percentage points sequentially, while annually, our EMS operating expense percentage declined slightly by 0.1 percentage points on lower spending and revenues. Operating margin for the third quarter was 3.7%, up 1.1 percentage points sequentially and up 0.4 percentage points year-over-year. The improvements are primarily the results of higher loading rate and some one-time inventory-related adjustments. Our EMS third quarter operating profit was TWD 2.5 billion, up TWD 1 billion sequentially and TWD 0.1 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application. The third quarter application mix shows the seasonal ramp-up of our customers' consumer products, with our consumer segment growing while all other segments declining in application share. We believe, at a strategic level, our EMS business faces similar technological manufacturing trends as our ATM business does. Trends such as power delivery and thermal control are core themes at the forefront in both our ATM and EMS businesses. Having the ability to address customer challenges at both the ATM and EMS level allows us to provide a broader set of technical solutions to our customers. On Page 10, you will find key line items from our balance sheet. At the end of the year, we had cash, cash equivalents and current financial assets of TWD 83.4 billion. Our total interest-bearing debt increased by TWD 55.6 billion to TWD 295.7 billion. This increase was primarily due to the completion of a TWD 50 billion syndicated loan to fund our CapEx. Total unused credit lines amounted to TWD 344.7 billion. Our EBITDA for the quarter was TWD 32.6 billion. Our net debt to equity this quarter was 63%. On Page 11, you will find our equipment capital expenditures relative to our EBITDA. Machinery and equipment capital expenditures for the third quarter in U.S. dollars totaled $779 million, of which $534 million was used in packaging operations, $199 million in testing operations, $40 million in EMS operations and $6 million in interconnect material operations and others. In addition to spending on machinery and equipment, during the quarter, we also spent $716 million on facilities, which includes land and buildings. The overall environment appears to be strengthening. For us, the upward seasonality during the third quarter has been the strongest since the COVID timeframe. From a customer sentiment perspective, the pendulum appears to be swinging from booking capacity on an as-needed basis to prebooking capacities and making sure raw materials are available. As a whole, our customers are now looking for more assurance and security in their supply chains. For the quarter, LEAP and test services continue to lead growth for the company. LEAP continues to be driven by AI. Although we are seeing more customers target their products for use within the AI super cycle, many new products are inferring AI capability or AI readiness. Products are expanding new and smart AI capabilities and features. Newer generations of products are becoming more robust electronically, while allowing streamlined access to certain aspects of GenAI capability, such as video and document creation. The key is whether the end consumers are enticed to integrate new generations of products into their lives. And to that end, AI does appear to be upping the basic standards of quality in various contexts, not just limited to the school, office and social media. And there does appear to be the not so subtle ominous angle of you need AI to be competitive. This is bringing an intelligence and capabilities arms race to everyone's front door. In such a context, understanding the seemingly insatiable need for more capable chips and hardware seems fairly straightforward. From the packaging and test perspective, the higher the AI computational capability, the stronger the chips packaging and testing needs are. Critical improvement paths in power delivery, processing bandwidth and thermal performance will continue to drive our LEAP services. With that, I'll hand the presentation over to Joseph to present the company's outlook. Joseph Tung: Thank you, Ken. Let me give you the fourth quarter guidance. Based on our current business outlook and the exchange rate assumption of USD 1 to TWD 30.4 versus in third quarter, we have TWD 29.7 exchange rate. Management projects overall performance for the fourth quarter of 2025 to be as follows. On a consolidated level, in NT dollar terms, our consolidated fourth quarter revenue should grow by 1% to 2% quarter-over-quarter. Our consolidated fourth quarter gross margin should increase by 70 to 100 basis points quarter-over-quarter. Our consolidated fourth quarter operating margin should increase by 70 to 100 basis points quarter-over-quarter. For ATM, in NT dollar terms, our ATM fourth quarter revenue should grow by 3% to 5% quarter-over-quarter. Our ATM fourth quarter gross margin should increase by 100 to 150 basis points quarter-over-quarter. For EMS, in NT dollar terms, our EMS fourth quarter revenue should stay flat or decline slightly quarter-over-quarter. Our EMS fourth quarter operating margin should be similar to fourth quarter 2024 level. With that, let me also give you some color for the full year. For ATM, we're seeing better-than-expected momentum of mainstream business, given the continuing recovery of the general market. While our leading-edge revenue, we are on track to reach the USD 1.6 billion mark as planned. Altogether, we expect ATM 2025 full year revenue to exceed our target and grow over 20% year-over-year in U.S. dollar terms. As for machinery CapEx, we expect to further increase our full year CapEx by another few hundred million U.S. dollars to meet customers' requests and to support continuing business momentum into 2026. The increase is largely for wafer probing for both AI and non-AI chips as well as for general capacity ramp and some new initiatives for year 2026. With that, let's give it back to Ken to open the floor for questions. Kenneth Hsiang: Thank you, Joseph. During the Q&A session that follows, we would appreciate if questions can be kept concise and asked one at a time. I will be receiving each question and repeating the asked question to Joseph. Again, we'll be limiting the number of questions asked to 2 questions per turn, but asked one at a time. Operator: The first question is from Gokul Hariharan of JPMorgan. Gokul? Gokul Hariharan: First question, obviously, on LEAP, could you give us a little bit more color about how the progress has been on LEAP revenues this year? I think you had the TWD 1.6 billion guidance or additional TWD 1 billion guidance. What are we tracking to compare to that guidance now? And any indications for what it could do next year? I think based on our own math, it looks like it could easily double next year. And you're also raising capacity and CapEx pretty much every quarter. And also, on LEAP, what is the margin contribution from LEAP-related business? Is it already accretive or it will turn accretive once you reach a certain kind of revenue run rate, and any indications on that? That's my first question. Joseph Tung: Gokul, you are looking for revenue progress and generally kind of what you're thinking for this year. Gokul Hariharan: Yes. Joseph Tung: Okay. Like I said, the -- we are on track in reaching our TWD 1.6 billion mark this year. Everything is progressing well. I think we have shown very strong momentum in the AI and HPC related part of the business. In terms of the revenue mix, I think, because of the geopolitical uncertainties, in terms of packaging, we are a little bit short from our original target, but that was sufficiently replenished by our more than expected growth in our test business. So we are very, very confident that we will reach our TWD 1.6 billion mark for this year. And going forward into 2026, we see -- we continue to see very strong momentum. And we are very, very confident that we will gain another -- over TWD 1 billion kind of revenue increase for 2026 in this space. CapEx-wise, we will continue to make heavy investments in our leading edge, I think, to support the strong momentum that we are seeing today. And I think AI or HPC is really -- the momentum is here to stay. We're not going to be shy on making the necessary investment to not just secure our dominant position in this space, also to expand that dominance against our competitors and to fully support our customers' needs. In terms of margin and return, I think the -- as steady state, as we mentioned before, the LEAP would definitely be both margin as well as return accretive. And we are quickly reaching that point at this point. Gokul Hariharan: Okay. That's very clear. Maybe one other question. Can you talk a little bit about pricing? I think, Ken mentioned in the opening remarks that you're pretty much running full on flip chip and bumping. You're pretty much running full on LEAP. I think last time around, I think Dr. Wu had discussed about potential price negotiations. Anything that you can report on what are we seeing on pricing for your overall offering? Should we expect that pricing should go up? I think OSAT pricing doesn't usually go up that much, but just wanted to understand how we should think about pricing going into next year. Kenneth Hsiang: Gokul, you're looking for commentary on overall just pricing environment for us for this year and next year. Gokul Hariharan: Yes. And maybe also specifically on LEAP as well as your flip chip and bumping kind of advance -- the mainstream advanced packaging business as well because the customer set is slightly different. LEAP, you're kind of largely partnering with the large foundry. Joseph Tung: Well, without giving -- without getting into specific, I think, in general, I think our pricing remains to be resilient. And I think it's very sensitive to talk about pricing. But as a whole, I think we will continue to set the -- our pricing, the most suitable pricing structure based on the current situation. I think there are a lot of moving parts, and there are a lot of uncertainties in front of us. But in general, I think we will continue to make our pricing a very, very resilient level. Gokul Hariharan: Maybe if I kind of tweak it a little bit, Joseph, like what is customer feedback? I think I'm sure that everybody is talking about this. We hear that from your fabless customers as well. But I just wanted to understand like what is customer feedback to pricing even in -- I wanted to think about a little bit more on the mainstream stuff, like flip-chip CSP or flip-chip BGA, where there is no super cycle of growth. Even in those areas, are you able to have some like value app programs coming through? Kenneth Hsiang: Are you asking for expansion on the original pricing question there? Gokul Hariharan: Yes, sir. Maybe talk a little bit more on the mainstream advanced packaging as well, yes. Joseph Tung: For mainstream, I think we are seeing the continuing recovery of the general market. And therefore, I think pricing wise, I think, it's right now at a very stable level. Operator: Next question is from Charlie Chan of Morgan Stanley. Charlie? Charlie Chan: Yes. I just unmuted myself. First of all, congratulations for very good results and outlook. My first question is really on sort of supply chain related discussion. For example, what's the update plan for you to do the U.S. operation? Because your major customers -- major foundry partners are all very active in the U.S., and there seems to be -- your competitor, Amkor, in that presence. So one is that your updated plan for the U.S. operation to enjoy that ASME kind of growth. And also, we are very concerned about the sort of T-Glass shortage. I think a lot of customers are going through with your fab to see if they can secure more substrates, right? So I'm not sure if they would be kind of a gating factor for your next year's growth. So this is the first question. Kenneth Hsiang: That's -- Charlie, that sounds like 2 questions. So let's start with question number one, the U.S. building out perspective. Joseph Tung: Okay. Thank you for your question, and thanks for coming to my concert. Charlie Chan: Yes, it was a great one. Joseph Tung: U.S., we don't have anything new to report except that -- let me reiterate what we mentioned last time that we were invited by our customers to look at the investment opportunities in the U.S. We are currently still engaging in discussion with our customers and we're evaluating different opportunities, but no decision is made at this point. But whatever decision we will eventually make, it will have to make economical sense for us. In terms of the competition, I think Amkor has its own mind. So I think I'm not going to answer for Amkor. But overall, we will continue to be watchful on the overall competition landscape and see how we can better position ourselves in terms of meeting this competition. Kenneth Hsiang: So Charlie, do you want your second question to be about your previous question on T-Glass and such? Charlie Chan: Yes, maybe we can save it for maybe second round. But my major second question is really the final test completion. So I know this one is a little bit controversial, but I wanted to get your updates or confidence level about your final test market share at major customers' next-generation GPU. Yes, and by the way, congratulations for a very strong share price. So I think your efforts were recognized by foreign shareholders. Yes, so second question is really about your final test business updates. Kenneth Hsiang: So you're looking for a more comprehensive explanation or update on our final test market share gains. Charlie Chan: Yes. Because your Taiwanese competitor seems to be very aggressive in the cashless purchase and capacity expansion as well. So I hope both can win. Yes, so I just wanted to get a little bit more color about your realistic assumption about your final test market share. Joseph Tung: I think, as we mentioned, we have been aggressive, and we have been pretty successful in terms of expanding our test business. I think for this year, our test business growth is going to be twice the packaging revenue growth. And we will continue to make large investment into our test capacity. But our resources are also limited. We don't have unlimited resources to try to cover everything in the market. So right now, the main focus for our investment in test is really on the wafer probing. And I think we will continue to on this effort for the time to come. And in terms of final test, I think we are making the investment -- necessary investment at this point to build up the capacity. And we're expecting to have meaningful revenue being generated in the later part of next year when we start serving the next-generation AI chips. Operator: Next question is from Bruce Lu of Goldman Sachs. Zheng Lu: Can you hear me? Kenneth Hsiang: Yes. Zheng Lu: Okay. My question is regarding to your revenue split for your incremental TWD 1 billion revenue in 2026 for your AI-related revenue. We understand that the revenue contribution is more geared to testing for this year. Are we able to see incremental more revenue contribution from packaging? And to be more specific, can we get more like packaging-related business from both outsourcing as well as your own packaging or AI packaging business? Kenneth Hsiang: Bruce, you're asking for the incremental revenue for this year, right? Zheng Lu: And next year, your -- because Joseph just said that we will see another additional TWD 1 billion revenue for next year, right? Kenneth Hsiang: He may have said that. So yes, okay. Joseph Tung: For the TWD 1 billion increase of our leading-edge revenue, I think the breakdown is TWD 650 million from packaging and about TWD 350 million from test for this year. For next year, well, we'll see how things go. I think the -- we'll kind of give you a ballpark number saying that we will be having maybe at least TWD 1 billion revenue growth. But in terms of the exact composition, I think that remains to be seen, and we'll base on the current situation to allocate our resources and to grow both of the business, but without -- right now, we don't have a set mind on what kind of breakdown it will be. But what I can say is that test seems to be -- continue to have stronger momentum at this point. Zheng Lu: I see. So the testing will grow faster than packaging next year within this TWD 1 billion? Joseph Tung: It has been growing faster than the packaging. But come next year when the new generation product comes on stream, the competition may have some changes. But what I'm saying is that we are seeing -- we're continuing to see strong momentum in test at this point. Zheng Lu: I see. Okay. The second question is for -- again, I want to drill down a little bit for the U.S. plan. I mean, TSMC has utilized asset plan to build some CoW process, and Amkor committed to build some substrate process. So it seems to me that they have -- your customer, your competitor seems to have at least one supply chain in U.S., which probably -- what's the strategy for ASE at the current stage? Obviously, you probably don't need a 2 supply chain in United States, right? So the potential -- losing some market share for TSMC Automotive business is definitely a threat for our future business, right? So can we elaborate more about like what's the strategy from ASE? Kenneth Hsiang: Bruce, you're looking for a reiteration on the U.S. plan on our behalf. Zheng Lu: Yes. . Joseph Tung: Well, we don't fight for market share just for market share's sake. We fight for the market share that makes sense or make profit for us. If we don't see return, if we don't see at least acceptable margin, then that's not the part of the business that we want to pursue. I think the -- like I said, regardless if it's U.S. or in any part of the world, for us to make an investment, it has to make economical sense. So that's -- if Amkor feels that with that kind of investment they can make a profit out of it, fine. But right now, we're not sure on that. Zheng Lu: So there's no way to pass on the incremental cost to the customer in order to make the investment like profitable? Joseph Tung: Well, it's not just about pricing, it's about the overall infrastructure, which -- that can support that kind of a business at a reasonable cost structure. And even with some premium pricing, whether that cost -- that can cover the costs associated with it remains to be seen. Right now, I think that's a very tall task actually. Operator: Next question is from Laura Chen of Citigroup. Chia Yi Chen: Can you hear me? Operator: Yes. Chia Yi Chen: I just want to consult, Joseph, your view on the gross margin outlook, and also, congratulations for the great result. Do you think we see quite full utilization rate like Ken just mentioned? At the same time, there is a stronger testing business. I recall, Joseph, you mentioned before that in the longer term, if the utilization rate get back to 80% plus, the gross margin could go back to high 20s. So just wondering how is the dynamic now. Are you also -- and also, you are increasing the CapEx for the future demand. So just wondering how should we think about the gross margin outlook into next year or longer term? Kenneth Hsiang: Laura, are you looking for commentary on the relationship between utilization and our margin structure? Chia Yi Chen: Yes. And also -- yes, and at the same time, we are also increasing CapEx. I believe that there's also some increasing in depreciation costs. So just wondering the dynamic right now, how should we think about the gross margin outlook? Joseph Tung: Well, if we exclude the foreign exchange impact, I think we have already come back to our structural margin. Like Ken mentioned in third quarter, if we were on the same ForEx level as quarter 1, our margin should be around 26.8%. And going into fourth quarter, there will be further margin improvement. And again, at the same currency level, we should be over 27%. So what we mentioned before, once our utilization reaches 70% and above, then we should go back to our structural margin range. But unfortunately, the foreign exchange does have a pretty big impact on our overall margin. But having said that, I think we will continue to -- I think right now, the foreign exchange seems to be stabilizing now. We will start our margin effort from this level. And we are very confident that with the continuing expansion of our leading-edge business, we're confident that we will continue to see -- as the capacity being ramped up, we are confident that we will continue to see margin improvement. And right now, we are very confident that in 2026, for the whole year, we should be -- we should have a gross profit margin for ATM at the structural margin range. Chia Yi Chen: We are looking for that. My second question is that -- about the leading-edge advanced packaging. ASE also developed your own focus technologies. Just wondering that how is the current progress in the customers' engagement. It's not just focused on the outflow opportunities on substrates. Also, how does ASE's -- your own focus progress? Kenneth Hsiang: Laura, you're looking for an update on our internal advanced packaging solutions, just as a focus. Chia Yi Chen: Yes. Right. Joseph Tung: Well, obviously, in terms of the overall capacity, I think for CoWoS or CoWoS like 2.5D, I think our foundry partner as well as ourselves is still scrambling to try to make the necessary investment for our capacity to catch up with the demand. And so given the tightness, I think, obviously, there will be customers -- other customers that would like to have other alternatives or solutions for -- to meet their demand, and that creates a very good business opportunity for us to try to sell our own solutions. And on that, we are making the necessary investment at this point. And we do have engagement with multiple customers. And -- but these things take time. I think the -- what we're expecting is that by latter part of next year, we will start to see meaningful full process revenue coming in serving multiple customers. Chia Yi Chen: Okay. So does this also included in your at least TWD 1 billion revenue increase into next year? Joseph Tung: Yes. Operator: Next question is from Sunny of UBS. Kenneth Hsiang: Sunny, are you there? Sunny Lin: Yes. Could you hear me okay? Operator: Yes. Sunny Lin: So congrats on the very good results and guidance. Glad to see LEAP business ramping up and gaining momentum going to 2026. So maybe a question on mainstream. Could you help us understand the recovery ahead? And so when you guide IC ATM sales to grow 3% to 5% sequentially, how is the growth by mainstream and LEAP? And how should we think about the cycle for mainstream going to 2026? Do you see the current utilization rate being a good base for critical recovery going to 2026? Kenneth Hsiang: Sunny, you're looking for basically our more trailing edge capacity or trailing edge plus traditional advanced packaging capacity. Sunny Lin: So mostly on the mainstream, so wire bonding, die bonding? Kenneth Hsiang: Okay. You're looking for commentary on more traditional packaging and then -- for this year and into next year? Sunny Lin: Yes. How should we think about the cycle from here? Joseph Tung: Well, as I mentioned, the mainstream business is -- we're seeing better-than-expected performances. And I think that's a result of the general market recovery. And also, in some part of the -- in different sectors, we are also seeing ourselves gaining shares, particularly -- if we look at different sectors, I think communication and -- communications, and of course, PC or computing is recovering better than the other, like automotive and industrial. But nonetheless, I think the recovery is very obvious at this point. Maybe in terms of automotive, it's kind of moving in a slower pace than the other 3 sectors. But on that, we actually posted a very, very good growth in our automotive business. I think for ATM this year, we're going to see over 20% growth in this part of the business. I think that's largely as a result of we continuing getting -- gaining market share in this space through our factory automation. In general, I think, in the beginning of the year, we were saying that we will have our leading-edge giving us 10% growth and mid- to high single-digit growth coming from the mainstream. Obviously, as I mentioned in the beginning of the session, I told everybody that we're going to exceed our revenue growth target to over 20%. So that means the mainstream performance is much better than what we were expecting in the beginning of the year. And we're not seeing anything negative at this point in terms of mainstream business. So without giving you any further guidance for next year, but we do think that we are in a very healthy space at this point for both in the general market, and we're still seeing very strong momentum in the leading edge as well. Sunny Lin: Maybe a very quick follow-up. So for Q4, is the utilization rate for mainstream continuing to recover a bit? Joseph Tung: Yes. I think in the -- like what Ken just mentioned, I think our bumping and flip chip are pretty full. Wire bonding is improving, although it's not entirely full, but it is steadily improving. Sunny Lin: Got it. My second question is on gross margin. So from here, one, with the improving measuring business, and then secondly, accelerating ramp probably for LEAP going to 2026 and a stabilizing FX, should we assume for IC ATM, the gross margin recovery should accelerate in the coming few quarters? Kenneth Hsiang: Sunny, you're looking for an update in terms of forward-looking commentary regarding our gross margin structure. Sunny Lin: Yes, especially on the pace of the improvement. Joseph Tung: Well, we're not in a perfect world, right? There's still a lot of moving parts and uncertainties in front of us, which includes foreign exchange movements. So yes, I think the general trend is very certain because as we continue to expand rapidly in our leading-edge, which is margin accretive, so that gives us a very good pace for our margin improvement going forward. But in terms of the pace, I think there's still -- I think right now, it's still too early to give you a clear path of what kind of pace we're going to have in terms of our margin expansion. Sunny Lin: Got it. Also, on LEAP, is there a margin difference between outsourcing and full-process CoWoS, meaning if you start to ramp more full process from second half of next year, will that further boost your gross margin for IC ATM? Joseph Tung: I think, in terms of full process, we're still at the early stage, so it's kind of difficult to make any meaningful comparison at this point. I think both needs to be at really a more stable level for us to make the comparison. I think theoretically, regardless it's our own full process or outsourced, leading edge does give us margin accretion. Operator: Our next question is from Felix Pan of KGI. Junhong Pan: Can you, guys, hear me okay? Operator: Yes. Junhong Pan: Yes. So my first question regarding to -- I have seen your foundry partner incremental CP test outsourcing demand. Just correct me if I was wrong, but I found it very difficult to quantify how big for the TAM is. Maybe for you, it's really hard to comment on the same, but maybe on the TAM side or even the percentage of the BOM, can you just give us some sense how can we quantify, how big for the CP test demand? Just any color will be grateful. That's my first question. Kenneth Hsiang: Felix, I think I'll take this one. In terms of the overall TAM, for something like that, I would say that that's not quantifiable, at least from our perspective. This is something that is probably known by our foundry partners. And you may want to address the amount of work that they want to outsource directly to them. We don't quantify that at this point. Junhong Pan: Okay. Yes. So my second question is, I think during the TSMC's latest earnings call, I think C.C. emphasized customers of customers engagement. We do see the incremental engagement. From your perspective, do you see the similar pattern, the engagement from customer to customer as well? Or -- I think there's a lot of thing happening this month, so I just want to -- if any color you can share, is any business model change or you have seen incremental customers' customer engagement as a TSMC as well? Yes. Kenneth Hsiang: Felix, you're asking for how we look at our overall market and whether we actually look into our customers' customers? Similar to... Junhong Pan: Actually, my question is there's any customer -- your customers' customer jump your customer to have the engagement with you guys, like to secure some critical capacity or something like that. Kenneth Hsiang: I don't know if we can talk about that. Joseph, if you want to take a step? Joseph Tung: Yes. I think we have a very, very close communication with both our direct customers as well as our foundry partners. Those dialogues are being conducted on a routine basis so that we can better prepare ourselves in terms of our capacity and also our technology roadmap. So in this regard, we do talk to them. And I think our information source is not just coming from our customer, but our customers will definitely keep us informed of what they're expecting from their own customers and how the overall market will shape up. So it's a constant dialogue among the industry players to make sure that the demand is sufficiently being supported by the supply. That's an ongoing process that has been going on for them, maybe forever. Operator: [Operator Instructions] Next question is from Gokul Hariharan of JPMorgan. Gokul Hariharan: First one, could you help us understand what is the progress on the full stack focus or CoWoS like kind of processes going into next year? When do we expect this to start becoming more meaningful contributor to revenues, to the LEAP total revenues? And are the applications still similar in terms of like AI accelerator? Or are the applications becoming more diverse in terms of networking or server CPU and other kind of stuff as well? Kenneth Hsiang: Gokul, you're looking for an update on our -- more on our full process type services, is that correct? Joseph Tung: I talked about this earlier. I think we are continuing our investment in full process, and we are currently engaging with multiple customers to plan for the capacity, and we expect that come later part of next year, we should start seeing some meaningful revenue coming from full process rather than just only from outsourced part of the business. In terms of the application, I think there will be AI accelerators. There will be other adoptions in different chips requiring such capability. But at this point, I think it's a little bit too early to say the exact revenue -- scale of the revenue or the composition of that -- of such revenue. We just have to continue to work very closely with our customers, multiple customers to better understand what their demands will be, and we'll prep ourselves for the necessary capacity for them. Gokul Hariharan: Got it. Maybe a slightly related question is on the CapEx. I think we are probably finishing this year above TWD 3 billion, well above TWD 3 billion in terms of machinery CapEx. How do we think about this investment cycle? Are we still going to be in this, like increased CapEx, likely to continue to increase CapEx over the next couple of years given the demand outlook that you're seeing from your customers and your customers' customers? Kenneth Hsiang: Gokul, you're looking for an update on our overall CapEx view. And also in the frame of the leading-edge advanced packaging, how it works? Gokul Hariharan: That's right. Yes. Joseph Tung: Like I said, we stay very close with our foundry partner, and they -- our foundry partner being the dominant player, they cover all the who's and who's in the -- whoever has any demand, they will be the one to supply. So they really have a very, very close connection with their customers and their customers' customers. Since we have a very close communication with them, so whatever information that they're gathering, we do have the benefit of sharing some of that information to better prepare ourselves for capacity expansion. And as I said earlier, again, we're not going to be shy of making the necessary investment for -- particularly for the leading edge, so as to secure and also to expand our dominance in this space. And as such, we believe, at least for next year, we will continue to see pretty heavy investments in our capacity as well as technology in this -- in the leading edge. Gokul Hariharan: So is it fair to say next year machinery CapEx is likely to be still higher than this year? Joseph Tung: We will give you better guidance once we complete our budget cycle, which is starting now. And we will reserve this question to next quarter. Operator: Next question is from Charlie Chan of Morgan Stanley. Charlie Chan: Yes, that question is about T-Glass resulting on the shortage of substrates. I'm not sure if you've heard, there would be kind of a risk factor for ASE Group to grow your revenue next year because we start to hear some customers' hard time to get the substrate sourced. And how would the ASE to help our customers to get a more sufficient supply? Kenneth Hsiang: Your -- Charlie, your second -- or your third question is regarding overall T-Glass supply and how it impacts our -- whether it would impact our overall supply chain going forward? Charlie Chan: Yes, yes. And how would the ASE manage or help your customers on this period of shortage? Joseph Tung: Like I said, there's a lot of uncertainties that's ahead of us, so -- like running any other business, there still is going to be ups and downs, there's going to be changes. But right now, I think whatever we're seeing today, maybe some of the materials or -- don't ask me what T-Glass is, but some of the materials may have a longer lead time. But at this time, we haven't seen any real disruptions on our service to our customers at this point. I think if anything else, being the dominant player, if there's any problem, we're the ones that our customers come to, and we certainly have the best leverage in trying to secure the needed materials or variable components that will be needed for the -- for serving them. Charlie Chan: Got you. So I would assume, for those materials or substrate, if there will be any cost or price increase, ASE would fully pass-through to customers? Is it right or you would charge some markup because those materials are getting harder to get? Joseph Tung: We will find the most suitable pricing for current situation. Operator: Next question is from Bruce Lu of Goldman Sachs. Zheng Lu: I think I asked this question last quarter, but I want to ask it again. What is the CapEx to revenue nowadays? Or is there any changes in terms of like how long does it take to see the revenue after you invest your CapEx? The reason I ask this is that you invest for TWD 1.8 billion CapEx last year and 3-point something billion this year, right? But you generate additional TWD 1 billion of revenue this year, but you also can only generate additional TWD 1 billion next year. Theoretically, should be able to generate a bit more than $1 billion next year, right? Is there any changes in terms of CapEx to revenue or trying to generate revenue? Kenneth Hsiang: Bruce, you're looking for the magic solution in terms of CapEx to revenue, right? Zheng Lu: Which Joseph used to give us. Joseph Tung: Well, first of all, the TWD 3 million plus CapEx is not entirely for leading-edge. I think -- for this year, I think 55% of that is for leading edge. And bear in mind that that's just a number. We don't make capacity expansion overnight. Equipment needs to be delivered. You don't have this equipment all delivered at once, right? Things move progressively. So just simple math, if it's TWD 1.8 billion worth of CapEx, that means now, on average, TWD 900 million worth of new capacity being put in. So this year, if it's a TWD 1 billion increase, that ratio seems to be still on track. Of course, the other half of the investment will start to generate revenue, but there is always a time gap between when the machineries -- or the CapEx being spent and when the revenue is being generated. I'm not saying that. I'm not giving you -- I'm not saying that we can only generate TWD 1 billion worth of new revenue coming in. I'm just saying that at this point, we are very, very confident that we can have at least TWD 1 billion worth leading edge revenue -- new revenue coming in next year. For the majority of the leading edge at this point, we're still in the earlier stage at this point, and we're still gathering data to come up with the more meaningful investment intensity on this kind of investment. But from the limited data that we've gathered so far, I think the traditional TWD 1 of investment creating TWD 1 of annual revenue seems still be the case for the main businesses that we are entering now, which is OS and test. Zheng Lu: So one to one. That's the major number. It still works. Joseph Tung: Still applies. But like I said, we are still in the process of gathering more data. And bear in mind that the -- our capacity is not in full ramp at this point. So it's going to take a little bit more time. Zheng Lu: My plan is simple, right? 45% of your TWD 3-point-something billion CapEx is USD 2 billion, right? I mean, you just mentioned that TWD 3.8-something billion, 55% is for matured technology. Let's say, 45% -- let's say, 50% of your TWD 3-point-something billion CapEx this year, that's close to TWD 2 billion for next year in terms of incremental new revenue from AI. That's how the math works. Kenneth Hsiang: No, that's not how the math works. We don't live on math. We live in the real world. Zheng Lu: Well, I only know math. Kenneth Hsiang: Well, if you're calling me conservative, well, call me conservative. Operator: There's no question on the floor. Kenneth Hsiang: Okay. I guess, time has pretty much run out. I would like to thank everyone for participating in the call. I look forward to seeing you all, either during the quarter or at the next earnings release. Joseph Tung: Okay. We are having a good run, and we'll continue to have a good run going into next year. And we're confident that we will continue to deliver good performances and good numbers for you. We'll see you next quarter. Thank you very much.
Operator: Good day, and welcome to the Jerónimo Martins First 9 Months 2025 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Ana Luisa Virginia , Chief Financial Officer of Jerónimo Martins Group. Please go ahead, madam. Ana Virgínia: Thank you, Sharon. Good morning, ladies and gentlemen, and thank you for joining this call dedicated to our first 9 months results. As usual, in our corporate website, you can find the results release, a slide presentation and a fact sheet for the period. The first 9 months of 2025 continue to be defined by the ongoing global geopolitical uncertainty that is also shaping consumer sentiment and fostering a more cautious value-driven approach among shoppers. Against this challenging context, price remains at the heart of our strategy across all banners. Every team worked hard to uphold our promise of price leadership and to create an attractive quality assortment, securing customer preference and driving sales growth. The reinforced commitment to cost discipline, operational efficiency and productivity paid off and ensure that EBITDA margins remained robust despite the tough combination of low basket inflation with high cost inflation in extremely competitive backdrops. Meanwhile, our ambitious CapEx program is being executed as planned, reaching EUR 816 million in the period with the opening of 274 new stores and the renovation of 170 locations. The balance sheet kept its robustness, closing September with a net cash position, excluding capitalized leases of EUR 467 million. All in all, our 9 months results are solid and show that our banners' business models are agile and prepared to adjust and respond to the current circumstances. Looking now at the P&L, I'm going to focus on the 9 months figures and flag a couple of things. On sales, our banners delivered well overall, driving the group's top line to grow by 7.1% or 6.6% at constant exchange rates to EUR 26.5 billion. EBITDA reached EUR 1.8 billion, 10.9% up on the same period of the previous year or a 9.9% growth at constant exchange rates. EBITDA margin was 23 basis points up versus the 9 months of 2024, reaching 6.8%. This performance is the result of good sales delivery combined with cost management and productivity measures, which more than compensated for price investment and cost inflation. The execution of the investment program is reflected in the evolution of both depreciation and net financial costs as the later also includes the interest expense of capitalized leases. The other profit and losses heading incorporates indemnities, write-offs and provisions as well as the allocation of EUR 40 million from the 2024 results to the Jerónimo Martins Foundation. Cash flow for the period, excluding the dividends paid in May, was at EUR 128 million. The 2 most important things to highlight here are the improved funds from operations following the solid sales and EBITDA delivery and enhanced working capital flows, which reflect the different growth dynamics compared with the same period of prior year and stricter stock management. As already mentioned, by the end of these first 9 months, thanks to the good sales performance and despite the execution of our ambitious CapEx plan, the balance sheet remains solid, including a positive cash position of EUR 467 million. Looking now into the detail of the performance, I will start with the top line. Group sales grew by 7.1%, 6.6% at constant exchange rates to EUR 26.5 billion, including a like-for-like of 2.4% and a solid contribution from expansion. All banners did well with Biedronka in particular, adding EUR 1 billion of sales at constant exchange rate in the 9-month period. In Poland, the market context continued to be highly competitive and consumer behavior remained cautious, focusing on low prices and promotional offers. Throughout its 30 years history in the country and in a meaningful way also this year, Biedronka has kept Polish families' needs and expectations at the heart of its offering. The banner maintained its price leadership and continue to offer the best savings opportunities while working to constantly evolve its assortment and improve its store network, having opened 111 new stores and remodeled 110 in the 9 months. Sales grew by 7.4% to EUR 18.8 billion, or 5.8% in local currency, with like-for-like at 1.8% despite the challenging comps. The like-for-like growth and the expansion of the store network resulted once again in market share gains. HeBe operated in a context that became increasingly price competitive, which combined with muted consumer demand strongly pressured like-for-like growth. Sales increased by 6.9% or 5.3% in local currency to reach EUR 451 million. Over the period, HeBe opened 13 stores in Poland, net -- 10 net additions and 2 in the Czech Republic. The banner is focused on reinforcing its offer differentiation and competitiveness while protecting its price positioning in the current context. In Portugal, consumers remain promotion oriented. Pingo Doce kept its intense commercial strategy, guaranteeing its leading price positioning. This dynamic, together with the contribution from the All About Food stores drove solid like-for-like growth. The banner opened 5 stores and steadily advanced in its remodeling program, having renovated 38 stores throughout the 9 months. The renewed store concept enhances the differentiation and uniqueness of the assortment, particularly in perishables and ready-to-eat meals. Sales grew by 5.4% to EUR 3.9 billion and like-for-like, excluding fuel, was up 4.1%. Recheio enlarged its client base and benefited from the competitiveness of the offer designed for the HoReCa channel, which combines price with quality of the assortment and a special emphasis on fresh and on the service provided to clients, particularly the Amanhecer partners. Against the difficult comparison with the same period in the prior years, our wholesale banner grew sales by 2.6% to reach EUR 1 billion with like-for-like at 2.4%. In Colombia, despite some improvement in consumer demand, Ara continued to face a difficult backdrop and maintained an intense commercial dynamic, offering the best saving opportunities for the Colombian families. With like-for-like growth at a solid 5.6% and a strong contribution from store network expansion, sales in local currency increased by 16.9%. In euros, sales reached EUR 2.3 billion, 9.6% up on the 9 months of 2024. This performance reflects our Colombian company's strong focus on growth that fueled its top line through intense promotional dynamics on one hand and the delivery on its expansion ambition on the other. This expansion included the opening of 135 stores over the period, of which 70 resulted from the integration of stores previously operated by Colsubsidio. Consolidated EBITDA grew by 10.9% or 9.9% at constant exchange rates to reach EUR 1.8 billion. This solid performance was driven by increased sales and effective cost and productivity management. All companies managed extremely well the challenging combination of price investment and cost inflation, particularly in wages. Never losing sight of our growth ambition and working efficiently and productively, all banners delivered good margin performance despite the muted consumer context, particularly in Poland. Group EBITDA margin was at 6.8%, up from the 6.6% registered in the 9 months of 2024. At Biedronka, EBITDA margin performance was driven by an assertive combination of sales growth, cost control and efficiency gains. At HeBe, while like-for-like was impacted by the market context, the focus on tightening cost discipline and working to shield product mix allowed for EBITDA margin protection. In Portugal, an effective promotional strategy drove sales growth, which together with reinforced productivity measures also preserved EBITDA margin. In Colombia, Ara's good performance benefited both from sales growth and the work initiated in 2024 to protect gross margin and mitigate the impact of inflation on costs. Wrapping up, amidst a backdrop of global geopolitical uncertainty, consumer behavior remains somehow restrained and predominantly price focused, contributing to intense competitiveness in food retail. During this period, we also continued to face cost inflation, particularly in wages. Despite these challenging conditions, we achieved solid sales growth. On top of the positive contribution of like-for-like, a recognition of our unwavering commitment to offer leading prices, the strategic expansion of our store network also played a decisive role. The combination of robust sales, cost discipline and operational efficiency translated into strong EBITDA delivery. With the Christmas and New Year season approaching, we will stay focused on offering the best saving opportunities and ensuring an agile responsiveness to the needs and wants of our customers so that they keep choosing our stores every time. Thank you for your attention. Operator, I am now ready to take questions. Operator: [Operator Instructions] And your first question today comes from the line of William Woods from Bernstein. William Woods: When we look shorter term, why do you think you can't pass on basket inflation in a normalized way just yet? And I suppose, have you seen any improvement in that basket inflation over the last few months? And also, when you look at your market share gains, are you able to give us any idea in Poland, how much market share you've been gaining either over the last year or 2 or something like that? And then when you look longer term in Poland, in particular, how confident are you that you can see margin recovery in that midterm view? Is there any reason why you don't think you could get back to 8.5%, 9% like you were achieving a couple of years ago? Ana Virgínia: So on basket inflation, of course, we are not alone in the market. The Polish market continues to be very, very competitive. And this -- it's true that this comes a long way but we know that considering the context and the fact that we are and we keep operating in a low basket inflation versus a still high cost inflation. This means that all players are more pressured, and this tends to intensify really the competition in the market. So I think that's what Biedronka intends to do is to keep its price leadership, as we said. This is really relevant in the current context. So currently, what we have to work for really is to make sure that we are and we continue to be the leaders in price. This being said, of course, it's a different situation, as I've been saying this year, it's a completely different situation to work even with low inflation than to work in deflation, which was the case last year. And of course, this really drives the performance, not only on the margins but particularly and also on the balance sheet, considering our business model, the way that it is crafted. So I think that we are not so keen in passing the whole inflation. The idea here is to really become or continue to be the most competitive to maintain the preference of consumers to make sure that through sales, we are able to dilute the costs and of course, to protect our profitability because growth is also important, as I said, for the return on invested capital as a whole. On market share gains, according to JFK, so it's the base and the source that we have, we continue to gain market share. Up to August, we gained 0.2 percentage points of market share. And I believe that in September, we even gained a little bit more than that but the numbers are not still out. So I think this -- and I have to say, it's an incredible performance by Biedronka's team, considering that we are growing on top of growth. And it's true that EUR 1 billion is not the same percentage when you are delivering EUR 25 billion in sales than when you were delivering billion EUR 20 million but it's really a terrific performance by our Polish banner. On the margin recovery, of course, this, as I said, I think that we are -- we know that we are becoming more leveraged from the P&L point of view when we work with lower margins. But the fact is that we had to prepare to work with high cost inflation and of course, still being in a collection move considering the low inflation of 2022 and 2023. So what -- if it's possible, this will really depend on the whole market. And what we are seeing, as I flagged, is still a consumer that is cautious, a consumer that doesn't see reasons to trade up in food. And of course, it's possible, but I don't think at this point will be our main priority. The main priority is really to protect profitability considering the whole business model and the -- as I said, the return on invested capital more than just the EBITDA margin or EBIT margin. Operator: And the next question comes from the line of Jose Rito from CaixaBank. José Rito: Sorry if I didn't get if you comment anything related with weather. We had some other players calling attention to the weather impact in Q3. Can you quantify how much was this impact for Jerónimo in Poland, please? That will be the first question. And then the second question I have is related to this OpEx evolution. OpEx as percentage of sales has been evolving well. What has been the main contributors to this? So what has been the cost lines that have been evolving below sales? Ana Virgínia: Thank you, Jose. So on the weather, we do not quantify, of course, the impact as we also don't quantify when the weather is good. So it's a circumstances that affects all players. And of course, we have to deal with that. It's true that affects some categories that usually are margin driven. But this being said, we don't isolate the effect in our performance. It's something that we have to deal with. On OpEx, so this has 2 main reasons, of course. One was all the measures in terms of cost control that were taken. And this a little bit in anticipation of what we were seeing in the market. So as you know, and having as a proxy, the minimum wage increase that has happened in our main markets, which was basically a very high single digits and knowing that it would be almost impossible to grow at that pace, all the banners started to implement a series of different initiatives to increase productivity and to make sure that regardless of the sales growth, they would somehow protect the profitability without losing, as I said, the competitiveness and losing the consumers' preference. And of course, the fact that we performed, in my opinion, well at the top line also helped to dilute and this was across, in fact, all banners, even in HeBe that had a more difficult context and is still operating with a high deflation, in fact, even -- he took some measures but that were already being prepared because of the context that we knew we would face this year. José Rito: Okay. Understood. So on the weather and I understand your answer on -- there is always positives and negatives. But can you at least say if now what we are seeing is more neutral relative to the weather in October? That will be the first. And the second one as a follow-up on the efficiency gains and be remind how much was the minimum wage increase this year. So the minimum wages next year will be much lower than this year if the efficiencies are there. So I would say that if top line momentum remains, so operating leverage could be even more in 2026, right? Ana Virgínia: Okay, Jose. So still on the weather. So what I know is that it continues to be challenging but it's now the season of bad weather. So I think that we should not depend very much on the weather to assess our full year results, to be honest. On the -- still on the OpEx. So it's true that the announcement, at least in Poland, because in Portugal, it's a little bit higher than that. And probably in Colombia, where there will be elections, we will see also an increase in salaries that is higher than the 3%. But this being said, we have to notice that it's not just a question of the increase in the minimum wage. We are facing very tight labor markets. We know that the immigration is also a question to see how we will deal with some constraints or some restraints in the different countries. So I think that we face still a very challenging backdrop in terms of wage increases or not. So if it's going to be 3%, this will also depend on the market dynamic and on making sure that we have the proper teams in place to continue to deliver our value propositions to our customers. The rest, of course, growing -- even growing in Poland at 3%, which would be -- and usually, you do that relation with the increase in costs. The question is that this will depend a lot as we are -- first of all, we have a very challenging base to grow from. And on the other hand, this will also depend on the consumer background and on how things evolved. And we continue to see a lot of volatility and still a lot of, let's say, muted consumer demand all across. So I wouldn't say that, yes, we are facing a more or less challenging context because the minimum wage increase or just because the minimum wage increase is lower this year than it was last year. In fact, we are growing from a much higher base than it used to be. Operator: [Operator Instructions] We will now take the next question and your next question today comes from the line of António Seladas from A|S Independent Research. António Seladas: Just a quick question in terms of working capital. It seems that figures are now stabilizing. So should we expect a more normal pattern from now on in terms of working capital? Or do you think that pressure that we saw in the recent quarters will continue? Ana Virgínia: Thank you, António. So on working capital, of course, as I mentioned, we are highly leveraged from the operational point of view. It is the nature of our business model. And of course, when we have growth and particularly when there is no deflation, the working capital goes or works in favor of us as a tailwind. And so I think that the correction move that there was in the market last year was penalized the working capital. At this point, what we are seeing, of course, is a different situation. So as I said, the growth dynamic is different and the working capital is better in this sense. This being said, I have to say that there was also a very significant work, particularly by the teams in Portugal and in Poland at the stock levels to make sure that overall, our profitability model works also on the working capital. So I think that's we can consider stabilized but it will depend again on the level of growth to continue to have the working capital being positive. And at this point, I wouldn't see that there wouldn't be working for us in the last quarter of the year. Operator: [Operator Instructions] There are currently no further questions. I will hand the call back to Anna Luisa. Please go ahead. Ana Virgínia: These 9 months results translate our banner's commitment and hard work to deliver against a very volatile geopolitical context whose impacts on the economic agents, including consumers are still far from being totally visible. Entering now the last quarter of the year and the crucial Christmas and New Year's period, we remain focused in responding to our customers' needs while continuing the key investment projects that are still to be concluded before the year-end. Thank you for your questions and for attending this conference call. I wish you all a nice day. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, everyone, and welcome to the Samsung Electronics 2025 Third Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Welcome, everyone, and thank you for joining us from around the globe. I am Daniel Oh, Head of Investor Relations at Samsung Electronics. It's my pleasure to be with you on our earnings call today to discuss our third quarter results. Before we begin, I would like to address some important housekeeping and legal matters. As a reminder, you can follow today's broadcast and slide presentation on our IR website at www.samsung.com/global/ir. Additionally, this call is being recorded, and it will be accessible on the same platform for those who wish to review it at a later time. We kindly ask for your attention and cooperation as we move forward as this session is designed to provide you with comprehensive insights into our financial performance and strategic outlook. I would like to remind everyone that this conference call may include forward-looking statements which are based on our current expectations regarding future events. These statements are not intended to serve as guarantees of future performance. Our actual results could differ materially from these statements due to a variety of factors, including, but not limited to, market conditions, regulatory changes and operational challenges. We appreciate your understanding and attention to these important considerations in our efforts to provide transparent and accurate information. With that in mind, I would like to outline today's format. I will begin the discussion with our third quarter financial performance, followed by EVP Soon-Cheol Park, our Head of Corporate Management Office and CFO, who will share our business outlook, capital expenditures and updates on shareholder returns. We will then turn the call over to our executives who will take this opportunity to discuss their respective business areas in detail. Following their presentations, we will open the floor to our valued analysts for any questions they may have. Please note that this call is planned to last approximately 1 hour, and we appreciate your time and attention throughout the discussion. In addition to myself and our CFO, the other executives joining today's call are EVP Jaejune Kim, representing Memory; VP Hyeok-man Kwon for Systems LSI; EVP Sukchae Kang for Foundry who has joined us for the first time; EVP Joonyoung Park for Samsung Display Corporation; VP Daniel Araujo for the Mobile eXperience; and finally, VP Mark Kim, representing Visual Display for this quarter. Now let's begin with our consolidated financial performance for the third quarter of 2025. Our total revenue reached KRW 86.1 trillion, up by 15.4% quarter-on-quarter. In the DS division, sales increased by 19% sequentially with the memory business setting a new all-time high for quarterly sales driven by strong growth of HBM3E and server SSDs. In the DX division, revenue was up 11% quarter-on-quarter, thanks to launch effects of new folding phones and solid flagship sales. SG&A expenses came in at KRW 21.3 trillion. And SG&A expenses as a percentage of sales declined by 3.1 percentage points sequentially to 24.8%. As of the end of the third quarter, year-to-date R&D expenses climbed to a record high of KRW 26.9 trillion, reflecting our commitment to innovation and long-term growth. Operating profit totaled KRW 12.2 trillion, representing a sequential increase of KRW 7.5 trillion, and operating margin increased by 7.9 percentage points quarter-on-quarter to 14.1%, led by DS division with increased memory sales, improved foundry line utilization and significantly reduced onetime inventory value adjustments compared to the previous quarter. Meanwhile, in the DX division, an increase in sales of high value-added products such as Fold 7 contributed to the growth. Regarding currency effects, the Korean won's relative strength against the U.S. dollar weighted on our component business as a significant portion of its transactions are in U.S. dollar. However, the negatives were largely offset by positives in the DX division, resulting in a minimal overall impact on the company's operating profit. More detailed third quarter results of each business will be presented by executives shortly. Before that, I would like to pass the conference call over to our CFO, Soon-Cheol Park, who will discuss the outlook for the fourth quarter and 2026. Soon-Cheol Park: Thank you, Daniel. And good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. It's a pleasure to join you once again on our earnings call. Firstly, our management is fully aware of the concerns of the market and the shareholders had concerning our performance through the previous quarter. However, thanks to the collective dedication of our employees in overcoming challenges, our third quarter results showed a clear rebound and meaningfully met market and shareholder expectations. Looking ahead, we will continue strengthening our business overall, and we remain committed to delivering strong performances to meet expectations. Before we move on, I would like to express my sincere gratitude to our shareholders for your patience and confidence in Samsung Electronics, especially during such a challenging environment. Now let's begin with the outlook for the fourth quarter of this year. We anticipate our mixed market environment in the fourth quarter characterized by ongoing global trade and geopolitical risks on one hand. And on the other, the potential for growth driven by the rapid advancement of the AI industry. In light of this outlook, the DS division will focus on enhancing its performance by increasing sales of high value-added memory products tail-loaded for AI. In the DX division, ongoing challenges such as heightened competition and tariffs may impact our projections for additional earnings growth. Nevertheless, we are persistent in our effort to expand sales, placing a strong emphasis on advanced AI products. Next, I would like to share our outlook for the coming year. In the first half of 2026, we expect the semiconductor market to remain strong driven by ongoing AI investment momentum. However, due to the uncertainties such as tariffs for the second half, we will provide a more detailed outlook during our earnings call for the second quarter of 2026. To navigate this uncertain environment, we utilized our strong technologies and diverse product portfolio to mitigate risks and maximize opportunities resulting in continuous sales turnover growth. In the DS division, the Memory business will make a timely investment and maintain each operational focus on profitability to actively respond to demand for high value-added AI products. At the same time, we will promote the expansion of sales for cutting-edge products such as HBM and high-capacity DDR5 and SSD. For System LSI, we plan to increase sales of premium SoCs and image sensors. The foundry business will work to strengthen its advanced processes and ensure timely ramp-up for the U.S. Taylor Fab. In Display, we will further reinforce our leading market position with our competitive product from the new 8.6 generation IT OLED design and by advancing our differentiated technologies and product excellence to meet the demand of AI devices. The DX division will strengthen its efforts to launch AI products equipped with the most innovative technologies through open collaboration with the leading global partners in respective business segment. Through digital initiatives, we'll expand sales of premium products and enhanced profitability, driving overall growth and reinforcing our leadership across the board. In the MX business, the launch of the S26 and other flagship products will provide our customers with enhanced performance and more intuitive and elevated AI experience. Moreover, we'll continue to lead form factor innovations with the recently released Galaxy XR and the upcoming launch of Tri Fold and leverage our differentiated Galaxy ecosystem to grow sales led by premium devices. In the VD business, we will drive sales growth by enhancing our premium leadership through the innovative new lineup, including Micro RGB and OLED, and we'll deliver unique customer experience with continually improving AI features. In the DA business, we will accelerate sales by strengthening the product lineups overall and improving differentiated connectivity between our products. Turning to CapEx. In the third quarter of 2025, CapEx decreased by KRW 1.9 trillion compared to the previous quarter and by KRW 3.3 trillion compared to the same quarter last year, coming in at KRW 9.2 trillion. This included KRW 7.8 trillion invested in the DS division and KRW 0.8 trillion in Display. For the first 3 quarter of this year, total CapEx was KRW 32.3 trillion, down KRW 3.6 trillion year-on-year. Of this amount, the DS division accounted for KRW 28.5 trillion, while the Display business represented KRW 2.1 trillion. For the full year of 2025, CapEx is projected to decline by KRW 6.3 trillion year-over-year, reaching a total of KRW 47.4 trillion. Within this total, the DS division is expected to account for KRW 4.9 trillion in CapEx, down KRW 5.4 trillion, while the CapEx for the Display business is anticipated to be KRW 3.3 trillion, down KRW 1.6 trillion. In Memory, we expect overall CapEx to remain relatively flat year-over-year, although infrastructure investments are projected to decline. On the other hand, equipment investment, particularly related to advanced node transitions, are anticipated to increase as we focus on expanding sales of high value-added products. In Foundry, we are continuing to invest in advanced node including 1.4 nanometer technology. However, we foresee a decline in total investment with the operations focused on improving and transitioning our current mass production line. In the Display business, our CapEx was mainly concentrated on reinforcing and upgrading existing production facilities as major investment in the 8.6 generation line are nearing completion. We expect the overall spending to decrease compared to the last year. In 2026, we will flexibly respond to the growing demand for AI by increasing investments strategically as needed. Moving on to shareholder returns. The Board of Directors today approved the quarterly dividend of KRW 370 per share for both common and preferred stock. On our shareholder return policy for 2024 to 2026, we are committing to an annual payout of regular dividends totaling KRW 9.8 trillion. The distribution for the third quarter amounting to KRW 2.45 trillion is scheduled for the payment in late November. Thank you. Daniel Oh: Thank you, Soon-Cheol Park. And to wrap up this portion of the call, I am pleased to report that Samsung Electronics has maintained its position as the world's fifth most valuable brand for the sixth consecutive year in the Interbrand Best Global Brands Top 100 ranking. Our brand value was assessed at $90.5 billion, which was the highest among non-U.S. companies. The evaluation highlighted positives such as our AI capabilities across all business units, the application of AI home experiences across our products, focused investments in AI semiconductors and our consumer-centric brand strategy. Now the executives will provide more detailed information on their respective business units third quarter performance, followed by their own business outlook. We'll start with Jaejune Kim, EVP of Memory business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market in the third quarter, demand remained strong and continued focus on HBM, high density DDR5 and server SSDs as the need for high performance and high-density server products are growing with the increasing investment in generative AI. As for mobile and PC, supply-demand dynamics remained tight, due to the impact of industry supply disruption focusing on servers. In this situation, along with increasing HBM3E sales, we proactively address the demand in overall application, including server. And our memory business in the third quarter recorded its strongest sales performance ever. Also, our performance improved significantly quarter-on-quarter, and the reduction in the inventory related onetime charges that occurred in the previous quarter also somewhat contributed to the performance improvement. Now let's move on to the outlook for the fourth quarter. Although uncertainties from tariffs and macroeconomic trends exist, we expect data center companies to continuously expand their hardware investments because of the ongoing competition to secure AI infrastructure. Therefore, our AI-related server demand keeps growing, and this demand significantly exceeds industry supply. For mobile and PC, we expect a supply shortage to intensify further in conjunction with the industry server-focused supply trend, increased content products driven by on-device AI and seasonal demand effects. In the fourth quarter, we will maintain our active response to rising server demand. For DRAM, we plan to optimize overall profitability by managing our product mix, focusing on HBM3E and high-density server DDR5 products in response to the robust demand for AI and conventional servers. And also for NAND, we will concentrate on expanding sales of high-density, high-performance server SSDs. Now let's move on to the outlook for 2026. With the continued expansion of AI investments next year and the increase of memory-intensive computer servers prompted by the spread of AI agents, we expect to see simultaneous growth in AI and conventional server demand. Moreover, in mobile and PC segment, we expect the trends of growing content products to continue with the spread of on-device AI. Especially for NAND, we expect supply constraints to intensify as industry inventory levels roll down sharply with the effect of SSD adoption as a replacement for nearline HDDs, which are in short supply. Accordingly, across overall applications, we are currently receiving memory demand for the year of 2026 and it is much stronger and faster than usual. It is expected that customers' demand for the next year will exceed our supply, even considering our investment and capacity expansion plans. In this situation, for DRAM, we plan to continue increasing the sales base for HBM. In particular, as for HBM4, from the initial stage of product development, we have already secured speed above 11 Gbps, exceeding the customers' requirement. With our industry-leading performance, we will focus on offering HBM4 centering on the high-end segment. Also for conventional DRAM, we plan to increase the portion of high value-added products related to AI application, such as high-density DDR5, LPDDR5X and GDDR7. Also, for NAND, we will increase the sales portion of server SSDs and heightened security in line with the strong demand for AI, and we plan to strengthen our portfolio, focusing on cutting-edge products by continuing the transition to V8 and V9. Thank you. Hyeok-man Kwon: Good morning. This is Hyeok-man Kwon from the System LSI business. In the third quarter, the smartphone market showed signs of slowing growth following modest gains in the first half. Major smartphone OEMs, which had built up inventory in anticipation of potential U.S. tariff risks began destocking in the second half, leading to weaker overall demand. We launched our industry's first 200 megapixel image sensors, featuring 2.5 micrometers, ultrafine pixels, laying the foundation for expansion in the high resolution segment. In SoC, efforts were focused on the stable supply of premium products to major customer flagship lineups. However, overall demand declined versus the first half due to broad-based inventory adjustments and seasonal impacts, resulting in flat quarterly earnings. In the fourth quarter, growth is expected to remain limited amid continued global economic uncertainty. With major OEMs maintaining cautious inventory level, demand recovery is likely to be measured. Against this spectrum, we aim to expand the shipment to key customers' premium lineups and continued cost reduction initiatives to defend earnings. Looking out to 2026, overall smartphone demand in major markets, such as China and the U.S., is expected to remain subdued, while the premium segment continued to post solid growth driven by lineup expansion and specification upgrades by leading OEMs. We are accelerating process stabilization and performance enhancement of our X nodes to secure production in key flagship models, while continuing to expand its market share in image sensors through differentiated technologies, such as the 200 megapixel and nanoprism sensors. Thank you. Sukchae Kang: Hello, everyone. This is Sukchae Kang from the Foundry business. In the third quarter, while U.S. export controls on China impacted sales to certain clients, revenue was sustained at the previous quarter's level driven by expanded sales to key customers in the U.S. and increased sales of memory products. Furthermore, profits saw a significant improvement due to a reduction in one-off cost, better line utilization and the realization of cost-saving efficiencies. We also began mass production of our first product using the first generation of nanoprocess while achieving our record high order backlog, driven by large-scale customer wins centered on advanced nodes. Looking ahead to the fourth quarter, the market is projected to see a slowdown in demand that had temporarily slowed due to the U.S. government tariff policies. However, strong demand in AI and HPC, along with the trend of semiconductor self-sufficiency in China is expected to fuel continued growth. We aim to expand our sales by ramping up mass production of 2nm products, increasing shipments of HPC, automotive and memory products and further improve earnings by enhancing fab utilization. In advanced node, development of the second-generation 2 nano process is processing as planned -- progressing as planned. We expect to expand orders for HPC and mobile applications based on our 2 and 4 nano processes. For mature node, we plan to broaden our customer base by diversifying into automotive and other applications through an expanded portfolio of specialty processes. For 2026, while the mobile market is projected to remain stagnant, we forecast continued robust demand for AI HPC applications. Notably, the first scale extension of 3-nano and 2-nano process mass production is expected to drive growth in advanced nodes. However, global supply chain uncertainties stemming from intensifying U.S.-China technology competition and the U.S. government semiconductor tariff policies are likely to persist, meaning demand volatility will also remain a factor. We plan to continuously increase the proportion of advanced nodes to address strong demand from AI HPC applications, thereby aiming for stable revenue growth. Specifically, we will pursue the mass production of second-generation 2 nano process products based on secured stability and focus on developing differentiated processes to strengthen our technological competitiveness. Additionally, we plan to expand demand for mobile and HPC through mass production of the performance and power optimized 4nm process and HBM4-based die. In addition, our new Taylor fab in the U.S. currently under construction is scheduled to commence operations from 2026. Thank you. Joonyoung Park: Good morning. This is Joonyoung Park from Samsung Display. In the third quarter, we delivered a sequential performance improvement in the mobile display business, thanks to the robust demand for our customers' flagship smartphones and newly launched products. Furthermore, we also achieved sales growth supported by an increase in the IT-led adoption rate. For the large display business, amid the rising demand for QD-OLED gaming monitors, we recorded double-digit growth in moving to sales compared to the previous quarter by actively meeting our customers' needs. Also, we introduced a new 27-inch QHD lineup, laying the groundwork for an additional increase in demand for QD-OLED monitors. Next, let me share the outlook for the fourth quarter. On the back of favorable year-end seasonality, we expect the demand for premium products to stay solid. In response, we will expand our sales by actively addressing customer demand for smartphones and boosting sales in non-smartphone segments such as IT, automotive and gaming. We aim to maximize the sales of QD-OLED monitors with the expected full-scale launches of our new lineup. Furthermore, we will respond to our major customers' demand for TVs in the year-end peak season in a timely manner. Moving on to 2026. Our outlook is quite conservative considering the intensifying impact of tariffs and lingering macroeconomic uncertainties. However, OLED adoption is continuously rising in diverse applications, thanks to its outstanding performance. Under these conditions, we plan to strengthen our product competitiveness for diverse segments, solidifying our market leadership. To start with, our new 8.6 generation IT OLED line slated for mass production next year will deliver competitive products, accelerating OLED penetration rate in the IT market. In addition, we will expand our technology lead in smartphones by enhancing the quality of foldable and introducing differentiated technologies for AI device such as low-power consumption and high refresh rate. Finally, for larger displays, we will continue to enhance the differentiated performance for TVs, such as brightness and solidify our position in QD-OLED monitor market by expanding lineups for both B2B and B2C and diversifying our customer base. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the MX division. Let me share our results for Q3 as well as our future outlook. The smartphone market rebounded in Q3 as macro uncertainties were somewhat alleviated due to progress in tariff negotiations among major countries together with expectations of interest rate cuts. For the MX business, Q3 saw smartphone shipments of 61 million units, tablet shipments of 7 million units and the smartphone ASP of $304. The launch of new flagship models contributed to growth in both sales and operating profit compared to Q2. Strong sales centered around the Fold 7 resulted in double-digit growth in both shipments and value for foldable devices compared to the previous year, while the S25 series also maintained solid sales momentum. The growth of flagship sales as a portion of total smartphone sales, along with improved sales of new tablet and variable products, enabled us to sustain robust double-digit profitability. Next, let me share the outlook for Q4. The smartphone market is expected to grow compared to the previous quarter due to seasonal factors. However, competition is expected to intensify especially in the premium segment. In the MX business, we expect a decrease in both smartphone shipments and ASP in Q4 as well as a decline in tablet shipments compared to the previous quarter. We aim to continue robust sales of AI smartphones, including our foldable devices and the S25 series, and we'll also press forward with expanding Galaxy ecosystem product sales in conjunction with seasonal demand, focusing on premium new products. Although we anticipate intensified competition and price increases in key components such as memory, we will persist in our efforts to achieve year-on-year annual revenue growth and maintain profitability through flagship focused sales and efficiency improvements across all processes. Next, I'll share our outlook for 2026. The smartphone market is projected to be roughly flat in both value and volume. Within the premium segment, the ultra premium segment is expected to see significant growth, especially around foldable devices. The mass segment is also anticipated to grow, mainly focused on higher price points. For ecosystem products, while tablets are experiencing a slowdown in replacement demand, the notebook PC segment is expected to expand due to growth of AI PCs and Windows 10 replacement demand. Additionally, the watch and TWS markets are projected to grow as interest in health and sports devices, together with the expansion of AI features. And next, we will continue strengthening our leadership in AI and form factor innovation, maintaining our strategy focused on expanding flagship sales. At the same time, we plan to drive growth across all segments by expanding into new regions and channels as well as upselling based on product competitiveness to solidify our leadership in volume. The S26 series will revolutionize the user experience with a user-centric, next-generation AI experience, a second-generation custom AP and stronger performance, including new camera sensors. For foldable devices, we plan to continue form factor innovations to strengthen our product lineup and provide new experiences aiming to expand our customer base. In ecosystem products, we aim to increase premium product sales with superior products and more advanced and intuitive Galaxy AI features. In particular, we will continue to enhance health AI experiences in our watches and further expand our TWS lineup in order to create new demand. Through these efforts, we will continue our business growth momentum even in the face of anticipated challenges next year. Thank you. Mark Kim: Hello, everyone. I'm Mark Kim from the sales and marketing team of Visual Display. Let me brief you on the market conditions and our results in the third quarter of 2025. In the third quarter, TV market demand increased quarter-on-quarter due to seasonality. However, it is expected to decrease slightly year-on-year as global TV market demand remains stagnant. For Samsung, we achieved solid sales growth in premium segment, including new QLED OLED and large screen TV. In response to intensifying competition in the entry-level market, we also diversified the QLED and 75-inches-and-above lineups to expand sales. If so, our profitability decreased year-on-year due to stagnant TV market demand, declining sales and increased costs driven by intensified competition. Now let me go over the outlook for the fourth quarter of 2025. In the fourth quarter, TV market demand is expected to increase slightly year-on-year although competition is likely to intensify with the year-end peak season. For Samsung, through strategic collaboration with major channel partners, we will strengthen our sales program for premium and large screen TVs to preemptively capture peak season demand and achieve a turnaround in the second half of the year. The TV market in 2026 is projected to grow slightly compared to this year. Also, the portion of strategic products such as QLED, OLED and large screen TVs above 75 inches, which are our core focus, is expected to expand further. For Samsung, we will strengthen premium leadership based on our innovative 2026 new lineup, including micro RGB and OLED. In particular, with our new form factors, micro RGB, we will secure new category in advance and reinforce our technological edge. At the same time, we will continue enhancing the competitiveness of the volume segment to drive a turnaround in revenue. By continuously advancing our AI features, we will deliver differentiated customer experience and solidify our leadership in the AI TV market. Lastly, the service business will drive solid profitability and growth momentum by advancing TV plus content and advertisement. Thank you. Daniel Oh: Thank you, Mark and all the other executives. That concludes our presentation on the third quarter performance of 2025 and brings us to the Q&A session which will be conducted in Korean. Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and questions for other business segments will be answered by business representatives. Operator: [Interpreted] [Operator Instructions] The first question will be made by [indiscernible] from Citigroup. Unknown Analyst: [Interpreted] Yes. First, congratulations on strong performance. I think recently on the semiconductor and memory side. I have one question for Memory and then for the overall company. In the case of Memory, it does seem that you have achieved strong performance in the third quarter. Could you explain more about third quarter bit growth and also pricing dynamics? And also, what is your outlook on the memory business for the fourth quarter? My second question is regarding your share buyback program. I understand that Samsung Electronics share buybacks have recently been completed and finished. Could you provide further details on the current status? Jaejune Kim: [Interpreted] Yes, let me address third quarter Memory performance and fourth quarter outlook. Well, with the expansion of inference applications and wider adoption of agentic AI, AI-related CapEx among data centers has been increasing even more significantly versus our initial expectations. And we continue to see strong demand in the Memory market for both DRAM and NAND driven by server applications. Also, for mobile and PC applications, with the industry providing priority supply to address AI server demand, there are growing concerns of supply shortages, and we have seen a rise in market prices. So already strong AI-related demand has become even stronger, driving the overall memory market. And in the third quarter, we also have expanded sales primarily of AI-related products to capture that demand. For DRAM, the expanded sales of HBM and high-density DDR5, LPDDR5X and GDDR74 servers, achieving big growth in the mid-teens percentage. For NAND, our focus was on profitability and we were able to proactively address demand for high margin services fees, recording around 10 percentage bit growth. Consequently, third quarter bit shipments outperformed our guidance, both DRAM and NAND, with a further reduction in our inventory levels. In the third quarter, impacted by rising pricing trends across the broad memory market, also increase in HBM sales mix. DRAM ASP rose by mid-10% Q-on-Q and then by mid-single-digit percentage. Profitability-wise, as we explained, inventory valuation adjustments in the previous quarter were reduced, partially contributing to improved earnings performance. Also, in the fourth quarter with major CSPs expected to expand CapEx, solid AI-related demand will continue. Meanwhile, on the supply side, with inventory across the industry dropping to subnormal levels, supply is expected to be highly limited, and rising prices are expected to increase further for DRAM and NAND across all applications. Given these conditions, we intend to continue our profitability-focused operations. For DRAM, while actively capturing HBM3E demand, we'll also increase the share of high-margin products for server applications. Within servers, we'll focus on high-value add products such as high-density DDR5, LPDDR5X to drive sales. That being said, as overall inventory levels come down, our bit shipment growth is likely to be limited to the low single-digit percentage in the fourth quarter. In NAND, as we continue to transition to V8 and V9, we'll also look to expand sales of high performance, 16 terabytes and above TLC SSDs for AI in foreign servers. Meanwhile, we'll ramp up supply of ultra-high density QLC SSD, which we collaborate on with large-scale data centers, starting from the fourth quarter onwards. However, as inventory has been declining at a faster pace and made continued migration of legacy lines to advanced nodes, bit production loss may be inevitable in the short term. So we expect fourth quarter bit shipments to come down to around 10% on a Q-on-Q basis. However, the share of server SSDs in our sales mix is expected to increase substantially. Soon-Cheol Park: [Interpreted] I will provide an update regarding our treasury shares. In November 2024, we announced a phased share repurchase program of KRW 10 trillion, which was fully completed by September 29. This was ahead of our original target date and the revised target stated in the third share repurchase disclosure. By executing the share repurchase within a shorter time frame, we aim to actively enhance shareholder value. In addition to the annual dividend of KRW 9.8 trillion, the company also completed further share repurchase during the quarter, reinforcing our active approach to shareholder returns. Also following the completion of the share repurchase regarding the possibility of additional returns, the management and the Board are fully aware of the market's increased interest. As a result, the company is continuously reviewing strategies to enhance long-term shareholder value. Additionally, excluding those reserved for employee compensation, we'll decide on the appropriate timing to cancel the remaining repurchase shares in the near future. Collectively, these actions reaffirm our commitment to creating long-term value for our shareholders. Thank you. Operator: [Interpreted] The next question will be by Mr. Kim Dongwon Dean from KB Securities. Dongwon Kim: [Interpreted] Yes. Congratulations on the highest performance in 3 years. I just have one question for HBM. I think there has been a great deal of recent interest on whether Samsung Electronics passed the final qualifications from NVIDIA or not for HBM3E. And generally, on the status of your HBMs, so could you provide an overview of your HBM3E and HBM4 business and also your sales outlook for HBM in 2026? Unknown Executive: Yes, let me take your question on HBM. First of all, I must say that regarding our HBM qualifications, we are quite aware that the market is very interested. But due to our NDA commitments with our clients, I'm afraid we are not able to comment further. What I can share with you at this point is that we are seeing HBM demand grow at a faster pace than supply, and that we have been expanding HBM3E mass production and sales to all of our customers. As a result, in the third quarter, our HBM bit shipments increased by mid-80% Q-on-Q. And excluding some small tail-end sales of legacy HBMs, our overall sales mix is now fully transitioned to HBM3E. For HBM4, as we explained at our earnings call late July, our development work is already finished, and we have shipped samples to all customers and are ready to start mass production and delivery in line with customers' required project time lines. One thing to look at regarding HBM4 commercialization is that as competition intensifies among customers for GPU performance, this has prompted some of the customers to change their original plans, and they have been asking for HBM4 with even stronger performance. From the start-up phase of our development work on HBM 4, we have made it a point to reflect these market needs in advance of the market, setting our performance targets above customer requirements in all our developments. Samples shipped to customers to date are fully capable of meeting 11 Gbps plus performance on low power consumption. Meanwhile, there is now fiercer demand for improved performance from AI applications because we expect a rise in demand for related HBM4, we will be proactive in executing on necessary investments to expand our 1C nano capacity. Soon-Cheol Park: [Interpreted] Let me address our sales forecast for HBM next year. While our 2026 HBM bit production plan was set reflecting a significant Y-o-Y increase, we have already secured customer demand -- significant customer demand for the planned volumes. However, as we -- as additional customer interest keeps coming in, we are internally reviewing possible capacity expansion. That's said, the recent rise in conventional DRAM prices has resulted in a sharp improvement in profitability. So for any additional product mix, we will be considering the relative profitability of HBM versus conventional DRAM. Any additional capacity expansion will also be set in an adequate level as we continue to monitor evolving market conditions. Operator: [Interpreted] The next question will be Mr. Jay Kwon from JPMorgan. H. Kwon: [Interpreted] This is Kwon Jay Hyun from JPMorgan. My first is on Memory. This is an extension of the prior question. Could you share your outlook on the memory market for 2026? And second, I understand that the company has recently announced an expanded stock compensation scheme for all employees and executives. So could you explain more about this in further detail? Jaejune Kim: Yes. So the 2026 Memory market outlook, let me take that. Next year, we expect the Memory market to continue growth momentum continuously driven by AI application demand. As DRAM requirements become more advanced for AI use cases, the high-performance HBM4 market is expected to emerge at full scale, while server DRAM will continue to shift toward higher capacities. And as industry supply tilts towards HBM and server DRAM, Mobile and PC applications will likely experience supply constraints. For legacy products like DDR4, LPDDR4X, GDDR6, as legacy processes accelerate transition to advanced cutting nodes across the industry, supply constraints have already been impacting prices, which rose sharply in the second half. This constrained supply condition is expected to continue next year as well. For NAND, similar to DRAM, demand is likely to increase mostly around high-performance, high-density products for AI. Also a supply shortage in nearline HDDs may solidify demand for substitute products, LC SCDs. And inventory -- industry inventory levels may bottom out faster than initially expected. So consequently, next year, amid overall bullish market conditions, even when assuming our CapEx and expansion and maximum production, customer demand will still exceed available supply and our available supply will remain far short of meeting customer demand. That said, for the second half of 2026, given various geopolitical uncertainties such as tariffs or export controls on high-end AI chips. We are looking more cautiously at the possible impact to market conditions. Even under such market uncertainties, we will continue to strengthen the competitiveness of our products in line with market demand and we plan to expand the supply of AI-related products, targeting the high-growth area markets, we'll focus on commercialization of HBM4 with differentiated performance, expanding sales of high-density, DDR5, SOCAR, GDDR7 and server SSDs, with products like 10.7 Gbps LP, DDR5 and UFS 5.0, will also actively address specialized demand for on-device AI to lead the market. Soon-Cheol Park: [Interpreted] Next, I'll provide an update regarding employee stock compensation. As reported in the media on October 14, to support mid- to long-term value creation, we plan to use performance stock units, or PSUs, and we'll expand stock compensation and the NPI performance incentive to include all employees. The goal is to motivate our people to focus on long-term performance and faster mutual growth across the company through this foundation. Under the performance stock units or the PSU program, the final number of shares granted will be determined by the stock's 3-year performance, and the granting of shares will then be made in installments over 3 years. This is an advanced compensation method linked to the company's future performance designed to align employee rewards with a stock price and enhance shareholder value. Next, the OPI stock compensation program will be expanded from executives only to include all employees starting from the payout in January 2026. The program for executives which began in January 2025 to strengthen responsible management will be available company-wide. Of the KRW 10 trillion worth of treasury shares repurchased over the past year, excluding the portion allocated for employee stock compensation, KRW 8.4 trillion worth will be canceled at an appropriate time, consistent with our previous disclosure. The KRW 1.6 trillion worth of treasury shares repurchased for employee stock compensation will be used for existing programs such as OPI, while additional shares for the newly announced PSU program will be purchased in the future. The specific acquisition period and volume will be determined in consultation with the Board and disclosed to shareholders accordingly. Overall, linking employee compensation to the stock price enables employees to focus on enhancing the company's value and delivering long-term performance while providing direct incentives to increase shareholder value so that we can remain committed to enhancing corporate value over the mid- to long term. Thank you. Operator: [Interpreted] The next question will be by Mr. Han Dong Hee from SK Securities. Dong Hee Han: [Interpreted] Yes, this is Han Dong Hee. I'm in charge of semiconductors at SK Securities. I have a question on foundry and another on smartphones. First, for foundry, it seems third quarter loss appears quite noticeably reduced versus the second quarter. What are the main reasons and drivers? Do you expect this improvement to continue into the fourth quarter. And for smartphone, in terms of profitability, amid the rise in memory and other component prices, do you think that you will be able to maintain current levels of profitability? Sukchae Kang: [Interpreted] Yes, let me answer your question on foundry. So in the first half of this year, there was impact from U.S.-China sanctions on advanced AI chips. And we did see an increase in certain one-off costs such as inventory write-downs from products that became unsellable due to sales restrictions. There was also impact from the sale of certain products produced at high cost during a period of low utilization in the second half of 2024 and also low utilization first half of 2025. However, in the third quarter, one-off costs from the second quarter decline and we saw utilization improve primarily around the advanced processes, resulting in cost savings, which combined led to a significant reduction in third quarter loss. In the fourth quarter, we will be ramping up mass production of new products, applying first-generation 2 nano processes. And we also expect an uptick in sales in high-demand HPC and auto products from main customers in the U.S. and China as well as memory products overall. We will engage in ongoing activities to further improve utilization and for cost efficiency gains, and we expect this to present additional improvements to our earnings. Daniel Araujo: I'll take your question on MX. So memory prices have seen a significant rebound beginning in Q3 with a steeper rise expected in Q4, leading to increased material costs for MX. Given the rising cost pressures, we aim to leverage the strong sales momentum of the Fold 7 -- Z Fold 7 as well as the continuing strong sales of the S25 series to drive revenue growth from high-margin flagship models. We will also drive sales of our newly launched Tab S11 and Watch 8 series to strengthen our premium market position in ecosystem products. At the same time, we're continuing efforts on process optimization, such as using standardized components as well as sharing components across product lines, while also pursuing efficiency improvements and cost reduction activities. Thank you. Operator: [Interpreted] The next question will be by Mr. Nicolas Gaudois from UBS. Nicolas Gaudois: So earlier, you have explained that you expect the memory business to be fairly strong in 2026. So in light of that outlook, could you directionally guide us on what Samsung memory CapEx will be looking like in 2026 compared to 2025 and maybe give a bit of clarity on the DRAM versus NAND flash. Jaejune Kim: [Interpreted] Yes. Let me address your question on memory CapEx. In 2026, we plan to maintain a proactive stance toward investments in memory. In fact, we are considering a significant year-on-year increase versus 2025. For several years now, we have been making steady investments in infrastructure to secure clean rooms for the future. Now building on that as a base, we are looking to execute facility investments at a scale required to address rising demand. For DRAM to address the rise in AI demand, we'll build on our 1b nano -- the 1b nano product portfolio and focus on capital investments to boost cutting-edge bit production. Also to respond to mid- to long-term future demand, we will also carry out some construction investments as well. And DRAM share of total investments will likely increase versus this year. For NAND, after confirming market demand, we intend to gradually increase the share of advanced processes in terms of our future directionality. Operator: [Interpreted] The next question will be by Mr. SK Kim from Daiwa Securities. S. K. Kim: [Interpreted] Yes. I'm Sung Kyu Kim from Daiwa. I have a question for foundry and another for a Samsung Display. So for foundry, it seems that your investments in foundry for this year were significantly cut. So could you explain the reasons why? What is your direction for investments next year? What will be your areas of focus investment? And second, for display. Other than smartphones, it seems that OLED penetration is increasing in these other non-smartphone applications as well. So what is Samsung Display's strategy in that regard? Sukchae Kang: [Interpreted] Yes, let me address the foundry CapEx question. This year, we continue to invest for the future to secure competitiveness in our 2 nano and 1.4 nano advanced node processes. CapEx for advanced production, however, was actually reduced year-on-year as we focus mostly on conversion of existing lines and line enhancements and upgrades. In 2026, we will maintain our basic position of flexible CapEx linked to customer demand and customer acquisition. We plan on finishing up construction on our new Taylor Fab for ramp-up of production and we'll be making facility investments toward our goal of supplying advanced semiconductor products to diverse customers in the U.S. In parallel, we'll also be preparing for mass production of new processes such as second-generation 2 nano and 17 nano CLS so CapEx will likely increase to 2024 levels. Joonyoung Park: [Interpreted] I'll give you an answer on the SDC. We have been extending our differentiated technologies proven over many years in smartphones to areas such as IT and auto, leading the expansion of the OLED ecosystem. Recently, across various products, including IT, automotive and watches, the adoption of OLED has been increasing, resulting in a growing contribution to the company's revenue. In particular, with the expansion of AI IT devices, market demand for low power and high-resolution OLED is increasing, and the adoption of OLED in IT products is expected to continue growing. In response, at the new 8.6 generation IT line, we plan to produce competitive products in 2026 to mainstream the IT OLED, while strengthening production and customer support capabilities to secure a mid- to long-term growth trajectory. For automotive products, we'll leverage our competitive edge in rigid OLED to expand our business not only in premium, but also in volume segment while applying UDC new form factors and other differentiated technologies to gradually increase OLED market share. We will further strengthen our competitive advantages in existing businesses while expanding our new growth industries including IT and automotive to establish a stable and balanced business portfolio. Daniel Oh: [Interpreted] I'll just take one more question due to time constraints. Operator: [Interpreted] The next question will be made by Giuni Lee from Goldman Sachs. Giuni Lee: I'd like to ask about the DX division. Could you please provide any update on the status of the Exynos adoption as well as of AI usage patterns for smartphones? Also, the second question is centering on Chinese brands. Price competition in the TV market continues to intensify. What impact will it have on your TV business? And what are your strategies? Daniel Araujo: Sure. So we, in MX, have clear standards for the experiences that each of our products should provide to customers, and we thoroughly evaluate APs across many dimensions and select ones that meet our criteria. This year, the Exynos AP was adopted in several of our products, including the Flip 7 and some A-Series models. For next year's S26, the evaluation for the AP is still underway, so we can't yet confirm on next year's flagship plan. Regarding AI usage patterns, this year's flagship devices show strong AI adoption with usage rates of Galaxy AI features of 60% weekly and 80% monthly. Features like now brief, which provides personalized information and photo assist for AI photo editing has been well received by users. And going forward, we plan to integrate more AI applications through our AI agent in order to streamline complex tasks and expand AI utilization across Galaxy devices. Unknown Executive: [Interpreted] I'd like to give you an answer on the TV part. In the TV market, aggressive pricing by competitors has boosted demand for entry-level models within each segment, heightening competition. Amid this difficult environment, we'll leverage our differentiated TV competitiveness to restore market share and return to a growth trajectory. First, we plan to launch a new form factor, micro RGB, to reinforce our technology leadership. At the same time, we'll expand OLED sales to drive premium growth and maximize synergies between micro RGB and the premium segments. Second, in the volume segments, we'll expand the application of our TV's key strengths, AI features and lineups while strengthening our real QLED marketing communication to counter competitors, price-focused strategies and shift the basis of competition toward consumer value. In September, we launched a conversational AI platform that provides natural interactions with Bixby to offer visually tailored information and recommendations called Vision AI Companion. In 2026, we plan to expand its availability across more lineup and countries to lead the AI TV market. Also, we will highlight the excellence and safety of our QLED TVs, which are the only products certified with real quantum dot display recognition. In addition, within the ultra-large TV segment, we'll expand our entry lineup, thereby strengthening our leadership in the 98-inch and above ultra-large TV market, which is showing a rapid growth even within the volume segment. Last, our service business, which continues to deliver strong profitability will further be expanded as a new growth driver for our TV business. TV Plus, our SaaS service, will differentiate itself by securing exclusive and live content. And to drive growth in performance-based advertising revenue, we will also secure new advertisers. Thank you. Daniel Oh: [Interpreted] Thank you for the answer. I would like to thank everybody who shared their valuable opinion. And that completes our conference call for this quarter. We wish all of you and those close to you to stay strong and in good health. We thank everyone for your participation today, and we look forward to speaking with you. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]