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Lars Solstad: Good morning, and welcome to Solstad Offshore's Third Quarter 2025 presentation. It has been another quarter of solid operational and financial performance and with a continued high activity across our fleet. Today's presentation will be held by myself, CEO, Lars Peder Solstad; and CFO, Kjetil Ramstad. And after the presentation, we will open up for Q&A. So please submit your questions in the chat. If we take a quick look at the disclaimer before we move over to the third quarter highlights and our business update. It has been another quarter of solid operational performance for Solstad Offshore with a fleet utilization of 97% in the quarter, and that is also the number for year-to-date. So 97% utilization year-to-date. And while the long-term demand remains positive and we see several longer-term opportunities, we also see that in the short-term market, we experienced a slower or lower demand than we previously expected. And that is also in line with what we communicated in the business update in October 9. Following the Solstad Maritime's reduction in full year 2025 adjusted EBITDA guidance, we have then also updated the Solstad Offshore guidance for the year accordingly with operational guidance still intact, while the share of associated companies and joint ventures are slightly reduced as earlier communicated. If we look at this quarter and earnings. Has then been adjusted EBITDA of $29 million, and that is compared to $28 million in the same quarter last year. We have secured several new long-term contracts in Brazil, contributing to a total order intake of $222 million in the quarter, and that includes 1 Solstad Maritime vessel that will go on long-term contract to Petrobras. In addition, we signed a 3-year contract for Normand Turmalina, one of our Brazilian-built anchor handlers, for a 3-year contract starting in first quarter '26. And also our client on CSV Normand Superior exercised their option to extend the contract with 1 more year. It is also nice to mention that the Board proposes a third quarter 2025 dividend of USD 0.05 per share, totaling approximately $4 million, which is more or less equal to Solstad Offshore's share of the Solstad Maritime third quarter dividend. If we take a closer look at the market. Solstad Offshore maintains a very strong foothold in Brazil, where long-term demand for offshore energy services remains robust. And Brazil continues to offer both long-term and project opportunities for the CSV and the anchor handling fleet. Globally and in addition to Brazil, the activity is good and offers more opportunities for our fleet. In 2025, it has been the North Sea that has had lower than expected activity. And as we continue to underline, to be able to sign contracts and to be a part of the global markets, it is essential to have a local presence. And Solstad Offshore has particularly in Brazil a very, very strong position. The long-term offshore energy services remain positive globally, but we have to keep in mind that the oil price development seen in the last months could introduce some uncertainties into activity level going forward. If we look at our backlog and earnings visibility. Solstad Offshore divides its backlog in two. One is the backlog we have on the owned fleet. The other is the backlog on Solstad Maritime vessels that utilize the Solstad Offshore structure for Brazilian contracts. And both continue to strengthen. The new 3-year contract for Normand Turmalina and 1-year option for Normand Superior have increased our direct backlog this quarter. And there was also a material increase in the backlog for Solstad Maritime vessels due to a new 4-year contract for the CSV Normand Commander with Petrobras that starts early next year. So the firm backlog for Solstad Offshore vessels is $280 million, which is a doubling of the backlog compared to last year. And for Solstad Maritime vessels, it is at USD 640 million. In fourth quarter this year, we will have some vessel availability. That is due to one vessel has come off a contract and is now exposed to the short-term market, while one is at a planned yard stay. So that will influence the utilization fourth quarter '25. But looking into 2026, the earnings visibilities are very good. And we also see that for the available vessels we have, we see that there are quite a few market opportunities that we are chasing for those vessels. So Kjetil, can you take us through the financial highlights? Kjetil Ramstad: I will, Lars. So let's start with the third quarter financial highlights for Solstad Offshore. It has been a quarter with high activity in third quarter with 97% utilization for the fleet compared to 97% last year. Year-to-date, we have an overall utilization of 97% versus 96% last year. On the revenue side. For the quarter, $73 million compared to $68 million last year. Year-to-date revenue was $220 million compared to $197 million. Adjusted EBITDA for the third quarter was $29 million compared to $28 million last year. Year-to-date, adjusted EBITDA of $91 million compared to $89 million last year. The net result was for the quarter $26 million compared to $11 million last year. Year-to-date, $88 million versus $52 million last year. Firm backlog for the Solstad Offshore owned vessels of $280 million compared to $42 million last year. This, of course, excludes the vessels on bareboat from Solstad Maritime. Book equity in the third quarter of $375 million, up from $203 million last year. And it gives an equity ratio of 44% for the company. Adjusted net interest-bearing debt of $57 million compared to $206 million last year. And the large reduction is mainly caused by Normand Maximus residual claim, which was approximately $185 million. Cash position at the quarter end was $87 million compared to $60 million last year. Plan to distribute dividend of $4 million in the quarter. Then if we have a closer look at the net interest-bearing debt and lease commitments in Solstad Offshore. We see that we have the regular bank facility of $90 million. That was drawn in November '24. That has a 5-year amortization profile with the majority in November '27. And then we have the financing for our Brazilian fleet, $51 million with BNDES, with maturity between '26 and '31. The lease commitments in the debt side of the balance sheet includes the Normand Maximus bareboat charter lease of $55 million and also the purchase options that is at $125 million and included in leasing with $105 million at the present value. Other leases is mainly the vessels that Solstad Maritime bareboats to Solstad Offshore for Brazilian operations and contracts. And the operational risk for these vessels are with the shipowner, Solstad Maritime. Then if we move over to the financial investments that we have in Solstad Offshore and start with Solstad Maritime, which Solstad Offshore owns 27.3% of. There will be paid a dividend of approximately $150 million in Solstad Maritime, and the share that Solstad Offshore will receive is $4 million. Share of the result in the quarter is $9.3 million compared to $13.1 million last year. Book value of the shares is $212 million. Then if we move to Normand Installer, which is a joint venture, owned 50-50 with SBM Offshore. The vessel is predominantly utilized on SBM Offshore's FPSO projects. First half of the year, the vessel had low utilization. And in the third quarter, the vessel had a planned maintenance dry dock. We expect that the rest of the year will be fully utilized. NISA is in a net cash position. And the share of the result in the quarter was negatively $0.3 million compared to positive $0.6 million last year. The book value of the shares is $20 million. And the last investment that Solstad Offshore has is Omega Subsea, where Solstad Offshore owns 35.8% of the shares. And Omega Subsea has 12 ROVs per the quarter end and 12 more scheduled to be delivered in 2026 and beyond. Share of the result in the quarter was $1.4 million and $4.2 million year-to-date. The book value of the shares is $16 million. Then if we go to financial guidance for Solstad Offshore. As mentioned and communicated 9th of October, we adjusted the financial guiding based on the change in guidance from Solstad Maritime. So the overall guidance on adjusted EBITDA is $150 million. The operational part of the guidance was unchanged at $60 million to $70 million, $53 million year-to-date. And the share of the results from associated companies and joint ventures was adjusted to around $50 million compared to the previous of $60 million to $80 million. As mentioned, there is a proposed dividend payment in the third quarter of USD 0.05 per share, totaling $4 million. And then if we go to the dividend dates. The summons to the AGM will be 3rd of November, and then the AGM will be 24th of November. Last day of trading to receive dividend is 24th of November. The ex date will be the 25th. Record date, the day after the 26th and then distribution date will be on or about the 28th of November this year. So with that, I leave the word back to you, Lars Peder, to summarize. Lars Solstad: Yes. Thank you, Kjetil. And to summarize our presentation and the third quarter. We have had or a quarter with solid operational -- yes, sorry about that. Now we have the correct slide. To summarize the presentation, another solid quarter operationally and financially for Solstad Offshore. We have had a strong order intake that increases the visibility for 2026 and beyond. We also see several market opportunities for the available vessels we have into 2026. But as I have said already, we have to also keep in mind that the recent oil price development represents a source of uncertainty going into the coming quarter and beyond. We are also very pleased to announce that the Board proposed a dividend payment for the quarter, which is also in line with earlier indications. So all in all, a solid quarter for Solstad Offshore and also the visibility for the coming year is solid. So by that, we conclude the presentation. And let's see if there are some questions, Kjetil. Kjetil Ramstad: Yes. Let's take the first one. What is the plan for Normand Tonjer and Normand Topazio? Lars Solstad: Yes. That is a relevant question. And those are the 2 vessels that we have availability or idle time on in fourth quarter. If we take the Normand Topazio first, that is one of the Brazilian-built anchor handlers we have operating in Brazil. That vessel is on a planned yard stay at the moment that will influence the utilization in fourth quarter. It is officially known that we were on top of the list on the Petrobras auction for a long-term contract. Those discussions are ongoing, and let's see how that develops in the coming weeks and months. But we are positive to achieve a good utilization for that vessel either on that contract or on alternative opportunities in Brazil. For the Normand Tonjer, that is a vessel that Solstad Offshore owns 56% of and has been operated on a contract for TGS on seismic projects for several years. That vessel is now redelivered to us, and we operate the vessel in the -- or we are preparing for operations in the short-term market in the North Sea right now. But we are also in some discussions for longer-term opportunities for the vessel, let's say, into '26. So that's what I can announce on those 2 vessels. Kjetil Ramstad: Thank you. Then there's a general question on the market of the fleet that we have in Solstad Offshore. How do you see the rate development on the contracts that we have? Is there escalations? Do we see a development from '25 to '26? Or what to expect on the secured contracts? Lars Solstad: Yes. I think, I mean, on the contracts we have, they are sort of going on their, let's say, original terms with the natural cost escalation process included. On the rate level, we see for vessels that we have available, I would say it's quite stable on a high level, I would say. So I don't see much difference or, let's say, downward pressure on the day rates for the vessel types that we have availability on. Kjetil Ramstad: And then there is a question on Petrobras and cost cutting. Can you update on the discussion on Petrobras with reference to the exposure that we have there with the 4 vessels -- the 3 vessels? Lars Solstad: Yes. I mean, Petrobras is a large client of us and we have had discussions with them, as most other in this business. And I would say it's very constructive discussions where it's about, are there any place where it's naturally to cut cost? That could be for mobilizations or preparations for new contract. It could be on manning level. It could be on other specialties that you see on Petrobras contracts. So constructive dialogue and no sort of red light are linked to those contracts in terms of uncertainty, if that's -- yes, so I think that answers the question, I hope. Kjetil Ramstad: Yes. Thank you. And then on Normand Maximus, it's on contract to the end of 2026. Can you say something about the plans for Maximus below this? And how do you see the market for a vessel like this long term? Lars Solstad: Yes, it's correct. The vessel is still committed for another 14 months or so. We have discussions ongoing with the present client but also with some others. So this is, in a way, one of a kind, let's say, one project enabler and one of the few that has availability into '27 in the market. So the position we have on that vessel is very solid and quite confident that we will be able to secure some interesting work for the vessel also beyond '26. Kjetil Ramstad: Thank you. Let's see. We have some more questions here. In the backlog for Solstad Offshore, we are showing a portion of Solstad Maritime vessels. Can you just explain why we look at Solstad Maritime vessels on the backlog of Solstad Offshore? Lars Solstad: Yes. That is simply because Solstad Offshore is the contract holder with Petrobras or other clients in Brazil. And so the Solstad Maritime vessels are then bareboated to Solstad Offshore. So you will get, let's say, a bareboat backlog into Solstad Maritime while you will get also the, let's say, backlog into Solstad Offshore due to the structure where we in Solstad Offshore are the contract holder with Petrobras. So that's the reason. And it's a back-to-back. So the operational risk, even if it's a bareboat, lays with the vessel owner and not with Solstad Offshore on those vessels. Kjetil Ramstad: Thank you. And then let me have a look. I think that concludes the questions for today. Lars Solstad: Okay. So thank you very much for listening in, and have a nice day ahead.
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.
Mui Lian Cheng: Good morning, everyone. Thanks for joining us this morning for MIT Second Quarter and First Half Financial Year '25-'26 Results Briefing. MIT has released its results today after market closed. We have the management team to present the key highlights of the results. Ms. Ler Lily, CEO; Ms. Khoo Geng Foong, CFO; Mr. Peter Tan, Head of Investment; Ms. Serene Tan, Head of Asset Management; Ms. Chng Siok Khim, Head of Marketing. I'll pass to Geng Foong to bring us through the results highlights. Geng Foong Khoo: Good morning, everyone. Thanks for joining us today. So for second quarter FY '25, '26, year-on-year, our net property income decreased due to loss of income from the divestments of 3 industrial properties in Singapore, which we have completed in August. Lower contributions from the North American portfolio from nonrenewal of leases, weaker U.S. dollar. These were partially offset by the higher contribution from acquisitions we did end of last year, as well as the completion of final fit out works in May '25. Borrowing costs decreased due to repayment of borrowings with the divestment proceeds, lower interest on unhedged floating rate loans and effects of weaker U.S. dollar. These were partially offset by higher borrowing costs we took for the Japan portfolio. Distribution declared by joint venture decreased due to higher borrowing costs from repricing of matured interest rate swaps as well as pre-termination of lease at one of the joint venture properties in prior year. So overall, our distribution to unitholders decreased 5.3% to $90.7 million, and our distribution per unit increased 5.6% to $0.0318. This prior year, we also distributed about $3.3 million of divestment gain from divestment of Tanglin Halt. So if we exclude that, our DPU would have decreased 2.2% instead. So for first half, most of the reasons are quite similar, so I'll skip that. So for quarter-on-quarter, our net property income decreased due to loss of income from the divestment of the 3 industrial properties in Singapore. Full quarter impact of end of lease amortization for the fit-out works at one of the property in Singapore portfolio, higher operating expenses at North American and Singapore portfolio. These were partially offset by the full quarter contribution from the final fit-out works at Osaka Data Center. So on borrowing costs is lower mainly due to repayment of borrowings with the divestment proceeds and lower interest on unhedged floating rate loans. Overall, our distribution to unitholders decreased 2.7% to $90.7 million and DPU decreased quarter-on-quarter 2.8% to $0.0318. From a capital management perspective, our total borrowings reduced to $3.1 billion, largely due to the repayment of loans with the divestment proceeds. Accordingly, our aggregate leverage ratio decreased to 37.3% and our interest rate hedge ratio increased to close to 93%. With a lower leverage ratio, this provides us with ample debt headroom to capture any potential growth opportunities. Our average borrowing cost for the quarter reduced slightly to 3%, largely due to repayment of higher cost debt with the divestment proceeds and lower interest rate on the unhedged floating rate loans. Having said that, we do have interest rate swaps coming due every year. So for this financial year as well as next financial year, we do have about $600 million of IRS due or coming due, which we expect to have impact on borrowing costs. Even these interest rate swaps were previously locked in when interest rates were lower. So overall, the borrowing cost for this financial year, we expect to be around 3.1% to 3.2%. And for next financial year, the interest cost will be about 3.3% to 3.4%. Our debt maturity profile remains well staggered. No more than 24% of total debt maturing in any single year and average debt tenure of 3 years. On the FX front, as much as feasible, we try to draw local currency loans to provide natural hedge for our overseas investments. This helps to protect FX fluctuation on our NAV and DPU. So for example, about 50% to 52% of our portfolio are funded with loans. So while our exposure to the U.S. by AUM is about 47% of onshore borrowings, our distributable income exposure to U.S. dollar is about 25% to [ 20% ]. This means that in terms of sensitivity for every 5% depreciation in dollar impact to our distributable income is only about 1.5%. So for the remaining of the foreign currency, we enter into FX forwards to hedge the income into Sing dollar. So we have about 86% of our next 12 months distributable income is hedged or derived in Sing dollar. Now to Lily to go through [Technical Difficulty]. Lily Ler: I will cover the operational performance. So if we can start off with the occupancy of the portfolio, I think that's something that above our [indiscernible]. On a portfolio basis, the occupancy rate has, I would say, remained relatively flattish. So we are looking at 91.3%. If you look at the Singapore portfolio, pretty resilient. We have managed to keep the occupancy flat, right? For North American portfolio, we do see a bit of slightly marginally down to 7.8%, and that's largely because of the expiry of lease at San Jose, which is something that we have spoke about in the last quarter. On the Singapore side, something which I missed out just now would be the progress of the Kallang Way property. I think that one, we have managed to improve the committed occupancy to 64.4%. So there is about a 1 percentage point improvement from the last quarter we have reported. I think this quarter, we have also seen quite a bit of new leases and renewal that we have actually executed. To date, we have executed about 184,000 square feet of the space in North America. This is about 2.6% if you look specifically at the North America [indiscernible]. Of this 184,000 square feet, we have about 20% -- 20% to 23% of these leases actually pertains to empty units, which were previously vacant. So we are able to fill up some of the vacant units. The rest of it are basically just renewals. So it's not going to -- it basically means that we are able to extend the lease period, right? I think if you look in terms of some details for lease renewals, weighted average revision comes up to be about 3%. I think if you look at the range of the revision, we are talking about from a low single of 2% to a double digit like 10%. And on lease renewal also for a relatively long period, so about 5 to 11 years. I think maybe I just also want to highlight that these are -- a lot of these leases or most of these leases, we will be taking effect only in FY '26, '27. That means the next financial year. I mean these are actually forward renewals that we have entered into. The lease commencement actually starts next financial year. So we will see the effect. I think the current financial numbers does not include the effects of these leases, not significant [indiscernible]. The rental revision in Singapore continues to be quite positive. I think we are looking at a weighted average of 46.2% on the average. Of course, if you look in terms of greater details, the general industrial buildings continue to see encouraging rental revision at about 8%. We do have a little bit of a negative revision in the Hi-Tech building and business space, specifically, that is more on the business park, where we have one particular tenant. I would say, not very sizable, but it's not your usual typically 1,000, 2,000 type of spaces. So we have actually defended the occupancy by taking a lower rental rate. So that accounts for the negative rental revision that you see. I think then if you look at the lease expiry -- in terms of the WALE, we will see that there is a slight improvement in terms of the overall portfolio. Last quarter, we reported 4.5 years. So this quarter, we actually reported a 4.6 years. Of course, you also understand that every time you move 1 quarter, naturally, this number will drop, but we have actually managed to improve it, and that is mainly because of one of the renewals that we -- which was one of a renewal, which I've mentioned earlier on that actually take effect towards the end of the financial year. So that has basically lengthened the WALE. If you look in terms of the profile for FY '25, '26, in total, we have about 4.6% of our total portfolio expiring. If we look specifically at the North American data center, that would be about 1.8%. And of course, I think we have spoke about this last quarter as well [indiscernible] 1.8%. There is also 1.2% that is largely due to the vacant unit. The office spaces that was given up by one of the data center tenants in 250 Williams. So I think whatever that is left in the remaining of the financial year, we are quite positive in terms of the renewal and backfilling. Okay. So for next financial year, '26-'27, of course, the large part of the expiry for the North American portfolio continues to be the San Diego. So that is something that we are keeping an eye on as well. I think in terms of some of the investment divestment activities, we have completed our divestment -- the Singapore divestment of the 3 properties. So that takes place -- that took place on 15th August. I think that is also why this quarter, we see some effects of the loss income coming from the divestment [indiscernible] through the financial numbers, right? With this, I think we will continue -- we will still continue to look at our divestment for the portfolio. But I think this -- the focus will be more on the North American side. I think that is something that we have always been looking at as well, right? So I think we probably will be looking at another $500 million to $600 million of divestment for the portfolio. In terms of investment activities, I think since our divestment, we have managed to bring our leverage ratio down. So that does give us some headroom in terms of looking at acquisitions. So I think we have -- we are seeing quite a few transactions in the market, say, in the Europe and more recently, in fact, I would say, a little bit more on the Japan side. So Europe and Asia will continue to be our focus. And of course, the 50% stake that the sponsor is still holding it will continue to be something that we want to look at. I think if you look at this portfolio specifically, it is a good portfolio, which can help to improve our quality of the quality of MIT's portfolio overall. And of course, we also know that, that is the one, where the hyperscalers facilities forms a large part of it. So it will be an interesting pipeline for us. So with this, I think we hope to be able to recycle the seeds that we have obtained from the divestment. And of course, with further divestment that can come through, that will also help to give us more gun powder in terms of the acquisitions. So looking ahead, I think our priorities will remain very much centered on improving the occupancy at both the Singapore and the North American sites. We have been getting some traction in recent times. So we are quite encouraged by that [indiscernible] continue doing this. We are still in talks with a few potential renewals or new leases in the North American side. So that is something that we hope we can continue to provide some good news next quarter. right? I think in terms of the interest rate side, as Geng Foong has said, we do have some repricing replacement that needs to be managed. So we need to be very nimble, and we can just adjust the hedge ratio and keep a lookout for any opportunities. So I think as we move along, there may be some transitional impacts on our results. Some of these -- as I said, some of these renewals that we are looking at are actually forward renewals. So we are actually paving the way going forward. So that's something that I hope you guys will understand. I think with this, that will end our presentation. I'll pass it back to -- I'll pass the floor back to Mui Lian. Mui Lian Cheng: [Operator Instructions] Terence, would you like to ask the first question? M. Khi: This is Terence from JPMorgan. Just wanted to ask a bit more on the backfilling of the U.S. data centers. Could you share a little bit on what -- how do you see progress? Or how should we expect backfilling for 250 Williams and the AT&T next year Lily Ler: I think for 250 William, we have -- as you will probably note that for the past few quarters, we have been able to lease out some of the office space. Although, as I said, these are not very big significant type of areas that we can go -- that we can fill up immediately, but we have been making some progress, and we are actually quite encouraged by that. There have been still quite a number of -- we are still seeing quite a few inquiries, some people coming to view, et cetera. So I think it seems like while the office space continues to still be quite weak in terms of the demand, there seems to be some slight recovery that is coming back. So we hope that we are able to continue this traction. In terms of the AT&T, we are still -- we are actually talking -- we are still kind of -- we need to talk to them and see actually what is their plan because if you remember, for AT&T, there is a further options to -- for them to extend another 5 months. So that's something that we will get some clarity -- we want to get some clarity from them. And of course, the efforts for us to release the building, repurpose the building or even to do a divestment for the building continues to be something on the card that we [indiscernible]. I hope that answers your question. M. Khi: Yes. So is that -- I mean, to give a sense, is there any details on whether we should expect that 5-month extension? Lily Ler: There's no clarity at this point actually. M. Khi: Okay. Great. Could I ask about the FX hedging? What is the hedge rate for U.S. dollar ForEx into the second half of the year? And how should we see the FX hedging for next year? Geng Foong Khoo: So for the income hedges, we have hedged about 53% of our USD income stream for the next 12 months. The average rate is about [ 1.28, 1.29 ]. Hopefully, it's for the next 12 months. M. Khi: And maybe a final question for me. Any thoughts? Could you share a little bit more on the acquisitions? I understand that you're looking at both the sponsors, 50% and also Europe and Asia. Maybe a bit more details in terms of cap rates and how you are seeing any preference? Lily Ler: I think now with the current interest rate environment, where the rate seems to be easing off, it is something -- it is a development, which will, I guess, help in terms of the acquisition cases. I think at least in terms of the yield spread that can start to make sense or make better sense for some of the projects that we are looking. So I think in more recent time, we have been seeing transactions that is coming up from the Europe, from the Japan and I think even from the U.S. for that matter. I think for us, it is very -- we do recognize that it is something that we want to -- that we will want to keep on pursuing in terms of the acquisition because at the end of the day, now that we have divested a bit of the -- relatively significant portfolio from the Singapore side, it is something that we will need to be able to replace at least if not part of the income that has been lost. So that is something that the team will have to continue to work on. So I think if you look in terms of the numbers or that, I don't think the numbers very, very far out from what you're seeing in the market. So Japan, you typically will still be looking at around 4%, sometimes maybe a bit sub-4%. But I think the interest rate side, I think there is still some -- I'll say that the increase doesn't seems to be so coming in so strongly. So I think in terms of the yield spread, it still quite makes sense. So I think we probably can be looking at a yield spread of around, say, 1.5% to 2% type. And you'll probably see a similar type of yield spread across the other regions as well. So basically, when your cap rate is there, your cost of funds tends to follow it as well. M. Khi: And in terms of timing, how should we think about timing? Is there a time or target for acquisitions? Lily Ler: In terms of what, sorry? M. Khi: Sorry, timing of acquisitions? Lily Ler: Well, I guess the thing with external acquisition is you either get it or you don't get it, right? So we have evaluated. We have tried -- we have done some submissions, et cetera. So I think we hope that we're able to get something quite soon as well. But as I say, this is something that we will have to continuously be in the works. Of course, what would be easier within which will be the 50% stake that we can look at. So I think that is something that we are always in continuous discussion with the sponsor. If they are looking to sell, I think it's something that we want to look at it seriously as well. Mui Lian Cheng: Can we have [indiscernible] to ask the next question. Unknown Analyst: Can I ask about the next $500 million to $600 million of divestment? Is that something that we can expect over the next 6 to 12 months? And also, is this sufficient to fund for your acquisition? Or are you also open to equity fundraising? Lily Ler: Okay. Let's address the $500 million to $600 million. I think that is generally the part of the portfolio, which we think that we want to do a recycling. As for the timing in terms of $500 million to $600 million, it is not it's not small, okay? So I think if you look at the U.S. trending so far, those properties that we have been selling are generally on individual basis relatively small, right? But this -- I think we do expect that perhaps we hope that for this financial year, we can do about $100 million to $200 million, right? But to fully divest the entire $500 million to $600 million, I think it will probably take some time. 12 years might be a bit too much. 12 months might be a bit too short for us. So you'll probably take, say, maybe about 1 or 2 years or so. Unknown Analyst: Funding for acquisition? Lily Ler: Sorry. So whether we will consider EFR, of course, it's never a case of I must do a divestment before I do an acquisition, right? It very much depends on the attributes of the projects. And if the market is conducive, we would want to do a bit of equity fundraising. That is that can basically help us in terms of managing our balance sheet as well. So I think it will also depend on the sizing of the -- the size of these acquisition targets. Unknown Analyst: Okay. Got it. Second question is on debt hedging. Can you explain why is it at 90% currently? And what's the comfortable level for debt hedging? Geng Foong Khoo: We pay down loans with the divestment proceeds. So what we have done is, of course, we paid down the unhedged portion. So that brings our interest rate hedge ratio to close to 93%. But we do have IRS coming due remaining financial year. So by March, we'll see this closer to about 80% back to the normal level. Unknown Analyst: And the target is to maintain it at 80%. Geng Foong Khoo: By year-end, it will be 80%. But of course, I mean, but over the next few years, we'll see the interest rate environment and recalibrate the hedge ratio. Mui Lian Cheng: Do we have Derek from Morgan Stanley to ask the next question? Jian Hua Chang: Can you hear me now? Mui Lian Cheng: We can hear you. Jian Hua Chang: All right. Perfect. I just want to ask on the upcoming lease expiry in FY '27 for U.S., how much is U.S. account for FY '27? And of that, how much is the AT&T lease? Lily Ler: Okay. So you're talking about FY '26-'27, right? Jian Hua Chang: Yes. Lily Ler: In total, if you look at the total portfolio, it's 19.2%. Specifically for North America, that would be about 5.5%. Of course, the majority will be for San Diego. I think San Diego generally contributes about 2.4%. Jian Hua Chang: 2.4%. Geng Foong Khoo: 2.5%. Jian Hua Chang: Sorry, 2.4%. Geng Foong Khoo: 2.5%. Jian Hua Chang: 2.5%, 2.5%. Okay. So 2.5%, that one is more -- that one visibility is much lower, but the remaining 3 percentage points that shouldn't be an issue? Lily Ler: I think it's something that we are continuously looking at. That's why I think if you look at some of the leases that we have signed this quarter or to date, some of these are actually pertaining to the '26, '27. So we would be able to -- I would say, the significant lease is actually more on the San Diego one. Jian Hua Chang: Understood. The ones that you signed, which also pertains to FY '27, those came at reversion of 3%, right? Lily Ler: Weighted average 3%, yes. I think in terms of the range, which is a wider range. So you're talking about the low 2% [ of ] 10%. So it's about 2% to 10%. Jian Hua Chang: 2% to 10%. Okay. And just on, I guess, San Jose, is there any updates on your power studies over there? Lily Ler: The power study has been done. We understand that the current facilities can take up to 7 megawatts, although I think previously, it was running at about 3 megawatts, right. if we want to bring the facilities up to a 20 megawatt, it is possible, but I think it will -- means that you need to put in the power supply -- the power supplier will need to put in additional CapEx to bring -- I think they need to build a new substation and put the new cabling through. So there will be cost involved in getting the 20 megawatts. And of course, that also means that it will take some time. Jian Hua Chang: So are you angling towards just going ahead with 7 megawatts without having to build power station? And how soon would you expect the lease-up of that asset? Lily Ler: Yes. So I think with this, what we have actually done is we wanted to -- with the power study in Japan, we wanted to actually sell the properties. I think the response is not as expected as what we expected. We do note that there is quite a number of requirements, those that come to look at it, the requirements tends to be more for the immediate power. So I think some of them are not prepared to wait 3, 4 years for the additional powers to come in. So I think this is something that we will have to continue to engage the prospect. Jian Hua Chang: Okay. So there's no timing per se that you can guide for at this point in time? Lily Ler: I think we are currently in the progress of actually trying to reach out to the prospect and maybe also to expand the marketing program. Jian Hua Chang: Okay. Understood. And are there any other power studies for other assets or it's just San Jose for now? Lily Ler: We have done one for Horton. And I would say that it is quite positive, right? So we are able to bring in much higher power as compared to San Jose, right? So I think that Horton is currently still leased. The lease will end probably next financial year. So that's something that we're also talking about talking to a tenant about the re-leasing -- sorry, the renewal of it. Jian Hua Chang: This is the -- this is in FY '27? Lily Ler: This is in FY '26, '27, the next financial year. Jian Hua Chang: How much does it account for that 5.5% for U.S., the Horton one? Lily Ler: I think it's about 1.2%. Jian Hua Chang: 1.2% Okay. Okay. So you're in the process of renewal and if that doesn't come through, you would use the power studies and increase the IT capacity for the [Technical Difficulty]. Mui Lian Cheng: Derek from DBS has the next question. Derek Tan: Can you hear me? Just a few questions from me. First one is on your rent reversion that you achieved for America, right? I'm just curious whether the leases were likely renewal or backfilling. I just want to get a sense whether there's possible improvements in occupancy. Lily Ler: Those -- the rental reversion we talked about is only for the [Technical Difficulty]. So we're talking about backfilling as in us trying to fill up additional empty spaces. I think just now I mentioned out of the 184,000 square feet that we have signed to date, about 23% are actually, I would say, backfilling of empty units. So yes, you'll see some contributions towards the occupancy. But I think we will also [Technical Difficulty]. Derek Tan: Then my next question is on your comments on acquisition, right? You're mentioning that you are scanning -- you're potentially divesting. But if you look at, let's say, opportunities that you're keen to execute, right, what -- how will you rank the 50% stake will be ranked the highest in our view? Lily Ler: Well, I think it's a difficult question. Derek Tan: Easy as I know, but... Lily Ler: [indiscernible] question I ask Peter to address, okay? Che Heng Tan: Yes. I mean, what Lily mentioned earlier, the 50% stake, those are very good properties and a good portfolio add-on to improve our quality of our portfolio. But we also -- we are also seeing a lot of other decent opportunity that is coming on our table. So we will have to assess it, but it kind of at least give us some leeway to choose, which is the assets or which are the portfolio that we wanted to add on to MIT. Lily Ler: It's not a very easy decision, I guess. Che Heng Tan: To add on is like [indiscernible] we have to choose. Lily Ler: I guess if we are able to get in other [ draw free ], it will also help in terms of the diversification for the portfolio, right? Notwithstanding that, the acquisition of the 50% stake will also increase our exposure to the hyperscalers. So I think that is something we have to evaluate when the transaction comes so forth. Derek Tan: Okay. Okay. Got it. But you're saying that you're also looking for Asia and Europe, anything that you believe is very -- that will rank quite soon because I'm just thinking about it from a new spread, right? I mean, Europe and Asia will be higher. Lily Ler: I think there is quite a number of transaction that potentially can be coming out. So that will be something that we'll be quite keen to pursue. So -- and you're right. I think in terms of the U.S. spread, maybe initial might be similar, but I think the difference also lies in terms of the built-in escalation, right? So I think typically, if you look at Europe, you'll be around 2% to 3%, which is quite similar too. I think Japan, generally, we are seeing some between the 1% to 2%. So that's something that we have to take into consideration as well. Of course, transactions varies from one another. So it really depends on what is the attributes, so. Mui Lian Cheng: We have Rachel from Macquarie to ask the next question. Lih Rui Tan: Maybe my first question is on the interest cost. I think at the start of the year, there was like $597 million of IRS that's due this year. And then now there's $600 million due this year and next year. Can you give us a breakdown in terms of how much has already lapsed and has been included in the interest cost? And then how much are we expecting the rest of this year? And how much are we expecting next year? Geng Foong Khoo: Thanks, Rachel. So okay, it's a bit difficult to -- because we do like some of the earlier renewal of -- mention of the hedges. So early this year, we have about close to $600 million IRS, right, coming due this financial year. But of course, all these were progressively due over this financial year. But having said that, whenever interest rate [Technical Difficulty] slightly, we will try to lock in a bit. So to date, we have locked in about maybe about $200 million IRS. So we still have about $400 million to go. But having said that, like I mentioned earlier, our hedge ratio is quite high. So we will -- this $400 million floating rate and then so that the hedge ratio will be about 80%. But net-net per annum impact, if you look at it, per annum impact all these replacement hedges for IRS is due this financial year, [ NIM ] is about $9 million to $11 million, but most of these are in U.S. dollar. onshore. So we have a bit of tax shield there. So net of the tax shield may be about $7 million, $8 million. And so you see the full year impact probably next year. This year, maybe half year impact. Lih Rui Tan: So meaning the net impact, $7 million, $8 million this year is half of that the impact and then next year will flow through. Geng Foong Khoo: Yes. Lih Rui Tan: Okay. And then the remaining [ 400 ] hedges that is expiring this year, you will drop it off. But next year, is there any more IRS? Geng Foong Khoo: Yes. So like I mentioned earlier, we have another $600 million IRS coming due next year. Similarly, we will see impact from these replacement hedges. But having said that, the average interest rate for those IRS coming due next year will be kind of slightly higher than this year's IRS due. So we'll see some impact, but not as much as this year. Lih Rui Tan: So -- okay, sorry, the next year one is also $600 million. Yes. So the $600 million this year and next year, $600 million, roughly. Okay. Okay. Then my next question is in terms of the San Jose, if I were to follow up, now that the tenant, I think you mentioned that the tenant want a higher power, right, but you are still talking to the tenant. So any intention of you putting in CapEx now that you're talking to a tenant? Or you will still walk away from putting in additional CapEx? And are you able to sell these assets? Che Heng Tan: Yes. I mean, just really to clarify, were you referring to San Jose or the one that we mentioned about, we're talking to existing tenant, which is Horton? Lih Rui Tan: No, no, the San Jose one. Che Heng Tan: So San Jose, the tenant have vacated earlier already, but we did complete the power study. So we are now just exploring whether with potential prospects to divest the property essentially. Lih Rui Tan: Okay. I see. So okay, right, to divest the property completely, right, with potential tenants, okay. Okay. Got it. Yes. And then maybe just squeeze in one. I remember in terms of acquisitions last quarter; you were actually more positive on like EU in terms of acquisition. But somehow rather this quarter seems the narrative seems to have changed a little bit. Can I just understand, has something changed along the way? Lily Ler: No. I'm still keen on Europe. I think at the end of the day, we do recognize that it will be good to have Europe, which is one of the -- which is one of the largest data center market globally. So Europe is definitely something that's on our radar. Similarly for Asia as well. I think in more recent times, we are -- I would say, in more recent times, we are seeing a little bit more transaction coming out from Japan. I think Europe, there is a few. So no, our radar is still on these 3 -- on Europe, Asia and potentially the 50% stake. Lih Rui Tan: Okay. Got it. Yes. And are you -- do you still intend to acquire bigger data centers in terms of the size? Che Heng Tan: I think in terms of the size, of course, we have done a range of transactions from $100-plus million, $500 million to about, say, $1-plus billion. So the range remains similar. Of course, considering where we are, it will be very hard for us to do a 1 gigawatt or 100-megawatt type of data center, but probably $1 billion-ish or so or from $100-plus million to $1 billion-ish remains on our radar. Mui Lian Cheng: We have from [ Yew Wong from CLSA ] to ask the next question. Unknown Analyst: I just have one question focusing on the 50% balance from the sponsor. Can you share more details about this portfolio in terms of performance, right? So if we look at your U.S. data center portfolio has been trending down over the past few years. Was -- does the 50% mirror similar trends? And also, secondly, what is the NPI margin as well for -- do you see the similar NPI margin decompression trend that you have with your existing portfolio? And how much of the 50% balance, right, has exposure to hyperscaler and also like megawatt capacity? Anything that you can share? And lastly, does the valuation of the portfolio, right? Is the cap rate similar to your existing cap rate of your U.S. data center portfolio? Lily Ler: Okay. For the 50% stake, that portfolio, a large part of it, I would say, about 60% of it is actually the hyperscaler that you see here. So the balance of it, most of them are colo providers, right? I think the issue that we are seeing with some of -- with our current portfolio is more of the facilities that were previously occupied by the enterprise user. So I think I mentioned previously before that when it comes to enterprise user, they are fixed in terms of the location, they are fixed in terms of how they allocate the space and how they design, the data centers fit-out, et cetera, may not be as efficient as what a data center operator was. So that kind of makes the re-leasing a little bit more difficult, right? But you don't have that in the 50% stake portfolio. Unknown Analyst: So the margins will be better as well and the occupancy will be arguably higher? Che Heng Tan: Okay. I think from a margin perspective, because they do have triple net leases and gross leases and so on. So ultimately, we will probably be looking at very similar cap rate currently about 5.5% to 6%. And I think in terms of -- sorry, your second question is the occupancy, yes. So for this 50% portfolio, the occupancies are generally pretty very strong. So we have always seen it as more than 90-plus percent currently and going forward. Unknown Analyst: Okay. So it did not really come down to the 80s, mid-80s as seen in your portfolio? Che Heng Tan: Not yet. Yes. I think… Unknown Analyst: not yet. Or is it -- you don't expect it to come down? Che Heng Tan: No, we think that it's probably quite pretty resilient or you will be more than -- you will be more [indiscernible]. Lily Ler: Yes. And this is actually locked in for quite long term as well. I think maybe just for this portfolio, if you recall, in one of the quarters, we [ said ] that we have a tenant who has vacated one of the buildings in Tampe is that. So I think that one, we are in the progress of backfilling it. We think that there shouldn't be any problem. Unknown Analyst: Okay. Okay. Yes. And any idea on like power capacity? Che Heng Tan: Yes. So I mean, for the 3 hyperscale data centers that we have in Northern Virginia, those [ carry ] between about 60 to 70 megawatts. And then the rest would be spread. Each asset is probably about 3 to 4 average. So total -- but the 3 to 4 are mainly our power shell assets. So -- but in terms of IT load, you're talking about, including the Northern Virginia ones, probably about 90 to 100 megawatt. Unknown Analyst: Okay. So total will be -- you're talking about the 50% that is from the sponsor, right? Che Heng Tan: Yes, yes, correct, correct. But all is on the entire 100 all the buildings -- is on the building, it's not proportionate. Lily Ler: Maybe just to add, so for the [ MRODCT ] portfolio, right, there's 2 parts, the power shell and the data hyperscale data center. So the 3 data hyperscale data centers, they are actually located in Northern Virginia, a very tight market at the moment. For the [indiscernible] data centers, right, actually, the WALE are fairly long. They are looking at maybe around 7 to 9 years. So for this particular portfolio, right, actually, we see trending maybe above 95%, 100% is about 94%. Unknown Analyst: And then -- and sorry, slip in one more question. So if you were to fund it using U.S. debt, right, what's the current debt that you can get in the market today? Geng Foong Khoo: For USD today, maybe about all in U.S. dollar funding, maybe about 4.4%, 4.6%. Mui Lian Cheng: We have Jonathan from UOB Kay Hain to ask the next question. Jonathan Koh: My first question relates to divestment. You mentioned you will focus on North America. And the size you indicated is quite large, $500 million to $600 million. Can I ask if you are like looking at like divesting a basket of data center in North America that will help you achieve that sizable goal? Are you looking at selling a few of them in a portfolio. Is that what you're looking at? Second question relates to your guidance of cost of debt going higher to 3.3% to 3.4% for FY '27. What's your assumption in terms of rate cut going forward for -- to get that 3.3% to 3.4%. And does that include or doesn't include the JV, the interest rate that you have mentioned? Lily Ler: Okay. I think in terms of the divestment portfolio; I think the approach is something that is not fixed. It doesn't mean that I will just group every one up because the moment you group everyone up, it becomes pretty sizable. So it may not be that easy to sell. And I think because the portfolio is actually quite spread out in terms of the location, et cetera, so depending on the individual local situation, sometimes it's better for us to just sell it as asset by asset or we also may look at bundling up some of the assets together as a portfolio to sell. So the approach that we are taking is not a very -- it's not something that is fixed at. I'll just package everything and go, right? So given the different attributes and the different local situation, demand and supply situation in the market, we will want to take the approach that can give us the best value. Jonathan Koh: Okay. So not cast in stone... Che Heng Tan: Yes. Maybe to add on, we do have -- okay, I won't say it's cast in stone, but we do have really identified how do we want to divest all those assets. Some of them are single asset transactions, some of them are on a portfolio basis. So you'll see a mixed bag. It won't be like, say, we want to sell 10 properties for $600 million or so. Geng Foong Khoo: Okay. So on the interest rate for FY '26-'27, the guidance 3.3% to 3.4%. Basically, we have assumed that the whole 600 million IRS coming due next year will be refinanced with, let's say, a 5-year USD [Technical Difficulty] about 3.4%, 3.5%. So as you're aware, we cut the base rate. So now it's around 3.75% to 4% range. So if because various banks have various expectation or forecast for next financial year -- for next year. So if the floating rate come down to around 3%, we may be able to so-called adjust that hedge ratio and accordingly, we price this at a lower level [Technical Difficulty]. And yes -- so just to clarify, all our capital management positions include our JV. Jonathan Koh: Okay. So you do factor in rate cuts in that forecast. Geng Foong Khoo: No. We have not factored in so-called the rate cut. We have assumed this 5-year pricing, a 5-year interest rate swap today instead of floating rate. Jonathan Koh: Okay. That is the rate today that you get. Geng Foong Khoo: For 5-year interest rate swap. Mui Lian Cheng: We have Vijay to ask the last question. Vijay Natarajan: A couple of questions from me. Firstly, in terms of the operating costs, I think operating costs for this quarter seems to have gone up a bit because of maintenance and utilities. Are there any one-offs? And moving forward, what should we expect in terms of margins? Geng Foong Khoo: I think in the set of numbers for this quarter, we do have some training contracts, which was renewed. So that one, we do see some inflationary increase in terms of the contract price. So that kind of explained it. But I think we basically I would say, tranche out our contracts. So we don't renew every one at one go, right? So the effect will be more muted that way. But I think in terms of the margin, the NPI margin, we should expect it to be somewhere similar to what we have this quarter. Vijay Natarajan: My second question is in terms of potential portfolio, I mean, possibly if you add on U.S. assets and Europe assets, I think over time, your Singapore exposure is going to go less and less below 40% or closer to the mid-30s, et cetera. Are you comfortable with that because I don't see any pipeline also in Singapore? Lily Ler: I think we would love to be able to add on more to Singapore. Our -- while we are doing a lot of acquisitions in terms of the data center global Singapore remains our home ground, and that will still be one of the focus. The only thing is at this point, acquisitions opportunities are actually quite limited. So I think if you look at it in terms of, say, data center in Singapore, the market is very tight. So we would love to be able to add something on. But it is also very limited in the sense that the government has been -- is putting on quite a bit of control in terms of the power acquisition -- sorry, the power allocation, right? So I think -- and in order for us to apply for all these power allocation, there are certain criteria that needs to be met. And some of these actually has to be -- it's more -- is something which an operator will be able to achieve, like you need to have a PUE of at least 1.3x, et cetera. So we are -- it is not -- the opportunities for us to do the acquisition in Singapore is not easy. And of course, if you look at other industrial properties that we see in Singapore, that continues to be something that we will be keen to look at and we will continue to look at. The only issue is when you look at the Singapore industrial property, a lot of them comes with the short land tenure. So that proves to be a bit something that can be -- well, I think that makes our decision much more harder because the moment you buy, say, 25 years underlying lease, in 5 years' time, you start to see the valuation of that property dropping simply because of the shortening land tenure. So that is something that we are also quite careful about, right? Of course, what we can do in terms of the Singapore properties is that we continue to look out for opportunities where we can do, say, build-to-suit projects, so getting land allocations from the governments together with the tenant that they like, right? Or we can also look at redeveloping the existing properties that we have on hand. I mean, if someone comes along, happy for us to take up some of the space if we were to redevelop, that can actually be a potential trigger for us to go to the government and see if they are able to extend the underlying land lease. So these are some of the things, which we hope that we can execute, and we will continue to scan the market for such opportunities. Vijay Natarajan: Got it. Just one last question, if I can. Can you give some color in terms of business park demand and Hi-Tech demand in the Singapore market at this point of time, which still seems a bit soft looking at the reversion in your portfolio? Lily Ler: Yes. I think Hi-Tech space and business park space are definitely still a weaker link at this point of time, and we have been seeing this for the past few quarters. Generally, I think when we look at the demand that is coming through there continues to be demand. So it's not a case of totally nobody even wants to look at it. There continues to be demand, except that the demands are not for the bigger space. So this tends to be the smaller areas. So if you take, for example, our development at Kallang Way, we started off [Technical Difficulty] redevelopment, we started off hoping that we are able to lease up floor by floor, which is relatively huge floor plate, right? But the demand aren't' really there. So we actually start to cut them out into smaller units, and that is where we start to see a bit more traction. So I think if you track our progression so far, last quarter, we managed to improve the committed occupancy by 3 percentage points. This quarter, 1 percentage point. So I think the -- I would say the transactions continues to be there. We are still continuing to be able to cross some of these inquiries into contracts. So this will be more for the smaller space. And for business park, I think we also know that there is quite a lot of competition in the vicinity. If you -- right now, we have already -- we have -- we had 3 business parks. Now -- and we divested 2. So I'm just left with the one in Changi Business Park. But if you look at Changi Business Park, specifically for our building, while the business park demand may not be so good, we have been able to hold up to the occupancy rate for Changi Business Park pretty well. right? Right now, I think you are looking at about 83%, 85% occupancy, right? If you look at some of the buildings in the vicinity, similar buildings in the vicinity, the occupancy is definitely not there. So I think that is also the reason why we want to make sure that we are able to defend that. And I think that was also the point that I made where we decide that for a tenant, where you have a slightly bigger size unit, okay, we are prepared to go down a bit just to defend the occupancy. I think the rest of the renewals that possibly can be coming up for the Changi Business Park smaller floor units. So that is something that we think we still can hold. Mui Lian Cheng: Maybe we can have Donald to ask the last question and end the session. Donald, are you there? Donald Chua: Can you hear me? Okay. Just a couple of quick clarifications. First is on the interest rate question. Do you mentioned -- so if U.S. rates -- swap rates come down by around 50 basis points, you mentioned about 3%, you can -- are you able to -- you can get some savings? Would that mean that your WACC is likely to come down if we -- if U.S. rates come off by 50 basis points in FY '27. Geng Foong Khoo: Yes. So for next [indiscernible] I think I want to like clarify that when Fed cut rates is on the floating. When we look at the interest rate swaps replacement, we look at the long-term rates, the 5-year long-term rates, which is today maybe 3.5%, right? So when they cut it, it doesn't mean that your 5-year rate will be lower? So… Donald Chua: Sure. So maybe put it another way, at current rates, you're expecting your interest cost -- all-in interest cost to go up in FY '27. By how much must rates come down for you to see your all-in interest costs come down? Yes. Geng Foong Khoo: Let's put it the other way around. If let's say, this $600 million now, I assume 3.5%, right? But in -- come next year, if the floating rate for U.S. dollar is 3%, we have the loans hedged. So I see that for [Technical Difficulty] 50 bps on that $600 million. Donald Chua: Sorry, you broke up a little bit. So if floating rate gone up by to 3%, you will see a neutral level. Is that what to take away from that? Geng Foong Khoo: You will still see some impact because all the interest rates were locked in when it was quite low, right? So average maybe 2%, 2.3%. So you still see why you have a bit of savings. Donald Chua: And then the second question about the MRO DCT portfolio. Any indication of what's the valuation and the ticket size at this point? Che Heng Tan: [ SGD 1 billion ]. Donald Chua: SGD 1 billion for the 50% stake, is it? Che Heng Tan: Right. Donald Chua: Okay. And is there any under-renting in the colo leases or hyperscale leases at this point? Che Heng Tan: Under-renting I wouldn't say it's under-rented [indiscernible]. Donald Chua: So pretty, quite near -- pretty much at market. Che Heng Tan: Yes, that's correct. Mui Lian Cheng: [Technical Difficulty]. If you have any questions, please reach out to us. Thank you.
Operator: Ladies and gentlemen, welcome to the Straumann Group Q3 2025 Results Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead. Guillaume Daniellot: Thank you, and good morning or afternoon to all of you. Thanks for attending this conference call on the Straumann Group's Third Quarter Results 2025. Please take note of the disclaimer in our media release and on Slide 2. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. As usual, the discussion will include some forward-looking statements. As shown on Slide 3, I will start with the highlights for the third quarter. Isabelle will then cover the financial details. And afterwards, I will share strategic updates and our outlook. We will be happy to answer your questions at the end of the presentation. Let's start with our highlights and move directly to Slide 5. I'm really proud of our teams globally for the great progress they made this quarter and how they are demonstrating agility to adapt to different market dynamics. In the third quarter, our revenue reached CHF 602 million, representing a strong organic growth of 8.3%. For the first 9 months, we achieved CHF 2 billion, which is up 9.6% organically. Building on this strong performance, I'm excited to announce the important steps in our orthodontic strategy, which includes new partnerships that will enable us to transform our clear line of business and unlock the full potential of our ClearCorrect brand. Later in the presentation, I will explain how we will accelerate innovation, increase profitability and strengthen ClearCorrect's position for sustainable growth together with our strategic partners, Smartee and Dental Monitoring. On the digital innovation side, one of the highlights of the third quarter was the launch of our new SIRIOS X3 intraoral scan. These marks another major step in strengthening our scanner portfolio across all price segments and our digital ecosystem through its full integration in our Straumann [ Access ] cloud-based platform. On the operational side, we are very pleased to announce that our new campus in Shanghai is fully operational by now and delivering first commercial products to the Chinese market. With this, we have significantly strengthened our supply chain resilience ahead of the upcoming VBP 2.0, which is expected to be announced end of this year. These achievements strengthen our foundation and create the opportunity for continued growth, supporting our confirmed full year 2025 outlook of high single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 currency rates. Now turning to Slide 6 and the regional development. I would like to start by highlighting that EMEA has once again achieved an excellent organic revenue growth with 11.2%. This success was driven by a strong execution across all businesses including double-digit growth in orthodontics and strong traction from our recent innovations in our core implant segment. The Straumann brand continued to gain market share while our challenger brand, Neodent and Anthogyr also grew strongly, reflecting our ability to serve different customer segments across different price points. In North America, we delivered solid growth in a still volatile environment. Organic growth accelerated to 5.7%, reflecting strong execution and growing adoption of iEXCEL implant system and our digital solutions. From a general perspective, patient flow remained rather stable during the quarter, even if we could witness some initial pocket improvements. In Asia Pacific, the significant slowdown compared to the previous quarter reflects 2 very different dynamics. On the one hand, in China, we have seen a significant slowdown due to the initial effect of VBP 2.0. Some patients have studied postponing treatments and distributors reducing inventories. On the other hand, markets outside China continued to grow strongly, especially India, Thailand, Australia and Japan, driven by robust patient demand and expanded access to care through intensified education activities. Finally, Latin America once again delivered a remarkable performance with 18% showing double-digit growth across all segments. Our challenger brand Neodent remains the key growth driver, while the Straumann premium brands, our orthodontics and digital businesses contributed strongly. Therefore, overall, our regional performance highlights the strength of our strategy and our ability to execute with discipline and agility across markets, with each region contributing with good growth despite varied market conditions. With this, let me now hand over to Isabelle who will take you through the financial performance. Isabelle Adelt: Thank you, Guillaume, and hello, everyone. Let's move to Slide 8, where you can see the revenue bridge for the third quarter. Our reported revenue increased from CHF 586 million to CHF 602 million, which represents a 2.9% growth. The Franc exchange rate effect of CHF 30 million is still very significant, but lower than in the second quarter. Overall organic revenue growth led us to 8.3%. As already mentioned by Guillaume, EMEA, our largest region, was once again the main growth contributor accounting for roughly half of the total increase in revenue, followed by strong performance of our Latin America region, which contributed more than 20% to the group's growth. Despite the currency effect, which we still expect to have a top line impact of 470 to 490 basis points for the full year, our underlying business remains very strong, reflecting both the strength of our brands and our disciplined execution across regions. Continuing with Slide 9, let's talk about our assets to mitigate tariffs. As you know, new tariff regulations have added cost pressure to the business. To counteract this, we have continuously implemented a set of mitigating measures over the past months. In the short term, we have increased inventory levels in key markets and adjusted logistic flows accordingly to secure continuity of supply chain. Thanks to these mitigating measures, we could sustainably reduce the effects of tariffs to around CHF 20 million to CHF 25 million for the full year 2025. For next year, we are increasing the share of locally produced finished products, including local assembly and packaging lines to reduce tariff exposure and improve supply chain efficiency further. For next year, we currently expect a similar impact from tariffs of around CHF 30 million. With this, we are protecting our margins while maintaining excellent service levels. Finally, a quick reminder on our capital allocation priorities on Slide 10. Our first priority remains reinvestment in sustainable business growth. Followed by maintaining a strong balance sheet and selective M&A to accelerate strategic execution. With continued earnings growth, we also aim to maintain or increase our dividend over time. So in short, we invest where the return on capital is higher also from a shareholder perspective. With that, let me hand back to Guillaume for the strategic update. Guillaume Daniellot: Thank you, Isabelle. Let's now look at the key strategic highlights of the quarter. As shown on Slide 12, our total addressable market is estimated at around CHF 20 billion, spanning across implantology, orthodontics, digital equipment, prosthetics and regenerative solutions. We currently hold roughly 12% market share with this market, which leaves us ample room for further growth, especially with new dedicated opportunities now to play in each segment. Moving on to Slide 13. I'm very excited to share important strategic developments, which will transform our orthodontics business. To reshape our clear aligner franchise and improved performance, we are focusing on 3 pillars. First, we are building a very competitive and differentiated ClearCorrect value proposition, delivering a superior customer and patient experience. Second, we are strengthening our manufacturing capabilities to increase profitability. And third, we are prioritizing strategic markets to accelerate future growth and establish a leading position especially among general partitioners. Innovation remains at the core of our strategy to accelerate growth and improve profitability in this orthodontic segment. To achieve this, we are partnering with Smartee, a global orthodontic leader that will help us bring new solutions to market faster and with greater efficiency. Smartee is a leading clear aligner organization with more than 20 years experience, known for its innovation, quality and clinical excellence. Smartee is the ideal partner for the next phase of our orthodontic growth. It will increase the ClearCorrect value proposition through expanding indications and product options. This includes new clinical capabilities such as treatment outcome simulation tool, mandibular advancement functionality and multiple streamline options to address a broader range of clinical needs and customers. As part of the partnership. Smartee will also take over full ClearCorrect production for EMEA and Asia Pacific regions, two of our largest and fastest-growing geographies. This transition will enable faster scaling, higher efficiency and significantly lower manufacturing costs through Smartee's fully automated, state-of-the-art production facilities. The production for these regions is currently based in [indiscernible] Germany, which is planned to be phased out by early 2026. This partnership unites the complementary strength of 2 industry leaders. By combining ClearCorrect's global commercial reach with Smartee's world-class technology and production capabilities, we will achieve the scale, cost optimization and margin improvement needed to build a profitable orthodontic business. Moving to slide 14, in addition to Smartee partnership, we will further strengthen ClearCorrect's value proposition by expanding our long-standing collaboration with y DentalMonitoring. We are partnering on a unique AI-powered remote monitoring technology, which is directly and uniquely integrated with the ClearCorrect Doctor Portal. This innovation enables clinicians to monitor cases more efficiently and help general practitioners manage treatments with greater confidence and convenience. It enhances the overall experience for both practitioners and patients and supports our ambition to drive broader adoption of clear aligner treatment among general practitioners in our key strategic segment. Building on the foundation of this new value proposition and the more cost-effective manufacturing capabilities for Smartee, we have also implemented a focused go-to-market model design around the key growth markets. By concentrating resources in high potential profitable markets and aligning our ortho organization under one integrated structure, we can operate with greater agility, increased efficiency and better customer focus. This approach strengthens our engagement with general practitioners and DSOs, enhances execution discipline and support sustainable growth. With all these developments, ClearCorrect is becoming more versatile, clinically advanced and efficient, strengthening our competitiveness and supporting our ambition to achieve a leading position in the global orthodontics market in the future. Let's now move from orthodontics to implantology on Slide 15, where innovation, education and digitalization continue to drive our leadership. Let's start with our premium brand, Straumann and its latest innovation iEXCEL. This high-performance implant system is becoming one of the most successful product launches we had in our recent history. iEXCEL combines 4 implant design in one system with a unified positive platform, a single connection and a single surgical kit. This unique offering simplifies workflows, reduces inventory and especially gives clinicians true intraoperative flexibility, enabling design implant changes on the spot during surgery without changing instruments. To further differentiate, iEXCEL is also coming with [indiscernible], 2 of our unique and most advanced technologies enabling minimally invasive protocols and faster osseointegration. We are really pleased to report that we have already sold more than 1 million iEXCEL implants, which is a fantastic milestone that shows the strong confidence clinicians place in this system. This success reflects our innovation and execution strength within the Straumann premium brands, which continue to drive market share gains and new customer acquisition. One of the greatest example of a new customer acquisition with iEXCEL is the [ Mayo Clinic ] in Portugal, which recently chose to partner with us and transitions its portfolio to Straumann. The decision of this highly respected implant-focused DSO highlights how our comprehensive solutions and digital capabilities create real value for clinicians and patients alike. Together, these achievements demonstrate how our focus on innovation, digital integration and close customer partnership continues to translate into tangible market momentum. Let's move to Slide 16. Our comprehensive education activities are key to improving market access, building stronger partnerships and gain market share. In the third quarter, we continued to expand our partner education network and deliver hands-on courses, particularly in Asia Pacific. These programs allow clinicians to refine their surgical and restorative skills, gain confidence in immediate protocols and embrace digital workflows. By investing in education, we not only raised clinical standards, but also reached new customers and strengthened our market share and with this further reinforced our leadership in implantology. In addition, we engaged with thousands of dental professionals in the third quarter at major events, such as the DSO CEO Summit in Boston, where we held strategic discussions on expanding access to care and driving efficient growth through partnership. In addition, we demonstrated our latest innovation at the EAO Congress in Monaco and the international aesthetic days attended by more than 1,400 clinicians. Let's move to Slide 17. At this event, we have launched our new SIRIOS X3 intraoral scanner, which is another very exciting innovation. This new iOS is our new generation wireless scanner that combines exceptional scanning speed, accuracy and ergonomics in a lightweight compact design. Positioned in the mid-price segment, SIRIOS X3 strengthened our iOS portfolio, together with the entry level of SIRIOS and the premium TRIOS solution by 3Shape enabling us to serve the different market segments. The first reactions from clinicians have been really, really strong. Early adopters highlight the ease of use and the effortless integration into our digital platform, Straumann [ AXS ]. This launch further strengthens our position in digital dentistry and marks another important step in expanding our clinician base connected to our Straumann ecosystem. Moving to Slide 18. Actually, thanks to our competitive digital portfolio, we are then continuously growing our intraoral scanner user base who are then benefiting from our simpler, faster workflows through the cloud-based Straumann [ AXS ] platform, which will further drive growth. A good example is our fast molar workflow, which is a streamlined, simple free step approach that helps to restore a posterior case quicker and easier. The solution uses fewer parts and reduce significantly chair time by removing appointments, helping dentists with more efficiency to deliver highly reliable clinical outcome. Another one is the latest Straumann EXACT innovation, which supports the digital full-arch workflow. It significantly helps clinicians treat patients who need a full set of new teeth by guiding them through each step from the first digital scan all the way to the final restoration. It simplifies what is usually a complex process and saves time both for the dentist and most notably for the patient. Turning now to Slide 19 and our progress in China. As mentioned before, we have seen a significant slowdown due to the initial effect of VBP 2.0 as some patients have studied postponing treatments and distributors are reducing inventories. Despite this early impact, we are well prepared for the implementation of VBP 2.0 and have taken proactive steps to strengthen our local setting. First, the ramp-up of our Shanghai campus has been completed, and the site has received all necessary licenses for local production. This milestone allows us to manufacture Straumann and Anthogyr implants in China, reducing lead times and improving cost efficiency. Secondly, as you know, in the past years, our business in China has been driven primarily by our premium brand and supported by Anthogyr in the value segment. Now to be prepared for the VBP 2.0, we are continuing to broaden our implant portfolio to serve all the different price segments. Therefore, alongside our Straumann and Anthogyr implants, we are developing a new brand for the [ eco ] segment, together with a local partner, ensuring we can meet customer needs on the lower price points. In parallel, we continue investing in education and training to support clinicians in adopting digital workflows and building their implantology expertise. These initiatives will help shape a sustainable growing environment -- implantology market in China based on clinical excellence and patient trust. With these steps, we are well prepared for VBP 2.0 with the right infrastructure, brand portfolio and local capabilities to continue growing and supporting our customers in this strategically important growth market despite any VBP 2.0 decisions. Moving to Slide 20. We strongly believe that our culture is what truly sets us apart. In an environment that is becoming more complex and volatile, our culture is what enables us to adapt faster, execute better and stay close to our customers. As a company, our commitment goes beyond business. It was very inspiring to see more than 5,000 colleagues from around the world come together over several months for the Smile Movement, the global employee initiatives that unites team to make a positive impact beyond dentistry. Through local activities, volunteering and fundraising, the Smile Movement celebrates our shared purpose of unlocking people's lives by creating smiles. This year, our colleagues turn that purpose into action rising over CHF 0.5 million for the Straumann Group Foundation through their collective energy, a true reflection of passion and dedication that defines our culture. Let's now move to Slide 22 to talk about the outlook for the full year. With our diversified portfolio, strong brands and continued focus on innovation and execution, we are well positioned to keep delivering sustainable and profitable growth. Despite ongoing macroeconomic uncertainties and the impact of tariffs, we remain confident and confirm our full year 2025 outlook. High single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 at currency rate. Before we close, let me highlight our upcoming Capital Markets Day, which will take place on November 25 in Basel, Switzerland. This event will give us the opportunity to take a deeper look at our market priorities, our innovation road map and our ambitions. I look forward to seeing many of you there, either in person or online, and to engage in inspiring discussions. And with this, we are happy to take your questions. As usual, we kindly ask you to limit the number of questions to 2 in order that each participants can have a chance to put their questions within the available time. Can we have the first question, please? Operator: The first question comes from Julien Dormois from Jefferies. Julien Dormois: Yes. I will limit myself to 2. Starting with China, it's obviously the key topic investors have been focused on in the past few months. So just wondering if you could try and quantify what's been the magnitude of the decline in China in the quarter. And how we should think about Q4 because this will obviously have an influence -- probably a starker influence, I guess, on your -- on the development in Q4. So interesting to hear your thoughts on that. And second one is on the U.S., wondering you have mentioned stable patient flows in the country with some pockets of improvements. How do you see that playing out in the fourth quarter and into '26. I know you had previously commented that you were expecting maybe stronger growth in 2025 versus '24? How do you think about this guidance at this point? Guillaume Daniellot: Yes. Thanks, Julien. Then I would say, first, the third quarter in China, I think you have more than 2 questions even with Q3, Q4 and 2026, but we'll try to cover that. We have seen a significant slowdown in China due to an early and initial impact of VBP 2.0 as we said, ahead of the potential lower pricing of implant treatment by the Chinese government that will be setting that potentially by the end of the year. We know that patients are starting to postpone treatment and distributors have started regency inventories and even a little bit earlier than planned, meaning that in Q3, China has been around flattish. What does it mean for Q4? It means that as the VBP 2.0 FX will increase, obviously, more patients will be postponing treatment and distributor will be continuing destocking, meaning that, obviously, the China and APAC will be moving in the negative side in the fourth quarter. Now when you look a little bit further despite the fact that we will have a -- obviously, a bit more in China and APAC, more challenging quarter, Q4, Q1, while then the VBP will be implemented, we believe that they are quite, for 2026, reason to be positive about China moving forward. First, because we are the only international premium brand with local manufacturing, all licenses and equivalents obtained for both than our Straumann brand, also our Anthogyr brand and our partner brand, meaning that if there is any aspect of the VBP that will somewhat support local manufacturing, I don't think there is any other company best place than we are. Thanks to our 4 brands, position also at the different price points. We don't know exactly how the price will be played in the VBP 2.0, but we believe that we will have all the different brands and portfolio to be able to benefit from any of the faster-growing segment moving forward. Finally, we also think from the fact that the pent-up demand from Q4, Q1 will also support the rest of the 2026 and that China is still something that we need to keep remembering, it's a very, very underpenetrated market, then we still believe that there is a lot of potential growth that needs to be unlocked moving forward, not only by the price effect that the authorities are trying to play, but also through education that we are significantly continuing to invest on. Then obviously, we see China as a future backloaded 2026, but still as being growing moving forward. Now when it comes to NAM, North America, we have been very pleased with what we have seen in the third quarter. And I would unpack that in 3 points. The first one is that the market indeed is remaining stable, even though we see some patient segment that have been willing to go for treatment more than we have seen in the past quarters. One of the aspect is also because -- and that's the second point, having the DSO making more investment to create patient traffic as we have been alluded to in the past quarter, then driving faster patient flow and faster growth in this customer segment. And this is a significant area of development versus the past quarter, and we are pretty well positioned on the DSO side in North America. And thirdly, this is also important to note that we have also improved some aspects of our sales execution, which is delivering continued market share gains. And it's a lot about leveraging our strong innovation such as iEXCEL, where we see higher growth. And we have also our differentiated workflow, which is supporting significantly practice efficiency that has been driving new customer acquisition. Then I would say there is a part of the market, which is a little bit coming better, but also some improved execution on our side that we are seeing as sustainable. And how it's going to be in 2026. I think at this moment in time, obviously, it's not easy to express because we have seen that very volatile but we see 2 positive things from our side. The first is that we have innovation that will keep us delivering above market growth. Not only on the implant side, but also, obviously, on the general side with our SIRIOS X3 and future capability to scan full launch with a very high precision that I think will be very appealing with the specialist segment. Our iEXCEL will continue to deliver growth, especially because it's going to be supported by additional portfolio line extension like BLC 4.0 that has been requested by the North American market, also new prosthetic line with specific laser technology to texture the surface differently that will continue to significantly differentiate iEXCEL as the best-in-class system out there. And I would say that finally, as you have heard, everyone expect another 25 rate cuts in the next meeting by the Fed that while it will not change yet completely the market dynamic because it needs an additional, I would say, 75 basis points, then it will send a positive message that should influence consumer confidence as we have seen, that has been one of the effect that has slowed down the market in the first half. Then all in all, yes, we believe that if it continues like this, we have a lot of very good dimensions for expecting a better NAM moving forward. Sorry for the long answer, but I hope it covered all the different points that you were asking for. Operator: The next question comes from Susannah Ludwig from Bernstein. Susannah Ludwig: I have 2, please. I guess just following up on China. Could you share whether this is more patients holding off on procedures or whether it's more a reduction in inventories? And then how many months of inventory do the distributors typically hold in China? And then second, on the partnerships within orthodontics, I guess, can you share more about your thoughts on potential economic impact? You previously noted that more scale was needed to get to profitability in that business. I guess, with these new partnerships, where do you see sort of the potential for the orthodontic profitability moving? Guillaume Daniellot: When it comes to China, I think it's -- we have seen both effects playing at the same time. And this is what we have seen also in the past VBP 1.0 where you have really this combination of effect, then you have -- at the beginning you asked, it starts by the patient starting to postpone some treatment step by step. And then obviously, when the distributors are deciding to reduce inventories, this is where it accelerates significantly because this is where they are obviously stopping ordering at the same rate, and this is obviously what is having the biggest impact at the end. Then this is what we have seen at the end of the quarter -- of this third quarter, and that's what we believe we are going to see increasing on the fourth quarter because this is what we have seen also in 2022 Q4 that has significantly impacted our last quarter of 2022. The inventory they are carrying, generally speaking, it's a 3-month inventory. Then this is what we had in the channel mid than Q3, and this is what will decrease significantly during the fourth quarter. When it comes to our orthodontic partnership, we are obviously very excited by this. We have said a couple of times that we were needing to invest significantly in increasing our value proposition as we are seeing also new competition coming in. And we have especially expressed a couple of times that we were needing to reach scale in order to be able to drive sustainable profitable growth in the future. And that's why we are really, really excited to announce the Smartee partnership because it will really help us to progress on both sides that are critical for the future of our orthodontic franchise. As expressed a little bit in the presentation, the first point of the Smartee partnership is to significantly improve our value proposition. This volume proposition is going to be increased through the Smartee technology that will allow us to have new clinical capabilities. And I think those new clinical capabilities are really significant. They are major ones. We will have, for example, CBCT integration in our planning. We are going to have different streamline options. We have a flat streamline at the moment, which are high and low, but we are going to have a scale up streamlined in the future, which is one of the major expectations of a lot of clinicians we met because this is what they are used to. We are going to expand indications in the mandibular advancement functionality as an example, which is also going to allow us then to go to more advanced users that we were not able to do before. And finally, something which is important to increase conversion rate and supporting the GPs to convert patient case, we are going to have that modern treatment outcome simulator, which is very important, obviously, to present to the patients what should be the clinical outcome. Then if you put all of this together, we are going to have a very unique differentiated value proposition. That should allow us to really accelerate significantly our shares in this segment. And the second aspect that we have really significantly highlighted is that Smartee, with being one of the leaders in this field and especially in the Chinese market, is really helping us to gain scale. Then -- we can then benefit from their scale and their automated manufacturing side in order to significantly lower our manufacturing costs. And this is what will help us obviously very quickly in the next 12 months to reduce our costs on our existing volume, especially in EMEA, in Asia Pacific. But also for all the different new customers and new business we are going to do, it will be at this new profitability side. And that's where when you combine those two, it's a very kind of an exciting transformation of what we do that will bring both top line and bottom line some significant development. Operator: The next question comes from David Adlington from JPMorgan. David Adlington: Sorry to focus on China again. But maybe just a slightly bigger picture. There's a lot of moving parts for next year with respect to obviously surprising headwinds but volumes, you're going to have some pent-up demand on potential restocking? Maybe sort of bigger picture, do you think you can grow both the China business and APAC next year? Or do you think is going to be a year of consolidation? And then secondly, in term terms of impact on margins from the shift to Chinese production, obviously, lower cost of production in China, but you are going to be left with some potentially stranded costs at your Swiss facility. Just wondering how we should think about capacity utilization there, whether you can reduce that capacity in Switzerland to offset that production utilization? Guillaume Daniellot: Yes. Thanks, David. And 2 points, yes, we believe we will grow in China next year. I think at the moment, this is what is our assumption and our belief. Now once again, as you know, there is no VBP rule out there yet. Then it will a lot depend on what VBP 2.0 then will be designed and how they will set new price and how they will try to define this new policy. Then that's the first point. And I would say it's still assumptions because, as we have seen, the rules of the VBP 1.0 are really significantly reshaped the market. Then we can only talk about what we assume some of the VBP 2.0 could be. And from our assumptions, the price cut should not be significant. It has been very significant in around 1.0. We don't expect then the authorities to do another major cut because it will also significantly challenged the profitability of clinical practices directly and it would potentially be counterproductive to what the Chinese authorities are trying to achieve, which is more access to implant therapy. The second aspect, if price are just adding a small than the cut, it's a lot about how volume obviously should grow. And we still believe that there is a significant market potential in China. There is a lot of patient expecting implant treatment. And there is a lot of dentists that are trained and are able to deliver it. And that's one of the important reason as well from that very underpenetrated nature of the China market that we believe after, the rules have been then published that we will see patient flow getting back to a good -- dynamic and a good level, and that would allow us to grow in China. And based on those assumptions, we believe China and APAC will grow in 2026. And when it comes to your questions on our Shanghai manufacturing, our assumptions right now, and the calculation is showing that we should have a 20% lower COGS on our China campus versus our Switzerland manufacturing site. That would be one of, of course, very good then the consequence of getting started now with this manufacturing side. And secondly, something which is obviously important those days, it's helping us to hedge our Swiss franc exposure by shifting a significant part of those manufacturing costs from Swiss franc in Chinese RMB. David Adlington: And will the Chinese facility be just for China? Or will you look to export from China elsewhere? Guillaume Daniellot: Yes, that's a good question. For the time being, we are really looking at China for China. But in the future, as depending on how the different supply chain will play and the different also trade deals will be implemented, I think this is also something that we could consider for the future to serve other markets in China. Operator: The next question comes from Richard Felton from Goldman Sachs. Richard Felton: Two questions from me, please. So first of all, a more general follow-up on margins. And I suppose any early thoughts that you can share on some of the moving parts on margins into 2026. You called out tariffs on the call. We know you've got VBP, maybe there's some offsets from growth from China manufacturing and the changes to orthodontics that you've announced this morning. So any early thoughts on how you're thinking and planning for margins in FY '26, please? And then the second one is another follow-up on China. Could you just remind us where your market share is in China today and how that's evolved since the first round of VBP being implemented? Guillaume Daniellot: Well, it's a bit early to talk about 2026. We have our Capital Market Day for this, but we can allude to, I think, the big margin effect has been for us, obviously, the geographical mix, and we believe that geographical mix will be then a tailwind next year because we expect North America then to be better, while China will be obviously more on the lower side when it comes to growth contribution. And then that would be a positive effect. The second thing is from a manufacturing standpoint, we are also then improving, thanks to the manufacturing site in China, which is also another positive effect. We are expecting -- well, we are expecting a very positive effect starting by the implementation of our partnership with Smartee on the ortho side. And also the fact that we are going to significantly prioritize the high-growth market, then we have significantly, let's say, be weighted on the negative side by our profitability, negative profitability of our ortho business and we are going to start seeing a significant transformation already in 2026 and even better in 2027 as we had a high double-digit million of losses on our ortho business in the past or until now, and this is going to change significantly. Finally, we hope also that on the tariff side, we can see some -- a little bit improvement if it could turn on the positive side for us. We know that there is some positive discussion in between the Brazil and the Trump administration, which would be one of the most important part of our tariff for next year as Isabelle express which is around CHF 30 million, but I would say something like a big chunk of it is coming from our Neodent import that would also significantly help. And that's why we believe that 2026 could be really interesting by driving some significant margin development on this side. Isabelle you want to add anything on this side or... Isabelle Adelt: No, perfectly covered Guillaume. Guillaume Daniellot: And the second question was, sorry? Isabelle Adelt: Market share development in China. Since we repeat [indiscernible] what market share do we have? Guillaume Daniellot: Yes. That's an interesting question. We have -- because as the market has evolved very, very significantly, and there is no official data in China. What we know is that we have a very significantly increased our share when we see the different development of many companies around us in China, we are leading by far what we could call the premium segment, and we progressed also on the challenger side. But still, on the value side, we represent a very, I would say, a pretty low share still. I think Korean companies are still having the lion share of the challenger segment together with some of the growing Chinese companies, but this is one of the way where we also expect through this very interesting new portfolio that we are developing with our Chinese partner, the possibility to have a very important inroad in the segment where we are underpenetrated. Operator: The next question comes from Daniel Jelovcan from Zürcher Kantonalbank. Daniel Jelovcan: I'm not sure actually if I haven't heard, has a Smartee collaboration, does that include any financial engagement by you? I'm not sure if I am clear on -- fully up to date. And the second question, your DSO CEO Summit in the U.S., can you put a bit more flesh on the bone for your key takeaways, which you have observed? Yes, basically, that's it. Guillaume Daniellot: Yes. Thanks, Daniel. I think actually, yes, very good question. Yes, this is a strategic partnership, then we have taken a nondisclosed share, which is, I would still say, a small share on Smartee from an equity standpoint. We want to demonstrate our commitment to this partnership. This is going to be, of course, a very important part of our ongoing strategy on the clear aligner business, then yes, we -- this is coming with financial equity participation in Smartee. The second side, when it comes to our DSO CEO Summit, yes, I think this is a very, very important meeting for us. First, to still be very, very close to this critical target group for dentistry in general and for us, in particular, as we believe that we are here trying to be much more than just a solution provider. We are really wanting to be a true business partner in supporting them achieving their goal. Then what we can say here on the DSO side is, one, it will significantly going to continue gaining share from provider care standpoint. They are continuing investing in technology. Then they are the target group, which is really supporting digitalization of dentistry, because they see the significant benefit they can get from an efficient workflow being able to help their dentists enlarging their indications and doing that also in a faster manner, still delivering high-quality outcome. Then they are a strong partner for increasing the digital penetration of entity. Secondly, they are also one of our strategic partner for growing the pie. They are the one being convinced about the fact that implant treatment is the gold standard of tooth replacement. And then they are doing all the necessary advertising and patient communication that are helping us to still bring implant as the preferred solution and increasing not only patient flow, but also treatment acceptance when they are there. And we are developing tools to help them in this perspective. And third, I would say this is also and we see more and more than very important customers that are expecting a very high level B2B service level, meaning that it's all about how we can implement a very connected and interlinked supply chain. They are also expecting very strong cybersecurity capabilities when it comes to being able to link our platforms, then DSO will continue to put barrier to entry to small organizations. Because when I see the investments you need to do to be a preferred partner to ensure not only high-quality clinical outcome with clinical evidence, but a lot in the background to support the efficiency of their supply chain, the security of their IT setup. This is really something that small organization or local or regional organization cannot do. And that's one of the reasons we are close to them, developing what it takes to lead the DSO segment and will help us to really be seen as the best potential partner for helping them achieving their goal. Daniel Jelovcan: That was very in depth. So the DSO segment in the U.S. is actually growing faster than your mom-and-pop, let's say, dentist, is that correct? Guillaume Daniellot: That's correct. And by leaps and... [Technical Difficulty] Operator: [Operator Instructions] Now we can hear you again. Guillaume Daniellot: Next question? Operator: The next question comes from Oliver Metzger from ODDO BHF. Oliver Metzger: First one is also on North America also in addition to the previous question. So obviously, there's a turn to the better, you also reported some patient flow improvement. You talked a lot about the supply side with the DSO situation is improving. How do you see it from a demand side? Can you see that actually also -- there is more flow coming from patients demanding single tooth replacement versus more complex procedures? Second question is on your strong performance in Europe. You highlighted the iEXCEL launch and with respect to success of that, can you just give us comment about how does patient volume has behaved in Europe in your view? Thank you. Guillaume Daniellot: As we expressed, the patient demand has been rather stable. And I think on all then the indication, it has been the same. We see then the single cases being done on a regular basis. But once again, not more, not less than the previous quarter. We have seen a little bit more of large indications being done in the third quarter. But once again, nothing that would support that we would say that we see a significant change in patient flow. It's still stable, but it's a little bit improving because I believe that the fear of inflation is reducing in -- among consumer. And it's not so much that -- we see for the time being, for example, a better eligibility to patient financing, we don't see that yet significantly because the rates are still not changing enough in order to open that yet. But we see a better confidence for patients to engage in the treatment in some areas. Then that's the only thing that we have witnessed in the third quarter. That's why we are still cautious in saying that it will develop from a pure market standpoint, However, we think that what is sustainable in our side is really improved execution on our side, but also all the significant traction we are getting with our innovation. We see iEXCEL having very significant higher growth rate than the rest of our portfolio. And as we are launching some additional portfolio extensions, we believe it will continue sustaining this very interesting market share gain and new customer acquisition. 20% of the iEXCEL customers are new customers that have never been customer from Straumann. And that's one of the aspects that we can really see that it ends delivering over market performance. When it comes to Europe, I think Europe has been really -- still delivering a very, very remarkable growth rate. And when you look at -- the reason for this, we expressed in the past the fact that there is, first, the affordability of implant treatment in Europe is much higher than in North America. The price level are twice less than U.S. Again, price for an implant plus crown in the U.S., it's going to be between $4,000 to $5,000 whereas in Europe, is going to be around EUR 2,000 to EUR 2,500. Then I think affordability is higher. There is more support from a reimbursement standpoint from either private insurance or social security from a national public support. Then that's a lot of explanation to -- to explain why Europe is behaving better than North America in a more kind of a challenging environment. And additionally, we have to say that iEXCEL is participating also here as gaining superior traction than the market. And all the different businesses are growing very significantly. Orthodontic clear aligner through the synergy we have with our core business around GP target group is also growing double digit. Digital is also growing significantly, then we have all the different aspects of our portfolio, which is supporting the Europe performance. And finally, something which is also important to consider, that's why we believe it's a sustainable capability to grow with all the different geographies are participating to that significant growth. As much as mature market like Scandinavia, Germany, U.K., Spain, for example, in the third quarter, but also very significantly Eastern Europe with Poland, Baltics, Romania and I can also list the distributor market that has been also very strong in the third quarter. Then it's not only one place, which is doing well, that may fade, it's the entire geographies, which is really supporting this very, very strong development. Operator: The next question comes from Brandon Vazquez from William Blair. Brandon Vazquez: I wanted to -- I'll ask two of them upfront here. The first one is just going back to the partnership with Smartee, Guillaume, you had mentioned that you're kind of in the operating losses right now. Can you talk to us, given, of course, this partnership is in part to improve profitability in this segment, what does operating profit or loss look like in 2026 as you flip that business over to Smartee? And then the second question is maybe a little bit more about North America. Encouragingly, it looks like North America actually improved a little bit despite the fact that consumer sentiment here has been pretty weak still. I know you've talked a lot about investments from DSOs? And maybe I'm curious if you could talk a little bit about what are those investments from DSOs that are improving North America results? Somewhat cautiously, I would say, the problems here are a little bit more macro, less commercial strategy, but it sounds like the partnerships that you guys and what you're seeing from the DSOs is that improving commercial strategy alone might improve North America? Guillaume Daniellot: Yes, when it comes to the Smartee partnership. And I think something that is to make it clear because we had also -- one of the question is, we will recognize revenue, obviously, because it's a distribution partnership and a manufacturing partnership because they will do that for 2 major regions of us, which is Asia Pacific and EMEA. Then yes, we had very significant operational losses because we have been investing very significantly on our technology, but also on the manufacturing side. And what we have seen that with our scale, it's very, very difficult to be able to go to profitability. Then when we say we had a very significant double-digit million losses from an operational standpoint on our ortho business, we expect this to be divided by 2 already by 2026, and we expect to be breakeven in 2027, which means that -- and obviously, afterwards, creating very positive profitability moving forward, thanks to what we are putting in place. Not only in terms of manufacturing but also on growing demand with technology and having a very sharpened go-to-market approach where we are now very structured in a clear business unit approach that would allow us to have speed but also efficiency which means that from a profitability standpoint, we expect a significant effect in the next 18 to 24 months, that should be seen on the bottom line as well. . When it comes to NAM on the DSO investment side, yes, they are doing, I would say, 3 kind of investments. The first one is then growing their network. It's still, from a DSO standpoint, a way to grow inorganically. Then it's creating new practices. There are some DSOs that are doing that by acquisition. But we see a lot of DSOs that are also creating de novo clinic because it allows you to implement all the processes and all your strategy in exactly the same way than all the rest of the network. Then you don't lose time to convert the existing clinicians to your old processes that are not used to potentially use this kind of brand of material or whatsoever, then you can standardize your approach very efficiently by creating de novo practices, and we see a lot of this ongoing and not only in North America but also in other geographies. The second investment they do then is on the organic growth this time and being able to invest into new patient flow. They are doing than advertising. And in North America, we have seen new campaigns that have been launched to create this patient demand that has been much less the case in the first half not knowing how the U.S. economy will evolve and with a big fear of inflation that would reduce the capacity for patients to pay. It seems that this is -- the risk of significant inflation is starting to reduce significantly even though no one knows exactly, but that's the perception that we have. Then there is an increased investment done in direct-to-patient communication for bringing them to the office and, of course, being able to drive patient acceptance. The third investment they do in standardization and digitalization of the entire network. Being able to drive then all the [ ultra-high ]scanning, driving workflow that will drive efficiency and especially one way of doing a procedure is helping them to have a very clear perception of the cost of one procedure and being able to have more an analytical perspective of their performance. Then we see that the investment in digitalization is now increasing and we believe that we will be able to benefit from this. There is a free kind of investment we see from DSO in North America, but also in other geographies that could help us making sure that it supports growth moving forward. Operator: The next question comes from Hassan Al-Wakeel from Barclays. Hassan Al-Wakeel: Two, please. Following up on China and particularly '26. Guillaume, when we met last month, you commented that you see double-digit growth in revenue in China is possible in '26 given low penetration, is it your current base case? How are you thinking about share gains in the mix? And what's the current price assumption on the decline? And then secondly, can you talk about iEXCEL performance in the U.S., particularly? How much did it contribute to growth given you called out the particular strength in EMEA. I think last quarter, you highlighted that iEXCEL was 15% of implant sales. How is this trending overall and by region in Q3, please? Guillaume Daniellot: Yes. Thanks, Hassan. Once again, I will express that China 2026, I think it will a lot depend on the VBP rules. And what we are looking at is, we have different scenarios, obviously, as we have been in the 2023 to prepare what the VBP can come up with. Then one of the positive scenario is obviously still having a low double-digit growth that could come out from China in case we see limited price cut which is around 5% to 10% and adding obviously, significant volume growth with a pent-up demand coming from a low Q4, low Q1 2026. And adding up to the 3 quarters of the year that we'll see a healthy patient flow and having the capability for us to keep gaining market share by adding our 4 different brands, Straumann, Anthogyr, T-Plus and our new Medentika line on the eco segment that would be able to take share and also potentially being favored by local manufacturing. . Then we have a lot -- again, as options to be able to play what the rules will be from VBP 2.0. But now being able to say we will grow double digit in China and Asia Pacific 2026, is too early to say, and we will be able to express that in our guidance based on when we will be able to say that early 2026, when the VBP rules will be out, and we will have much more visibility on how we are going to play this new regulation. But once again, there are options for us to grow low double digits, there are options also to have a lower growth rate based on what will be coming. On the iEXCEL side in North America, yes, I think what we can say globally and without having a first specific North America prism, this is representing -- iEXCEL is representing already 20% of our implant green premium sales, then we -- this is really a testament on the loyalty, the traction that we are getting with the system and the repurchasing that we're having with this. North America is also around those numbers with a very strong penetration about our existing users and our new users that are also being captured in North America. And one of the major reasons why we are growing faster than the market is the new customer position that is done through iEXCEL on the premium segment. We benefit also on new customer acquisition on the challenger brand with Neodent, but I think we are still growing faster, and we see in -- constant market share gain in North America on the premium side that we can really monitor on a regular basis and that we can confirm once again. The simple thing which I think I will highlight here that will help or that will continue to support the growth of iEXCEL is that all the evolution and innovation on the prosthetic side will be available only with the iEXCEL connection, which is the new TorcFit. That means if you would like to benefit from our new angulated screw channel on customized abutment as an example, if you would like to benefit from our new laser textured value-based for easy and efficient restoration. And especially, if you would like to benefit on our new workflow, which is the one I presented, the Fast Molar with Anatomic Healing Abutment which is allowing you to do the restoration with one Appointlet with the patient, you have to use iEXCEL because it all comes with the new connection. Then there is a lot of our strategy from future innovation that will also drive the penetration of iEXCEL and then making our customers benefiting from the latest technology. Operator: The next question comes from Julien Ouaddour, Bank of America. Julien Ouaddour: The first one, I mean, thanks for all the color on China. But just me being picky with [indiscernible], But you mentioned sort of back-end loaded growth for next year. Just wanted to confirm, is it because 1Q '26 is likely to remain negative for the market. I believe the VBP implementation at public hospitals may start only in 2Q? And also, you talked about the Shanghai Camps benefits from local production and this cost advantage probably fully offsetting the price cut for next year. But given the, let's say, the full ramp-up is expected for 3Q, could we see some gross margin pressure in H1 and a bit more back-end loaded recovery? Second question is on clear aligner. You mentioned the ambition to achieve leading position in these markets. I think today, you have 3% market share. Competition is pretty fierce. What's your mid- to long-term ambitions for ClearCorrect? And do you fear aligners becoming a kind of like commodity products and a price war could maybe slow down a little bit the margin expansion target that just set within the partnership? Guillaume Daniellot: That's 4 questions. But we'll be happy to answer. The first one, Q1 2026 China. I think, here, we cannot express phasing in 2026. It's too early from exactly Q1. When we say backloaded, is obviously, first, when you look at comparison base, we are going to have a very high comp base in the first half and a very low comp base in the second half. And first, obviously, from a growth rate standpoint, mathematically, you are going to be backloaded anyway. The second aspect also is that the Q1 will depend given a lot about the Chinese authorities communication about the magnitude of the change and especially when they are going to finally give reasons, which is not really clear at the moment. If the VBP reasons will be given, when I say reasons, it means that they will present the rules in December. The companies have to do their bidding about what kind of pricing they want to do. And then afterwards, they are publishing reasons of who is selected, who is not selected in the different category. If they are able to express it fast enough and the implementation of the new rules are going to be done during January, then the first quarter can benefit from the pent-up demand directly. If the information about the results of the VBP 2.0 will be done later in the year, which has been done a little bit the case in implementation, it has been done after the Chinese New Year in 2023, meaning that we have started to see everything being executed by the beginning of March, then that's where you have a Q1, which is rather weak because still then waiting for all the new price to be available. Then I think this is a lot depending on how this is going to be played out. And that's why it's difficult to answer exactly your Q1 perspective. But we are expecting, at the moment, from an assumption that Q1 will anyway be weak. We are going to have a Q4 and Q1 that are going to be weak because it's going to be frozen by the VBP effect, and that we will benefit from those new rules moving forward. When it comes to the Shanghai Campus, yes, I think we don't expect -- and we'll see the price decrease being bigger than our COGS gains that we are going to do. This is one of the reasons why we believe that the price cut would not then affect significantly profitability of our China business, thanks for providing everything mainly from China. But this needs to be confirmed with the VBP 2.0 rules. When it comes to clear aligner commodity, I actually don't think so. There is already a very significant competition that we see out there but as we expressed, without scale, it's pretty challenging to play in this environment. Then what we have seen in the past, we have seen a lot of small companies trying to come in and play in the clear aligner business and actually being wiped out because of the lack of scale and the lack of capability to gain significant market share. Then yes, there will be price competition that we are seeing at the moment. Yes, it will continue to become a pretty competitive market, but we still believe that I would not go to commoditization because of all the technology which is going to go with it. And we have a midterm perspective to be able to reach 10% of this market in order that we can really start to become a significant player and being able to deliver the growth that we are looking for. Operator: The next question comes from Veronika Dubajova from Citi. Veronika Dubajova: I'm going to try to keep it to 2. One, Isabelle, I was hoping you could circle back on the tariff commentary that you made at the beginning of the call. I think on this first half conference call, you sort of expressed the hope that tariffs would mitigated fully this year and then you'd have an impact as you move into fiscal '26. I know you mentioned the CHF 20 million to CHF 25 million number for this year. So should we understand that as you are no longer expecting that to be mitigated fully or at all? Is this something that's appearing in the P&L? And I guess that's a pretty meaningful headwind, obviously, in terms basis points. So I'm just curious where you are finding other opportunities to offset this to maintain the margin guidance for the year? So if you can talk through that. And then sort of CHF 35 million number for next year. I guess, is there any mitigation? Or is that including the mitigation efforts. So if you can talk through that, that would be helpful. And then I'll ask my second question because it's for Guillaume after that. Maybe we can just get the financial bit out of the way first. Isabelle Adelt: I'm happy to elaborate on that and I think excellent question. So earlier, we said we will mitigate all of those tariffs, and it will not change our guidance. And given we just reiterated our guidance, we still stand by this. So the effect of CHF 22 million to CHF 25 million still to be shown has been mitigated this year. On the one hand side, of course, we mitigated the full impact of the tariffs through all of the supply chain route changes we put into play through transferal of production activities of finished products to the U.S. for especially the Straumann Green products. But then what we're currently preparing for packaging and finishing lines for Neodent products as well to be prepared for next year. And I think as you remember from the call, we had for the half year results, we already shipped more or less all of the demand we have for this year in July and August. So we have some time to implement those mitigating measures. How are we mitigating? On the one hand side, of course, by implementing this, but then on the other hand side, by looking at different other measures to improve our profitability in terms of production, but then in terms of OpEx savings, where we have very strict guidelines and reiterated them for the remainder of the year. So all of this impact can be mitigated. Same holds potentially for next year as well. As you can see, the number we are looking at the CHF 30 million, the ballpark number we gave you is very similar to the amount we have for this year, although we will see a full year impact. So this CHF 30 million is, I would say, the worst-case assumption in case everything remains as it currently is. So major factors behind the 50% tariff on all imports from Brazil and 39% tariffs for all imports from Switzerland. And having said this, why is the amount very similar because we put all of those mitigating measures into place already. So the finishing lines for Neodent plus the acceleration of transferring Straumann branded products faster than expected to our campus in campus in Andover close to Boston. And having said this, we expect a very similar mitigating results for next year than what we see this year. Veronika Dubajova: Okay. So the way to think about the CHF 30 million, is that the gross impact and the net impact in terms of what we have to think about in the P&L is going to be substantially lower? Isabelle Adelt: Yes, potentially. Veronika Dubajova: Okay, potentially. Okay. That's very helpful. And then my second question is for you, Guillaume. And I guess, just your confidence in the China midterm growth rate. And I know I see you have a ton of uncertainty in the short term. But I'm just curious, kind of once we're through VBP, how are you thinking about that sort of growth rate in China on an underlying volume basis, I think, obviously, we've gone this year from volumes growing double digits to single digits to not growing at all. Are you confident that it's just the implementation of VBP? Is this a market that's maturing? And I would love to get your thoughts on how you think about China volume growth on a 3- to 5-year basis? And what underpins that confidence? Guillaume Daniellot: Well, the confidence in China is just based on the fact that -- on the one hand, you have a very underpenetrated market that will continue to grow. I think this is the most important foundation of the growth expectation that we have. And the second side is that we believe that we have one of the company, the best place to be able to benefit from that increased market penetration. Because we are having a strong offer on the premium side that will continue to be, I think, interested and being the only one being localized once again, but there is no other premium competitors that will have local manufacturing, which received license and equivalent, meaning that if there is a condition in the VBP to support local manufacturing companies, I think we will benefit from this. And the second aspect is that we have set now additional portfolio for then the value segment where we are significantly underpenetrated and where we should be able to also meet some significant demand growth. Then I would say that's those 2 aspects. On the one side, I think the market has the significantly capability to grow. And secondly, we are well placed to be able to take a fair share of this growth, which is making us confident about that development. Now it will obviously again depend of the external factor, which are the VBP on the one side, which are the macroeconomic factor on the other side. But if we would like to look more on the midterm, and we are going to talk now in a 3 years' time frame because this is the kind of VBP period, which is going to happen every third year. We believe that for the 2026, 2028 period, we are expecting something which is low double-digit growth, something around 10% to 12%. That's a little bit the perspective on how we are looking at it. Operator: Last question comes from Thyra Lee from UBS. Thyra Lee: Just standing in for Guillaume this morning. We have a super quick one. On North America, just given the green shoots that you guys have seen in Q3, would you expect the U.S. to be sequentially better in Q4? Guillaume Daniellot: I think this -- it's very difficult to be very [indiscernible] clear or precise on this question. We expect a good growth rate in North America in Q4. First, because we see a really good development; second, because we believe that the market conditions are helping a little bit also macro, at least from a consumer confidence standpoint. And third, we have also then comparison base, which are helpful here. Then I would say we expect North America to be a significant growth provider in the fourth quarter. Is it going to be better than Q3, at least we expect the trend to continue then to be at least equal or better is what we are expecting. Thank you for joining us today and for your continued interest in Straumann Group. We look forward to seeing you again soon and wish you a pleasant rest off today. Have a nice day, good bye from Basel. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, ladies and gentlemen, and welcome to the HelloFresh SE Q3 2025 Results Call. [Operator Instructions] Let me now turn the floor over to your host, Dominik Richter. Dominik Richter: Good morning, everyone, and thank you all for joining our Q3 earnings call. At HelloFresh, we follow a powerful mission to change the way people eat forever. We've built the only scaled global player in both meal kits and ready-to-eat meals over the past 14 and 5 years, respectively. Our customers benefit from great tasting, healthy meals our wide-ranging variety of seasonal ingredients and global cuisines and the significant reduction of food waste, leading to a superior sustainability profile and lower CO2 emissions versus alternatives. The business is powered by our just-in-time supply chain, the largest of its kind in the world, and a data-driven marketing engine that allows us to reach and engage customers worldwide week in, week out. Over the past 12 months, we've enacted quite drastic changes, emphasizing unit economics improvement, profitability and a much improved customer experience over revenue growth in the short term. Those changes are resonating with customers and multiple customer satisfaction metrics are trending at record highs, indicating that we're both deeply embedded in customers' lives and successful with regard to our mission to change the way they eat. While we're still squarely in our efficiency reset phase with more underlying cost savings making their way through the P&L in the coming quarters, we're now starting the path to unlock even more favorable changes to the customer experience to eventually return to growth. Before I share more on this, let me start by introducing and welcoming our new CFO, Fabien Simon, who joined us about 6 weeks ago. Fabien has had an impressive career to date, most recently serving as the CEO of JDE Peet's, a leading CPG coffee and tea player. Prior to this, he was instrumental in building the JDE Peet's Group from the ground up as their CFO and partner of the investment holding JAB behind it, taking JDE Peet's public at the Amsterdam Stock Exchange. Earlier in his career, he spent 14 years at Mars, where he served in multiple finance leadership roles around the globe, among others, as the CFO of their pet care division. We really couldn't be more excited for Fabien to join us and help us write the next chapter for HelloFresh. At this stage, I also want to extend my gratitude and appreciation to Christian, who served as HelloFresh CFO for the past 10 years and has been instrumental in the growth of the company from about EUR 300 million in revenues when he joined to just shy of EUR 7 billion in revenues in 2025, while turning the business sustainably profitable. Christian's last day will be tomorrow. All the best, Christian, for your future endeavors. With that, let's turn to the highlights for our most recent Q3 quarter now. We observed a stable revenue trend in Q3 versus prior quarters, a decline of about 9% in constant currency, driven by a double-digit decline in orders, somewhat offset by a 4% increase in AOV. In meal kits, we saw a continuation of the trends previously seen, a sequential deceleration of revenue decline for the third quarter in a row with September exit rates showing further momentum. A similarly encouraging trend in RTE, where we saw September exit rates at better levels than in July and August, and we expect both of these trends to continue into Q4. Q3 adjusted EBITDA came in at EUR 40.3 million with the typical seasonality driven by marketing investment and ramp-up costs for our product launches in meal kits and RTE. Despite headwinds from FX rates and mix, we maintained a double-digit adjusted EBITDA margin in our seasonally weakest quarter in meal kits with both North America and also now International improving year-over-year. While Q3 net revenue performance in RTE suffered from lower order rates and customer retention seen in our H1 cohorts, we have turned a corner on many leading indicators, which are up sharply versus the lows seen in H1 this year. Similarly, we continue to be on track with our EUR 300 million efficiency program with about 70% of initiatives implemented, up from about 50% by the end of Q2. Free cash flow before leases has also been on a strong upward trajectory. Year-to-date, we have improved this metric by over EUR 140 million with 9-month year-to-date free cash flow at EUR 170.4 million. In previous interactions, we emphasized two priorities for 2025, delivering our EUR 300 million efficiency program and reinvesting into the product to materially improve the customer experience. These two priorities, efficiency and product reinvestment are not isolated efforts, they are interconnected and deliberately sequenced. Let me give you an update where we stand on both of them. With regard to our efficiency program, we continue to make meaningful progress. By the end of September, we had implemented about 70% of the entire program with the remainder to come in the next quarters. As a result, we are on track to implement about 80% of our efficiency program projects by year-end. Based on current run rate and the tight governance we have wrapped around the program, we feel confident that we will achieve the original EUR 300 million cost savings target or outperform it. The majority of these tailwinds will still work their full effect through the P&L and balance sheet in the coming quarters, given the lagged P&L effect of things like site closures, notice periods or software renewals. Crucially, though, the majority of these actions are permanent. They structurally lower our fixed cost base and improve margins on every order shipped in 2026 and beyond. Despite lower order volumes and significant product reinvestment undertakings year-to-date, these efforts resulted in structurally improved profit contribution margins, lower indirect costs and a leaner, faster organization already. The results are clearly visible. Free cash flow year-to-date is up 4x year-over-year and free cash flow per share is up over 5x year-over-year due to the additional reduction of shares outstanding given the ongoing share buyback program. We are now starting to put that foundation to work via the ReFresh strategy that I introduced in the last call. The flywheel is clear. Cost discipline funds product innovation, a great product drives retention and lifetime value, and improved retention unlocks profitable growth at scale. In Q3, we embarked on our most significant investments to date in the U.S.; in August for HelloFresh and in September for Factor. In meal kits specifically, we expanded to over 100 weekly options on the menu, up from about 60 at the beginning of the year and focused our menu expansion primarily on featuring new cuisines, additional ingredient varieties and many new never-before featured SKUs. We also invested in larger portion sizes and have upgraded the quality and aesthetics of our packaging, keeping our ingredients fresher for longer. The response has been really positive, especially among our most loyal and also lapsed customers who are typically at the highest risk of becoming bored or feeling too much sameness week-over-week in a limited options menu. Sentiment on both social media and across our internal customer satisfaction metrics has been great, and gives us confidence that this is the way to improve long-term customer happiness, retention and ultimately customer lifetime values. Our efforts to acquire fewer but higher-quality customers, combined with the recently launched ReFresh strategy have shown encouraging results across our active customer base year-to-date. Since embarking on our strategic pivot 12 months ago, we have improved average order rates materially versus 2023 and also in 2025 over the 2024 average. And we expect additional improvements on the back of the product investments we have launched in August going forward. This now starts to translate into a recovery of meal kit revenue, which we improved for the third quarter in a row in Q3, as you can see on the right-hand side of the page but even more forcefully when looking at September only, that's the very right-hand bar chart on that right-hand chart. We expect this trend to continue into Q4. Now let's turn to our RTE product group. As indicated in the last earnings call for Q2, we've been hard at work to overcome the temporary operational setbacks we had seen earlier in the year. I'm happy to report that we've made strong progress on many dimensions. We have reworked a lot of our food manufacturing process path. And as a result, we've been able to revert the majority of our meal catalog back to optimal reheat times. We will continue to work through the remainder of the catalog in Q4. We have also instituted and operationalized strict lab testing protocols for all of the new meals coming to our meal catalog. Consequently, we've been able to restore the week-over-week meal variety and menu retention in the earlier parts of Q3 as a first step. Based on this much better customer experience and more robust food manufacturing processes in place, we have then started to improve our meals and menus considerably from September onwards. This is what we call the Factor ReFresh. Since early September, Factor U.S. customers now have over 100 weekly meal options on the menu, up from 40 options in the start of the year. We dedicated additional meals to increase the depth of our GLP-1 range, and we now feature more than 3x the number of seafood meals versus prior periods. The menu expansion is supported by quality investments such as overall larger portion sizes and vegetable quantities as well as higher chicken quality and beef SKUs. We've also opened up additional regional zones for weekend deliveries, giving customers more choice around preferred delivery days and shortening the time from order to delivery of their meals. We've also launched a 4-meal plan to customers. This has been one of the most requested features and directly addresses the customer feedback that they feel overwhelmed by the minimum quantity of six meals per week that we previously had. We won't stop here though. In Q4, we will further continue to expand our menu by an additional 20% with a focus on a new salad range that we developed with a partner, introducing a new ready-to-eat format that does not require reheating per se. For the remainder of Q4, we have also slotted the launch of a number of new, never-before featured premium proteins such as veal sausage and short rib, which have tested really well in customer panels to date. Within the much expanded menu, we will make it easier for customers to navigate the whole menu by rolling out an AI meal recommendation engine that continuously learns which meals customers like best and are most suited to their preferences. With all these things we have implemented on those which are just around the corner, we continue to make big progress on step changing the customer experience. These efforts to date have already shown strong improvements in all of the leading indicators we track. The Net Promoter Score of new customers has trended up sharply since we fixed a lot of the operational issues in Q2 and early Q3. You can really see the sharp drop in Q1 and early Q2 and the continuous climb up since then on the left-hand chart on this page. In September, Net Promoter Score of new customers has been up by 18 points compared to the low point of the year observed in April. The predicted average order rate for new customers has similarly trended up by 12% in September since the lows observed in April and is now back above the historical averages. Finally, projected customer lifetime value has also improved in line with the improvements in AOR, although at a slightly smaller pace than AOR, given the associated extra costs we have absorbed in our margin while fixing all the operational issues throughout Q2 and Q3. While we are confident that we've taken decisive action and can see the success of these actions across all leading indicators, the Q3 output metrics such as revenue and our EBITDA were still heavily impacted by the performance of customer groups we had acquired in H1. You can see the lower order rates of these cohorts in the chart in the middle of this page and extrapolate how those lower order rates from 6 months ago had a compounding negative effect on Q3 orders. The trends for both revenue and margin did, however, improve over the course of the quarter with September marking the best month on revenue, and we feel confident that we can sustain the overarching trend into Q4 now. In summary, we fixed a lot of the customer-facing problems and the customer experience is back in a place where we feel confident starting to invest behind the brand again. Let's now take a look at our KPIs for the last quarter one by one, starting with orders. We've seen group orders at the same rate as we had in H1, down by about 13% year-over-year. In terms of product category, meal kits improved sequentially for the third quarter in a row. RTE worsened sequentially. As explained moments ago, this was primarily due to the low average order rate of new customers acquired during the first half of the year when we faced headwinds from all the food manufacturing-related changes, which drove down the customer satisfaction and early customer retention. Group AOV continued to increase year-over-year by about 4%, driven by our loyal customer base in meal kits who make up a larger portion of the customer base and the strong improvement to the value proposition we have delivered. Both geographic segments actually increased by about 5% like-for-like, but mix effects and adverse FX rates led to a 4% group AOV increase. Specifically, we benefited from customers taking larger baskets in Q3 versus the same period last year, lower incentives given the maturing customer base and selected price increases towards the end of the quarter. Taken together, the decline in orders and the increase in AOV drove a 9% year-over-year revenue decline in Q3, a marginal sequential improvement for the group. Geographically, North America revenues declined by 13% year-over-year, while International net revenues saw a 1.5% year-over-year decline. More interestingly, by product group, net revenues decelerated to a decline of 12% year-over-year, a third straight quarter of improvement. And again, we expect this trend to show up even more forcefully in Q4 for meal kits. For RTE, we saw revenue decline by about 5% year-over-year in constant currency, a result of the lower order numbers from the customers acquired 6 months ago. This was worse sequentially versus Q2. But as our leading indicators have improved sharply versus the lows in H1, we expect a clear reversal of that trend for Q4. Finally, we continue to grow our other segment by 44% year-over-year, while containing the adjusted EBITDA losses for that segment to the same level year-to-date than what we saw in 2024 and despite lapping much larger comparables. With that, I'd like to hand over to Fabien to go through the cost side of the business and update you on our free cash flow, share buyback program and guidance. Thank you. Fabien Simon: Thank you, Dominik. I'm very pleased to be here today presenting our Q3 results for the first time since joining HelloFresh a little over a month ago. We are at a pivoting time for HelloFresh. So I'm looking forward to joining Dominik and the rest of the team and to leveraging my previous experience to help HelloFresh successfully navigate this reset phase and beyond. Over the last month, I have already met some of you in the analyst and investor community, but I will, of course, be available after this quarter to discuss HelloFresh further. Let's now turn to Page 15 to discuss our contribution margin for the quarter. In Q3, the contribution margin came out at 24.5% of revenue, excluding impairments and share-based compensation. This is a touch better as a percentage of revenue than the same quarter last year. Although down in absolute terms, I would qualify it as encouraging, especially in the context of the volume decline, product reinvestment, residual operational issues in ready-to-eat and finally, some increasing complexity that comes from the step-up in our menu choice and personalization. The slight increase as a percentage of revenue had been possible, thanks to the efficiency program, which had been initiated by management. And that is on track to deliver what had been communicated earlier this year. If we look at it from a geographic lens, both North America and International have shown a degree of expansion in their contribution margin, which I understand is the first time in quite some quarter now where both improved at the same time. For the group, we remain on track to deliver the promised improvement of 100 basis points of contribution margin for full year 2025. On the next page, we show the evolution of our marketing spend for the third quarter of the year. With a marketing investment intensity around 20% of net revenue, the business is well invested. This percentage is slightly up versus the H1 trend, which is explained by the back-to-school seasonality, a moment when it makes sense to acquire customers when families are grappling with returning to a post-summer routine. Overall, the absolute amount spend reduced by about EUR 25 million in the quarter. But because it reduced less year-on-year than the revenue decline, the percentage increased versus last year. I think this is a result of the strategy shared over the last few quarters to acquire less but higher quality customers with better product offering while pursuing a higher marketing ROI. This is noticeable on the meal kit P&L, where we continue to see a step down in marketing spend in both absolute and percentage of sales. Yet there's still a meaningful amount invested, which was leveraged to target existing and prospect customers on our Hello ReFresh product upgrade. For ready-to-eat, as it was discussed during the previous Capital Market Day, we are continuing to invest in brand equity building for Factor and the other RTE brands in order to support long-term quality growth where we note increase in awareness from the uninterrupted investment. You can see the development of our adjusted EBITDA for the quarter as well as year-to-date on this page. Overall, the adjusted EBITDA went down by EUR 32 million in the quarter, which is in large majority driven by ready-to-eat, where we continued to invest in brand equity and products as shared just before. This is visible here on both product category level and as well at a geographic level in North America. On the positive side, you can note a stable absolute profitability in meal kit despite the tailwinds we referred earlier. And we managed to increase the adjusted EBITDA margin this quarter versus the same quarter a year ago. Similarly, the International side of the group kept the same adjusted EBITDA margin in Q3 than last year with a contribution margin almost stable in absolute terms. So again, besides the adjusted EBITDA setback in ready-to-eat, the overall profitability dynamic in the quarter and in year-to-date has been positively supported by the efficiency reset program as well as a targeted attempt to be diligent in our marketing spend. On to the next page now to review our free cash flow performance. So far, the free cash flow is presented excluding repayment of the lease liabilities, but expect it to be presented after those repayments going forward as it is, in my view, the true reflection of the cash flow generated from which we strategically decide to allocate capital. So with or without the repayment of this lease liability, there's a meaningful progress on free cash flow year-to-date by EUR 140 million on the existing definitions. This makes us on track to meet the guidance of more than doubling the free cash flow from last year. I think it's probably a good time to update on the share buyback program. In the first 9 months of the year, we repurchased a total of 11.1 million shares for a total value of EUR 97.6 million. 6.2 million shares were canceled in July, and a further 7.9 million shares are currently in the process of being canceled. So accounting for the impact of our share buyback program, the free cash flow before repayment of lease liabilities per diluted share in the first 9 months of the year was EUR 1.03 compared to EUR 0.18 for the comparative period in 2024. Looking now at the guidance. So with the benefits of 3 quarters of trading behind us, we can first confirm the latest commitment and as well take the opportunity to guide towards the most likely range. So first on top line. For Q4, as preempted in the previous slide, we are seeing sequential improvements for both ready-to-eat and meal kit in constant currency. Of course, we have to be mindful that a month does not make a quarter, but assuming that the current trend persists, meal kits are likely to post a high single-digit decline in Q4 from what had been so far a double-digit decline. Ready-to-eat should also see an improvement. However, with a slight delay in the recovery that we saw in Q3, the growth will likely remain negative in Q4 on a constant currency basis. So with that in mind and somewhat dependent on the path of the recovery of RTE in the next couple of weeks, we would likely be at a mid- to high single-digit decline level in Q4 in constant currency. Which means that for the year, we are trending towards the bottom end of the latest constant currency growth guidance, so at around minus 8%. On the bottom line, for Q3 adjusted EBITDA, we should expect a similar level than last year in absolute euro terms. So extrapolating that for the full year, we should trend towards the bottom half of the latest adjusted EBITDA range of EUR 415 million to EUR 465 million. Thank you. And with that, I'll hand over to the operator for the Q&A sessions. Operator: [Operator Instructions] The first question is from Joseph Barnet-Lamb, UBS. Joseph Barnet-Lamb: So in the deck, you show us on Slide 7 that meal kits only declined high single-digit constant currency in September, which is obviously incredibly encouraging. It's also a big customer acquisition month. So I guess there are two things related to that. Firstly, in order to obtain this performance, I assume you marketed harder. Can you just talk about the phasing of marketing within that quarter a little bit? And also what CAC looked like in September given the heightened spend? And secondly, related to it, I appreciate the month hasn't quite ended, but any indication you can give us on October would be helpful. I mean you've sort of given us some indication with regard to your guidance for Q4, but is it fair to assume that October has followed a similar path to September as well? Dominik Richter: Thanks for your question. Let me take that and give Fabien some time to settle into our Q&A session here. So high level, I think it doesn't make sense to kind of like comment on every single month. I think for Q4, we definitely feel very confident that we'll see a recovery -- a further recovery in meal kits revenues as Fabien just laid out. Month-over-month, I think you will also see that these trends continue that we've seen in September. But overall, there's always like a lot of different holidays, other stuffs, et cetera, so that you shouldn't kind of like always just look at every single month. But I do think that the trends that we saw for Q3, both on RTE and on meal kits will definitely persist into Q4 and into the full Q4. Now with regard to the first part of your question around marketing intensity and CACs, we're definitely still in the phase where we are -- especially for meal kits, I think, holding back a lot of spend. We don't comment on CACs generally because we think CACs are just one part of the overall equation. So what we try to optimize for is that for the -- every marketing dollar that we invest that we get the best return. We don't necessarily always get that by investing at the lowest CAC. You don't get it by investing at the highest CAC. You need to look at the customers that you acquire, what's the quality of them and how do you think they will trend over the next couple of quarters as they pay back the marketing investment. So we always look at the equation end-to-end rather than at one single piece of it. But for sure, what we have seen is that the product -- the ReFresh launch in the U.S. has allowed us to first launch the product and then advertise it both on own channels and also on other advertising channels that we're in. But we haven't been massively, massively kind of like stepping up our investment levels, especially not compared to last year. Operator: And the next question is from Luke Holbrook, Morgan Stanley. Luke Holbrook: I just got a question again on the RTE side, just to try and understand some of the challenges that you're facing that you're expecting declines in Q4 from growth before. How much of this do you think is more [Technical Difficulty]. Can you kind of just give us a bit more color on how we think about the EBIT margin being a bit weaker, but also growth too? Just break that down for us. Dominik Richter: Look, we've had a hard time understanding your question. Maybe you can repeat. Luke Holbrook: I'm just trying to understand why some of the EBIT margin is weaker, but also the [Technical Difficulty] the RTE side. Is this attributable to more competition from community and others? Is this more from the macro conditions? Like what is that you have on why the revenues and EBIT margins are a little bit weaker on the [Technical Difficulty]. Dominik Richter: We continue to have a hard time understanding your question exactly. I picked up a couple of parts and maybe can try to answer what I inferred. So high level, we've reworked a lot of our meal catalog in RTE, right, with additional lab testing with a reformulation of a lot of the process path. We're throwing additional labor sort of like on some of those things to fix the customer experience first. This was our first order of priority, making sure that we fix the customer experience. And certainly, over the course of Q2 and also in Q3, we have definitely like carried some additional cost as a result of it. I think now that the customer experience is restored, we can see positive momentum on lot of the leading indicators. We'll be focused a lot on Q4 and into the next quarters to basically be better on the unit economics and kind of like drive efficiency as much as possible. I hope that was going in the direction as I inferred from what I could hear from your question. Luke Holbrook: And perhaps [Technical Difficulty] just clarification then on the financial side. There's a EUR 20 million cash out on the working capital side [Technical Difficulty] what that was in Q3? And does that unwind in Q4 as well? Fabien Simon: Luke, let me take this one. So I understood your question was related to the Q3 free cash flow. So in Q3, the free cash flow was negative, minus EUR 80 million comparing to EUR 44 million negative last year. So a difference of about EUR 36 million. But I will -- if you look at it, it's all coming from the difference in adjusted EBITDA, which was EUR 32 million. So you have EUR 1 million or EUR 2 million on working capital, EUR 1 million or EUR 2 million on CapEx. But I would say it's exactly the same dynamic. So I would not overread a quarter of free cash flow in this business given the inherent seasonality. What is more critical is the year-to-date. And I'm very pleased with the significant improvement. But even more interestingly, if you look at the free cash flow after lease repayments, this year, it turned positive. Last year, it was negative EUR 36 million year-to-date. Now it's positive, a bit more than EUR 75 million, which is extremely encouraging. And in Q3, the free cash flow landed to the level where the management anticipated it to be, given the seasonality. Operator: And the next question is from Nizla Naizer from Deutsche Bank. Fathima-Nizla Naizer: So my question is around the ready-to-eat business as well. Could you remind us -- so if Q4 is going to be a quarter of declines again, when could the segment again return to growth? Would that be a Q1 '26 story or further out in the year as you continue to invest in the product? Some color there would be great. And maybe connected to that, how do you think of the shape of the group's growth when you look at 2026? Any sort of targets that you already have in mind that you can share with us? Because if this is a transition year, would next year then be the year of recovery and growth again? Some color would be great. Dominik Richter: So we're very happy with what we've seen in the leading indicators in Q3 and how we have restored them from the lows in H1 in RTE. So we think this will definitely be a positive tailwind into Q4. Now are we going to land at flat? Are we going to land at slightly negative, et cetera? I think this is always like within sort of like the margin of error, but we're very confident that we'll see a sequential improvement in RTE. And then we're in the middle of planning for the next year. I think generally, if you think about the drivers of the business, I would expect that we have better order rates in the business next year than what we've seen this year. If you think back to the lows that we've seen in H1, I think we should be able to stabilize our conversion volume. And so I think overall, if I look at the whole picture, I see no reason why we shouldn't be able to grow in RTE next year, but we go through the detailed bottom-up business planning over the next couple of weeks. And in the course of reporting our full year results, we'll also share more about the shape that next year will take. Operator: And next, we have a follow-up from Joseph Barnet-Lamb with UBS. Joseph Barnet-Lamb: Given I've managed to get to the front of the queue again, I might ask a couple, if that's okay. So firstly, on contribution margin, you saw a 0.2 percentage point increase year-on-year in the quarter. In Q2, you saw a 1 percentage point improvement. You mentioned the temporary RTE food manufacturer fixes weighing on this. Do we expect this to continue weighing in 4Q? Is it something that's fixed in sort of one go? Or is it something that's fixed progressively? That would be question one. Question two, there was a USDA recall relating to Listeria. That was in early October, so it wouldn't have impacted 3Q. What was the impact of this, both from a top line and cost perspective? And then -- well, maybe I'll stop there. I've got more. Fabien Simon: So maybe I can take the second part of the question and giving time to Dominik to answer the first one. On the Listeria issue, yes, you have seen indeed the communications on an issue related to a third-party manufacturer. We have been taking very precautionary measures to immediately seize it. And actually, there has been some impact in our Q3 numbers because there has been some inventory write-off that we had at the end of Q3, we decided to book this quarter, which was at EUR 1.7 million. And we may expect a few credits to customers to come in this quarter, but it will be a negligible amount because the issue has been well contained. Dominik Richter: On the contribution margin overall, I mean, there's always sort of like, obviously, Q3 is a seasonally weak quarter. So we absorb sort of like more of the fixed costs in Q3. Generally, there were definitely sort of like some additional costs in reworking some of the RTE manufacturing processes. I think overall, if you look at the substance of our improvement plan, at the substance of our efficiency program, then I think there's quite a bit more that we can clip on the contribution margin side over the next quarters. What we also had in Q3 was the ramp-up. If you think about meal kits 60 to 100 meals in September for RTE then also towards 100 meal menu, this usually is in the first 2, 3, 4 weeks when we introduce it temporarily has somewhat higher costs. That's what we saw in meal kits that has settled back down after 3, 4 weeks when we had some more routine with those processes. So I think really structurally, if you look under the hood, I think a lot of the efficiency metrics are doing pretty well. And I would expect that this is not a sort of like a setback or that the sort of like improvements are now kind of like trending heavily backwards. But that actually the program that we have and a lot of the underlying efficiency metrics, if you net out like some of the one-off impacts that we had in Q3, that there is definitely still ample room to improve further. Joseph Barnet-Lamb: Really helpful. If I can squeeze one more in. At the Capital Markets Day, you indicated that retention was 6% better at 10 weeks and 8.4% better at 20 weeks for your post-pivot cohort. With substantially more data behind you, can you now comment what happens beyond 20 weeks? I certainly don't expect you to give us any specific numbers, but at sort of 30 weeks or 40 weeks, is retention more than 8.4% better than the pre-pivot or less or similar? Any color on that you can give would be amazing. Dominik Richter: So I don't have the exact numbers top of mind. I didn't bring them to this call. But I think what you tend to see is product investments have a particularly good impact on sort of like the outer parts of a cohort. This is really where it addresses sort of like some of the concerns that customers have when they say that the menu kind of like tastes too much the same after I have used it for a long time. These are the things that we're really addressing with a lot of the product reinvestment initiatives. And to date, a lot of the initiatives tested in isolation have shown exactly that impact. And what the aggregate impact of that is, I would have to look up. But generally, I think what we should expect that the bulk of the impact of a lot of our reinvestments comes in the outer quarters of a cohort. Operator: And as we have no further questions in the queue, I will hand back for closing remarks. Dominik Richter: Thank you all for attending our Q3 earnings call. I think when we think back to the start of the year and the plans and objectives that we've laid out back then, we feel very good about our efficiency program. We feel very good about a lot of the organizational and leadership changes that we've made. We feel definitely that the velocity of the organization increased materially. We are very much on track with our recovery plan in meal kits. But obviously, sort of like the curveball that we've had to deal with over the course of the year was around the RTE performance. Here, I think a lot of the leading indicators are pointing to the success of the efforts that we have initiated, but we'll need to work through this to kind of like get both business lines then eventually return to growth and provide sort of like the outcomes that we're all working towards. Thanks a lot for attending our call and speak to you in the new year, most likely. Thank you. Bye-bye.
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: " Mark Wilson: " Chris Chong: " Malcolm Bundey: " Rahul Anand: " Morgan Stanley, Research Division Paul Young: " Goldman Sachs Group, Inc., Research Division Lachlan Shaw: " UBS Investment Bank, Research Division Glyn Lawcock: " Barrenjoey Markets Pty Limited, Research Division Kaan Peker: " RBC Capital Markets, Research Division Ben Lyons: " Jarden Limited, Research Division Jonathon Sharp: " CLSA Limited, Research Division Mitch Ryan: " Jefferies LLC, Research Division Unknown Analyst: " Robert Stein: " CLSA Limited, Research Division Matthew Frydman: " MST Financial Services Pty Limited, Research Division Lyndon Fagan: " JPMorgan Chase & Co, Research Division Operator: Thank you for standing by, and welcome to Mineral Resources Analyst Call covering today's release of its September 2025 Exploration and Mining Activity Report. Your speakers today are Mark Wilson, Chief Financial Officer; and Chris Chong, General Manager, Investor Relations. A bit of admin before we kick off. [Operator Instructions] This call is being recorded with a written transcript being uploaded to the MinRes website later today. I will now hand over to the MinRes team. Mark Wilson: Thanks, Josh, and good morning, everyone. My name is Mark Wilson. I'm the CFO of Mineral Resources, and welcome to our quarterly call for September. In the office with me this morning, I have Chris Chong, Investor Relations. And today, we're joined on the line by our Chair, Malcolm Bundey. As usual, I'll first run through some highlights from the quarterly, which was released this morning, and then we'll be happy to take questions at the end. Beginning with the key highlights. I'm pleased to advise we've delivered another strong quarter across the business and as a result, confirm that we're on track for our volume and cost guidance for FY '26. Onslow Iron was a key highlight in the quarter. We shipped 8.6 million tonnes on a 100% basis in the quarter, which was a commendable performance from the team, noting that road upgrades were being conducted through almost all of the quarter. Project also operated at its full 35 million tonne per annum nameplate capacity between August and October, which, as announced this week, triggered a $200 million Morgan Stanley Infrastructure Partners payment, which we expect to receive in coming days. Securing that contingent payment is a strong financial outcome that rewards the operational excellence we're seeing at Onslow Iron. And I want to take a moment to thank the entire team for a huge effort to get us to that point. This range from the construction team to our approvals and heritage teams through the commodities and mining services teams. On the Board renewal front, Mel commenced as Chair on the first day of the quarter. We also announced the appointment of 2 new independent nonexecutive directors in the quarter, being Lawrie Tremaine and Ross Carroll. And after quarter end, we were pleased to advise the further appointments of Colin Moorhead and Susan Ferrier as independent nonexecutive directors. Turning to safety. The 12-month rolling TRIFR was 3.35, which was a 13% improvement quarter-on-quarter. That's a solid outcome and reflects less recordable injuries following the wind-down of construction activity at Onslow Iron. In terms of corporate, our liquidity remains strong and steady at $1.1 billion at 30 September, with net debt at $5.4 billion and importantly, net debt to EBITDA continuing to fall. I believe we're now past peak net debt, and we continue to see a clear pathway to deleveraging through the operations. As we've said previously, as Onslow Iron ramps up, our EBITDA is expected to increase, and our net debt to EBITDA will continue to decrease organically. The Onslow Iron carry loan, which to remind everyone, is the receivable from our JV partners for funding them into the project, is now being repaid with interest, with balance at the end of the quarter of $714 million. That's a decrease of over $50 million over the quarter despite some additional spend adding to the balance. Subject to commodity prices, we expect that balance to reduce more quickly in coming quarters. As foreshadowed during the quarter, we successfully refinanced our USD 700 million May '27 notes, extending the maturity out to April 31 at our lowest coupon rate of 7%. This represents the smallest spread over treasuries we've achieved, and I believe it reflects the bond market's understanding of our diversified business model and the improved quality of cash flows being generated in the business. In terms of Mining Services, quarterly production volumes were 81 million tonnes, steady over the prior quarter and notably representing growth of 19% year-on-year. Volumes were driven by the ramp-up of Onslow Iron to nameplate and were partially offset by reduced volumes at Mt Marion and a couple of the client sites. At Onslow Iron, we have -- sorry, we have incurred additional costs as a result of the use of contracted trucks, but we've also benefited from higher rates, which were designed to protect us through the first 15 months or so of operations. Those rates are now back to long-term rates. In terms of the broader market for mining services, third-party demand remains strong, and we see good growth opportunities with Onslow Iron being a great showcase of our capability. For Mining Services, we remain confident of hitting our guidance range of 305 million to 325 million tonnes for the year, implying 13% annualized growth. In terms of iron ore, total attributable shipments were 7.6 million tonnes over the quarter, up over -- sorry, up 30% over the quarter. The average quarterly realized price across both hubs was USD 90. That represented an 88% realization. We continue to see strong demand for our Onslow Iron product. I do, however, want to point out that realizations at our Pilbara hub are likely to reduce over the next 2 quarters as the contribution of ore from One Mana decreases ahead of Lamb Creek's ramp-up in Q4. As I flagged last quarter, with iron ore prices solid and the curve relatively flat, we've prudently hedged out about 1/3 of production to the end of calendar year '25, given the first half weighting of CapEx. We're currently assessing our strategy for the next calendar year. In terms of iron ore at Onslow, as I said, team is delivering excellent performance there. We've loaded 44 oceangoing vessels this quarter. And as of today, we've loaded a total of 136 vessels, and continue to be very pleased with the way the transshippers are performing. We have had an issue with the bouruster of one of the transshippers since the 7th of October, which means that for the last 3 weeks, we've been operating with 4. That bouruster is being repaired and expected to be back online early next week. Sixth transshipper was launched from China in the quarter, and we expect it to be commissioned by around June next year, as we flagged previously. Over the quarter, we had 202 -- on average, 202 road trains operating, 118 of the MinRes jumbo trucks, and 85 contractors with over 31,800 trips to port completed. With the private haul road upgrade completed, we're now operating unconstrained at normal speeds, and all the contracted road trains are now solely using our road. We do have the full fleet of jumbo road trains on site, and we're progressively reducing the number of contracted trucks being utilized in line with contract arrangements. We'll be able to continue to operate at the 35 million tonne per annum nameplate rate, but do expect some seasonality impacts through the typical cyclone season from November through to April. On the costs at Onslow, I've said previously that I feel like we have a pretty good grip on those. They came in -- the costs came in at $54 a tonne at the bottom end of guidance. And just confirming there were no capitalized operating costs as we had declared commercial production from 30 June. In terms of the Pilbara Hub, we shipped a total of 2.7 million tonnes, which was another strong quarter. PB costs came in at $83 a tonne, reflecting a higher contribution from Iron Valley. We do expect those hub costs to fall back within guidance over the year as we transition from One Mana to the lower-cost Lamb Creek operation in the second half. Turning to lithium. The lithium pillar continued the strong operational performance we've reported over recent quarters. Production across Mt Marion and Wodgina was 137,000 dry metric tonnes on an SC6 equivalent basis, with sales of 142,000 tonnes SE6. That's up 23% quarter-on-quarter. Average realized quarterly prices across both sites was USD 849 dry metric tonne on SE6 equivalent basis. That's up 32%. Wodgina delivered sales of -- sorry, 88,000 kilotonnes of SE6. That was helped by a ship that was scheduled for June slipping into early July. Production was up 6%, driven by improved recoveries of 67%. That followed the plant improvements that I mentioned last quarter, including the successful commissioning of high-intensity conditioning dewatering cyclones on the second and third processing trains, which is now complete. We achieved a FOB cost for Wodgina, SE6 equivalent basis of $733 per tonne. I just want to point out that we expect that cost number to rise in the second half. Essentially, we're moving from higher or upper levels of Stage 3 down. And as we do that, we're feeding ore that we'll see a little bit more dilution and lower recoveries through the plant, but we will then get to deeper and higher quality ore. In terms of Marion, Q1 sales were 55,000 on an SC6 equivalent basis, in line with the prior quarter, the cost coming in at $796 a tonne. Those costs are lower than guidance. And again, I just want to point out that we expect them to rise in the second half. We're transitioning from the central pit to the north pit. So the grade changes and the mining costs increase. Finally, to finish with energy, we did receive an independent resource certification for the Lockyer-6 well in October, post-quarter end, and we've now received $41 million for that as a final payment under that arrangement with Hamrock. Having completed those comments, I'm now happy to hand back to Josh to queue questions. Thanks. Operator: [Operator Instructions] Our first question today comes from Rahul Anand from Morgan Stanley. Rahul Anand: Look, I've got 2 questions. Firstly, in terms of Mining Services, you did talk about the 15-month rates coming off and the rates being lower. But then I guess, to offset that, you do have contractors going off the road. And I understand year-on-year, there's going to be a bit of a lower margin in terms of EBITDA per tonne. But how should we think about that margin progressing into next year? And how should we basically square the circle of these 2, I guess, opposing forces for the margin side of things? And I'll come back with the second. Mark Wilson: Yes. Thanks, Rahul. We generally talk in terms of the $2 a tonne number, and we said that we think that's a reasonable guide going forward. There is a little bit of up and down in the first half with the movements that you've described. We do get the benefit from that additional rate through the first quarter. So it might be a little bit up and down. But yes, generally, $2 over the year still seems right for us. Rahul Anand: And then, look, I just wanted to touch upon the lithium business. Obviously, very strong performance this period. And I guess the market is there to be able to supply as well. Two quick ones there are just around -- is there potential to sweat the assets a bit harder to kind of make use of this strong market in terms of volumes? And then any sort of progress update on that lithium business potential sale, as well, that's previously been talked about? Mark Wilson: I think that makes 3 questions in total role, but I'll answer them both. In terms of the lithium, we're very pleased with the way that business is performing. It's been performing well for quite some time now. We have pulled back on production, as we've said previously, we're running Mt Marion a little bit slower. And Wodgina, we're running a little bit over 2 trains on average over the period. We can push that third train on with relatively short notice when we choose to do so. But what we've said is that we won't be at clean ore to be able to feed 3 trains consistently until around November -- around this time next year. So there is capacity to go harder. We don't have any plans to push it harder at this point. In terms of any sort of process around lithium, I'm not going to comment specifically on lithium as such. What I will say is that Chairman in his letter to shareholders expressly referenced a willingness to consider inorganic deleveraging, and you should assume that's something that we're continuing to do. As we've said before, we've got a history of doing that. We've been doing that for the last 5, 7 years, and we'll continue to evaluate options. Operator: Our next question comes from Paul Young from Goldman Sachs. Paul Young: First of all, really strong operating performance. So well done on a good quarter. First question is on Onslow and with respect to actually costs, which were really, really good considering you're still running the contractor fleet. But I noticed the strip ratio was really low, only 0.3:1. So as you unwind the contractors, you're going to benefit there. But just on the strip ratio, maybe just over the near to medium term, how are you seeing that profile? Mark Wilson: Yes. So I just want to make it clear. Thanks, Paul. Nice to talk. Just want to make it clear for everybody. Those contractor costs don't come through that fog number. Those contractor costs sit in the mining services business because they have a mining services business has effectively a mine-to-ship contract. So the MineCo, Onslow Iron enjoys the benefit of a fixed price contract. And so that number of 54 reflects that price. So those costs have effectively reduced the margin in Mining Services, albeit, as I said earlier, offset by higher rates. So hopefully, that clarifies that. In terms of the strip, it is true that the strip at Onslow is low. It will revert in the short to medium term to 0.6. We are actually pulling tonnes now from Upper Cane, which actually has a strip of 0.1. So we expect to see low cost going forward, and we don't see upward pressure on that $54 into future quarters. Yes, we still think we'll be between guidance of 54 to 59. Paul Young: And second question, just on the hedging strategy, which has been great so far. I mean you hedged at 30 volumes at the end of the year. The market is tight. You can see that through your realizations. What is the hedging strategy next year? I know you said you're assessing it, but I would have thought that it'd be pretty compelling to hedge more at -- under the current structure into next year? Mark Wilson: Yes. We are considering it. There are a range of considerations that we're weighing up. We actually have locked a few tonnes away in January. We're using the same sorts of structures, zero cost collars with a floor -- the ones this year -- this calendar year, between a floor of 100 to 101 and a cap of around 106 to 108. We can get probably slightly better numbers in January, which we have in place for a small number of tonnes. We're looking at now extending that out. The market has moved a little bit over the last week, as you know. So it's something we're watching closely. But it is attractive at these prices, particularly as we move through this deleveraging phase. Operator: Our next question comes from Lachlan Shaw from UBS. Lachlan Shaw: So 2 from me. I suppose I just wanted to check with Onslow. So the August run rate, 38 -- in excess of 38 million tonnes per annum. And obviously, TSB 6 arrives within sort of 12 months. Just interested in how you're thinking about the ability of the asset to sort of sweat or push above that 35 million tonne per annum run rate sort of post '26. And I'll come back with my second question. Mark Wilson: Thanks, Lachlan. We're very pleased with the way the assets performed or the projects performed over the quarter. We have benefited from comparatively calm weather through the period. We have lost a number of days, but this is a quarter we would expect to do well. As you would expect from us, we're constantly looking at ways that we can improve productivity. We're searching for minutes literally in every aspect of the operation. What we've said consistently is the sixth transshipper should give us the capacity to go to 38 million tonnes per annum. We are trialing and have been trying for the last month or 2 channel passing of our transshippers, and we see the potential to possibly increase throughput by another 5% as a result. But we'll -- possibly, we'll see how we go through -- we'll continue running those trials over the coming months. But I think the headline number that we've got to remains unchanged that we see us getting up to 38 million with the sixth transshipper. Lachlan Shaw: And look, my second question, so just on the lithium side of the business and the MineCo, and obviously, reports around and being open to, I suppose, capital recycling. But I wanted to ask, can you help us understand -- I mean, how do you think about this business, and I suppose the optionality embedded in being exposed to the potential for fly-up pricing in lithium, there will be another cycle. We know that, versus obviously, a key motivation for doing or looking at this sort of transaction will be at the gear. But can you help us understand how you think about -- I mean, how do you sort of weigh all that up? Because I do know, obviously, spot prices are looking better. You're realizing a better price this quarter, and perhaps things are looking a little better into next year. So just interested in how the business thinks about those trade-offs. Mark Wilson: So what I'll say is I'll just repeat, Chairman's expressed very clearly an intention to consider inorganic deleveraging. Management is assessing a whole range of different possibilities. You should assume that anything we do on any of the assets, we will only transact if we see real value there. So we don't need to do a transaction today. We're really pleased with the way the business is performing. We're pleased with the cash it's generating. We can see that, as I said earlier, that clear line of sight to deleveraging through the performance of the business. Just to emphasize, we won't do anything unless we can see very strong value, both financial and strategic for doing something. I don't know that I can say much more than that. Operator: Our next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just if you could maybe help a little bit on the realizations for iron ore, 85% of Pilbara and 90% at Onslow. How much of that was due to the hedging you put in place? And just how much is that maybe quality as you start pushing Onslow because it was -- you were getting more like 80% realization? Mark Wilson: Yes. So Glynn, almost no impact from the hedging. We had maybe a couple of percentage points impact through prior period adjustments, but not substantial. Really, what we've seen is the whole market has tightened in terms of low-grade discounts over the quarter. There's been a shortage of supply into China, and we're seeing as the mills become more familiar with the Onslow product and figure out how to blend and optimize it through the plant, continuing to see very strong demand for that product. And really, they would take as much as we could give them. So very pleased with the way that's performed. But as you pointed out, even in the Central Pilbara, the discount has been tighter. So I think that's reflected in general market conditions. And we're seeing that continue into the early stages of this quarter. Glyn Lawcock: And then maybe just any update you can provide on discussions with the Pilbara Port Authority over the dispute on charges for Onslow? Mark Wilson: We've got a great relationship with the Port Authority. We work with them in a number of areas. I can't comment specifically on that matter because it's before the courts. Operator: Our next question is from Kaan Peker from RBC. Kaan Peker: Just on the parallel channel passing, just wanted to get an understanding of how the trials have gone. What needs to be seen to be rolled out? And why only 5% upside in capacity? A bit more detail around that? And I'll circle back with a second. Mark Wilson: Thanks, Kaan. The trials are performing well. We have to trial with each of the vessels. We have to trial with the different shifts. We have to trial with day and night. We have to trial with the different crews. So there's a whole number of elements that need to be trialed over a period of time. We're also working with the Chevron vessels passing in the channel and so on. So it just -- it's a process that we've agreed with the port authority. It takes time over a period of months. In terms of the 5%, we've modeled it out. We're taking a view. We can't assume that we can do that for every movement of the transhippers. So to get to that number, we've taken a view on the percentage to see how frequently we can utilize that opportunity. Kaan Peker: And then maybe the commentary around flotation at Mt Marion. You've sort of mentioned it before, but I think it's the first time seen a date of 1Q '27. Just wondering the CapEx for that and if that's been included in FY '26 guidance. Mark Wilson: In terms of the float, that's something we're still studying. So we're doing some -- we are doing a little bit of design work on it, design engineering work. We're working with our joint venture partners to understand what that looks like. But the actual work itself is not underway. When I say the work itself, the construction, we haven't taken a decision to do that. That's something that we'll talk with the Board about and with our JV partner about as we work through our updated capital allocation framework. Operator: Our next question comes from Ben Lyons from Jarden Securities Limited. Ben Lyons: First question, just on Onslow. Congratulations on a very strong quarter, obviously. And I understand your comments around the channel passing trials, et cetera. Just specifically on one of the transshippers, though, Montebello doesn't appear to have moved since very early in the month of October. So just wondering if there's any maintenance issues or operating issues or crew availability or whether you just don't have sufficient capacity to run all of those transshippers simultaneously at present. Mark Wilson: The Mondi is the vessel that I was referencing earlier when I said that one of the transshippers had a bowruster issue. So the portside bowruster was lost in operation. And just to be prudent, we basically moor it up whilst we repair it. And that's down from the 7th of October. As I said, we expect it to be back in service early next week. So it's not a capacity issue or anything like that. It's just an unplanned maintenance. Ben Lyons: Apologies, I did miss the first part of the call. And this one might have already been asked as well, but just on the iron ore hedging, just whether you've disclosed the rough pricing you've hedged away that sort of 33% of volumes for fiscal '26. Mark Wilson: Yes, no problem. One of the things I said earlier, and you might have missed it, was that we've only hedged out through calendar '25. So we haven't hedged the full financial year. We're actually waiting to see and understand better the impact of the change to the 61% index. So we've hedged the third out to the end of December. We've done that with a series of 0-cost collars with a floor of somewhere between 100 and 101 and a cap of $106 to 108. We've also got a few 0-cost forward sales, $102 to 105. So that's out to December. I also said that we've been able to hedge just a small volume of tonnes into January, and we're just reassessing what we might do through that first quarter next calendar year. Operator: Our next question comes from John Sharp from CLSA. Jonathon Sharp: Chris, congratulations on the ramp-up of Onslow, quite impressive results. And just the first question there around that, and a similar question to Lockheed sweating the assets, but more to do with the road trains. You've said that you're confident that you'll maintain the 35 million tonnes per annum as contractors come off. But are there any improvements that you see there with the road trains, whether it's cycle times, loading of trucks, anything that you're seeing there where you can improve? Or is that not a concern because maybe the transshippers are more of the concern? Mark Wilson: I think we've been consistent in saying that ultimately, the transshippers are the bottleneck. We did have some inefficiencies through that first quarter just because of the use of the public road at times, the use of large numbers of contracted trucks, which impact productivity when they're unloading, and so on. So we expect to see greater efficiency over the coming months, but we don't see the haulage as being the constraint. Jonathon Sharp: And just a question on the progress towards autonomous haulage. Can you just give us an update there? Is there any regulatory sort of certification that needs to be done, or anything to update us on there? Mark Wilson: Thanks, John. The benefit -- or one of the benefits of having the road upgrade completed is now that we can move back to trialing of the autonomy, which is now underway. So we are trialing a number of trucks with the autonomy. That's a process that we said is going to take some time. We need to collect all the data and do the analysis, and working closely with the regulator to satisfy ourselves and then the state of those systems. So we've said that that's going to be a second half of next year sort of thing before we can really know with certainty how it's tracking. But at this point, we're still very confident in terms of how it's shaping up. Operator: The next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Just wondering on within the lithium business, if I look at on an SC6 basis, there was a divergence between the ASP at Mt Marion and Wodgina. Can you help us understand this, please? Mark Wilson: Sure, Mitch. So a couple of things I'd point out. We're very, very happy with the price performance, in particular of Wodgina. And so we sell on spot. And obviously, in part, it depends on timing of sales and cargoes and the like. But I'd say that Wodgina's sales performance has been very strong through the quarter. So I think that, that delta between the 2 is possibly exaggerated to an extent by that. And the demand for that Wodgina product continues to be very strong, reflecting of the grade that we put through there. Marion, we tend to sell as a parcel with a combination of the higher grade and the lower grade. And so historically, the difference between the 2 has been about 5%. This quarter, it's 10%. I'd say it's in part due to the strength of the performance of Wodgina. There is a 10% discount applied to the S3 product, the 3.5. Mitch Ryan: And then staying at Marion, total tonnes mined were down materially quarter-on-quarter. How do we think about strip ratios and material movements in the mine plan going forward? Mark Wilson: Yes, it's a good pickup and consistent with what we're saying -- one of the benefits of Marion is we operate out of a number of pits. So we don't just have a single pit. So you shouldn't be -- and you haven't suggested this, but I'm talking about the market generally. I shouldn't be worried that we're high-grading or anything like that. We're just reshuffling, resequencing our mine planning. And you're right, we were able to benefit from lower strip at Marion through the quarter. And we did that in part to help manage CapEx. We've said before that we're conscious about the way that we're managing our capital through the business. And so we are going to sequence back to higher strip pits, and the life of mine average at Marion is 10 to 11. So that's one of the reasons why I called out costs going up in the second half as we do that. But just to emphasize, we still see costs for the year falling within guidance. Operator: Our next question comes from [ Hayden Burlow ] from [indiscernible]. Unknown Analyst: Really good result. Just a couple of questions from me. Mark, just on mining services. Just keen to get your sort of thoughts on external volumes and whether that you see some opportunities to grow, I guess, more into next year than this year, but just keen to see where that's at. And also in the Pilbara Hub, do we assume then lower volumes in this in the next quarter, just as you transition and get Lamb Creek going in Q4? Mark Wilson: In terms of the first question, mining services, as I said, I think the external market, the demand for the services is strong. The industry is generally strong with the others in the industry, not that we have any true competitors the way we operate, but others are focused on gold. We see significant pipeline of opportunity into calendar year '26 and beyond. So very comfortable with the outlook and prospects for that business. In terms of the volumes out of the Central Pilbara, it's more a shift between the mines. As the market understands, one of the challenges with the Iron Valley product, even though it's a great product, it's very high. And so we do need to blend it. Wonmana is there, but the grades are falling. And so that's one of the reasons why I called out lower realizations over the next 2 quarters as we do that blending with reducing grades before we get Lamb Creek on. And then Lamb Creek, we'll see the grade stabilize and the blended grade stabilize. It will also see the cost improve because of the strip is quite low. Operator: Our next question comes from Robert Stein from Macquarie. Robert Stein: Quick one on just CapEx, the $400 million. I assume that's front-end weighted into the first half of the year, and obviously, because guidance is still intact that we can expect a slower second half run rate? And I've got a follow-up. Mark Wilson: Rob, yes, that's an accurate assessment. Robert Stein: And then secondly, just the Hancock payment. So the $41 million that was results to date, the issue with the well being capped basically getting another drill rig back on site, and then the other remaining part of the contingent consideration is still accessible once you're able to access or drill that -- the second part of the well? Mark Wilson: No. So the Hancock arrangements now concluded with that payment of $41 million. The well that we referenced in the quarterly was another exploration well, and we weren't able to determine commercial volume to be able to take it to production. So we've got a program of drilling planned with Hancock. They're going to drill some material for opportunity for themselves, and JV will do some work over the coming months, but we have no intention to go back to that well. Operator: Our next question comes from Lyndon Fagan from JPMorgan. Our next caller is Matthew Frydman from MST Financial. Matthew Frydman: A couple of questions on mining services, please. Firstly, you mentioned in the release a bit of a reduction in third-party or client contract volumes. That sounded pretty minor. But is there anything you can do to quantify the drivers there, or whether that's a temporary or lasting impact? Mark Wilson: Yes. Happy to explain that a little bit better. We had an external site finish last quarter, and we had a new one start this quarter, and they didn't balance out. We did more volume with the terminating contract and the new contract through its start-up phase. So that's a timing thing. And then we had 1 or 2 sites where the client wasn't able to provide us with the sort of volumes that we would normally expect. But again, not significant in any sense. So just a temporary thing, I think best described as. Matthew Frydman: And then maybe following up on Hayden's earlier question, just, I guess, trying to quantify the next opportunity in mining services. I mean simple maths will tell us that even to grow volumes by a fairly modest 10%, it needs to be a 35 million tonne per annum contract. So what does the next opportunity in mining services look like? Is it partnering on more onslowsized developments? And I guess what sort of timeline do you expect in terms of yes, achieving some of those opportunities? Mark Wilson: I think you've identified that -- I mean, the business has got a fantastic track record of growth over many years. And I think you've identified one of the challenges, which is to continue to support that sort of growth rate for a number of years into the future. So it is something we talk about internally. We do think about how we allocate resources. We've got -- we do have -- we've got a wonderful team, but we've got a certain number of people. We need to make sure they're pointed to the right opportunities. And so we need to work with management and with the Board to make sure we're thinking about that capital need going forward. I can't talk about specifics as you would appreciate. But what I would say is that the market better understands the capabilities of that business as a result of the success of Onslow, and I'll probably leave it at that. Operator: We're going to try Lyndon Fagan again. Lyndon Fagan: Look, just wanted to check in again on Wodgina Train 3. I'm not sure if this got covered off, but given a better outlook for the market, what do you need to see to ramp it up? Mark Wilson: So the answer is that we've sought to be disciplined with supply. We have pulled volume out of the market. We do run that third train from time to time. We haven't set a hard number as such. We obviously track the market every day with the calls that we're making around sales. So we've got a pretty good view and feel for the market and what that outlook looks like in the short term. It's a JV asset as well. So any decision that we take around that needs to take into account the views of Albemarle. What I would say is we still -- we're holding to the guidance for this year. I think that's the best way to put it in terms of where we think sales production will be. Lyndon Fagan: And I guess if you decided at the end of this year, the market outlook was sufficient to bring it on, when -- how quickly could you go from that decision to Train 3 at nameplate across the whole operation? Mark Wilson: I think one of the interesting parts about that question is it highlights the optionality that sits inside the business generally. Specifically with respect to Train 3, we can turn that on overnight, and we can produce. In terms of having clean, consistent feed to support all 3 trains, that will be 12 months from now. We would be able to deliver production from 3 trains next week. But what we would see would be recoveries would fall, costs would be a little bit higher because we'd be dealing with more contact ore, and we'd have some dilution impacts on the plant. So on the mining and through the plant. So it's a choice that's available, but to get to nameplate with clean ore is going to be 12 months. Operator: [Operator Instructions] Our next question comes from Lachlan Shaw from UBS. Lachlan Shaw: Just a couple quick ones. So firstly, great result with the recent debt refinance. I'm just wondering, though, corporate spreads are pretty tight right now. You might be tempted to go early again on the next bond due November 27. Mark Wilson: We were very pleased with the market reaction when we came to market. There was a lot of appetite both out of Asia and out of the U.S. The bond -- the next bond has a call premium of $1.04 effectively. So it's a little bit expensive to go now. That will step down shortly. It's a broader conversation in terms of how we think about the capital stack and what we're doing. So we don't have any hard plans to go, but that's an option we're continuing to monitor. Lachlan Shaw: And then just a final one from me. So obviously, the haul road Donslow repair is complete, a really good outcome. As we're coming into the wet season and you sort of look at how that's all gone, are you comfortable that the sort of the risk areas along the road in terms of river crossings and potential for ling water to impact? Are you comfortable that's all being sufficiently addressed, and you've now got pretty reliable and resilient pathway through the wet season? Mark Wilson: One of the benefits of the somewhat painful experience earlier this year was that we got a better understanding of where the water sat and how it moves live as opposed to the modeling. And so you can assume that we've studied that. We've worked with that, and we've tried to address that in the work that we've done through that period up to September. So yes, I'm confident that the team has done that work. Operator: Our next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Previously, you had disclosed plans to take Onslow well beyond 35 million towards 50 million tonnes with the deleveraging in sight. Is there any information to dust those plans off? Or what would you need to see to dust those plans? Mark Wilson: Mitch, thanks for the question. We're not changing our position. We see a potential to go to 38 with the sixth transhipper. We know that there's a huge amount of resource out there, but there's also a lot of work that will be needed to be done both on the resource and on port infrastructure to go materially higher. So that's something you can assume that we're talking about because we always have the medium to long term in mind. But for the short to medium term, there's no plans to change what we're saying. Mitch Ryan: And just with regards to the study of reintroducing float at Mt Marion, does that potentially use the existing float equipment there? Or will it need new equipment? Mark Wilson: There's potential to reuse some of it, but it will be largely new. And just we've talked about it a little bit today. Yes, the benefits of the float are clear in the sense that it would allow us to have a single product, and it should take -- subject to what the study -- final study says, we estimate it could take up to $100 a tonne out of the all-in sustaining cost of the operations. But ultimately, it's a capital investment decision. We have to take that through management and through the Board once we finish our analysis. Operator: There are no further questions. That concludes today's call. Thank you for your time, and have a great day. Please reach out to the MinRes team if you have any follow-up questions. 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.]
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.
Benjamin Poh: Good morning. Ladies and gentlemen, this is Ben Poh, the Head of Investor Relations at ASMPT. And today, I'll be moderating the call for the first time. On behalf of ASMPT Limited, welcome to our third quarter 2025 investor conference call. Thank you all for your interest and continued support. [Operator Instructions] During the Q&A session priority will be given to the covering analyst. Before we start, let me go through our disclaimer. Please note that there may be forward-looking statements about the company's business and finances during this call. Such forward-looking statements could involve known and unknown uncertainties and risks that could cause actual results, performance and events to differ materially from those expressed or implied during this conference call. On the call, unless stated otherwise, all references to gross profit or margin, operating profit, segment profit and net profit are on adjusted basis as described in our MD&A. For your reference, the Investor Relations presentation on our recent results is available on our website. On today's call, we have the Group Chief Executive Officer, Mr. Robin Ng; and the Group Chief Financial Officer, Ms. Katie Xu. Robin will cover the group's key highlights for the third quarter, guidance and outlook for the next quarter, while Katie will provide details on the financial performance for the third quarter. Now I will hand it over to our Group Chief Executive Officer, Robin. Cher Ng: Thank you, Benjamin. Good morning and good evening to everyone today. It is a pleasure to have you all on our earnings conference call for the third quarter of 2025. Now let's start with the key highlights of the third quarter. This quarter, we continue to experience strong momentum driven by AI. The group's Advanced Packaging and mainstream businesses continued to benefit from sustained AI adoption. The group's strong Advanced Packaging momentum has been driven by Thermo-Compression Bonding or TCB. We remain dominant in advanced logic, have made rapid inroads into high-bandwidth memory or HBM and more recently have a first mover advantage in HBM4. At the same time, AI infrastructure comprising data centers, data transmission and power management contributed to demand in the mainstream business. In China, demand was also driven by EV and high factory utilization across OSATs. Now let me talk about our technology leadership in TCB. We have further solidified our leadership in HBM. The group's HBM TCB solution have achieved better yields versus the competition. And as I said above, we are leading in the transition to HBM4. In addition, our proprietary fluxless active oxide removal technology provides superior scalability for HBM 16-high and above with the lowest cost of transition. In logic, the group's ultrafine pitch TCB for chip-to-wafer with plasma AOR solution has successfully passed final qualifications for quality and reliability at a leading foundry and is ready for high-volume manufacturing. Notably, plasma-based technology has been endorsed by this leading foundry, underscoring this technological advantage over other processes. Turning to TCB orders. Encouragingly, the group achieved recurring orders from both memory and logic customers in the third quarter. In memory, our TCB solutions for HBM4 12-high became the first to secure orders from multiple HBM players. We expect to remain as a primary supplier, demonstrating our technology leadership in the rapid transition to HBM4. In logic, the group continued to win orders as a process of record for chip-to-substrate applications for key customers. As the market transition to a larger compound dies, we are well positioned to secure sizable orders in Q4 2025 and beyond from the OSAT partners of a leading foundry. As a business, we remain confident in the outlook for TCB demand. As to the other updates, in hybrid bonding, the group continued to ship hybrid bonding tools in Q3 2025. Our second-generation hybrid bonding solutions are competitive in alignment precision, bonding accuracy, footprint efficiency and units per hour. In photonics, we continue to dominate the optical transceiver market, reinforcing our leadership as a key supplier of 800G transceivers while also actively engaging industry players on next-generation 1.6T photonics solutions. Moving to SMT. Bookings were better than expected in the third quarter, demonstrating signs of recovery in the business. SMT's AP solutions achieved strong bookings year-on-year growth in the third quarter and won sizable Systems-in-Package orders from IDMs and OSATs for RF modules for base station to support AI growth. SMT also continued to win orders for the next-generation chip [ SMT 2 ] in advanced logic smartphone applications from a leading foundry and OSAT partners -- and OSAT players. In our mainstream SMT business, the demand came mainly from EVs where we remain a leading player in China. Before I conclude this section, I want to highlight that we have delivered a profitable quarter, excluding the strategic restructuring costs from the voluntary liquidation of the Shenzhen AEC plant as announced in August. The decision was made to optimize the group's global supply chain to better align with the evolving market dynamics and customer needs. As said in the announcement, this move is expected to improve the cost competitiveness, agility and resilience of the group's global manufacturing operation for its key products and solutions. With those highlights, let me now pass over the time to Katie, who will talk about our group and segment performance. Yifan Xu: Thank you, Robin. Good morning, and good evening, everyone. Let me take you through the group financials. This slide covers the group's key financial metrics for the third quarter of 2025. The group delivered revenue of USD 468.0 million, representing an increase of 7.6% quarter-on-quarter and 9.5% year-on-year, largely driven by growth in SMT. In third quarter, the group recorded bookings of USD 462.5 million, driven by AI momentum. We recorded recurring TCV orders in memory and logic and SMT bookings were also better than expected. This marks the sixth consecutive quarter that we have achieved year-on-year growth. The group had an isolated bookings cancellation in the third quarter for its panel deposition tools from a leading high-density substrate manufacturer in response to a slower-than-expected digestion of its existing capacity. This is a one-off occurrence. And excluding this cancellation, the group's bookings in the third quarter would have been USD 486.6 million, 1.5% higher quarter-on-quarter and 20.1% higher year-on-year. The group achieved a book-to-bill ratio of 1.04 for the quarter, maintaining a ratio above 1 since Q1 2025. SMT posted a robust ratio of 1.12, while SEMI's ratio was at 0.96. The group closed the quarter with a backlog of USD 867.7 million. The group's adjusted gross margin for the third quarter was 37.7%, which is lower than our typical level. It was impacted by a larger contribution from SMT and the lower SEMI gross margin, which I will explain in the next slide. I would like to note that the group's year-to-date adjusted gross margin remained healthy at approximately 40%. The group's operating expenses were up 6.2% Q-on-Q and 5.3% year-on-year. As expected, higher OpEx was largely due to strategic R&D and infrastructure investments and foreign exchange impact. They were partially offset by prudent spending control and some benefits from restructuring. The group's adjusted operating profit was HKD 124.4 million, down 26.6% quarter-on-quarter and 30.3% year-on-year due to lower gross margin and higher operating expenses. Group adjusted net profit was HKD 101.9 million, down 24.4% quarter-on-quarter, but up 245.2% year-on-year. The quarter-on-quarter adjusted net profit, which included the fee collected from the order cancellation mentioned above was offset by the absence of tax credits recorded in the previous quarter. The year-on-year increase in adjusted net profit was driven by the fee collected from the order cancellation and a lesser negative impact from foreign exchange. The adjusted earnings per share was HKD 0.24. Now moving on to the Semiconductor Solutions segment for the third quarter of 2025. SEMI's revenue was USD 240.5 million, down 6.5% quarter-on-quarter, but up 5.0% year-on-year. The year-on-year revenue increase was driven by stronger demand for wire bonders and die bonders due to the increased needs for power management across multiple applications. Quarter-on-quarter revenue decline was due to the timing of key customers' AI technology road maps, which impacted AP demand this quarter. There was also some shipment disruption caused by a typhoon in September in China. SEMI's bookings of USD 207.8 million were down by 1.7% quarter-on-quarter and 12.4% year-on-year. Excluding the booking cancellation explained above, SEMI's Q3 2025 bookings would have been USD 231.9 million, 9.6% higher quarter-on-quarter and slightly lower year-on-year. SEMI recorded quarter-on-quarter and year-on-year growth in wire bonders and die bonders. TCB orders were up quarter-on-quarter but remained at a lower level due to the impact on AP demand, as mentioned above. As I said earlier, SEMI's adjusted gross margin was lower than normal at 41.3% for Q3 2025. Q-on-Q decline was due to a higher contribution from wire bonders, lower TCB revenue and a relatively lower manufacturing utilization in Q3 2025. Year-on-year decline was due to high base effect from TCB manufacturing ramp in Q3 2024 and a higher contribution from wire bonders this quarter. Encouragingly, year-to-date SEMI adjusted gross margin has stayed in the mid-40s and AP margins have remained stable. SEMI adjusted segment profit was HKD 82.6 million in Q3 2025, down 52.8% quarter-on-quarter and 41.5% year-on-year, mainly due to lower gross margin and higher operating expenses, as mentioned in the previous slide. Next, the SMT Solutions segment of our business. SMT delivered strong revenue of USD 227.5 million, up 28% quarter-on-quarter and 14.6% year-on-year. This was due to a robust performance in Asian markets driven by AI servers, EVs in China and the delivery of a smartphone bulk order booked in the previous quarter. However, contributions from automotive outside China and industrial remained soft. SMT registered Q3 2025 bookings of USD 254.7 million, down 5% quarter-on-quarter, but up 51.8% year-on-year. Marginally lower quarter-on-quarter bookings were due to a high base effect from the Q2 smartphone bulk order, while the year-on-year increase was driven by strong momentum across both AP and the China mainstream markets. AP bookings were supported by demand from IDMs and OSATs for telecom base stations and AI servers. China's mainstream business recorded strong year-on-year growth due to demand from EVs. SMT delivered a gross margin of 33.9% this quarter, up 136 basis points quarter-on-quarter and 163 basis points year-on-year. And segment profit was HKD 163.0 million, up 205% quarter-on-quarter and 65.6% year-on-year. Both were driven by higher volume effects. With that, let me now pass the time back to Robin for Q4 revenue guidance. Cher Ng: Thank you, Katie. Now to Q4 revenue guidance. The group expects Q4 2025 revenue to be between USD 470 million and USD 530 million. This is up by 6.8% quarter-on-quarter and 14.3% year-on-year at the midpoint, which is above market consensus. This growth will be supported by momentum in both SEMI and SMT. Looking ahead, the group's TCB TAM projection has a potential to go beyond USD 1 billion in 2027, supported by recent news about investments in the AI ecosystem. AI data centers will continue to drive demand for AP, particularly TCB for HBM4 and advanced logic where the group has technology leadership. The group's mainstream business will be supported by global investment in AI infrastructure and stable demand from China, while visibility for automotive and industrial end markets recovery remains low. While the group has not experienced any material impact from tariff policies, it acknowledges that uncertainties remain. The group's global presence will provide flexibility to navigate any potential impact, and we will continue to monitor the situation closely and adapt as needed. This concludes our third quarter 2025 presentation. Thank you, and we're now ready for Q&A. Let me pass the time back to Ben to facilitate. Benjamin Poh: Thank you, Rob. [Operator Instructions] With that, may I request Gokul to unmute. Gokul Hariharan: First question I had is on the HBM4 commentary from you, Robin. And you mentioned that you are leading this transition to HBM4. Could you explain a little bit more what exactly that is indicating? Do you think that you would have higher market share in HPM4-based TCB compared to the incumbent Korean vendor? And also your updated view on when does the fluxless TCB insertion happen for HBM? Is it happening for HBM4 or we are waiting for HBM4E for this migration to happen? Cher Ng: Gokul, have you finished? Gokul Hariharan: Yes, that's my first question. Cher Ng: I think the question is on the HBM4, right? Benjamin Poh: Leading transition to HBM4. Cher Ng: That's right. Yes, I think as mentioned in our MD&A, we believe we have established ourselves as a primary supplier for the HBM4 market. I mean we have a conviction because we have won -- we are probably the first to have won the HBM4 orders for not just 1, but 2 major HBM players. Now I think the second question is on fluxless. We believe that there is point as the industry continue to stack higher and higher and move from HBM4 to [ 4E to 5 ], in our opinion, it's quite inevitable that they have to move to a fluxless solution because the number of IOs will continue to increase, the pitch will probably narrow down, the chip gap will get smaller. So all this means that fluxless will be a better solution compared to a flux-based TCB solution. Gokul Hariharan: So just to clarify, Robin when you talk about 2 HBM vendors, does it include the biggest market share player? Because I thought they are still using the incumbent vendor, right? Cher Ng: Yes, of course, of course, as we said, we have won orders from 2 of the 3. So definitely, yes, we are talking to the leading one. Gokul Hariharan: Got it. Understood. Also maybe next question is, I think you observed some pause in AP and TCB in Q3. What is the reason for that? And given your guidance for 7% Q-on-Q growth for Q4, could you talk a little bit about how SEMI's overall and TCB within that will be growing? That would be outgrowing that 7% or it will be growing slower than the 7%? Cher Ng: I think in terms of when we talk about pause, actually, it's really largely driven by the timing of key customers' technology road map, right? So we are confident that when they launch the new architecture, we will get the orders. So it's a matter of timing in our opinion. So TCB demand, whether in terms of booking or billing will actually align with this timing as far as concerned. So it tends to be a bit lumpy, yes. Gokul Hariharan: Is that more about logic? Or is it more about HBM? And also any indications on like segment-wise too, how are we thinking? Cher Ng: Gokul, I would say both because the technology road map will drive both HBM as well as on the logic side as well. Yes. Gokul Hariharan: Okay. And Q4, any thoughts? Cher Ng: I think in terms of, if you are alluding to booking, maybe it's time for me to give you some color on booking for Q4, right? I'm sure this question will pop up during the conference call as well. Now the way we look at Q4 booking color on the group-wise in Q4, group-wise booking in Q4, we expect our bookings to be kind of flattish compared to Q3 reported number of -- Q3 reported number was USD 462 million. So going forward in Q4, we expect that to be kind of flattish on a group basis. However, we do expect that this Q4 booking for the group will be the seventh consecutive quarter of year-on-year booking growth since Q2 2024. So it's encouraging to note that we have been growing our bookings for 7 consecutive quarters. And I think Gokul, encouragingly we see SEMI bookings are expected to increase by mid-teens Q-on-Q mainly due to TCB. So I'd say Q-on-Q mid-teens and still comparing against the reported number, right? So that's for the SEMI bookings, expected to increase mid-teens Q-on-Q mainly due to TCB. So we expect TCB booking to sort of increase on Q-on-Q basis compared to Q3. And for SMT, we expect SMT to decline Q-on-Q due to the already high base effect in the prior quarter. Now baked into the Q4 booking for SEMI, I think the [ QR ] for chip-on-substrate application. And as the market moves towards larger compound die because of higher computing power -- compute requirement, we are confident of achieving a sizable TCB order for OS application in Q4 from the leading foundry OSAT partners. And these orders will be likely built in early part of 2026, which will be definitely gross margin accretive, right? So I think to sum it all in terms of Q4 and certainly beyond Q4 in terms of booking color, we remain confident that the strong AI tailwinds, including the recent news regarding investment in the entire ecosystem for AI will continue to drive demand for AP, in particular, our TCB technology leadership will position us strongly going into 2026 and beyond. So this is a bit of Q4 color and slightly into Q1 as well. Benjamin Poh: And next, I would like to request Donnie to unmute. Donnie Teng: My first question is a housekeeping question. So considering we have disposed the AEC operation in China, wondering if Katie can give us some color on how should we estimate the OpEx or OpEx ratio in the coming quarters as we have seen the OpEx ratio has been pretty high for the past few quarters. So wondering if it will be coming down after the disposal of the AEC operation and also some cost control management. And my second question is regarding to the TCB. So my understanding is that despite we have some progress in fluxless TCB, but the real volume shipment remains small into maybe fourth quarter this year. So I was just wondering if you can give us a time line where -- when exactly the fluxless TCB for memories and for leading foundries can ramp up more significantly in the future. And also some comment on the progress in China will be also appreciated. As you know that China has been aggressively increasing their AI chip production capability, including HBMs as well. Yifan Xu: I think I will take the first portion, Donnie. So you asked a question about AEC liquidation. I just want to make a correction. For AEC liquidation, as we announced, the savings was going to be RMB 150 million each year. Majority of that saving actually will be benefiting COGS, not OpEx. There will just be a little bit factories and G&A that will be part of OpEx. So that -- so on AEC, let me just spend a quick minute. The liquidation took -- sorry, the announcement took place in August, and the project has been progressing pretty well. And we do expect that the savings will benefit us going forward. And on the OpEx ratio and specifically on OpEx, there's actually no change. At the beginning of this year, we announced that we will be investing incrementally HKD 350 million in R&D, especially AP and the infrastructure of the company. So every quarter, we've been actually -- we are on the path of the investment. And because of that incremental investment, we've mentioned in prior quarters that this year's OpEx will be similar to prior year with some marginal increase. And that narrative has not changed and will not change for the year. Cher Ng: Okay. I will take on the second question, Donnie. In terms of TCB fluxless application. As mentioned in our MD&A, we have made very good progress in terms of fluxless [indiscernible] TCB for logic side, Chip-on-Wafer. I think plasma technology has been endorsed by the leading foundry. And also just to recap, Donnie we have been saying already in the past, but it's good for recap that Chip-on-Wafer demand this year, even we have won the technology battle, the Chip-on-Wafer demand will not be significant this year. We are looking into 2026 for inflection point in terms of Chip-on-Wafer application for logic TCB fluxless. Now I think that's your question, if I'm not wrong. Benjamin Poh: Yes, next question on the time line for the memory and leading foundry shipment. Cher Ng: Yes. I think in terms of fluxless, I answered the first question to Gokul already. So I think it all depends on when they will adopt the fluxless TCB for memory. As I said in our opinion, as the industry continues to step higher, the chip get smaller, more IOs in our opinion, at some point, quite inevitable that they have to move towards a fluxless TCB solution even for HBM. Donnie Teng: And any color on China's adoption of TCB or opportunities there? Cher Ng: Yes. Donnie, I think we have been saying we are -- we supply to the global customer base. I think in terms of volume, obviously, the rest of the world volume in TCB is still higher than those of China. And for sure, we -- China ambition to really step up in terms of advanced packaging. Benjamin Poh: And next, I will request Kevin to unmute. Unknown Analyst: My first question is on the TCB outlook. As mentioned on the logic side, we are already passing the qualification, right? So I was wondering how should we think about the potential business opportunity on the chip-to-wafer part as compared to chip-to-substrate, as mentioned that most of the contribution will be coming from next year. And when is it likely the timing of this contribution will start? And also on the memory side, I think we just mentioned that HBM4 we are screening order from multiple customers, right? So just wondering for the customer, are these for sample tool or for production already? Cher Ng: I can answer your first question first, Kevin, in terms of chip-to-wafer. Quite similar answers to Donnie. Chip-to-wafer in terms of volume, we expect it to be still smaller compared to substrate because substrate, I think the whole industry has moved -- almost the whole industry has moved to TCB solution. Whereas for chip-to-wafer at the moment, it's only the leading foundry leading the pudding in terms of using a TCB for particular end customer. So if more end customers adopt TCB, then you will see Chip-on-Wafer TCB solution fluxes will increase. Otherwise, it's just one customer. I think the volume will still be smaller than the substrate volume. Now in terms of HBM4, I would say they are already into some kind of a small volume production already using our tools for HBM4 production for the 2 customers that we talked about. Unknown Analyst: My next question is on the hybrid bonder side. So we are -- I was wondering how competitive are we in our Gen 2 hybrid bonder, which [indiscernible] we are already shipping? And what kind of chip order process are these for? Or this is going to be for mainly on the logic side or for the memory side? Cher Ng: Yes, Kevin, we have -- I would say we are shipping HBM -- HB, hybrid bonding solution for both logic and memory. As we speak, we are actively collaborating with other key logic and memory players and we're making good progress and all these projects are at different stages of evaluation. So we are hopeful that at some point when the hybrid bonding market takes off, we are there to compete with incumbent. Unknown Analyst: Okay. So we have already -- are we securing order from these customers already? Or this is just right now still in the evaluation process? Cher Ng: Yes, still in evaluation for some of these very key logic and memory players. We are engaging them very actively as we speak. Benjamin Poh: And next, I would like to request Sunny to unmute. Sunny Lin: Could you hear me okay? So my first question is on a high level, directionally, how should we think about the recovery of mainstream SEMI solution from here? I wonder in the last few months, now given more manageable impact from tariffs, do you think the overall client sentiment is improving or not much change for 2026? Cher Ng: Thanks, Sunny. I think in terms of mainstream, I would say quite encouraging because mainstream are now also -- I mean AI also contribute to the mainstream demand. I think as you're probably aware, China is a significant portion. So we see China volume has been picking up for the last few quarters. So that's giving -- that's supporting the mainstream quite a fair bit for both SEMI as well as SMT. Now in terms of tariff, I think the initial part of the year and initial period of the year, I think the tariff situation definitely has some impact on the sentiment of our customers. Now I think with the tariff situation a little bit more stable, I think customers are now a little bit more confident, I would say, in terms of placing orders. That's why we are also seeing -- we have good orders coming from mainstream wire bond, die bond and SMT are also seeing a mainstream application for putting chips on larger PCB boards for base stations and all that. So all these are also partly driven by the AI adoption. So in general, we see mainstream certainly coming up on the bottom. But going forward, we see mainstream stable, especially the demand coming from China provides that kind of stability for mainstream. Sunny Lin: Got it. And then I have questions on TCB. Maybe if you could remind us the lead time for you to make TCB tools nowadays. In terms of orders, should we expect the inflection point to potentially come maybe in first half or second half of 2026 for logic and for HBM? Cher Ng: I think for logic, I think we mean that sizable orders for the chip-on-substrate for larger compound die will most likely realize the revenue in the early part of 2026. For HBM, it all depends again on the timing of our key customers' technology road map. So if they accelerate, we will see revenue earlier for HBM. If there's a further delay, then our timing will also align accordingly. Now in terms of TCB lead time, actually, internally, we are efficient. We don't take a long time to assemble a TCB machine. It all boils down to material supply, right? So if we -- if customers give us more visibility, we can order materials earlier, then the lead time will be shorter. So I think that's the dynamic of the TCB lead time at this point in time. Sunny Lin: Sorry, maybe a quick follow-up. So for logic -- so on Chip-on-Wafer, any view on when the leading foundry may start to migrate to TCB? Maybe will that be in second half of next year or early 2027? And therefore, assuming if your lead time is about like 2 quarters, should we see orders starting to come through maybe from first half of next year? Cher Ng: We are hoping orders will come sooner. But again, as I say, it depends on the timing of the road map. We are confident that chip-to-wafer, we will have delivery or shipment in 2026. I don't think it will delay to 2027. Benjamin Poh: And next, I would like to request Daisy to unmute. Daisy Dai: My first question is for Katie regarding the SEMI Solutions gross margin. Katie, you previously mentioned that the closure of AEC will have a positive impact of the cost of goods sold going forward. Yes. So how we should think about the near-term and the long-term gross margin for the SEMI Solutions segment? Yifan Xu: Daisy, assuming you're kind of talking about basically the gross margin going forward, right? Daisy Dai: Yes. Yifan Xu: Okay. So first on the AEC point, is correct. We would expect the savings to come in gradually in Q4 and then full-fledged in next year. Now in terms of the overall SEMI Q4 gross margin, we do not provide guidance, but just some kind of directional pointers. Robin guided Q4 revenue probably could tell that the TCB contribution -- revenue contribution will continue to be lower, but with some have high photonics but wire bond momentum will be sustained. So therefore, we expect a slight margin accretion for SEMI's margin in Q4. And then when you look at the group level, then if SEMI and SMT mix stays similar and SMT experiences a stable margin, then we expect basically slight margin accretion for the group in Q4. Now of course, we always caveat right it's really depending on the mix going forward, especially in the midterm in kind of longer run, we -- the technology leadership in HBM and advanced logic with those leadership, we expect the TCB order in Q4 and beyond -- I'm talking about in the midterm now, would actually provide support to SEMI's gross margin. And with this liquidation that you mentioned earlier, we do expect that the SEMI gross margin will come back to the kind of the mid-40s level. Daisy Dai: It's clear. And second question is for Robin on the hybrid bond. So you are at an evaluation stage for the leading foundry and HBM customers. So for the HBM use hybrid bond, do you see that it will happen in 16-high or 20-high. Cher Ng: Since we are a dominant TCB player, we hope that they can continue to use TCB even up to 20-high. But nevertheless, we are prepared that if they have to switch to hybrid bonding, we will be there also to provide competitive solution for hybrid bonding for HBM 20-high. Daisy Dai: Yes. And also a quick follow-up for your leading foundry customer, your European peer has been a dominant supplier for hybrid bond at that leading foundry customer. So how you see your hybrid bond opportunity at this leading foundry customer? Cher Ng: Yes. We will be relentlessly knocking on their doors for sure. But I think having said that we also have been saying that because we are not the leading player in hybrid bonding, I think the advantage is that we know the pain point, existing pain points, right? So with that coming in from behind, we are relentlessly and diligently working with all the leading logic and memory players, asking them what are the current pain points so that we can incorporate features, engineering innovations to mitigate or totally eliminate those pain points using our tools. This is what we have been doing. So I think we are confident that our Gen 2 and in future Gen 3 should be able to address all the pain point and give us an entry point in all this leading key logic and memory players. Daisy Dai: And sorry, final follow-up. So in the Gokul's question, you said that you are the primary supplier of the HBM4 market and the first company won the HBM order at 2 key customers. So is it the fluxless TCB or the flux TCB? Cher Ng: It's still the flux TCB at this point in time. Daisy Dai: [ Flux 1 ]? Cher Ng: Yes. The Flux 1. Yes. Benjamin Poh: Next, I will request Leping to unmute. Leping Huang: I have another question about the TCB. So what are the current customer concentration level of your TCB equipment now? And what may look like in the future? So is it mainly still concentrated on the top 3 memory maker and the leading foundry? Or you also see some broadening of your customer to other OSAT or other foundries in the market? This is my first question. Cher Ng: I think we have definitely we have broadened our TCB fan-out to not just leading foundry, the OSATs, HBM and also globally as well. So we're pretty engaged with all top AI customers needing requiring or requiring TCB solution. I hope I answered your question. Leping Huang: Okay. The second question is about this -- you have the deposition equipment cancellation. So is it due to some the road map change of the -- in the advanced packaging? Also, I remember, is it due to the -- you have a company subsidiary called NEXX, it is from that subsidiary. Cher Ng: It is from that. It is from NEXX. I think it's a case of digestion of capacity, right? So there was a bit of a sizable capacity maybe about 2 years ago, right? So the customer take time to digest. So -- and these particular customers decided to give it up and pay us a cancellation fee. Benjamin Poh: Next, I will request Alex to unmute. Alex Chang: First question is about your margin on SMT solution. It seems like your quarterly revenue level already increased to the level similar to 4Q '23 or early '24. So I see the margin still like low 30s to -- is this the normalized margin going forward? Or you expect margin can return to high 30s level sometime in the future? Yifan Xu: Yes, Alex, this is Katie. Thanks for the question. So for -- you're kind of comparing to a few years ago where actually the SMT's end market composition were quite different. The -- few years ago, actually, automotive and industrial were running really, really strong and their contributions to SMT's revenue were much larger. And this is where we actually could command relatively higher margin. So currently, as we mentioned, the automotive and industrial end markets are relatively muted. And that's why the margins are sitting in the, call it, low 30s. Unless the end market composition changes, this kind of level will be sustained in terms of margin percentage. Alex Chang: Another follow-up question on TCB. You mentioned the TAM would reach like USD 1 billion in 2027. Do you have probably a rough split between the logic versus memory and also split between C2W applications? Cher Ng: Yes. I think it's dynamic. I would say, Alex, it's very dynamic. Again, it all depends on customer road map and all that. But generally speaking, if you take really looking further into the future, it's just intuitive that the HBM TCB demand or size or TAM will be larger than logic because of the number of stacks and also as the industry migrate from one architecture to the next generation, they require more HBM stacks per chip, right? So naturally, I think HBM demand over time, not in a particular year, not in a particular quarter, but over time, HBM demand for TCB will be larger than logic. Alex Chang: Got it. So what is the company's target market share for each application? Cher Ng: We don't go down to that kind of granular level HBM market share or logic. But overall, I think last year, we put out the TAM for TCB, our aspiration is to hit 35% to 40% market share in the entire TCB TAM. Benjamin Poh: And next, I would like to request Arthur to unmute. Yu Jang Lai: Can you hear me? So the first one, Robin, if you can -- can you share with us a high-level ballpark figure on the revenue contribution from AI? Cher Ng: This is a difficult question. I think for -- we don't share -- sorry, first, we don't share, but also this is a difficult question because we talk about AI benefiting both AP and mainstream. Well, we have better visibility on how AI benefit AP. But in terms of mainstream, it's a little bit tricky because wire bond, die bond, they are quite fungible. Today, customers may say, okay, I use it for AI-related packaging, tomorrow, they use it for others. So it's a bit difficult to really unpack, sorry. Yu Jang Lai: No problem. Because you just mentioned that you saw some power application, they start to come back and the drivers from the AI. So that's why I want to get this high-level ballpark figure. Maybe we can discuss it next quarter when we have a visibility. The question number 2 is on the cancellation from the high-density substrate. And I think Leping already touched base a little bit. So my question is, is the key component of the equipment fungible? Can you give it to the other substrate customer? Cher Ng: The short answer is yes, there's no inventory related issue relating to this cancellation. Yu Jang Lai: Because if we look into the AI business of the rack and also the key component, actually, we heard more and more PCB, HDI substrate shortage at this moment. So I'm kind of wonder, so was the client is based in Japan or in Taiwan or China? Cher Ng: None of this actually, none of this. I mean this is a NEXX business, we are saying that they supply to a few key players, high-density substrate players. It just happened that, as I said, I repeat again, it just happened that there was a big capacity ramp-up in the last 2 years. And this particular customer just say, okay, I'd rather not keep you holding on all these orders, I decided to cancel it. So I think in short, this is that kind of circumstances. Yu Jang Lai: So in the future, when we look back, this could be an isolated event. So do we think this demand for the other customer will return? Cher Ng: No. This in a way I don't -- if you are thinking is this AI related, I wouldn't say this is AI related. Yes, this is -- they are serving a particular IDM which use all this equipment for RDL and all that. So it's a particular application. I would say it's not related to AI. So don't link this cancellation with AI that we have been talking about. De-link these 2 pieces, Arthur. This cancellation has nothing has nothing to do with AI. Benjamin Poh: I think we have time for one last question. I think we have Gokul here. Gokul Hariharan: So my question is more on the margins and operating leverage. I think we are having pretty good momentum both now in mainstream and in TCB. Margin still seems to be a little bit sluggish. How do you think, let's say, next 2, 3 quarters, TCB revenues will come through given all these orders, bookings realize into revenues. What does it do to gross margins? Like is TCB still accretive to group gross margins right now? Or is it kind of similar to group gross margins? Second part of the question, again, to Katie is on operating leverage because now that we are back to some degree of revenue growth, we're still not yet seeing meaningful operating leverage come through. I'm asking because Street expectations are for very big operating leverage to kick in for next year. I think revenue growth of 10%, 15% contributing to doubling of your operating profit is what a lot of Bloomberg estimates are looking at. So just wanted to understand what is the extent of operating leverage that we can expect? I think we have seen operating margin go back to high teens to 20% at really, really peak kind of levels back in 2021. But in the recent past, we've not really seen operating margin really get beyond the mid-single-digit levels. So just wanted to understand what is the extent of operating leverage we can expect as we start some of these ramp-ups for TCB and other products? Yifan Xu: I appreciate the question. First thing, TCB, I just want to make it very clear that TCB margin has been stable and is accretive to SEMI business. Now overall, when you say operating leverage, volume has come back up, but not quite at the super cycle level. And within the volume, we always say there are a few mixes that actually impact margin. One is the segment mix. So far, as you can tell, like in Q3, for example, the SMT contribution to the group is at about 50%, right? SMT naturally has lower gross margin. Therefore, the segment mix could be different based on the contribution from the 2 businesses. The other thing is on product mix. Within SEMI, for example, it really depends on the product mix between TCB and wire bond in Q3 and as we guided for Q4, if you look at that product mix, when we have less TCB revenue, but more wire bond revenue coming from mainstream applications, the margin -- the gross margin side would not -- would be under certain pressure. But having said that, in the long run, as a few of you asked earlier, we do expect that our SEMI business will continue to enjoy the accretive margin contribution from applications like TCB. And with the AEC liquidation we mentioned, we should have savings from operation efficiency, et cetera. So that I think our conviction for SEMI gross margin to stay in the mid-40s and then gradually going up has not changed. And then so at the group level, we've been talking about the 40%, right? I think, again, I'm talking about in the long run, not a specific given quarter, I think we are comfortable that the group's gross margin will be at that level and gradually improve as we go. Gokul Hariharan: Got it. So just on the OpEx side, same, because that's something that you can control revenue harder to control, especially on mainstream. Are we going to stay around this roughly HKD 5 billion kind of level going into next year? Or we still see that OpEx will keep growing given we are investing in some of these newer technologies? Yifan Xu: Yes. So Gokul, I actually cannot answer your question very well right now. Maybe give us a quarter because the organization actually is going through the budget process. But directionally, as we have talked about before, the OpEx has been running at HKD 4.7 billion in the last few years. And this year, with the R&D and infrastructure investment, we have communicated that will be marginally higher. Though the investment is at HKD 350 million, we are doing certain restructuring projects and the cost saving projects that you probably have seen in the last few years on trying to bring it down. So this year, I think you guys can do the math, right, it's about HKD 2.8 billion. So that's kind of where we are. I think going forward, Gokul, we're not going to change our commitment in R&D investment as you guys were talking about TCB, hybrid bond, all that, that side of the conviction has not changed. We'll continue to do the right investment. On the other front, for the overall efficiency and productivity of OpEx, we'll continue to look into any opportunities we can find and trying to contain that. So again, I cannot give you a specific number. We'll probably share with you more. But I think our strategy -- our thinking on OpEx has not changed. Benjamin Poh: That will be all for the last questions. And I will now pass the time back to Robin for his closing remarks. Thank you. Cher Ng: Thank you, Benjamin. Just a couple of pointers before we officially close the call. The group maintained strong business momentum this quarter. Our AP and mainstream business will continue to benefit from sustained AI adoption. TCB solution, we secured repeat orders in both memory and logic, reflecting ongoing technology leadership, particularly in HBM4 and advanced logic. What Katie said, we are in the midst of really finalizing our budget for 2026. But certainly, I can -- at this juncture, we can give you some direction or some color on how we look at 2026. We expect a growth year in 2026 largely driven by AP because of AI and underpinned by the sustained momentum of our mainstream business. And finally, we remain confident in the total addressable market for TCB, which we believe could go beyond USD 1 billion in 2027. So thank you. With that, we will close the call and see you next quarter.
Operator: Good morning, and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on LG Display's Third Quarter of Fiscal Year 2025 Earnings Results. Suk Heo: Good afternoon. This is Heo Suk, Leader of the LG Display IR team. Thank you for joining our third quarter 2025 earnings conference call. Joining us today are CFO, Kim Sung-Hyun; Vice President, Choi Hyun-chul, in charge of Business Control and Management; Vice President, Kim Kyu Dong, in charge of Finance and Risk Management; Lee Kyung, in charge of Business Intelligence; Vice President, Kim Yong Duck, in charge of Large Display Planning and Management; Hong-jae Shin, in charge of Medium Display Planning and Management; Park Sang-woo, in charge of Small Display Planning and Management; and [ Hong Moon-tae ], Head of Auto Planning and Management. Today's conference call will be conducted in both Korean and English. For detailed performance-related materials, please refer to our disclosure or the Investor Relations section in the company's website. Please refer to the disclaimer before we begin the presentation. Please be informed that the financial figures presented in today's earnings release are consolidated figures prepared in accordance with IFRS. These figures have not yet been audited by an external auditor and are provided for the convenience of our investors. I will now report on the company's business performance in Q3 2025. Panel shipment grew Q-o-Q across the entire OLED product line, driven by the start of seasonality and supply for new small- and medium-sized OLED products. Revenue was KRW 6.957 trillion, up by 25% Q-o-Q and up 2% Y-o-Y. Operating profit reached KRW 431 billion, improving by over KRW 500 billion Q-o-Q and Y-o-Y. The improvement resulted from the growth in shipment and portion of OLED products as well as the company's ongoing intensive cost innovation activities. The number reflects around KRW 40 billion in onetime costs related to workforce efficiency activities, excluding which the business performance stands at approximately KRW 470 billion. Net income was KRW 1.2 billion, including the impact from the foreign currency translation gain with the exchange rate rising Q-o-Q. EBITDA in Q3 was KRW 1.4239 trillion with an EBITDA margin of 20%. Next is the trend in area shipment and ASP. In Q3, area shipment fell 1% Q-o-Q despite the seasonality and growing shipment of small and medium OLED product lines. This is following reduced shipment of low-margin midsized LCD models in line with our ongoing profitability-focused product portfolio management. ASP per square meter was $1,365, up 29% Q-o-Q, slightly outperforming the guidance. It was driven by the higher-than-planned growth in shipments of small and medium OLED products. It is an all-time high, resulting in part from the rising portion of OLED. Next is revenue share by product category. Mobile and Others, which has the largest share, reached 39%, up 11 percentage points Q-o-Q, led by panel shipment growth stemming from the seasonality and preparation for new products. In IT, while revenue grew on the back of sharp expansion in shipment of OLED panel for IT, there were larger changes in revenue in other businesses. As a result, its portion fell to 37%, shrinking by 5 percentage points Q-o-Q. The TV segment's revenue share was 16%, down 4 percentage points Q-o-Q. Auto segment's share was 8%, down 2 percentage points Q-o-Q. The share of OLED products out of total revenue was 65%, up 9 percentage points Q-o-Q and 7 percentage points Y-o-Y. As we continue to expand the performance of OLED-centric business structure upgrade, its impact is further solidifying our foundation for growth and profitability. Next is financial status and main indicators. Cash and cash equivalents in Q3 stood at KRW 1.555 trillion, largely unchanged Q-o-Q. As we keep downsizing nonstrategic businesses, for example, discontinuing the LCD TV business and enhancing operational efficiency, the size of essential working capital has also decreased. Debt-to-equity ratio was 263% and net debt-to-equity ratio 151%, down 5 percentage points and 4 percentage points, respectively, Q-o-Q, further strengthening our financial soundness. Next is Q4 guidance. Continuous growth is expected in area shipment of OLED products in Q4, while LCD shipment is expected to decrease as we keep running profitability-centered product portfolio. Accordingly, total area shipment is projected to grow in low single-digit percentage Q-o-Q. And for ASP per square meter, we saw much more pronounced increase in Q3 than usual, thanks to shipment growth of small and midsized OLED driven by seasonality and preparation for new product launches. And that is also why going into Q4, we anticipate another higher level of ASP compared to average quarters. However, it is expected to decline in low single-digit percentage Q-o-Q due to some factors such as mix change in small and midsized OLED products. And now let me hand over to our CFO, Kim Sung-Hyun. Sung-Hyun Kim: Good afternoon, everyone. This is the CFO, Kim Sung-Hyun. Let me thank you all for joining us at our conference call. Q3 this year was when we saw the results of our ongoing strategy to upgrade our business structure to be more OLED-centric and our strong initiatives for cost innovation beginning to come to fruition and manifest themselves into business performance. As mentioned earlier, Q3 saw an increase in shipment coming from the seasonality, coupled with the impact of concentrated shipment of small and medium OLED for new products, it has boosted OLED product group's revenue share up to 65%. Based on this, Q3 year-to-date business performance showed revenue of KRW 18.6093 trillion and operating profit of KRW 345 billion, continuing the trend of improvement and giving more visibility to a full year turnaround after 4 years. Despite the pressure on revenue from the discontinuation of the LCD TV business, it remained flat Y-o-Y, thanks to larger portion of OLED and premium products. Operating profit year-to-date improved by approximately KRW 1 trillion Y-o-Y. It is owed to the intense and speedy execution of strategic initiatives, including cost innovation and operational efficiency along with business structure upgrade. External uncertainties and the consequent shipment volatility are expected to persist in Q4. There still remain variables in the business environment, including macro-related real demand, intensifying competition among suppliers and supply chain stability, but we plan to address these challenges by prioritizing business efficiency initiatives. OLED products revenue share is expected to be similar Q-o-Q in Q4 with the annual share projected at a low 60% level. Incidentally, we are also planning for an additional workforce improvement program in Q4 as part of our ongoing cost innovation effort. The specifics cannot be disclosed in advance, but its impact on our financial performance is considered to be more than that of last quarter. The onetime cost occurred by this workforce improvement program will be offset after 1.5 years, providing positive impact on the business performance thereinafter. Next, let me share our plans and strategies by business segment. For small mobile business, we plan to ensure more stable operations by expanding panel shipments every year based on our technological leadership and stronger partnership with our customers. At the same time, we will keep broadening our future business opportunities by methodically implementing all future-proofing activities, including R&D and investments in new technologies. For IT OLED, which is part of our midsized business, we plan to respond to the growing demand in high-end tablet market with our Tandem OLED technology. And for the anticipated shift to OLED in the notebook sector, we will closely examine the market size and pace of change and respond effectively. Overall, we will enhance our responsiveness with differentiated approaches. Leveraging our long-standing technological leadership and mass production competitiveness, we will solidify our leading position in the market. We will also proactively respond to changing environment, including market demand and customers' requests through efficient utilization of our existing infrastructure. In IT LCD business, we remain focused on reducing low-margin products while focusing on B2B and differentiated high-end LCD segments. It is encouraging that this has led to meaningful improvement in profitability Y-o-Y. We will strengthen execution of our current initiatives to deliver improved results next year as well. For large panel business, where OLED's differentiated competitiveness is well recognized in the market, we will further solidify our leadership in the premium market with a various lineup of OLED panels offering unique value based on close partnership with strategic customers. We will continuously grow our business performance and intensify cost improvement initiatives to maintain stable business operations. Last is Auto. The market outlook is more positive than other product areas, led by expanding in-vehicle display adoption and accelerating enlargement of displays. While competition is expected to intensify, we plan to maintain our competitive edge and create differentiated customer value based on our solid market position and diversified technology and product portfolio. Finally, on investment. Our principle in CapEx execution remains unchanged, focusing on investment for future preparedness and business structure upgrade. Because our investment efficiency initiatives continue, CapEx this year is expected to be at high KRW 1 trillion range below last year's level. Moving forward, we will make prudent investment decisions while maximizing the use of existing infrastructure. New investments will be executed with profitability as the top priority. Thank you very much for your attention. Suk Heo: This concludes our presentation of business highlights for Q3 2025. We will now take your questions. Operator, please commence with the Q&A session. Operator: Now Q&A session will begin. [Operator Instructions] The first question will be provided by Gang Ho Park from Daishin Securities. Gang Ho Park: Congratulations on the good performance. Now I have largely 2 questions. Now I see that in the third quarter, the performance has risen sharply, and that appears to be on the back of rising revenue from the OLED panel as well as the revenue share of the OLED panel as well. Then the question is, does the company believe that it has the kind of structure that can sustain this kind of business performance down the road? And then related to this, traditionally, the company has been sluggish in the first half because of the strategy of its strategic customer. But then given the fact that it saw a good performance in the first half of this year, then does the company believe that this marks any change in the structure of the OLED market or the OLED business? And then based on that, then what would be the outlook for next year first half and also for the whole year? And the second question is, now in 2026, it appears that the macro uncertainties will continue and also competition continues to intensify even amidst the sluggish demand in the downstream. And as a result of this, then there could be some pressure from the customer to lower the ASP. Then how does the company intend to respond if such pressure should arise? And what is the company's strategy for continuous growth for the future? Choi Hyun-chul: This is VP Choi Hyun, in charge of the Business Control and Management responding to your questions. Now allow me to respond to the second part of your question first. And thank you very much for your interest in the company. Now it is true that in the past few years, the uncertainty and volatility in the external environment have continued. But then the company have continued also to expand our business performance every year based on internal capabilities based on our push to upgrade our business structure to be more OLED-centric and also to continue with the cost innovation activities. And as a result, despite the various factors coming from the outside, we were able to improve our performance, and we intend to keep demonstrating more stable performance down the road. Now looking back to the performance in the past 2 years, then last year, in 2024, we were able to narrow the loss by a very big margin of KRW 2 trillion from the previous 2023. And then for this year, although we still have the fourth quarter to go, we have the projection that we will be able to improve profitability by another KRW 1 trillion this year for the year. Now looking ahead, uncertainties in the external environment are likely to persist. But then as explained earlier, based on the stronger business fundamentals as well as the ongoing efforts at cost innovation, we will continue to work to further improve our business performance next year as well Y-o-Y. And looking ahead, we will continue to maintain stable business performance. And now it is true that there has been sluggish demand in the display market downstream and also stronger competition, making it difficult for any company to go for both growth and stable management of profitability at the same time. Having said that, the company will continue to try to expand our revenue and solidify our market leadership by increasing the OLED product portion, focusing more on high value-add and high-end products from global leaders and also developing the new growth engines based on differentiated technologies. And now with regards to your question about the panel price, I take it that it is a question about our maintenance of the profitability. Now based on our strong partnership with our customers, we will continue to operate an optimum pricing strategy, while at the same time, upgrading our product mix and continuing with our cost innovation and operational efficiency activities at the same time so that we can continue to expand our profitability. Suk Heo: We will take the next question. Operator: The following question will be presented by Mingyu Kwon from SK Securities. Mingyu Kwon: Congratulations on the good performance. I have 2 questions, and one is about the mobile. So it seems that the -- so I'm wondering about the market reception to the launch of new models by the North American customer. Now from media reports, it seems as if the reception for the standard model is better than expected, for the air model, perhaps less so. Then what would be the implications for the LG Display? For example, will there be any changes in the expected shipments or in the market share? And then the second question is now for the smartphone panel annual shipment target and the outlook for next year. So if there is a foldable product to be launched and also given the -- so given the likely launch of the foldable product and also the intensifying competition, then what is the possibility of shipment increase in 2026? If the company believes that shipment growth in 2026 is possible, then what would be the drivers for that? And then the last question is related to the small to midsized OLED. Now because of the restructuring in the Japan Display Inc., it is understood that LG Display is now the sole supplier for the smartwatch panels. Then what will be the volume, the annual volume of supply? And also what will be the contribution to the company's revenue and profit and loss? Park Sang-woo: This is Park Sang-woo, in charge of Small Display Planning and Management. Now for the smartphone business, the company has been achieving stable performance, thanks to our stronger competitiveness with our technology and production as well as across all areas of operation. And then in terms of the response to the new models by the customer, we understand that generally, it is quite positive. But then for the different models, the actual demand could be different. So this could also translate into some changes in the shipment plan based on the market trends. And now in the first half, despite the seasonality, there was a meaningful shipment growth by over 20% Y-o-Y. And then in the second half, thanks to the diversified product portfolio and stable supply system as well as the efficiency improvement, there has been improvement in profitability as well. So for the year, we are confident that we will be able to further expand our performance from last year. Now for the company, we believe that we have already have built up the technological know-how to flexibly respond to the diversifying needs from the customer. For example, by having a stronger capability in development and mass production of smartphone panels. And also by more efficiently utilizing the current infrastructure, we will be able to respond even more speedily and flexibly to new technologies and also growth in demand for different products. And looking ahead, we will continue to create stable performance by strengthening our quality competitiveness, continuing with our cost innovation efforts and preparing for the future technologies based on our close partnership with the customer. Now about the wearable devices, they are equipped with a number of different functionalities. And also across the society, we are seeing increased interest in health overall. So it seems as if the use of these products across the consumers' lifestyle in general is going to keep going up. So we believe that the outlook for the mobile OLED product market, including the smartphones is quite positive. The company already has the best technological leadership and production capability in the smartwatch panel business. And recently, there has been a change in the supplier status in the industry, which has also resulted in the growth of panel supply volume. And we believe that this will serve to further solidify the company's position in the premium wearable market. Now in terms of the annual supply volume, revenue, profitability and other information related to them are directly related to the customer. And thus, please understand that I am not in the position to discuss the details or the specifics. But then we will continue to create stable performance in the smartwatch panel business, utilizing our technological competitiveness and leading supplier status. Suk Heo: We will take the next question. Operator: The following question will be presented by John Heekyu Yun from UBS Securities. John Heekyu Yun: I have a question on the small mobile product. Now the market expectation is that in the second half of 2026, the North American customer will be launching a foldable smartphone product. Now then what would be LG Display's strategy for foldable smartphone panel business? And can you also share with us the status of the company's readiness for the product and technology? Park Sang-woo: Now for foldable products, there is growing anticipation from the market on the possibility of opening up new market segments for its differentiated form factor and the new user experience that it provides. Now if the foldable smartphone market becomes well established, then the product can also become the vehicle for trying out new technologies as the flagship model. So the company is closely monitoring the smartphone market trends as well as the demand outlook and is preparing for potential market growth. But for now, our strategy is to maximize the supply volume for the existing products so that we can continue to heighten our performance until we can get better visibility into the demand growth as well as opportunities for the company. So the company continues with the series of activities to strengthen our R&D and acquire new technologies. Now in the smartphone areas, if we can come upon more clearer opportunities, then we will build up our supply structure and expand our business opportunities after carefully reviewing the market acceptance of differentiated product as well as the market growth pace. Suk Heo: We will take the next question. Operator: The following question will be presented by Sun Kim from Kiwoom Securities. Sun Kim: I have 2 regarding the IT business. Now first, in IT, the LCD, the competition for LCD in IT is intensifying. And also, at the same time, the profitability is worsening. Then are there any plans for the company to downsize or even exit the LCD IT business as it has done so in the LCD TV? Or otherwise, what would be the strategy for the LCD IT business? And then second, now there is also outlook for growing adoption of OLED in the IT market as well. And in response to this, the -- your peers in the market are now making investment into the 8.6 Gen OLED. So what is the company's preparation or what are the company's activities in order to be ready for this potential adoption growth of OLED in IT? Hong-jae Shin: This is Hong-jae Shin, in charge of Medium Display Planning and Management. Now it is true that the medium product market remains overall sluggish, but then the company has been maintaining intense cost innovation activities. And as a result, we have been moving closer to our targeted performance, for example, making gradual improvement on our profitability, thanks to our focus on the high-end LCD technologies and differentiated competitiveness coming from OLED. In LCD, we are maintaining profitability-centric business management by the select and focused approach centered on strategic customers. And utilizing the company's technological advantage and global customers' partnerships, we continue to maintain our business based on B2B and high-end lineups. While at the same time, downsizing the low-margin models and improving profitability and enhancing stability. And for OLED, in particular, the company is providing various solutions to our customers based on the 2-track strategy of addressing new demand and preparing for future market. Now based on the company's differentiated competitiveness, we continue to respond to the growing demand of high-end monitors like gaming. And as a result, we are also seeing increase in the shipment of OLED panels for monitors. Now in the notebook business, it is expected that there is going to be a gradual transition to OLED. But then the company believes that we need to see additional and clearer signs of the market size, transition speed as well as consumers' acceptance. As such, the company remains closely watching the OLED notebook market size, while at the same time, we will be utilizing the existing infrastructure as much as possible for the technologies that can apply to future products. And by doing so, we will steadily make preparation for future technologies and mass production. Suk Heo: We will take one last question. Operator: The last question will be presented by Won Suk Chung from iM Securities. Won Suk Chung: Now I have a simple question about the OLED TV. So the macro uncertainties continue and also there is growing competition with the LCD products. And then at the same time, there are also reports that a domestic TV set-top company is intending to expand its OLED lineup as well. So what is LG Display's strategy and mid- to long-term target for the OLED TV business? Kim Yong Duck: This is Kim Yong Duck, in charge of Large Display Planning and Management. Yes, it is true that the uncertainties in the external environment and the business environment continue. But then for the company this year, we are projecting a mid-6 million unit level of large OLED panel shipment, which is growth Y-o-Y. Now compared to the LCD, the unique value of OLED panel appears to be more and more recognized in the market. And also pricing is nearing the range of affordability, enhancing further its acceptability in the market. And as such, for next year, the company is looking forward to another growth expecting 7 million units. And in particular, the gaming OLED monitor, so the demand for the gaming OLED monitor that is produced out of the large OLED fab is seeing meaningful growth. So for the large OLED panel, so we believe that the gaming OLED monitor out of the large OLED panel shipment, the share will be around low- to mid-teen percentage this year. The company continues to strengthen the fundamental competitiveness of OLED products as we also continue to diversify our product group. At the same time, we are maintaining very intense cost innovation activities and operational efficiency activities at the same time so as to continue to improve profitability of our large panel business. Of course, I cannot mention the specific profitability of each business segment, but then the results of all these multifaceted efforts are coming together to make a bigger contribution to the overall business performance. But of course, external uncertainties persist and competition between the different products is also intensifying as evidenced by the launch of various products that are in direct competition with OLED. So in response to these changes, the company will maintain our very strong cost innovation activities and also continue to build up our partnership with global top-tier customers so that we can maintain stable business performance. And last, the company's OLED capacity is 180,000 for Generation 8, out of which we are currently utilizing 135,000 for mass production. And down the road, we intend to flexibly run the capacity in linkage to actual demand. And we also have sufficient infrastructure to flexibly respond to any additional growth in the market demand. Suk Heo: Thank you very much. This concludes LG Display's Q3 2025 earnings conference call. We thank everyone for joining us today. Should you have any additional questions, please contact the IR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good afternoon, and welcome to Mister Car Wash Third Quarter 2025 Conference Call. [Operator Instructions] Please note that this is being recorded, and a reproduction of this call, in whole or in part, is not permitted without written authorization from the company. I will now turn the call over to Eddie Plank, Vice President of Investor Relations. Edward Plank: Good afternoon, everyone, and thank you for joining us to discuss our third quarter financial results. With me on the call today are John Lai, Chairman and Chief Executive Officer; and Jed Gold, Chief Financial Officer. After John and Jed have made their formal remarks, we'll open the call to questions. During this conference call, references to non-GAAP financial measures will be made. A complete reconciliation of these measures to the most comparable GAAP measures have been included in the company's earnings press release issued earlier today and posted to the Investor Relations section of the company's website at mistercarwash.com. As a reminder, comments made on today's call may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. While the company may choose to update these statements in the future, it is under no obligation to do so unless required by applicable law or regulation. Please review the forward-looking statements disclaimer contained in the company's SEC filings, including its most recent 10-K and 10-Q reports as such factors may be updated from time to time with the Securities and Exchange Commission. I'll now turn the call over to John. John Lai: Thanks, Eddie. Good afternoon, everyone, and thanks for joining our third quarter 2025 earnings call. We are very pleased with our performance in Q3. Our team delivered strong growth with revenue up 6% to $263 million and adjusted EBITDA increasing 10% to $87 million. In addition, our 3.1% comparable store sales growth marks the tenth consecutive quarter of comp gains. These results were fueled by strong UWC growth and exceptional execution from our powerhouse operations team, who consistently raised the bar and reset our high standard for excellence. We ended Q3 with approximately 2.2 million UWC members, a 6% increase year-over-year. I'm particularly pleased with the continued strong capture rates experienced across our stores. Our UWC performance was led by our Titanium 360 tier, which reached approximately 25% penetration of our total membership base. During the quarter, we completed the rollout of our base membership price increase and are encouraged by the member adoption and retention trends to date. These initial results demonstrate the strong price-to-value relationship and speaks to future opportunities to drive revenue growth. Importantly, our commitment to delivering high-quality service at an accessible price point continues to be a key objective for our brand. Separately, after the quarter closed, we announced the acquisition of five stores in Lubbock, Texas. This expands our footprint in this market to nine locations, more than doubling our market share and offering customers greater convenience and more choices, amplifying our network effect. We have a strong track record of successfully acquiring and integrating businesses and look forward to reopening under the Mister flag once all the value-added improvements have been put in place. As the industry continues to streamline and consolidate, we anticipate further opportunities to drive growth through strategic M&A. Building on that thought, we believe the industry is entering a healthier, more rational phase. The pace of new competitor openings in our markets continues to moderate, reducing pressure on trade areas. Over time, we also expect the rapid expansion that peaked in 2023 to lead to some capacity exiting the market creating room for strong operators like Mister to capture incremental market share and drive growth. Ultimately, we're setting the stage for meaningful, sustainable performance by investing strategically driving innovation and sharpening our competitive edge, all while delivering on our mission to produce a clean, dry shiny car with unparalleled customer service. With the largest subscription base in the industry, strong unit economics and a long history of innovation, we're exceptionally well positioned to accelerate growth and elevate our brand for the long term. Now let's discuss the progress we've made on our strategic imperatives during the third quarter. Let me start with expanding our footprint. During the quarter, we opened five new greenfield locations, bringing our total store count to 527 stores across 21 states. And just a few days ago, we celebrated the grand reopening of one of our flagship stores in TUCSON at the corner of Speedway Boulevard in Country Club, which we fundamentally transformed to deliver an even better customer experience. With one quarter left in 2025, we remain on track to open approximately 30 new stores this year. In addition to the five stores we recently acquired. What's most exciting is that we're only about halfway to our long-term goal of more than 1,000 Mister locations across the U.S., underscoring the growth opportunity in front of us. Moving on to increasing our innovative solutions. At Mister, innovation is more than just ideas. It's a launch pad for growth and delivering differentiated solutions that further separate Mister from other operators in the marketplace. From improving the quality of the water we use to fine-tuning our chemistry and tunnel equipment to introducing proprietary extra services like Titanium 360, innovation is at the heart of who we are at Mister. We continue to put our capital to work where we'll have the biggest impact on sales, our stores and improving the customer experience, and we remain committed to investing in technology and R&D to further differentiate and extend our lead. Our innovation pipeline is strong. And although it's too early to discuss details, we aim to bring our newest major innovation to market in 2026. Next, driving traffic and growing membership. We were encouraged by the results of our marketing tests in Q2. And in Q4, we're stepping up our marketing investment and expanding our testing program in a select number of markets. Our goal is clear. Build a strong foundation where marketing becomes a scalable growth engine for Mister in 2026 and beyond. This phase is all about focus and precision. Zeroing in on what matters most to understand which channels and tactics drive efficient incremental sales growth. Once we've established that baseline, we'll look to broaden our efforts exploring new channels and creative promotional offers that generate a meaningful return on our advertising investments. With a long runway of opportunity ahead, we're excited about what this program can unlock for Mister's long-term growth, particularly within our retail business. Finally, building a best-in-class team. We have the best team in the industry, and it shows. From our frontline team members in the stores all the way up to our senior leadership, our people and culture are woven into every layer of the business, driving performance, innovation and customer experience. Our team has been the high octane fuel behind our success as we continue to scale, we remain fully committed to investing in their growth and development and long-term potential. Before I wrap up my prepared remarks, I want to thank our amazing people across the entire company for their ongoing contributions and commitment to our customers, which allows us to deliver solid results. In summary, this is an exciting time for Mister, and we're energized by where our business stands today and where we're going tomorrow. Industry headwinds are clearing. We're actively managing variability in our retail performance and we're capitalizing on M&A opportunities to fuel additional growth. By strengthening our core, driving innovation and expanding both organically and inorganically, we're not only meeting strong customer demand, we're reshaping our category for the future. We've laid a strong foundation for sustainable growth and are well positioned to lead both our business and the broader industry into its next chapter. I'll now turn the call over to Jed to provide more commentary on our financial results. Jedidiah Gold: Thanks, John, and good afternoon, everyone. Overall, we are pleased with our third quarter results and the performance of the business. We exceeded the high end of our expectations with comp store sales growth of 3.1% and adjusted EBITDA of $87 million. Additionally, we delivered adjusted EPS of $0.11, a 38% increase year-over-year. The team remains focused on the task at hand and aligned on delivering results. From a channel mix perspective, UWC was the primary growth driver, representing over 75% of total sales. This large and predictable base of subscription revenue continues to be the cornerstone of our resilient business model and a key contributor to our strong free cash flow. As noted in our earnings press release, we started reporting free cash flow in discretionary terms to highlight the strength of our cash generation and provide greater transparency into the nondiscretionary CapEx needs of the business. I'll expand on this shortly. We also successfully completed the rollout of our base membership price increases which contributed to the uplift in Express revenue per member during the quarter. As previously shared, this rollout was phased across markets and positions us well to drive continued revenue per member growth into next year. Importantly, churn has remained in line with expectations with a modest initial increase, followed by a reversion to the mean within 4 to 6 weeks. Across the industry landscape, we see encouraging signs of normalization. First, the pace of new competitor store openings within a 3-mile radius of existing Mister Car Wash's has moderated compared to recent years with an estimated 40% fewer newbuilds year-to-date versus last year, contributing to a healthier, more balanced environment. Second, as we've noted in prior calls, Mister locations that experienced competitive pressure continue to show year-over-year growth within 18 to 24 months of the competitor opening, ultimately outperforming the chain-wide average. During the third quarter, for example, the 49 sites facing competition less than a year old comped down low single digits, while sites with competition older than two years or no competition comped up mid- to high single digits on average. This underpins what we've long believed. While customers may explore alternatives, they consistently return to Mister for the superior customer experience we deliver. These two trends give us confidence in the quality of our model and optimism about our ability to accelerate growth moving forward. Now let me provide some more details on the third quarter numbers. For simplicity, I'll be referring to adjusted numbers only, which exclude items such as stock-based compensation and gain or loss from the disposition of assets. The reconciliation of adjusted figures can be found in our 8-K filings and earnings press release. Net revenues increased 6% driven by a combination of 3.1% comparable store sales growth and the contribution of incremental revenue from the 26 net new stores opened over the last 12 months. UWC comps increased high single digits, while retail comps performed in line with our expectations for a low double-digit decrease. We achieved a 6% increase in UWC membership over the prior year, while maintaining retention rates consistent with our long-term averages. Overall, we remain pleased with the performance and productivity of our store fleet and believe that the combination of decreasing competition and more data-driven site selection methodology, will drive higher returns on our invested capital moving forward. Sales growth was the strongest in July. Cycling a relatively easier lap but nonetheless positive through each month of the quarter. UWC sales represented 77% of total wash sales, and we ended the quarter with more than 2.2 million UWC members. At the end of the quarter, the membership split among base, Platinum and Titanium was approximately 41%, 34% and 25%, respectively. I'd like to point out that our subscription members remain resilient, and we're not seeing trade down to lower-priced packages. Finally, we continue to see strength in Express revenue per member, which increased approximately 4% year-over-year to $29.56. This was driven by our base membership price increases and additional mix shift into Titanium given the strong consumer response to our targeted trial promotion over the summer. Total operating expenses were $177 million in the quarter. As a percentage of revenue, total operating expenses improved 130 basis points to 67.1%, primarily due to sales leverage and disciplined cost management as the team continues to find ways to optimize costs and maximize operational leverage. Within total operating expenses, labor and chemicals improved 40 basis points to 28%, as leverage on our stronger sales, along with some savings in chemical costs more than offset higher labor expenses. Other store operating expenses increased modestly by 10 basis points to 32.7%, driven by higher cash rent tied to our strategic new store investments and elevated utility costs particularly electricity where rates have been trending upward. G&A expense improved by 100 basis points to 6.4% as a result of better expense management. Looking ahead, we plan to invest approximately $2 million in Q4 to support the next wave of marketing tests. Building on the encouraging results from Q2, we're optimistic about how this next phase will resonate with consumers and excited to fine-tune our approach to marketing and advertising going into 2026. EBITDA increased 10% to $87 million, and EBITDA margin increased to 130 basis points to 32.9%. Of note, this is on top of a 100 basis point increase last year and represents the highest Q3 EBITDA margin that we have ever reported. Third quarter interest expense improved by 32% to $14 million, primarily due to lower average interest rates year-over-year and lower borrowings compared to last year as we've reduced our total outstanding debt by more than $100 million over the last 12 months. Finally, third quarter net income and net income per diluted share were $37 million and $0.11, respectively. Moving on to some balance sheet and cash flow highlights. At the end of the quarter, cash and cash equivalents were $36 million and outstanding long-term debt was $827 million, a $22 million sequential improvement as we voluntarily paid down debt during the quarter. Importantly, our leverage ratio stands at 2.4x adjusted EBITDA well within our stated target of 2x to 3x, and our liquidity position remains strong positioning us well to continue investing in future growth opportunities while reducing debt when feasible. In addition, we were active in the sale-leaseback market. During the third quarter, we completed one sale-leaseback transaction involving one carwash location for an aggregate consideration of $5 million. In addition, our pipeline for Q4 is strong, with seven carwashes currently under LOI or contract. The passage of The One Big Beautiful Bill Act and the restoration of 100% bonus depreciation incentive have sparked a notable increase in demand, which along with the high quality of our assets is allowing us to negotiate deals on very favorable terms, and we are seeing a material improvement in cap rates as a result. Further easing of interest rates will likely provide an additional tailwind to cap rate trends. In addition, the majority of our capital expenditures qualify for 100% bonus depreciation under the bill. Coupled with our existing net operating losses, we expect these deductions to fully offset taxable income and reduce our federal cash tax liability to near 0 for the next several years. Now I'd like to take a moment to highlight our free cash flow. While we continue to believe that our greenfield development program remains the most effective use of capital, growth CapEx represents nearly 90% of our total capital expenditures. As such, we believe it's important to emphasize the strength of our underlying cash generation. Excluding growth-related investments, we generated free cash flow of $202 million for the nine months ended September 30, compared to $174 million in the same period last year. This represents 26% of sales and highlights the cash flow performance of our core operations and our ability to generate meaningful cash flow while investing to maintain our existing fleet of core stores. It also underscores the financial flexibility we have to pursue strategic opportunities beyond our greenfield development program. Finally, regarding the Lubbock acquisition, announced shortly after we closed the third quarter. The addition of these five stores strengthens our market position and enhances the value proposition for our subscription members. From a financial and membership standpoint, we expect the impact to be immaterial. We do expect the five stores to be incremental to our previously communicated guidance of approximately 30. Now I'll provide an update on our full year outlook. We are reiterating our previously provided guidance ranges for the fiscal year ending December 31, 2025. To assist with your modeling, I'll add some additional context and color. First, on comparable store sales, given our stronger-than-anticipated Q3 results, we now expect to finish the year at the high end or slightly above our guidance range of 1.5% to 2.5%. This reflects quarter-to-date trends through October, which as we noted on our last call, represented the toughest year-over-year comparison of any month in Q4. Second, on revenue, we expect full year revenue to land near the high end of our guidance range of $1.046 billion to $1.054 billion. This outlook incorporates approximately 17 new store openings in Q4, up from 14 in Q4 of 2024, and the timing of revenue contribution from those stores. We are also factoring in a modest sales uplift from our ongoing marketing tests. Finally, on adjusted EBITDA, we expect to be at the high end of our guidance range of $338 million to $342 million. As increased spend on our Q4 marketing test is largely offset by a corresponding sales lift. For even more details, the full list of our outlook ranges for 2025 can be found in the table in today's earnings press release. In summary, we remain committed to investing in our growth initiatives while continuing to deliver strong profitability and cash flow. Looking ahead, we are encouraged by the strength of our markets, the resilience of our business model and the consistent execution by our teams. We are well positioned to capitalize on the favorable tailwinds emerging in the carwash industry, achieve our financial objectives and create lasting value for our shareholders. Operator, that concludes our prepared remarks, and we will now open the call for questions. Operator: [Operator Instructions] The first question comes from the line of David Bellinger with Mizuho. David Bellinger: Maybe first one just a couple of parts. So could you just help us understand where the sales upside were that materialized within Q3? And then on the October comment, I know there was a more difficult comparison, but just anything you've noticed from your core customers, a lot of noise out there with the government shutdown, some of these SNAP benefits potentially going away for a period. So anything that you've noticed on the start to Q4, just that's been a little different than your expectations? Jedidiah Gold: Yes, David. It's Jed. Thanks for the question. So first of all, on your -- the first part of your question about just what materialized and helped drive the strength in Q3. Overall, when we look at the trends by month, it was -- all months were positive, as we talked about on our last call. It was a little bit softer lap in July. So July was the stronger of the three months, but each month was positive. We're really happy with the revenue per member growth that we saw during the quarter, which was fueled by Titanium mix, just a little bit stronger than what we had expected at just over 25% during the quarter. As we look at October, October, as we've talked about, it is going to be the most difficult lap of the year. We're lapping a positive low double-digit comp. We knew this was going to be a challenge. It's in line with what we've expected, and it's been factored into our -- the full year guidance that we provided. David Bellinger: Very good. And then second question, I appreciate all the cash flow commentary. It seems like a lot of things move in your favor with the accelerated depreciation and some of the leaseback demand picking up. So my question is, what's the pecking order of your cash flow usage from here? Is it leverage pay down? Is it new units? Could you even buy back some stock directly from your private equity sponsor, if possible? Just help us think about the pecking order of your cash flow usage? Jedidiah Gold: Yes. Really happy with the free cash flow that's being generated from the business. It does present, as you highlighted, a lot of optionality for us to drive shareholder value. As we look at the uses of cash, greenfield is certainly the highest and best use of capital. So we're not looking to pull off the gas in any way on continuing to build new units infill within our existing markets, expand our footprint. And then some of the other alternatives that you laid down, it gives us some alternatives right for potential share buyback, debt paydown, but also, we continue to look at different M&A opportunities. So really hard to say because it's not a static analysis. It's something that we're going to continually look at and optimize that cash deployment. Operator: The next question comes from Justin Kleber with Baird. Justin Kleber: First one, just on, I guess, a couple of questions on pricing. I wanted to understand how the base price increase wraps into '26? And then secondly, how do you guys think about the ability to optimize pricing at a local level? I know some of your markets have a slightly different pricing architecture, but I think most are fairly consistent. So just wondering if there's an opportunity to create price zones based on local market dynamics. John Lai: Yes. I'll start. Good question. So listen, the way we approach pricing is on a market-specific basis. We would always love to get to a national pricing structure, but we think that, that's not the right approach. So today, we're continuously evaluating our strategy, and we look at it through the lens of the value that we're providing to our customers. We keep a finger on the pulse of competitive activity. I think the fact that we're delivering a premium experience justifies us perhaps moving up the ladder on pricing when we see that opportunity present itself. But we've been very cautious with respect to our approach. Typically, we're not going to telegraph any future price moves on a call like this, so we like to keep that close to the vest. Jedidiah Gold: And then I think the first part of your question, Justin, about how that base price increase will flow into 2026. So the rollout is just -- as we had talked about in our prepared remarks, it's been in line with our expectations, where we'll take the base price increase for a short period, we'll see for 4 to 6 weeks, we'll see a period of elevated churn, but then churn comes back within its historic average. But it was, as you know, a phased rollout of that base price increase and some of the -- our larger markets, that base price increase didn't get rolled out until late Q3, early Q4. So most of the benefit from those markets will be realized in 2026. Roughly, as we think about the total base price increase and how much is going to impact 2025 versus 2026, it's roughly 1/4 to 1/3 will -- of that total base price increase will roll into 2026. Justin Kleber: All right. And then, Jed, just based on your comments around full year comp, it seems like you're not planning for a negative comp in the fourth quarter. Just wanted to confirm that. Jedidiah Gold: That is -- Justin, that is correct. We are not planning on a full -- on a negative comp, at least on the full quarter, but keep in mind, October, as we've highlighted, a little more difficult lap. But November, December, it softens up a little bit. So we expect to be positive on the quarter. Operator: The next question comes from the line of Peter Keith with Piper Sandler. Alexia Morgan: This is Alexia Morgan on for Peter. We were wondering if you could provide some more color on membership trends. We calculate members per store in Q3 declining from Q2. And it looks like the total member count was either flat sequentially or possibly saw some slight decline, if my math is correct. Any insight you could provide into that trend would be helpful. And do you expect this trend to continue over the coming quarters? John Lai: Yes. Thanks for the question. This is John. So you're absolutely right. Sequentially, our membership base has been relatively flat. And that also is kind of in line with what we expected when we look at retail volume. And so for us, retail volume is the top of the funnel as we get more retail traffic in the door. We've proven that we can convert them at north of a 10% capture rate into membership. So really, for us, it's solving for this retail traffic and getting more retail customers in the door to increase our member base. I will say that when we look at utilization of our current member base, it's remained steady, and so the level of engagement has not waned. And we're also looking to deepen the relationship that we have with our members to improve that engagement level, primarily focused on how we onboard that new member which is a really critical time to establish a different habit of behavior. And we think that, that first 90 days is absolutely critical. Some additional color on UWC though and things that I think are important from a KPI perspective, our churn has remained steady at roughly 5%. So no uptick in churn, which is always a good thing. And when we look at the shape of that retention curve as our member base matures and they stay in the program longer, that churn rate decreases for those folks are staying longer. So for us, it's all about getting them in, getting them used to washing their car ideally once a week. And once we establish that behavior, they tend to stay in the program. So today, we're super happy. I think contextually, when you look at our member base, we're definitely in the upper quartile on an industry-wide basis with approximately 5,000 members per store for our mature stores. But we have a number of stores that have 7,000 members, a bunch of stores, that have 10,000 members. So it just emboldens us that we have organic growth inside of our existing customer base. And if I were just to zoom out for a second. When we think about the TAM for subscription, we think that the market is under subscribed and that there is a whole lot more potential for our industry to grow their membership base, and we look at other sectors like the gym space that has north of a 25% of the U.S. population belongs to some gym membership. And we think that, that customer parallels a carwash customer very closely. So to that end, that is what our potential is. So if we can double the TAM potential of our membership universe, that would be a really awesome tailwind for our business. Alexia Morgan: Okay. That's really helpful. And then my second question is on your marketing test. Is there any update or quantification on the comp lift in the markets experiencing those market tests? And then just anecdotally, any new marketing forms that are resonating with these tests? John Lai: Yes. So as we noted in the last call, in Q2, we had a mid-single-digit uptick in comp store sales for the six pilot markets that on average that we tested in. And then we took the learnings from that and leverage those learns to deploy in our Q4 test, which is currently underway. So we don't have anything to share with you in terms of how that is currently trending because it's relatively new. But for us, it was breaking down channel offer the different types of image and building upon the good and then also discarding the stuff that wasn't moving the needle. Jedidiah Gold: And then as we think about Q4, Alexia, it's -- we did factor in a very small sales lift, but it's a limited test, we're still calling it a test. And it's going to take a little bit of time to get some traction, just limiting the amount of sales benefit that we expect to see during the fourth quarter. Operator: The next question comes from Michael Lasser with UBS. Michael Lasser: So the competitive intensity within the industry is moderating, yet retail remains down low double digits. So is there a case where economic sensitivity is rising? Or alternatively as you raise the base price membership, the appeal of becoming an a la carte member looks a little bit more attractive. Maybe you could just give us a sense of what you think those dynamics start playing out? John Lai: Yes. Michael, good question. So listen, while we believe or we're seeing that the amount of new entrants into the space is abating and receding from the high of 2023, which is a good trend for us. Those businesses are out there, the ones that have been built. And so we have 80% of our portfolio as a competitor within a 1-mile -- or excuse me, a 3-mile radius. And so as we look at the types of promotional offers that they're deploying. Most of them are in the introductory subscription trial offers. We haven't seen a whole lot of discounting on retail. I will say that I think to your question around the price sensitivity for our retail base price. It's a $10 carwash. And so that's within reach, I think, of most Americans. That said, we are sensitive to the bottom quartile of the income bracket, and those folks certainly are under a little bit more pressure, which we think is having an impact on frequency. Jedidiah Gold: Yes, Michael, just putting a little bit finer point on that is when we look at -- and it's been pretty consistent over the last few quarters, when we look at those stores that are in the lower income demographic, they are underperforming the balance of the portfolio, speaking to that lower-end consumer being under just a little bit more pressure, and their wallet not going quite as far in their spend. Michael Lasser: Okay. Very helpful. And then has there been a change philosophically within the Mister Organization where the company would be willing to accept fewer members per location with the offset being you can harvest more revenue per member? And how does that -- if that's the philosophy now, how does that look heading into 2026? Because the pipeline is going to have -- probably been under some pressure, the pipeline for new members given the low double-digit retail decrease in 3Q. And if you're pointing to a flat overall comp in 4Q, that's probably going to suggest that retail remains under pressure in 4Q. John Lai: Yes. Michael, so philosophically, I think there's never been a primary thrust on maximizing profitability per customer. To your point, we were more about driving membership early on in our life cycle. But where we sit today, we're definitely looking more at how we can increase the value of that member. So when we look at revenue per member, which is a really important KPI for us, that's shown a really healthy uptick over the last 5 years, primarily driven by Titanium. So we were really pleased with how we were able to take an existing, very large installed base and increase the value of that base. And one could argue, without taking a price increase, it was introducing a new top tier. So that was terrific. But as we also noted, though, after roughly 18 years of holding the line on base membership, with rising input costs, we were kind of kicking and screaming to the table going, "Hey, we needed to take our membership price up," which we did, the base, and that flowed through rather nicely. So I think to your question, today, we want our cake and eat it too. We want to grow our member base, but we also want to increase the value of that member, and we're trying to do both of those simultaneously. Operator: The next question comes from the line of John Heinbockel with Guggenheim. Jacob Nivasch: This is Jake Nivasch on for John. A quick question. Just wanted to go back to the marketing test. The expanded marketing test look from -- from what 4 markets to double that? And I guess, what lift are you getting on brand awareness? And just trying to get a better sense of what the right level of spend you guys think might be, I guess, near term or just going forward here? John Lai: Yes. Thanks for the question. So we're just in the throes of the Q4 test right now. So too early for us to share anything of substance, although we are excited about the potential. So we just point back to the results that we had in Q2, which were promising, and emboldens us to want to turn up the knob more. As we've noted on previous calls, our ad spend as a percentage of revenue is minuscule, and we would love to be able to turn up the knob, but we want to be able to justify the investment and not just throw money at it. So we're holding ourselves internally to a high bar from a ROAS perspective and making sure that every incremental dollar that we spend is going to generate ideally a 3x return in revenue. Jedidiah Gold: And Jake, just a little bit more to build on that, right? So you talked about brand awareness and looking -- using that as a measure for success. While we are looking at that, I think the focus really is around how do we drive incremental sales and incremental return on invested ad spend. So truly looking at this, we want to make sure that we know what works, what doesn't work, looking at messaging, looking at channels, looking at the amount of spend, the combination of different channels. There's a lot that goes into this, and we want to make sure we're really getting smarter about it and building this disciplined marketing muscle that will continue to drive the top line going forward. So really optimistic about what we saw in Q2. It's what's emboldened us as we look to this test to continue to refine our learnings in Q4. Operator: The next question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: I wanted to ask, can you remind us on Titanium, how long -- I guess, when was the first -- several markets rolled out? Are we in like a year 2 in some places or just 1.5 years? And then can you talk about what's happened to membership in some of those longest markets? What you're seeing in terms of Titanium membership growing on growth? And then what's happening in other tiers in some of those longer markets? John Lai: Yes. Simeon, thanks for the question. So it's launched in 2023 and there's a rolling rollout, [ let's say ]. So we don't do it all in one day. We roll it out by region and make sure that we're reducing it. So we've had this benefit of month-over-month sequential growth that has been helpful. The membership, I think, recovering in the 25% range. And again, that has exceeded our expectations. When we look at the blend of the premium mix, which is our Platinum and Titanium, that's roughly 60% of our overall member base. And again, we're very pleased with that number. Would we like to see it grow? For sure. And so internally, we're working on some techniques to continue to elevate the premiumization of our membership universe. But the way we go about it, has been very kind of what we call slow burn. In that, we don't want to become overly promotional and trying to get people into those tiers. But the fact that they have adopted it, and they're sticking in the program, is really a testament to the value that they're driving from the service that we're providing. Jedidiah Gold: Yes. And Simeon, when we look at it by market, there are some markets that are 35% plus mix, which is what gives us hope that there's still some continued opportunity to drive Titanium mix and this membership premiumization. But it's not going to be at the same accelerated rate that we've seen over the last 1.5 years. It's going to take some concerted focus from the -- particularly our frontline team members in really helping elevate in their communications with members for us to start to realize that higher member or higher Titanium mix across even more of our markets. Simeon Gutman: And then a follow-up. I want to talk -- ask about the greenfield markets. Can you talk about anything that surprised you? Can you talk about market development? Are you approaching it the same way in terms of number of stores? Anything either on membership or the retail customer in greenfield? John Lai: Yes. Listen, the greenfield program, there's been a lot of learnings for us. I think let me start by saying that the bulk of the greenfields that we've opened are hitting it out of the park. We're absolutely crushing it. But that said, there's been another bucket of stores that have come under some competitive intrusion, and those stores are ramping at a different trajectory as a result. There's another kind of bucket as we break them into different categories of stores that we're calling the early stores, that were intentionally early, where we went in to establish our position in the trade area that hasn't been fully built out, but we expect that it will, and getting that beachhead will hopefully prevent others from coming in. So again, we're optimistic about the long-term potential of those locations. But then there's also a smaller segment of stores where we just made some site selection errors, and we learned a lot from those mistakes, and we baked that into a lot of new protocols. One of those is we're becoming a lot more data-driven and rigorous in our site selection process. And I will say our real estate team going forward is really, really focused on quality and making sure that we have a super high degree of confidence in the success of the future pipeline. Operator: The next question comes from the line of Phillip Blee with William Blair. Phillip Blee: Quick one on unit growth. You previously brought down your expectations for this year by a bit to 30 greenfields. Should we expect this to be your new run rate going into 2026? And does changes in the M&A environment impact your greenfield plans at all? Jedidiah Gold: Yes, Phillip. So as we think about 2025, the guidance of approximately 30, as we shared in our prepared remarks, important to note that, that's just greenfields. That does not factor in any M&A. So the Lubbock acquisition would be incremental to that. And then as we think about 2026, we expect the greenfield development to be in line with what we see in 2025. Phillip Blee: Okay. Okay. Very helpful. And then previously, I believe you had mentioned that Lubbock was a market that was largely built out. So did something change in that assessment? And then how are you viewing the incremental opportunity to grow that total market? And then are there other cities that you maybe thought were a bit saturated from a store perspective, but maybe then reassessing the potential for further density? John Lai: Yes. This is John. So great question. So listen, we had an established presence in Lubbock, albeit a small one with 4 stores. And we have the opportunity to double our footprint with a 5-store acquisition to get to 9 locations. It put us clearly in the #1 seat for that market. But to your point, it is a competitive market. There's a lot of good operators in that market that we have the highest regard for. But at the end of the day, it's not a market that we would add a greenfield to, given, to your point, the market is mature and kind of that capacity. But this really, again, speaks to the strength that we have from a growth perspective as a company and that we're agnostic in unit growth. We can buy businesses, or we can build businesses, build stores and the fact that we have a two-pronged approach to strengthen our position. And so again, our primary objective is to densify and fortify each of the markets that we're in, elevate our market share. And if there's a good opportunity to do that through M&A, we will pull the trigger. And that's exactly what we did in Lubbock. We're very optimistic about that. Operator: The next question comes from the line of Mark Jordan with Goldman Sachs. Mark Jordan: With the recent acquisition, should we expect M&A to accelerate going forward? Or is this acquisition just more opportunistic in nature? John Lai: Yes. It's hard for us to predict M&A. It's, as you know, lumpy. Oftentimes, it's predicated on when those opportunities come to market, and so we can't project that. But we have -- we remain open for and evaluating opportunities as they come across the table. And we're out there pounding the pavement right now looking for the onesie-twosies, that we're calling bolt-ons, that can strengthen our position in each market. So we're very bullish, big picture, on what we think will be a really nice setup for perhaps larger scale combination opportunities in the future, but trying to predict that is difficult. So I will say that over the next 2 to 5 years, I expect the industry to skinny down a little bit in terms of the number of folks that -- particularly the platforms that are in the space, the PE-backed platforms specifically that we'll look to monetize and exit. And it's our prediction that most of them will probably exit at a lower multiple than what they paid to get in. Mark Jordan: That's perfect. And then that kind of dovetails into my next question is, like, what are -- asking multiples in the M&A market, how does that compare now to maybe what you were seeing a year or 2 ago? John Lai: It's dropped precipitously. Operator: The next question comes from Bobby Griffin with Raymond James. Robert Griffin: Congrats on a good quarter. I guess, John, for me, I just wanted to circle back to -- I think it was in your prepared remarks. You mentioned something about speaks to further opportunities to drive revenue growth when you're talking about price, which is a little bit different. Is that more one-off? Or is that honestly putting in that like price now is part of the consistent wheel as we think about multiyear comp drivers for this business? John Lai: Yes. So I think a couple of things. The cadence of our price increases have been -- we characterize them as episodic and definitely lagging inflation, but no more frequent than once a year and ideally once every 2 years, I think if you start moving pricing more frequently than that. It could rattle the customer. And we certainly don't want to do that, and we want to be careful about how we approach it. That said, as we look inside of our business down to the regional level, down to the store level, there are a number of opportunities today for us to optimize pricing. And so we kind of not hold that in reserve, but as we selectively look at where those opportunities are, we will pull the trigger on them at the appropriate time. But again, we're not going to telegraph those moves on this call. Robert Griffin: Yes, completely understandable. That's very helpful, though, in the way to think about it. And I would agree with you on the opportunity as well. And I guess the second one I wanted to ask is just maybe to cut the store comp a little differently. But if you look at your mature markets that aren't experiencing competitor growth, but also aren't experiencing densification from you guys themselves, what does that mature market profile comp look like versus the company average? Jedidiah Gold: Yes. So Bobby, as we think about that ramp curve, you really see the majority of the comp store sales growth coming from those stores that are open within the first 5 years, which isn't unique to other retailers. You have a little bit of an accelerated comp or a little bit of an outsized comp. And then as you move into the mature stores, they tend to lag those stores that are in the first 5 years. I do think we're in a little bit of a unique position given that we have 63 interior clean locations, and all 63 of those interior clean locations sit in the most mature vintages. And as we look at those interior clean locations, during the quarter, they comped at a plus -- or excuse me, at a negative 1.6%, serving as a headwind to the overall comp, thus a headwind to the overall mature store base. Robert Griffin: Okay. That's helpful. I appreciate the details, and good luck here on the fourth and some of the marketing tests. Operator: The next question comes from Robby Ohmes with Bank of America. Yanjun Liu: This is Vicky on for Robby Ohmes. In the markets where you have tested marketing spend, have you seen any competitive responses? John Lai: We have nothing out of the ordinary. Yanjun Liu: Got it. And Titanium penetration is now 25%. For the markets that have above-average Titanium penetration, you mentioned some locations have around 35%. What's the primary driver of the outperformance? Jedidiah Gold: Yes. So just one clarification. Some markets are at 35%. We have some stores, some locations that are even more than that. So that's just markets. And so as we look at those markets and what's driving the outperformance, it's always going to be a number of factors, economic -- good economic tailwind, but good -- this is where great operations leadership really shines and being able to align the team on the task at hand and being able to help drive that Titanium mix even higher. And so different -- some of our different operators in different markets are better at that than others, but the leadership at that market level does have a play a role. Operator: The next question comes from Christian Carlino with JPMorgan. Christian Carlino: How are you thinking about the retail comps in the fourth quarter? It seems like you can hit the high end even if retail gets a bit worse. So is that just conservatism given the consumer is about to absorb tariffs in other areas of their wallet? I know you have the tough comp in October, but just any help on the puts and takes into the fourth quarter? Jedidiah Gold: Yes. So as we think about the Q4 comp, we'll have obviously the continued tailwind of the base membership price increase, helping drive revenue per member, going to continue to stay focused on Titanium penetration and look for opportunities to drive that a little bit further. The high end of the guide, it does -- so when we look at the UWC revenue per member, looking at positive low single digit to mid-single digit. But that retail comp sales, it would be negative. It implies a negative high teens. So it implies getting worse from what we saw in Q3. And Q3 was slightly better than what we saw in Q2. So forecasting retail, it continues to be the more difficult line to forecast. And so I wanted to make sure we gave ourselves just a little bit of room, especially given how well October -- how strong October was last year. Christian Carlino: Got it. That's helpful. Could you talk about how comps trended by region? Any big outperformers or underperformers? I know there was some hurricane noise last year with some lost days and then a lot of pent-up demand releasing afterwards. Any comments there? And do you think weather was a tailwind in the third quarter after being neutral in the second quarter? Jedidiah Gold: Yes. Weather was certainly a tailwind as we look at Q1. Really, really good weather patterns in Q1 of this year. And then as we talked about Q2, it was just moderated, and was more in line with what we historically see, hence, the moderation in the comp. Q3, really nothing significant in the aggregate. There's -- right? Given how many markets we operate in, there's always going to be benefit in some markets, but there's going to be a tailwind in others. I mean one of the biggest factors that impacts comp when you look at it on the regional level, it's just the number of stores that are moving from their freshmen year into their sophomore year and just the existing base of stores that we may already have in the region. If we are running a marketing test, that also will drive a little bit of outperformance in the particular regions, whether strength of the operating team -- there's a lot of different variables that will come into play when we start looking at regional trends. We could have a whole half-day session in going through all the different regions and the variables that are impacting them. Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to John Lai for any closing remarks. John Lai: Well, thanks, everyone, for joining us for the Q3 call. We had a great quarter, as we noted. We're super optimistic about how the year is shaping up. We have a lot of momentum in the business right now. More importantly, we're very excited about the long-term opportunity to double our footprint. And I think as the noise from some of the underperforming carwash chains dies down, emerging from that will be a handful of very well-run, well-capitalized, growth-oriented carwash platforms that will ultimately prevail, and we expect to be one of them. So thank you, guys. Look forward to talking to you on the next call. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.
Operator: Ladies and gentlemen, welcome to the Straumann Group Q3 2025 Results Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead. Guillaume Daniellot: Thank you, and good morning or afternoon to all of you. Thanks for attending this conference call on the Straumann Group's Third Quarter Results 2025. Please take note of the disclaimer in our media release and on Slide 2. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. As usual, the discussion will include some forward-looking statements. As shown on Slide 3, I will start with the highlights for the third quarter. Isabelle will then cover the financial details. And afterwards, I will share strategic updates and our outlook. We will be happy to answer your questions at the end of the presentation. Let's start with our highlights and move directly to Slide 5. I'm really proud of our teams globally for the great progress they made this quarter and how they are demonstrating agility to adapt to different market dynamics. In the third quarter, our revenue reached CHF 602 million, representing a strong organic growth of 8.3%. For the first 9 months, we achieved CHF 2 billion, which is up 9.6% organically. Building on this strong performance, I'm excited to announce the important steps in our orthodontic strategy, which includes new partnerships that will enable us to transform our clear line of business and unlock the full potential of our ClearCorrect brand. Later in the presentation, I will explain how we will accelerate innovation, increase profitability and strengthen ClearCorrect's position for sustainable growth together with our strategic partners, Smartee and Dental Monitoring. On the digital innovation side, one of the highlights of the third quarter was the launch of our new SIRIOS X3 intraoral scan. These marks another major step in strengthening our scanner portfolio across all price segments and our digital ecosystem through its full integration in our Straumann [ Access ] cloud-based platform. On the operational side, we are very pleased to announce that our new campus in Shanghai is fully operational by now and delivering first commercial products to the Chinese market. With this, we have significantly strengthened our supply chain resilience ahead of the upcoming VBP 2.0, which is expected to be announced end of this year. These achievements strengthen our foundation and create the opportunity for continued growth, supporting our confirmed full year 2025 outlook of high single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 currency rates. Now turning to Slide 6 and the regional development. I would like to start by highlighting that EMEA has once again achieved an excellent organic revenue growth with 11.2%. This success was driven by a strong execution across all businesses including double-digit growth in orthodontics and strong traction from our recent innovations in our core implant segment. The Straumann brand continued to gain market share while our challenger brand, Neodent and Anthogyr also grew strongly, reflecting our ability to serve different customer segments across different price points. In North America, we delivered solid growth in a still volatile environment. Organic growth accelerated to 5.7%, reflecting strong execution and growing adoption of iEXCEL implant system and our digital solutions. From a general perspective, patient flow remained rather stable during the quarter, even if we could witness some initial pocket improvements. In Asia Pacific, the significant slowdown compared to the previous quarter reflects 2 very different dynamics. On the one hand, in China, we have seen a significant slowdown due to the initial effect of VBP 2.0. Some patients have studied postponing treatments and distributors reducing inventories. On the other hand, markets outside China continued to grow strongly, especially India, Thailand, Australia and Japan, driven by robust patient demand and expanded access to care through intensified education activities. Finally, Latin America once again delivered a remarkable performance with 18% showing double-digit growth across all segments. Our challenger brand Neodent remains the key growth driver, while the Straumann premium brands, our orthodontics and digital businesses contributed strongly. Therefore, overall, our regional performance highlights the strength of our strategy and our ability to execute with discipline and agility across markets, with each region contributing with good growth despite varied market conditions. With this, let me now hand over to Isabelle who will take you through the financial performance. Isabelle Adelt: Thank you, Guillaume, and hello, everyone. Let's move to Slide 8, where you can see the revenue bridge for the third quarter. Our reported revenue increased from CHF 586 million to CHF 602 million, which represents a 2.9% growth. The Franc exchange rate effect of CHF 30 million is still very significant, but lower than in the second quarter. Overall organic revenue growth led us to 8.3%. As already mentioned by Guillaume, EMEA, our largest region, was once again the main growth contributor accounting for roughly half of the total increase in revenue, followed by strong performance of our Latin America region, which contributed more than 20% to the group's growth. Despite the currency effect, which we still expect to have a top line impact of 470 to 490 basis points for the full year, our underlying business remains very strong, reflecting both the strength of our brands and our disciplined execution across regions. Continuing with Slide 9, let's talk about our assets to mitigate tariffs. As you know, new tariff regulations have added cost pressure to the business. To counteract this, we have continuously implemented a set of mitigating measures over the past months. In the short term, we have increased inventory levels in key markets and adjusted logistic flows accordingly to secure continuity of supply chain. Thanks to these mitigating measures, we could sustainably reduce the effects of tariffs to around CHF 20 million to CHF 25 million for the full year 2025. For next year, we are increasing the share of locally produced finished products, including local assembly and packaging lines to reduce tariff exposure and improve supply chain efficiency further. For next year, we currently expect a similar impact from tariffs of around CHF 30 million. With this, we are protecting our margins while maintaining excellent service levels. Finally, a quick reminder on our capital allocation priorities on Slide 10. Our first priority remains reinvestment in sustainable business growth. Followed by maintaining a strong balance sheet and selective M&A to accelerate strategic execution. With continued earnings growth, we also aim to maintain or increase our dividend over time. So in short, we invest where the return on capital is higher also from a shareholder perspective. With that, let me hand back to Guillaume for the strategic update. Guillaume Daniellot: Thank you, Isabelle. Let's now look at the key strategic highlights of the quarter. As shown on Slide 12, our total addressable market is estimated at around CHF 20 billion, spanning across implantology, orthodontics, digital equipment, prosthetics and regenerative solutions. We currently hold roughly 12% market share with this market, which leaves us ample room for further growth, especially with new dedicated opportunities now to play in each segment. Moving on to Slide 13. I'm very excited to share important strategic developments, which will transform our orthodontics business. To reshape our clear aligner franchise and improved performance, we are focusing on 3 pillars. First, we are building a very competitive and differentiated ClearCorrect value proposition, delivering a superior customer and patient experience. Second, we are strengthening our manufacturing capabilities to increase profitability. And third, we are prioritizing strategic markets to accelerate future growth and establish a leading position especially among general partitioners. Innovation remains at the core of our strategy to accelerate growth and improve profitability in this orthodontic segment. To achieve this, we are partnering with Smartee, a global orthodontic leader that will help us bring new solutions to market faster and with greater efficiency. Smartee is a leading clear aligner organization with more than 20 years experience, known for its innovation, quality and clinical excellence. Smartee is the ideal partner for the next phase of our orthodontic growth. It will increase the ClearCorrect value proposition through expanding indications and product options. This includes new clinical capabilities such as treatment outcome simulation tool, mandibular advancement functionality and multiple streamline options to address a broader range of clinical needs and customers. As part of the partnership. Smartee will also take over full ClearCorrect production for EMEA and Asia Pacific regions, two of our largest and fastest-growing geographies. This transition will enable faster scaling, higher efficiency and significantly lower manufacturing costs through Smartee's fully automated, state-of-the-art production facilities. The production for these regions is currently based in [indiscernible] Germany, which is planned to be phased out by early 2026. This partnership unites the complementary strength of 2 industry leaders. By combining ClearCorrect's global commercial reach with Smartee's world-class technology and production capabilities, we will achieve the scale, cost optimization and margin improvement needed to build a profitable orthodontic business. Moving to slide 14, in addition to Smartee partnership, we will further strengthen ClearCorrect's value proposition by expanding our long-standing collaboration with y DentalMonitoring. We are partnering on a unique AI-powered remote monitoring technology, which is directly and uniquely integrated with the ClearCorrect Doctor Portal. This innovation enables clinicians to monitor cases more efficiently and help general practitioners manage treatments with greater confidence and convenience. It enhances the overall experience for both practitioners and patients and supports our ambition to drive broader adoption of clear aligner treatment among general practitioners in our key strategic segment. Building on the foundation of this new value proposition and the more cost-effective manufacturing capabilities for Smartee, we have also implemented a focused go-to-market model design around the key growth markets. By concentrating resources in high potential profitable markets and aligning our ortho organization under one integrated structure, we can operate with greater agility, increased efficiency and better customer focus. This approach strengthens our engagement with general practitioners and DSOs, enhances execution discipline and support sustainable growth. With all these developments, ClearCorrect is becoming more versatile, clinically advanced and efficient, strengthening our competitiveness and supporting our ambition to achieve a leading position in the global orthodontics market in the future. Let's now move from orthodontics to implantology on Slide 15, where innovation, education and digitalization continue to drive our leadership. Let's start with our premium brand, Straumann and its latest innovation iEXCEL. This high-performance implant system is becoming one of the most successful product launches we had in our recent history. iEXCEL combines 4 implant design in one system with a unified positive platform, a single connection and a single surgical kit. This unique offering simplifies workflows, reduces inventory and especially gives clinicians true intraoperative flexibility, enabling design implant changes on the spot during surgery without changing instruments. To further differentiate, iEXCEL is also coming with [indiscernible], 2 of our unique and most advanced technologies enabling minimally invasive protocols and faster osseointegration. We are really pleased to report that we have already sold more than 1 million iEXCEL implants, which is a fantastic milestone that shows the strong confidence clinicians place in this system. This success reflects our innovation and execution strength within the Straumann premium brands, which continue to drive market share gains and new customer acquisition. One of the greatest example of a new customer acquisition with iEXCEL is the [ Mayo Clinic ] in Portugal, which recently chose to partner with us and transitions its portfolio to Straumann. The decision of this highly respected implant-focused DSO highlights how our comprehensive solutions and digital capabilities create real value for clinicians and patients alike. Together, these achievements demonstrate how our focus on innovation, digital integration and close customer partnership continues to translate into tangible market momentum. Let's move to Slide 16. Our comprehensive education activities are key to improving market access, building stronger partnerships and gain market share. In the third quarter, we continued to expand our partner education network and deliver hands-on courses, particularly in Asia Pacific. These programs allow clinicians to refine their surgical and restorative skills, gain confidence in immediate protocols and embrace digital workflows. By investing in education, we not only raised clinical standards, but also reached new customers and strengthened our market share and with this further reinforced our leadership in implantology. In addition, we engaged with thousands of dental professionals in the third quarter at major events, such as the DSO CEO Summit in Boston, where we held strategic discussions on expanding access to care and driving efficient growth through partnership. In addition, we demonstrated our latest innovation at the EAO Congress in Monaco and the international aesthetic days attended by more than 1,400 clinicians. Let's move to Slide 17. At this event, we have launched our new SIRIOS X3 intraoral scanner, which is another very exciting innovation. This new iOS is our new generation wireless scanner that combines exceptional scanning speed, accuracy and ergonomics in a lightweight compact design. Positioned in the mid-price segment, SIRIOS X3 strengthened our iOS portfolio, together with the entry level of SIRIOS and the premium TRIOS solution by 3Shape enabling us to serve the different market segments. The first reactions from clinicians have been really, really strong. Early adopters highlight the ease of use and the effortless integration into our digital platform, Straumann [ AXS ]. This launch further strengthens our position in digital dentistry and marks another important step in expanding our clinician base connected to our Straumann ecosystem. Moving to Slide 18. Actually, thanks to our competitive digital portfolio, we are then continuously growing our intraoral scanner user base who are then benefiting from our simpler, faster workflows through the cloud-based Straumann [ AXS ] platform, which will further drive growth. A good example is our fast molar workflow, which is a streamlined, simple free step approach that helps to restore a posterior case quicker and easier. The solution uses fewer parts and reduce significantly chair time by removing appointments, helping dentists with more efficiency to deliver highly reliable clinical outcome. Another one is the latest Straumann EXACT innovation, which supports the digital full-arch workflow. It significantly helps clinicians treat patients who need a full set of new teeth by guiding them through each step from the first digital scan all the way to the final restoration. It simplifies what is usually a complex process and saves time both for the dentist and most notably for the patient. Turning now to Slide 19 and our progress in China. As mentioned before, we have seen a significant slowdown due to the initial effect of VBP 2.0 as some patients have studied postponing treatments and distributors are reducing inventories. Despite this early impact, we are well prepared for the implementation of VBP 2.0 and have taken proactive steps to strengthen our local setting. First, the ramp-up of our Shanghai campus has been completed, and the site has received all necessary licenses for local production. This milestone allows us to manufacture Straumann and Anthogyr implants in China, reducing lead times and improving cost efficiency. Secondly, as you know, in the past years, our business in China has been driven primarily by our premium brand and supported by Anthogyr in the value segment. Now to be prepared for the VBP 2.0, we are continuing to broaden our implant portfolio to serve all the different price segments. Therefore, alongside our Straumann and Anthogyr implants, we are developing a new brand for the [ eco ] segment, together with a local partner, ensuring we can meet customer needs on the lower price points. In parallel, we continue investing in education and training to support clinicians in adopting digital workflows and building their implantology expertise. These initiatives will help shape a sustainable growing environment -- implantology market in China based on clinical excellence and patient trust. With these steps, we are well prepared for VBP 2.0 with the right infrastructure, brand portfolio and local capabilities to continue growing and supporting our customers in this strategically important growth market despite any VBP 2.0 decisions. Moving to Slide 20. We strongly believe that our culture is what truly sets us apart. In an environment that is becoming more complex and volatile, our culture is what enables us to adapt faster, execute better and stay close to our customers. As a company, our commitment goes beyond business. It was very inspiring to see more than 5,000 colleagues from around the world come together over several months for the Smile Movement, the global employee initiatives that unites team to make a positive impact beyond dentistry. Through local activities, volunteering and fundraising, the Smile Movement celebrates our shared purpose of unlocking people's lives by creating smiles. This year, our colleagues turn that purpose into action rising over CHF 0.5 million for the Straumann Group Foundation through their collective energy, a true reflection of passion and dedication that defines our culture. Let's now move to Slide 22 to talk about the outlook for the full year. With our diversified portfolio, strong brands and continued focus on innovation and execution, we are well positioned to keep delivering sustainable and profitable growth. Despite ongoing macroeconomic uncertainties and the impact of tariffs, we remain confident and confirm our full year 2025 outlook. High single-digit organic revenue growth and a 30 to 60 basis point improvement in the core EBIT margin at constant 2024 at currency rate. Before we close, let me highlight our upcoming Capital Markets Day, which will take place on November 25 in Basel, Switzerland. This event will give us the opportunity to take a deeper look at our market priorities, our innovation road map and our ambitions. I look forward to seeing many of you there, either in person or online, and to engage in inspiring discussions. And with this, we are happy to take your questions. As usual, we kindly ask you to limit the number of questions to 2 in order that each participants can have a chance to put their questions within the available time. Can we have the first question, please? Operator: The first question comes from Julien Dormois from Jefferies. Julien Dormois: Yes. I will limit myself to 2. Starting with China, it's obviously the key topic investors have been focused on in the past few months. So just wondering if you could try and quantify what's been the magnitude of the decline in China in the quarter. And how we should think about Q4 because this will obviously have an influence -- probably a starker influence, I guess, on your -- on the development in Q4. So interesting to hear your thoughts on that. And second one is on the U.S., wondering you have mentioned stable patient flows in the country with some pockets of improvements. How do you see that playing out in the fourth quarter and into '26. I know you had previously commented that you were expecting maybe stronger growth in 2025 versus '24? How do you think about this guidance at this point? Guillaume Daniellot: Yes. Thanks, Julien. Then I would say, first, the third quarter in China, I think you have more than 2 questions even with Q3, Q4 and 2026, but we'll try to cover that. We have seen a significant slowdown in China due to an early and initial impact of VBP 2.0 as we said, ahead of the potential lower pricing of implant treatment by the Chinese government that will be setting that potentially by the end of the year. We know that patients are starting to postpone treatment and distributors have started regency inventories and even a little bit earlier than planned, meaning that in Q3, China has been around flattish. What does it mean for Q4? It means that as the VBP 2.0 FX will increase, obviously, more patients will be postponing treatment and distributor will be continuing destocking, meaning that, obviously, the China and APAC will be moving in the negative side in the fourth quarter. Now when you look a little bit further despite the fact that we will have a -- obviously, a bit more in China and APAC, more challenging quarter, Q4, Q1, while then the VBP will be implemented, we believe that they are quite, for 2026, reason to be positive about China moving forward. First, because we are the only international premium brand with local manufacturing, all licenses and equivalents obtained for both than our Straumann brand, also our Anthogyr brand and our partner brand, meaning that if there is any aspect of the VBP that will somewhat support local manufacturing, I don't think there is any other company best place than we are. Thanks to our 4 brands, position also at the different price points. We don't know exactly how the price will be played in the VBP 2.0, but we believe that we will have all the different brands and portfolio to be able to benefit from any of the faster-growing segment moving forward. Finally, we also think from the fact that the pent-up demand from Q4, Q1 will also support the rest of the 2026 and that China is still something that we need to keep remembering, it's a very, very underpenetrated market, then we still believe that there is a lot of potential growth that needs to be unlocked moving forward, not only by the price effect that the authorities are trying to play, but also through education that we are significantly continuing to invest on. Then obviously, we see China as a future backloaded 2026, but still as being growing moving forward. Now when it comes to NAM, North America, we have been very pleased with what we have seen in the third quarter. And I would unpack that in 3 points. The first one is that the market indeed is remaining stable, even though we see some patient segment that have been willing to go for treatment more than we have seen in the past quarters. One of the aspect is also because -- and that's the second point, having the DSO making more investment to create patient traffic as we have been alluded to in the past quarter, then driving faster patient flow and faster growth in this customer segment. And this is a significant area of development versus the past quarter, and we are pretty well positioned on the DSO side in North America. And thirdly, this is also important to note that we have also improved some aspects of our sales execution, which is delivering continued market share gains. And it's a lot about leveraging our strong innovation such as iEXCEL, where we see higher growth. And we have also our differentiated workflow, which is supporting significantly practice efficiency that has been driving new customer acquisition. Then I would say there is a part of the market, which is a little bit coming better, but also some improved execution on our side that we are seeing as sustainable. And how it's going to be in 2026. I think at this moment in time, obviously, it's not easy to express because we have seen that very volatile but we see 2 positive things from our side. The first is that we have innovation that will keep us delivering above market growth. Not only on the implant side, but also, obviously, on the general side with our SIRIOS X3 and future capability to scan full launch with a very high precision that I think will be very appealing with the specialist segment. Our iEXCEL will continue to deliver growth, especially because it's going to be supported by additional portfolio line extension like BLC 4.0 that has been requested by the North American market, also new prosthetic line with specific laser technology to texture the surface differently that will continue to significantly differentiate iEXCEL as the best-in-class system out there. And I would say that finally, as you have heard, everyone expect another 25 rate cuts in the next meeting by the Fed that while it will not change yet completely the market dynamic because it needs an additional, I would say, 75 basis points, then it will send a positive message that should influence consumer confidence as we have seen, that has been one of the effect that has slowed down the market in the first half. Then all in all, yes, we believe that if it continues like this, we have a lot of very good dimensions for expecting a better NAM moving forward. Sorry for the long answer, but I hope it covered all the different points that you were asking for. Operator: The next question comes from Susannah Ludwig from Bernstein. Susannah Ludwig: I have 2, please. I guess just following up on China. Could you share whether this is more patients holding off on procedures or whether it's more a reduction in inventories? And then how many months of inventory do the distributors typically hold in China? And then second, on the partnerships within orthodontics, I guess, can you share more about your thoughts on potential economic impact? You previously noted that more scale was needed to get to profitability in that business. I guess, with these new partnerships, where do you see sort of the potential for the orthodontic profitability moving? Guillaume Daniellot: When it comes to China, I think it's -- we have seen both effects playing at the same time. And this is what we have seen also in the past VBP 1.0 where you have really this combination of effect, then you have -- at the beginning you asked, it starts by the patient starting to postpone some treatment step by step. And then obviously, when the distributors are deciding to reduce inventories, this is where it accelerates significantly because this is where they are obviously stopping ordering at the same rate, and this is obviously what is having the biggest impact at the end. Then this is what we have seen at the end of the quarter -- of this third quarter, and that's what we believe we are going to see increasing on the fourth quarter because this is what we have seen also in 2022 Q4 that has significantly impacted our last quarter of 2022. The inventory they are carrying, generally speaking, it's a 3-month inventory. Then this is what we had in the channel mid than Q3, and this is what will decrease significantly during the fourth quarter. When it comes to our orthodontic partnership, we are obviously very excited by this. We have said a couple of times that we were needing to invest significantly in increasing our value proposition as we are seeing also new competition coming in. And we have especially expressed a couple of times that we were needing to reach scale in order to be able to drive sustainable profitable growth in the future. And that's why we are really, really excited to announce the Smartee partnership because it will really help us to progress on both sides that are critical for the future of our orthodontic franchise. As expressed a little bit in the presentation, the first point of the Smartee partnership is to significantly improve our value proposition. This volume proposition is going to be increased through the Smartee technology that will allow us to have new clinical capabilities. And I think those new clinical capabilities are really significant. They are major ones. We will have, for example, CBCT integration in our planning. We are going to have different streamline options. We have a flat streamline at the moment, which are high and low, but we are going to have a scale up streamlined in the future, which is one of the major expectations of a lot of clinicians we met because this is what they are used to. We are going to expand indications in the mandibular advancement functionality as an example, which is also going to allow us then to go to more advanced users that we were not able to do before. And finally, something which is important to increase conversion rate and supporting the GPs to convert patient case, we are going to have that modern treatment outcome simulator, which is very important, obviously, to present to the patients what should be the clinical outcome. Then if you put all of this together, we are going to have a very unique differentiated value proposition. That should allow us to really accelerate significantly our shares in this segment. And the second aspect that we have really significantly highlighted is that Smartee, with being one of the leaders in this field and especially in the Chinese market, is really helping us to gain scale. Then -- we can then benefit from their scale and their automated manufacturing side in order to significantly lower our manufacturing costs. And this is what will help us obviously very quickly in the next 12 months to reduce our costs on our existing volume, especially in EMEA, in Asia Pacific. But also for all the different new customers and new business we are going to do, it will be at this new profitability side. And that's where when you combine those two, it's a very kind of an exciting transformation of what we do that will bring both top line and bottom line some significant development. Operator: The next question comes from David Adlington from JPMorgan. David Adlington: Sorry to focus on China again. But maybe just a slightly bigger picture. There's a lot of moving parts for next year with respect to obviously surprising headwinds but volumes, you're going to have some pent-up demand on potential restocking? Maybe sort of bigger picture, do you think you can grow both the China business and APAC next year? Or do you think is going to be a year of consolidation? And then secondly, in term terms of impact on margins from the shift to Chinese production, obviously, lower cost of production in China, but you are going to be left with some potentially stranded costs at your Swiss facility. Just wondering how we should think about capacity utilization there, whether you can reduce that capacity in Switzerland to offset that production utilization? Guillaume Daniellot: Yes. Thanks, David. And 2 points, yes, we believe we will grow in China next year. I think at the moment, this is what is our assumption and our belief. Now once again, as you know, there is no VBP rule out there yet. Then it will a lot depend on what VBP 2.0 then will be designed and how they will set new price and how they will try to define this new policy. Then that's the first point. And I would say it's still assumptions because, as we have seen, the rules of the VBP 1.0 are really significantly reshaped the market. Then we can only talk about what we assume some of the VBP 2.0 could be. And from our assumptions, the price cut should not be significant. It has been very significant in around 1.0. We don't expect then the authorities to do another major cut because it will also significantly challenged the profitability of clinical practices directly and it would potentially be counterproductive to what the Chinese authorities are trying to achieve, which is more access to implant therapy. The second aspect, if price are just adding a small than the cut, it's a lot about how volume obviously should grow. And we still believe that there is a significant market potential in China. There is a lot of patient expecting implant treatment. And there is a lot of dentists that are trained and are able to deliver it. And that's one of the important reason as well from that very underpenetrated nature of the China market that we believe after, the rules have been then published that we will see patient flow getting back to a good -- dynamic and a good level, and that would allow us to grow in China. And based on those assumptions, we believe China and APAC will grow in 2026. And when it comes to your questions on our Shanghai manufacturing, our assumptions right now, and the calculation is showing that we should have a 20% lower COGS on our China campus versus our Switzerland manufacturing site. That would be one of, of course, very good then the consequence of getting started now with this manufacturing side. And secondly, something which is obviously important those days, it's helping us to hedge our Swiss franc exposure by shifting a significant part of those manufacturing costs from Swiss franc in Chinese RMB. David Adlington: And will the Chinese facility be just for China? Or will you look to export from China elsewhere? Guillaume Daniellot: Yes, that's a good question. For the time being, we are really looking at China for China. But in the future, as depending on how the different supply chain will play and the different also trade deals will be implemented, I think this is also something that we could consider for the future to serve other markets in China. Operator: The next question comes from Richard Felton from Goldman Sachs. Richard Felton: Two questions from me, please. So first of all, a more general follow-up on margins. And I suppose any early thoughts that you can share on some of the moving parts on margins into 2026. You called out tariffs on the call. We know you've got VBP, maybe there's some offsets from growth from China manufacturing and the changes to orthodontics that you've announced this morning. So any early thoughts on how you're thinking and planning for margins in FY '26, please? And then the second one is another follow-up on China. Could you just remind us where your market share is in China today and how that's evolved since the first round of VBP being implemented? Guillaume Daniellot: Well, it's a bit early to talk about 2026. We have our Capital Market Day for this, but we can allude to, I think, the big margin effect has been for us, obviously, the geographical mix, and we believe that geographical mix will be then a tailwind next year because we expect North America then to be better, while China will be obviously more on the lower side when it comes to growth contribution. And then that would be a positive effect. The second thing is from a manufacturing standpoint, we are also then improving, thanks to the manufacturing site in China, which is also another positive effect. We are expecting -- well, we are expecting a very positive effect starting by the implementation of our partnership with Smartee on the ortho side. And also the fact that we are going to significantly prioritize the high-growth market, then we have significantly, let's say, be weighted on the negative side by our profitability, negative profitability of our ortho business and we are going to start seeing a significant transformation already in 2026 and even better in 2027 as we had a high double-digit million of losses on our ortho business in the past or until now, and this is going to change significantly. Finally, we hope also that on the tariff side, we can see some -- a little bit improvement if it could turn on the positive side for us. We know that there is some positive discussion in between the Brazil and the Trump administration, which would be one of the most important part of our tariff for next year as Isabelle express which is around CHF 30 million, but I would say something like a big chunk of it is coming from our Neodent import that would also significantly help. And that's why we believe that 2026 could be really interesting by driving some significant margin development on this side. Isabelle you want to add anything on this side or... Isabelle Adelt: No, perfectly covered Guillaume. Guillaume Daniellot: And the second question was, sorry? Isabelle Adelt: Market share development in China. Since we repeat [indiscernible] what market share do we have? Guillaume Daniellot: Yes. That's an interesting question. We have -- because as the market has evolved very, very significantly, and there is no official data in China. What we know is that we have a very significantly increased our share when we see the different development of many companies around us in China, we are leading by far what we could call the premium segment, and we progressed also on the challenger side. But still, on the value side, we represent a very, I would say, a pretty low share still. I think Korean companies are still having the lion share of the challenger segment together with some of the growing Chinese companies, but this is one of the way where we also expect through this very interesting new portfolio that we are developing with our Chinese partner, the possibility to have a very important inroad in the segment where we are underpenetrated. Operator: The next question comes from Daniel Jelovcan from Zürcher Kantonalbank. Daniel Jelovcan: I'm not sure actually if I haven't heard, has a Smartee collaboration, does that include any financial engagement by you? I'm not sure if I am clear on -- fully up to date. And the second question, your DSO CEO Summit in the U.S., can you put a bit more flesh on the bone for your key takeaways, which you have observed? Yes, basically, that's it. Guillaume Daniellot: Yes. Thanks, Daniel. I think actually, yes, very good question. Yes, this is a strategic partnership, then we have taken a nondisclosed share, which is, I would still say, a small share on Smartee from an equity standpoint. We want to demonstrate our commitment to this partnership. This is going to be, of course, a very important part of our ongoing strategy on the clear aligner business, then yes, we -- this is coming with financial equity participation in Smartee. The second side, when it comes to our DSO CEO Summit, yes, I think this is a very, very important meeting for us. First, to still be very, very close to this critical target group for dentistry in general and for us, in particular, as we believe that we are here trying to be much more than just a solution provider. We are really wanting to be a true business partner in supporting them achieving their goal. Then what we can say here on the DSO side is, one, it will significantly going to continue gaining share from provider care standpoint. They are continuing investing in technology. Then they are the target group, which is really supporting digitalization of dentistry, because they see the significant benefit they can get from an efficient workflow being able to help their dentists enlarging their indications and doing that also in a faster manner, still delivering high-quality outcome. Then they are a strong partner for increasing the digital penetration of entity. Secondly, they are also one of our strategic partner for growing the pie. They are the one being convinced about the fact that implant treatment is the gold standard of tooth replacement. And then they are doing all the necessary advertising and patient communication that are helping us to still bring implant as the preferred solution and increasing not only patient flow, but also treatment acceptance when they are there. And we are developing tools to help them in this perspective. And third, I would say this is also and we see more and more than very important customers that are expecting a very high level B2B service level, meaning that it's all about how we can implement a very connected and interlinked supply chain. They are also expecting very strong cybersecurity capabilities when it comes to being able to link our platforms, then DSO will continue to put barrier to entry to small organizations. Because when I see the investments you need to do to be a preferred partner to ensure not only high-quality clinical outcome with clinical evidence, but a lot in the background to support the efficiency of their supply chain, the security of their IT setup. This is really something that small organization or local or regional organization cannot do. And that's one of the reasons we are close to them, developing what it takes to lead the DSO segment and will help us to really be seen as the best potential partner for helping them achieving their goal. Daniel Jelovcan: That was very in depth. So the DSO segment in the U.S. is actually growing faster than your mom-and-pop, let's say, dentist, is that correct? Guillaume Daniellot: That's correct. And by leaps and... [Technical Difficulty] Operator: [Operator Instructions] Now we can hear you again. Guillaume Daniellot: Next question? Operator: The next question comes from Oliver Metzger from ODDO BHF. Oliver Metzger: First one is also on North America also in addition to the previous question. So obviously, there's a turn to the better, you also reported some patient flow improvement. You talked a lot about the supply side with the DSO situation is improving. How do you see it from a demand side? Can you see that actually also -- there is more flow coming from patients demanding single tooth replacement versus more complex procedures? Second question is on your strong performance in Europe. You highlighted the iEXCEL launch and with respect to success of that, can you just give us comment about how does patient volume has behaved in Europe in your view? Thank you. Guillaume Daniellot: As we expressed, the patient demand has been rather stable. And I think on all then the indication, it has been the same. We see then the single cases being done on a regular basis. But once again, not more, not less than the previous quarter. We have seen a little bit more of large indications being done in the third quarter. But once again, nothing that would support that we would say that we see a significant change in patient flow. It's still stable, but it's a little bit improving because I believe that the fear of inflation is reducing in -- among consumer. And it's not so much that -- we see for the time being, for example, a better eligibility to patient financing, we don't see that yet significantly because the rates are still not changing enough in order to open that yet. But we see a better confidence for patients to engage in the treatment in some areas. Then that's the only thing that we have witnessed in the third quarter. That's why we are still cautious in saying that it will develop from a pure market standpoint, However, we think that what is sustainable in our side is really improved execution on our side, but also all the significant traction we are getting with our innovation. We see iEXCEL having very significant higher growth rate than the rest of our portfolio. And as we are launching some additional portfolio extensions, we believe it will continue sustaining this very interesting market share gain and new customer acquisition. 20% of the iEXCEL customers are new customers that have never been customer from Straumann. And that's one of the aspects that we can really see that it ends delivering over market performance. When it comes to Europe, I think Europe has been really -- still delivering a very, very remarkable growth rate. And when you look at -- the reason for this, we expressed in the past the fact that there is, first, the affordability of implant treatment in Europe is much higher than in North America. The price level are twice less than U.S. Again, price for an implant plus crown in the U.S., it's going to be between $4,000 to $5,000 whereas in Europe, is going to be around EUR 2,000 to EUR 2,500. Then I think affordability is higher. There is more support from a reimbursement standpoint from either private insurance or social security from a national public support. Then that's a lot of explanation to -- to explain why Europe is behaving better than North America in a more kind of a challenging environment. And additionally, we have to say that iEXCEL is participating also here as gaining superior traction than the market. And all the different businesses are growing very significantly. Orthodontic clear aligner through the synergy we have with our core business around GP target group is also growing double digit. Digital is also growing significantly, then we have all the different aspects of our portfolio, which is supporting the Europe performance. And finally, something which is also important to consider, that's why we believe it's a sustainable capability to grow with all the different geographies are participating to that significant growth. As much as mature market like Scandinavia, Germany, U.K., Spain, for example, in the third quarter, but also very significantly Eastern Europe with Poland, Baltics, Romania and I can also list the distributor market that has been also very strong in the third quarter. Then it's not only one place, which is doing well, that may fade, it's the entire geographies, which is really supporting this very, very strong development. Operator: The next question comes from Brandon Vazquez from William Blair. Brandon Vazquez: I wanted to -- I'll ask two of them upfront here. The first one is just going back to the partnership with Smartee, Guillaume, you had mentioned that you're kind of in the operating losses right now. Can you talk to us, given, of course, this partnership is in part to improve profitability in this segment, what does operating profit or loss look like in 2026 as you flip that business over to Smartee? And then the second question is maybe a little bit more about North America. Encouragingly, it looks like North America actually improved a little bit despite the fact that consumer sentiment here has been pretty weak still. I know you've talked a lot about investments from DSOs? And maybe I'm curious if you could talk a little bit about what are those investments from DSOs that are improving North America results? Somewhat cautiously, I would say, the problems here are a little bit more macro, less commercial strategy, but it sounds like the partnerships that you guys and what you're seeing from the DSOs is that improving commercial strategy alone might improve North America? Guillaume Daniellot: Yes, when it comes to the Smartee partnership. And I think something that is to make it clear because we had also -- one of the question is, we will recognize revenue, obviously, because it's a distribution partnership and a manufacturing partnership because they will do that for 2 major regions of us, which is Asia Pacific and EMEA. Then yes, we had very significant operational losses because we have been investing very significantly on our technology, but also on the manufacturing side. And what we have seen that with our scale, it's very, very difficult to be able to go to profitability. Then when we say we had a very significant double-digit million losses from an operational standpoint on our ortho business, we expect this to be divided by 2 already by 2026, and we expect to be breakeven in 2027, which means that -- and obviously, afterwards, creating very positive profitability moving forward, thanks to what we are putting in place. Not only in terms of manufacturing but also on growing demand with technology and having a very sharpened go-to-market approach where we are now very structured in a clear business unit approach that would allow us to have speed but also efficiency which means that from a profitability standpoint, we expect a significant effect in the next 18 to 24 months, that should be seen on the bottom line as well. . When it comes to NAM on the DSO investment side, yes, they are doing, I would say, 3 kind of investments. The first one is then growing their network. It's still, from a DSO standpoint, a way to grow inorganically. Then it's creating new practices. There are some DSOs that are doing that by acquisition. But we see a lot of DSOs that are also creating de novo clinic because it allows you to implement all the processes and all your strategy in exactly the same way than all the rest of the network. Then you don't lose time to convert the existing clinicians to your old processes that are not used to potentially use this kind of brand of material or whatsoever, then you can standardize your approach very efficiently by creating de novo practices, and we see a lot of this ongoing and not only in North America but also in other geographies. The second investment they do then is on the organic growth this time and being able to invest into new patient flow. They are doing than advertising. And in North America, we have seen new campaigns that have been launched to create this patient demand that has been much less the case in the first half not knowing how the U.S. economy will evolve and with a big fear of inflation that would reduce the capacity for patients to pay. It seems that this is -- the risk of significant inflation is starting to reduce significantly even though no one knows exactly, but that's the perception that we have. Then there is an increased investment done in direct-to-patient communication for bringing them to the office and, of course, being able to drive patient acceptance. The third investment they do in standardization and digitalization of the entire network. Being able to drive then all the [ ultra-high ]scanning, driving workflow that will drive efficiency and especially one way of doing a procedure is helping them to have a very clear perception of the cost of one procedure and being able to have more an analytical perspective of their performance. Then we see that the investment in digitalization is now increasing and we believe that we will be able to benefit from this. There is a free kind of investment we see from DSO in North America, but also in other geographies that could help us making sure that it supports growth moving forward. Operator: The next question comes from Hassan Al-Wakeel from Barclays. Hassan Al-Wakeel: Two, please. Following up on China and particularly '26. Guillaume, when we met last month, you commented that you see double-digit growth in revenue in China is possible in '26 given low penetration, is it your current base case? How are you thinking about share gains in the mix? And what's the current price assumption on the decline? And then secondly, can you talk about iEXCEL performance in the U.S., particularly? How much did it contribute to growth given you called out the particular strength in EMEA. I think last quarter, you highlighted that iEXCEL was 15% of implant sales. How is this trending overall and by region in Q3, please? Guillaume Daniellot: Yes. Thanks, Hassan. Once again, I will express that China 2026, I think it will a lot depend on the VBP rules. And what we are looking at is, we have different scenarios, obviously, as we have been in the 2023 to prepare what the VBP can come up with. Then one of the positive scenario is obviously still having a low double-digit growth that could come out from China in case we see limited price cut which is around 5% to 10% and adding obviously, significant volume growth with a pent-up demand coming from a low Q4, low Q1 2026. And adding up to the 3 quarters of the year that we'll see a healthy patient flow and having the capability for us to keep gaining market share by adding our 4 different brands, Straumann, Anthogyr, T-Plus and our new Medentika line on the eco segment that would be able to take share and also potentially being favored by local manufacturing. . Then we have a lot -- again, as options to be able to play what the rules will be from VBP 2.0. But now being able to say we will grow double digit in China and Asia Pacific 2026, is too early to say, and we will be able to express that in our guidance based on when we will be able to say that early 2026, when the VBP rules will be out, and we will have much more visibility on how we are going to play this new regulation. But once again, there are options for us to grow low double digits, there are options also to have a lower growth rate based on what will be coming. On the iEXCEL side in North America, yes, I think what we can say globally and without having a first specific North America prism, this is representing -- iEXCEL is representing already 20% of our implant green premium sales, then we -- this is really a testament on the loyalty, the traction that we are getting with the system and the repurchasing that we're having with this. North America is also around those numbers with a very strong penetration about our existing users and our new users that are also being captured in North America. And one of the major reasons why we are growing faster than the market is the new customer position that is done through iEXCEL on the premium segment. We benefit also on new customer acquisition on the challenger brand with Neodent, but I think we are still growing faster, and we see in -- constant market share gain in North America on the premium side that we can really monitor on a regular basis and that we can confirm once again. The simple thing which I think I will highlight here that will help or that will continue to support the growth of iEXCEL is that all the evolution and innovation on the prosthetic side will be available only with the iEXCEL connection, which is the new TorcFit. That means if you would like to benefit from our new angulated screw channel on customized abutment as an example, if you would like to benefit from our new laser textured value-based for easy and efficient restoration. And especially, if you would like to benefit on our new workflow, which is the one I presented, the Fast Molar with Anatomic Healing Abutment which is allowing you to do the restoration with one Appointlet with the patient, you have to use iEXCEL because it all comes with the new connection. Then there is a lot of our strategy from future innovation that will also drive the penetration of iEXCEL and then making our customers benefiting from the latest technology. Operator: The next question comes from Julien Ouaddour, Bank of America. Julien Ouaddour: The first one, I mean, thanks for all the color on China. But just me being picky with [indiscernible], But you mentioned sort of back-end loaded growth for next year. Just wanted to confirm, is it because 1Q '26 is likely to remain negative for the market. I believe the VBP implementation at public hospitals may start only in 2Q? And also, you talked about the Shanghai Camps benefits from local production and this cost advantage probably fully offsetting the price cut for next year. But given the, let's say, the full ramp-up is expected for 3Q, could we see some gross margin pressure in H1 and a bit more back-end loaded recovery? Second question is on clear aligner. You mentioned the ambition to achieve leading position in these markets. I think today, you have 3% market share. Competition is pretty fierce. What's your mid- to long-term ambitions for ClearCorrect? And do you fear aligners becoming a kind of like commodity products and a price war could maybe slow down a little bit the margin expansion target that just set within the partnership? Guillaume Daniellot: That's 4 questions. But we'll be happy to answer. The first one, Q1 2026 China. I think, here, we cannot express phasing in 2026. It's too early from exactly Q1. When we say backloaded, is obviously, first, when you look at comparison base, we are going to have a very high comp base in the first half and a very low comp base in the second half. And first, obviously, from a growth rate standpoint, mathematically, you are going to be backloaded anyway. The second aspect also is that the Q1 will depend given a lot about the Chinese authorities communication about the magnitude of the change and especially when they are going to finally give reasons, which is not really clear at the moment. If the VBP reasons will be given, when I say reasons, it means that they will present the rules in December. The companies have to do their bidding about what kind of pricing they want to do. And then afterwards, they are publishing reasons of who is selected, who is not selected in the different category. If they are able to express it fast enough and the implementation of the new rules are going to be done during January, then the first quarter can benefit from the pent-up demand directly. If the information about the results of the VBP 2.0 will be done later in the year, which has been done a little bit the case in implementation, it has been done after the Chinese New Year in 2023, meaning that we have started to see everything being executed by the beginning of March, then that's where you have a Q1, which is rather weak because still then waiting for all the new price to be available. Then I think this is a lot depending on how this is going to be played out. And that's why it's difficult to answer exactly your Q1 perspective. But we are expecting, at the moment, from an assumption that Q1 will anyway be weak. We are going to have a Q4 and Q1 that are going to be weak because it's going to be frozen by the VBP effect, and that we will benefit from those new rules moving forward. When it comes to the Shanghai Campus, yes, I think we don't expect -- and we'll see the price decrease being bigger than our COGS gains that we are going to do. This is one of the reasons why we believe that the price cut would not then affect significantly profitability of our China business, thanks for providing everything mainly from China. But this needs to be confirmed with the VBP 2.0 rules. When it comes to clear aligner commodity, I actually don't think so. There is already a very significant competition that we see out there but as we expressed, without scale, it's pretty challenging to play in this environment. Then what we have seen in the past, we have seen a lot of small companies trying to come in and play in the clear aligner business and actually being wiped out because of the lack of scale and the lack of capability to gain significant market share. Then yes, there will be price competition that we are seeing at the moment. Yes, it will continue to become a pretty competitive market, but we still believe that I would not go to commoditization because of all the technology which is going to go with it. And we have a midterm perspective to be able to reach 10% of this market in order that we can really start to become a significant player and being able to deliver the growth that we are looking for. Operator: The next question comes from Veronika Dubajova from Citi. Veronika Dubajova: I'm going to try to keep it to 2. One, Isabelle, I was hoping you could circle back on the tariff commentary that you made at the beginning of the call. I think on this first half conference call, you sort of expressed the hope that tariffs would mitigated fully this year and then you'd have an impact as you move into fiscal '26. I know you mentioned the CHF 20 million to CHF 25 million number for this year. So should we understand that as you are no longer expecting that to be mitigated fully or at all? Is this something that's appearing in the P&L? And I guess that's a pretty meaningful headwind, obviously, in terms basis points. So I'm just curious where you are finding other opportunities to offset this to maintain the margin guidance for the year? So if you can talk through that. And then sort of CHF 35 million number for next year. I guess, is there any mitigation? Or is that including the mitigation efforts. So if you can talk through that, that would be helpful. And then I'll ask my second question because it's for Guillaume after that. Maybe we can just get the financial bit out of the way first. Isabelle Adelt: I'm happy to elaborate on that and I think excellent question. So earlier, we said we will mitigate all of those tariffs, and it will not change our guidance. And given we just reiterated our guidance, we still stand by this. So the effect of CHF 22 million to CHF 25 million still to be shown has been mitigated this year. On the one hand side, of course, we mitigated the full impact of the tariffs through all of the supply chain route changes we put into play through transferal of production activities of finished products to the U.S. for especially the Straumann Green products. But then what we're currently preparing for packaging and finishing lines for Neodent products as well to be prepared for next year. And I think as you remember from the call, we had for the half year results, we already shipped more or less all of the demand we have for this year in July and August. So we have some time to implement those mitigating measures. How are we mitigating? On the one hand side, of course, by implementing this, but then on the other hand side, by looking at different other measures to improve our profitability in terms of production, but then in terms of OpEx savings, where we have very strict guidelines and reiterated them for the remainder of the year. So all of this impact can be mitigated. Same holds potentially for next year as well. As you can see, the number we are looking at the CHF 30 million, the ballpark number we gave you is very similar to the amount we have for this year, although we will see a full year impact. So this CHF 30 million is, I would say, the worst-case assumption in case everything remains as it currently is. So major factors behind the 50% tariff on all imports from Brazil and 39% tariffs for all imports from Switzerland. And having said this, why is the amount very similar because we put all of those mitigating measures into place already. So the finishing lines for Neodent plus the acceleration of transferring Straumann branded products faster than expected to our campus in campus in Andover close to Boston. And having said this, we expect a very similar mitigating results for next year than what we see this year. Veronika Dubajova: Okay. So the way to think about the CHF 30 million, is that the gross impact and the net impact in terms of what we have to think about in the P&L is going to be substantially lower? Isabelle Adelt: Yes, potentially. Veronika Dubajova: Okay, potentially. Okay. That's very helpful. And then my second question is for you, Guillaume. And I guess, just your confidence in the China midterm growth rate. And I know I see you have a ton of uncertainty in the short term. But I'm just curious, kind of once we're through VBP, how are you thinking about that sort of growth rate in China on an underlying volume basis, I think, obviously, we've gone this year from volumes growing double digits to single digits to not growing at all. Are you confident that it's just the implementation of VBP? Is this a market that's maturing? And I would love to get your thoughts on how you think about China volume growth on a 3- to 5-year basis? And what underpins that confidence? Guillaume Daniellot: Well, the confidence in China is just based on the fact that -- on the one hand, you have a very underpenetrated market that will continue to grow. I think this is the most important foundation of the growth expectation that we have. And the second side is that we believe that we have one of the company, the best place to be able to benefit from that increased market penetration. Because we are having a strong offer on the premium side that will continue to be, I think, interested and being the only one being localized once again, but there is no other premium competitors that will have local manufacturing, which received license and equivalent, meaning that if there is a condition in the VBP to support local manufacturing companies, I think we will benefit from this. And the second aspect is that we have set now additional portfolio for then the value segment where we are significantly underpenetrated and where we should be able to also meet some significant demand growth. Then I would say that's those 2 aspects. On the one side, I think the market has the significantly capability to grow. And secondly, we are well placed to be able to take a fair share of this growth, which is making us confident about that development. Now it will obviously again depend of the external factor, which are the VBP on the one side, which are the macroeconomic factor on the other side. But if we would like to look more on the midterm, and we are going to talk now in a 3 years' time frame because this is the kind of VBP period, which is going to happen every third year. We believe that for the 2026, 2028 period, we are expecting something which is low double-digit growth, something around 10% to 12%. That's a little bit the perspective on how we are looking at it. Operator: Last question comes from Thyra Lee from UBS. Thyra Lee: Just standing in for Guillaume this morning. We have a super quick one. On North America, just given the green shoots that you guys have seen in Q3, would you expect the U.S. to be sequentially better in Q4? Guillaume Daniellot: I think this -- it's very difficult to be very [indiscernible] clear or precise on this question. We expect a good growth rate in North America in Q4. First, because we see a really good development; second, because we believe that the market conditions are helping a little bit also macro, at least from a consumer confidence standpoint. And third, we have also then comparison base, which are helpful here. Then I would say we expect North America to be a significant growth provider in the fourth quarter. Is it going to be better than Q3, at least we expect the trend to continue then to be at least equal or better is what we are expecting. Thank you for joining us today and for your continued interest in Straumann Group. We look forward to seeing you again soon and wish you a pleasant rest off today. Have a nice day, good bye from Basel. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Lars Solstad: Good morning, and welcome to Solstad Offshore's Third Quarter 2025 presentation. It has been another quarter of solid operational and financial performance and with a continued high activity across our fleet. Today's presentation will be held by myself, CEO, Lars Peder Solstad; and CFO, Kjetil Ramstad. And after the presentation, we will open up for Q&A. So please submit your questions in the chat. If we take a quick look at the disclaimer before we move over to the third quarter highlights and our business update. It has been another quarter of solid operational performance for Solstad Offshore with a fleet utilization of 97% in the quarter, and that is also the number for year-to-date. So 97% utilization year-to-date. And while the long-term demand remains positive and we see several longer-term opportunities, we also see that in the short-term market, we experienced a slower or lower demand than we previously expected. And that is also in line with what we communicated in the business update in October 9. Following the Solstad Maritime's reduction in full year 2025 adjusted EBITDA guidance, we have then also updated the Solstad Offshore guidance for the year accordingly with operational guidance still intact, while the share of associated companies and joint ventures are slightly reduced as earlier communicated. If we look at this quarter and earnings. Has then been adjusted EBITDA of $29 million, and that is compared to $28 million in the same quarter last year. We have secured several new long-term contracts in Brazil, contributing to a total order intake of $222 million in the quarter, and that includes 1 Solstad Maritime vessel that will go on long-term contract to Petrobras. In addition, we signed a 3-year contract for Normand Turmalina, one of our Brazilian-built anchor handlers, for a 3-year contract starting in first quarter '26. And also our client on CSV Normand Superior exercised their option to extend the contract with 1 more year. It is also nice to mention that the Board proposes a third quarter 2025 dividend of USD 0.05 per share, totaling approximately $4 million, which is more or less equal to Solstad Offshore's share of the Solstad Maritime third quarter dividend. If we take a closer look at the market. Solstad Offshore maintains a very strong foothold in Brazil, where long-term demand for offshore energy services remains robust. And Brazil continues to offer both long-term and project opportunities for the CSV and the anchor handling fleet. Globally and in addition to Brazil, the activity is good and offers more opportunities for our fleet. In 2025, it has been the North Sea that has had lower than expected activity. And as we continue to underline, to be able to sign contracts and to be a part of the global markets, it is essential to have a local presence. And Solstad Offshore has particularly in Brazil a very, very strong position. The long-term offshore energy services remain positive globally, but we have to keep in mind that the oil price development seen in the last months could introduce some uncertainties into activity level going forward. If we look at our backlog and earnings visibility. Solstad Offshore divides its backlog in two. One is the backlog we have on the owned fleet. The other is the backlog on Solstad Maritime vessels that utilize the Solstad Offshore structure for Brazilian contracts. And both continue to strengthen. The new 3-year contract for Normand Turmalina and 1-year option for Normand Superior have increased our direct backlog this quarter. And there was also a material increase in the backlog for Solstad Maritime vessels due to a new 4-year contract for the CSV Normand Commander with Petrobras that starts early next year. So the firm backlog for Solstad Offshore vessels is $280 million, which is a doubling of the backlog compared to last year. And for Solstad Maritime vessels, it is at USD 640 million. In fourth quarter this year, we will have some vessel availability. That is due to one vessel has come off a contract and is now exposed to the short-term market, while one is at a planned yard stay. So that will influence the utilization fourth quarter '25. But looking into 2026, the earnings visibilities are very good. And we also see that for the available vessels we have, we see that there are quite a few market opportunities that we are chasing for those vessels. So Kjetil, can you take us through the financial highlights? Kjetil Ramstad: I will, Lars. So let's start with the third quarter financial highlights for Solstad Offshore. It has been a quarter with high activity in third quarter with 97% utilization for the fleet compared to 97% last year. Year-to-date, we have an overall utilization of 97% versus 96% last year. On the revenue side. For the quarter, $73 million compared to $68 million last year. Year-to-date revenue was $220 million compared to $197 million. Adjusted EBITDA for the third quarter was $29 million compared to $28 million last year. Year-to-date, adjusted EBITDA of $91 million compared to $89 million last year. The net result was for the quarter $26 million compared to $11 million last year. Year-to-date, $88 million versus $52 million last year. Firm backlog for the Solstad Offshore owned vessels of $280 million compared to $42 million last year. This, of course, excludes the vessels on bareboat from Solstad Maritime. Book equity in the third quarter of $375 million, up from $203 million last year. And it gives an equity ratio of 44% for the company. Adjusted net interest-bearing debt of $57 million compared to $206 million last year. And the large reduction is mainly caused by Normand Maximus residual claim, which was approximately $185 million. Cash position at the quarter end was $87 million compared to $60 million last year. Plan to distribute dividend of $4 million in the quarter. Then if we have a closer look at the net interest-bearing debt and lease commitments in Solstad Offshore. We see that we have the regular bank facility of $90 million. That was drawn in November '24. That has a 5-year amortization profile with the majority in November '27. And then we have the financing for our Brazilian fleet, $51 million with BNDES, with maturity between '26 and '31. The lease commitments in the debt side of the balance sheet includes the Normand Maximus bareboat charter lease of $55 million and also the purchase options that is at $125 million and included in leasing with $105 million at the present value. Other leases is mainly the vessels that Solstad Maritime bareboats to Solstad Offshore for Brazilian operations and contracts. And the operational risk for these vessels are with the shipowner, Solstad Maritime. Then if we move over to the financial investments that we have in Solstad Offshore and start with Solstad Maritime, which Solstad Offshore owns 27.3% of. There will be paid a dividend of approximately $150 million in Solstad Maritime, and the share that Solstad Offshore will receive is $4 million. Share of the result in the quarter is $9.3 million compared to $13.1 million last year. Book value of the shares is $212 million. Then if we move to Normand Installer, which is a joint venture, owned 50-50 with SBM Offshore. The vessel is predominantly utilized on SBM Offshore's FPSO projects. First half of the year, the vessel had low utilization. And in the third quarter, the vessel had a planned maintenance dry dock. We expect that the rest of the year will be fully utilized. NISA is in a net cash position. And the share of the result in the quarter was negatively $0.3 million compared to positive $0.6 million last year. The book value of the shares is $20 million. And the last investment that Solstad Offshore has is Omega Subsea, where Solstad Offshore owns 35.8% of the shares. And Omega Subsea has 12 ROVs per the quarter end and 12 more scheduled to be delivered in 2026 and beyond. Share of the result in the quarter was $1.4 million and $4.2 million year-to-date. The book value of the shares is $16 million. Then if we go to financial guidance for Solstad Offshore. As mentioned and communicated 9th of October, we adjusted the financial guiding based on the change in guidance from Solstad Maritime. So the overall guidance on adjusted EBITDA is $150 million. The operational part of the guidance was unchanged at $60 million to $70 million, $53 million year-to-date. And the share of the results from associated companies and joint ventures was adjusted to around $50 million compared to the previous of $60 million to $80 million. As mentioned, there is a proposed dividend payment in the third quarter of USD 0.05 per share, totaling $4 million. And then if we go to the dividend dates. The summons to the AGM will be 3rd of November, and then the AGM will be 24th of November. Last day of trading to receive dividend is 24th of November. The ex date will be the 25th. Record date, the day after the 26th and then distribution date will be on or about the 28th of November this year. So with that, I leave the word back to you, Lars Peder, to summarize. Lars Solstad: Yes. Thank you, Kjetil. And to summarize our presentation and the third quarter. We have had or a quarter with solid operational -- yes, sorry about that. Now we have the correct slide. To summarize the presentation, another solid quarter operationally and financially for Solstad Offshore. We have had a strong order intake that increases the visibility for 2026 and beyond. We also see several market opportunities for the available vessels we have into 2026. But as I have said already, we have to also keep in mind that the recent oil price development represents a source of uncertainty going into the coming quarter and beyond. We are also very pleased to announce that the Board proposed a dividend payment for the quarter, which is also in line with earlier indications. So all in all, a solid quarter for Solstad Offshore and also the visibility for the coming year is solid. So by that, we conclude the presentation. And let's see if there are some questions, Kjetil. Kjetil Ramstad: Yes. Let's take the first one. What is the plan for Normand Tonjer and Normand Topazio? Lars Solstad: Yes. That is a relevant question. And those are the 2 vessels that we have availability or idle time on in fourth quarter. If we take the Normand Topazio first, that is one of the Brazilian-built anchor handlers we have operating in Brazil. That vessel is on a planned yard stay at the moment that will influence the utilization in fourth quarter. It is officially known that we were on top of the list on the Petrobras auction for a long-term contract. Those discussions are ongoing, and let's see how that develops in the coming weeks and months. But we are positive to achieve a good utilization for that vessel either on that contract or on alternative opportunities in Brazil. For the Normand Tonjer, that is a vessel that Solstad Offshore owns 56% of and has been operated on a contract for TGS on seismic projects for several years. That vessel is now redelivered to us, and we operate the vessel in the -- or we are preparing for operations in the short-term market in the North Sea right now. But we are also in some discussions for longer-term opportunities for the vessel, let's say, into '26. So that's what I can announce on those 2 vessels. Kjetil Ramstad: Thank you. Then there's a general question on the market of the fleet that we have in Solstad Offshore. How do you see the rate development on the contracts that we have? Is there escalations? Do we see a development from '25 to '26? Or what to expect on the secured contracts? Lars Solstad: Yes. I think, I mean, on the contracts we have, they are sort of going on their, let's say, original terms with the natural cost escalation process included. On the rate level, we see for vessels that we have available, I would say it's quite stable on a high level, I would say. So I don't see much difference or, let's say, downward pressure on the day rates for the vessel types that we have availability on. Kjetil Ramstad: And then there is a question on Petrobras and cost cutting. Can you update on the discussion on Petrobras with reference to the exposure that we have there with the 4 vessels -- the 3 vessels? Lars Solstad: Yes. I mean, Petrobras is a large client of us and we have had discussions with them, as most other in this business. And I would say it's very constructive discussions where it's about, are there any place where it's naturally to cut cost? That could be for mobilizations or preparations for new contract. It could be on manning level. It could be on other specialties that you see on Petrobras contracts. So constructive dialogue and no sort of red light are linked to those contracts in terms of uncertainty, if that's -- yes, so I think that answers the question, I hope. Kjetil Ramstad: Yes. Thank you. And then on Normand Maximus, it's on contract to the end of 2026. Can you say something about the plans for Maximus below this? And how do you see the market for a vessel like this long term? Lars Solstad: Yes, it's correct. The vessel is still committed for another 14 months or so. We have discussions ongoing with the present client but also with some others. So this is, in a way, one of a kind, let's say, one project enabler and one of the few that has availability into '27 in the market. So the position we have on that vessel is very solid and quite confident that we will be able to secure some interesting work for the vessel also beyond '26. Kjetil Ramstad: Thank you. Let's see. We have some more questions here. In the backlog for Solstad Offshore, we are showing a portion of Solstad Maritime vessels. Can you just explain why we look at Solstad Maritime vessels on the backlog of Solstad Offshore? Lars Solstad: Yes. That is simply because Solstad Offshore is the contract holder with Petrobras or other clients in Brazil. And so the Solstad Maritime vessels are then bareboated to Solstad Offshore. So you will get, let's say, a bareboat backlog into Solstad Maritime while you will get also the, let's say, backlog into Solstad Offshore due to the structure where we in Solstad Offshore are the contract holder with Petrobras. So that's the reason. And it's a back-to-back. So the operational risk, even if it's a bareboat, lays with the vessel owner and not with Solstad Offshore on those vessels. Kjetil Ramstad: Thank you. And then let me have a look. I think that concludes the questions for today. Lars Solstad: Okay. So thank you very much for listening in, and have a nice day ahead.
Operator: Good day. Welcome to the Range Resources Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Statements made during this conference call that are not historical facts are forward-looking statements. Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the speaker's remarks, there will be a question-and-answer period. At this time, I would like to turn the call over to Mr. Laith Sando, SVP, Investor Relations at Range Resources. Please go ahead, sir. Laith Sando: Thank you, operator. Good morning, everyone, and thank you for joining Range's Third Quarter 2025 Earnings Call. With me on the call today are Dennis Degner, Chief Executive Officer; and Mark Scucchi, Chief Financial Officer. Hope you've had a chance to review the press release and updated investor presentation that we posted on our website. We may reference certain slides on the call this morning. You'll also find our 10-Q on Range's website under the Investors tab or you can access it using the SEC's EDGAR system. Please note, we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures. We've also posted supplemental tables on our website that include realized pricing details by product along with calculations of EBITDAX, cash margins and other non-GAAP measures. With that, I'll turn the call over to Dennis. Dennis Degner: Thanks, Laith, and thanks to all of you for joining the call today. As we report on the progress made during the third quarter and focus on the execution of the remainder of our 2025 program, the results remain consistent with what we've shared in prior cycles. During the quarter, Range executed on our plan safely and efficiently, delivering consistent well results, free cash flow, returns to shareholders and steady activity levels that support the growth plans we've previously communicated. All-in capital came in at $190 million, while generating production of 2.2 Bcf equivalent per day for the quarter. Year-to-date, we have invested $491 million in capital, putting us right on track with the previously improved guidance of $650 million to $680 million for the full year. Our year-to-date operational savings come from several differentiated aspects of our business, which include returning to pad sites for incremental development, utilization of existing infrastructure, extended reach horizontal development, and the team's dedication to continued operational improvements. I'll touch on a few of our operational highlights driving this in just a moment. As we look ahead, our previously announced growth plans will begin to gain visibility in Q4 as strong field level performance is expected to deliver production of approximately 2.3 Bcf equivalent per day in the quarter and growing towards 2.6 Bcf equivalent per day in 2027, an increase of approximately 20% from current levels. Importantly, Range's incremental production will be transported to known end markets as our depth and quality of inventory allowed Range to secure transportation capacity that was going underutilized by others. We believe our plans align well with increasing demand in the Midwest, Gulf Coast and global LNG markets in the years ahead, while having the flexibility to meet future in-basin demand as well. And lastly, we will add our planned 400 million cubic feet equivalent per day of growth very efficiently with relatively flat annual capital over the next 2 years and supported by investments in additional work-in-progress inventory since late 2023. This will keep Range's reinvestment rate at the low end of the peer group, allowing significant capital returns to shareholders while growing. Diving into the quarter. Consistent with prior quarters, Range operated two horizontal rigs, drilling approximately 262,000 lateral feet across 16 laterals, averaging 16,400 feet per well. This adds to Range's planned drilled uncompleted inventory and places us on track to exit 2025 with more than 400,000 lateral feet of growth-focused inventory supporting our development plans through 2027. For completions, the team ended the third quarter completing just over 1,000 frac stages, utilizing a combination of our full-time electric fracturing fleet and a spot frac crew for a single pad in Northeast PA that we discussed during the prior call. Completion efficiencies for the third quarter were at nearly 10 frac stages per day across all operations. Supported by a strong KPI-driven focus, efficient logistics and a look back from prior pad executions, our Northeast PA operations continue to deliver incredibly efficient results and strong returns, utilizing existing infrastructure on our occasional return trips to the area. Cash operating expenses for the third quarter finished at $0.11 per Mcfe, firmly within our previously improved guidance for the year. The team continues to see efficiencies within the field, especially when focusing on multi-operational project scheduling to improve production downtime, reduce spending and maximizing field run time from the wellhead to the burner tip. Shifting over to marketing. The third quarter of 2025 was an exciting time for U.S. energy marketing as we saw the commissioning of new NGL export capacity, the ramp-up of recently commissioned LNG export capacity and strong interest in new natural gas supply for power generation within the Appalachia Basin. Highlighting some specifics, starting with natural gas. The U.S. exported record volumes of LNG in the third quarter as new capacity continued to be commercialized and international demand for clean, reliable American energy remains strong. Three additional LNG projects reached FID in the third quarter with additional projects recently sanctioned, bringing the year-to-date total to approximately 9 Bcf per day of incremental feed gas demand, making this a record-breaking year for FIDs in the U.S. Based on projects under construction, LNG feed gas demand is expected to exceed 30 Bcf per day by 2031, more than doubling the export capacity versus current levels. We are confident of the world's strong appetite for U.S. natural gas as long-term global gas demand is underpinned by rising incomes and population growth. Looking at in-basin opportunities, we continue to be encouraged by early phase activity in Pennsylvania toward gas-fired power generation data center projects. Numerous projects are progressing and the past few months have provided us with even more conviction that consensus estimates for approximately 2.5 Bcf per day of Northeastern demand potential from data centers by the end of the decade is becoming more real. We are continuing to make progress on the Fort Cherry joint venture project with Liberty and Imperial announced earlier this year. In addition, Range is in conversations with multiple other potential projects that could benefit from Range's asset location in Southwest PA, our pipe access across the U.S., our marketing acumen and importantly, our depth of high-quality inventory and financial strength that can support long-term supply agreements that end users are looking for. As we look forward, we believe there will be a clear call for Appalachia to play a key role in supplying U.S. markets with affordable, reliable natural gas supply. And we believe that expanding infrastructure from Appalachia and sourcing more power demand within Appalachia is the most effective way for America to fuel its long-term energy needs. We remain very constructive on the setup for natural gas with storage levels at or below average than last year in terms of days of supply. And as we move into 2026, a further 4 Bcf per day of LNG export capacity is expected to come online, leading to tightening gas market fundamentals. Turning to NGLs. Similar to our outlook for natural gas, we're encouraged by the fundamental setup for ethane and LPG. Ethane and propane are both expected to see substantial increases in export capacity out of the Gulf Coast into continuing stronger international demand, and we expect this to improve NGL pricing relative to WTI in the coming quarters. Specific to Range, our geographically advantaged access via exports to the European market continues to support a premium versus the Mont Belvieu index. We see continued strong demand for Northeastern U.S. LPG as Europe continues to secure long-term supply from reliable producers. During the quarter, Range once again leveraged its flexible transportation and marketing portfolio to respond to market dynamics and enhance margins. These optimization efforts for Range led to a strong seasonal natural gas price differential of minus $0.49 per Mcf versus the NYMEX index, coupled with a continued premium on our NGLs. And we have improved our full year guidance accordingly. The future of natural gas and NGLs is strong, with significant demand continuing to materialize in the near and medium term, both globally and within Appalachia. Range is poised to help meet this future demand while creating outsized value for shareholders with the strongest financial position in company history, a large contiguous inventory measured in decades and a proven track record of delivering through-cycle returns of capital, while investing in the long-term success and the optionality of the business. I'll now turn it over to Mark to discuss the financials. Mark Scucchi: Thanks, Dennis. The first 9 months of 2025 have underscored the stability and profitability of Range's business. During this period, NYMEX natural gas prices averaged $3.39, while Range achieved an average realized price of $3.59 per unit of production, a $0.20 premium created by our diversified commodity mix and sales strategy. Strong pricing realizations, combined with low full cycle costs have provided Range the ability to continue progress along our 3-year growth plan while returning capital to shareholders. Year-to-date, we have repurchased $177 million in shares, paid dividends of nearly $65 million while reducing net debt $175 million since year-end. Each of these actions, reinforcing our commitment to delivering on our stated capital allocation priorities. While front month gas prices fluctuate, our business model sitting at top a high-quality resource base has consistently generated free cash flow, enabling capital allocation options of executing a market-driven, growth-oriented operational plan alongside current capital returns to investors. Range is proving the free cash flow resilience of its business and enhancing that resilience through targeted capital investment. The specific attributes of Range's business that provide a stable base and enable through-cycle investments and returns include a high-quality, long-duration inventory that enables a low reinvestment rate, a strong balance sheet to allow value capturing opportunistic investments, a diverse portfolio of natural gas and natural gas liquids transportation that links Range to customers in key U.S. and global markets, delivering roughly 90% of revenue from outside Appalachia. While building cost-effective DUC inventory to meet future demand, our opportunistic investments and returns in 2025 have grown from prior years in the form of share buybacks and dividends, given the strength of Range's balance sheet. In other words, while investing at a maintenance plus level, we are generating healthy free cash flow and diligently redeploying that capital to harvest value from Range's resource base. As the U.S. and global natural gas markets continue to integrate with commissioning of new LNG facilities alongside substantial domestic demand growth, primarily from electricity, we believe Range's long-life, low-cost inventory creates enormous option value to play an integral role as a key supplier. Our durable free cash flow evidenced through cycles in recent years, position Range to consistently deliver value to its shareholders. Dennis, back to you. Dennis Degner: Thanks, Mark. Range's year-to-date results reflect a consistent theme: strong operational performance against our stated multiyear plan, consistent free cash flow generation and prudent allocation of that cash flow, balancing returns of capital, balance sheet strength and the optimal development of our world-class asset base. You've heard us state this before, but we continue to believe the results communicated today showcase that Range's business is in the best place in company history, having derisked a high-quality inventory measured in decades and translated that into a business capable of generating significant free cash flow through cycles. With that, let's open the line for questions. Operator: [Operator Instructions] And our first question will be coming from Jake Roberts at TPH & Co. Jacob Roberts: I wanted to spend some time on the work in progress inventory. Can you speak to what you think that 400,000-foot number looks like at the end of 2026? And if you could, I know it's early for 2026 discussions, but is there any consideration on timing of that drawdown we should be thinking about? Dennis Degner: Yes. I'll try and help provide some color on what '26 looks like. As you start to kind of think about from a capital, I'll start there at a high level. Capital is going to look really similar in 2026 to what you've seen us executing here in the program here for 2025. The difference is -- between the 2 years is an allocation of the capital that will then start to lean more heavily on the completion of the DUC inventory that's been building over the last couple of years and through 2025 and our ability to start to work through that, coupled with some timing of some infrastructure that will come online that I'll touch on here in maybe just a moment. So maybe more simply put, where you've seen us have two drilling rigs over the last couple of years, we've talked about that as being kind of a maintenance plus kind of a program. So over 3 years, we will have added 400,000 lateral feet and roughly that translates into around 30 wells. So I'll put some context around the last 3 years between '23, '24 and '25 from that perspective. Then when you start to shift into 2026, and that's also with one completion crew. So that maintenance plus inventory that gets built is clearly more than one frac crew can consume. For '26, we'll take that drilling activity down throughout the balance of the year. We'll still maintain at least one rig for the balance of the year, and there will be portions of the year where there may be a little bit more activity, but the completions activity will go on an uptick. So you'll see a single frac crew for portions of the year. And then instead of like what you've seen in '24 and '25, where there's been a spot crew to complete maybe one or two pad sites, you'll see some continuous activity with a second crew that then starts to work through that inventory. So what does it look like at the end of 2026? We're still kind of working through the refinement of those numbers, and we'll have some better guidance for you on what that lateral inventory looks like. They expect it to be a very linear utilization trend over the balance of '26 and '27. That also translates into the production that we've talked about where roughly we'll be at 2.4 Bcf a day, then going to 2.6 by 2027. So it will be a fairly ratable increase over the balance of that time. There'll be portion of '26 where you'll see production at a high level of utilization into the existing infrastructure before we get to the midyear point, and then you see another increase with Harmon Creek III processing and some also gathering support there. So a lot to unpack with what I've shared with you this morning. But ultimately, the 2026 program is going to have a fairly linear trend of that utilization of inventory over 2026 and into 2027. Jacob Roberts: Great. That's really helpful. And staying on the same topic, as we think about that shift or the balance perhaps of B versus C capital here in 2026. You guys have spoken a lot about returning to pad sites and things like that as drivers of efficiencies over the past quarters and years. I'm wondering if you've already spoken that you see capital is similar, but I'm wondering if there's anything we could be thinking about maybe on the OpEx side of things that as we progress through the drawdown of this inventory that might move the needle in either direction on some of those line items? Dennis Degner: When I think about the breakout of, let's just say, capital and operating expenses, we're from a -- I'll just say, you've come to see us really remain at a very low level from a cash operating expense basis. So from an LOE perspective, we've typically run somewhere between $0.10 to $0.12 depending upon seasonality and winter influence. I wouldn't expect that to move a whole lot because we're already starting from a really, really low base. There's always an opportunity for a little more improvement there. And then as you point to returning to pad sites with existing infrastructure, that is something that we factor in year-in and year-out from a perspective of it represents roughly about half of our activity on a year-in and year-out basis. You can expect to see that fluctuate a little bit. But again, I would say, all in all, what you're seeing in our historical efficiency gains on completion and the drilling side drilling, as you've heard us say, our fastest and longest laterals, all while staying within greater than 90% within a tight target window. We would expect that momentum to continue into '26 and '27. So we're refining those goals right now as we speak on what that could look like for '26. So we'll have more to share at the February call, but I would expect us to continue to be on that leading edge of what cost per foot looks like with our ability to move back to these pad sites, drill really long laterals and continue to be very efficient with our operating capital. Operator: [Operator Instructions] Our next question will be coming from Kalei Akamine of Bank of America. Kaleinoheaokealaula Akamine: I wanted to follow up on 2026 as well. So this year, you're pretty much on track with your plans, and that's great because it's effectively year 1 of 3 as you think about that ramp through 2027. But as you continue here, given your strong execution this year, where do you see upside to your plan? Is there opportunity to outperform on the capital or volume side in the next couple of years? Dennis Degner: Yes. Good question. Thanks for joining us, Kalei. When I think about '26 and '27, we really think we have, I'll just say, opportunities to perform. It's really what you've seen us talk about in many, many cycles, and that is the efficiencies from an operations perspective in the field. And what we've seen and the ability to drill long laterals. I'll just say we drilled against some of our fastest wells and again staying in a tight target. Our completion efficiencies continue to show improvement there. So I think that's a way that you could see some potential upside in the numbers. And then I think the other part, when I think about '26 and '27 is infrastructure utilization that comes online with our midstream partners like MPLX. They've really done a good job working closely with us, and they've demonstrated the ability to remain on schedule and also move pretty quickly to commissioning of that infrastructure. So I would say field run time performance, especially as it pertains to new infrastructure and then our ongoing operational efficiencies. Kaleinoheaokealaula Akamine: For my second question, I want to see if you guys could opine on the NGL macro. You had a couple of interesting slides in your deck last night, showing maybe some green shoots on both the propane and the ethane side. So maybe I can simply see the floor and maybe you can tell us what you're seeing in that market for 2026? Dennis Degner: Yes. I'll start here, and if we need to take a deeper dive and others may jump in. But ultimately, when we start to take a look at the macro for NGLs, we're as optimistic on that front as we are really from an at gas perspective. And I know you've heard us really dive into the nat gas side a number of times. And really, it starts with the really 2 components: one, the demand growth side. There continues to be increasing run rates on previously commissioned infrastructure. And then, of course, on the LPG side, you've got another 700,000 barrels per day of demand growth by year-end 2026. So the demand side, we feel like is still continuing to show really good strength. And by the end of the decade, it looks like at least from what we can see in tally, it's a total of 1.4 million barrels per day of incremental demand. So that really, in our mind, points to a strong call on LPG demand growth and really a supply pool that's going to be important out of the U.S. So how do you get it there? Well, there's been a lot of export capacity expansions that have been in progress of either being constructed in process of being commissioned, and we'll also see an increase in their run rate over the balance of the next months ahead. So we're excited about the ability to see, I'll just say, the Lower 48 move the barrels, the demand growth side continuing to materialize. And we really think for Range, as an example, our ability to have access to East Coast export capacity continues to be a differentiator for us. And so that will be not only in the next -- as we think about the next 12 to 24 months. But really, as we're thinking about that 1.4 million in growth demand by the end of the decade as well. Ethane, a little bit different story, but it's very similar, more export capacity growth and also more demand growth as you're starting to, in a lot of ways, see in the next -- by the year-end 2026, there's roughly another 400,000 barrels of growth there and by the end of the decade, an incremental 260,000 on top of that. So again, continuing to show good positive signs for demand growth and also the ability to export those barrels. And some of the counterparties that are actually representing that demand growth for counterparties that we currently do business with today. So we know that there are good calls coming in for how we could potentially participate in that growth in the future, if needed and warranted. And we think that's exciting for Range. Kaleinoheaokealaula Akamine: On the demand side, do you see that demand on the export side pulling volumes out of the Rockies and driving ethane to natural gas parity in 2026? Dennis Degner: I don't think -- I guess at a high level, I don't know that I see that, that is -- there's a need for that. I'll let Alan kind of jump in that runs our marketing effort. Alan Engberg: Yes, I'd say what we see going forward with that demand is that you're going to be pulling -- recovering as much ethane as you can out of the Permian, Mid-Continent, it's going to be pulling out of Appalachia as well. So we see the ethane spread to natural gas actually improving. In fact, month of September was interesting. We set an all-time record in terms of exports. It was over 600,000 barrels per day of ethane exports, supported by some of the new infrastructure that Dennis was talking about. And with that, we saw the spread between ethane and natural gas improved as a result of that demand pull. So with the ethane exports pretty much doubling by the end of next year with the capacity of export. And that's -- you've got new crackers that are starting up in Europe as well as in Asia as well as in China. And then you've actually got roughly 130,000 barrels per day of new demand domestically that will be starting up late '26, early 2027. All that combined leads us to believe that ethane fundamentals are going to get stronger, inventories are going to come down, day supply is going to come down and the price will improve relative to natural gas. Operator: And our next question will be coming from Michael Scialla of Stephens. Michael Scialla: Want to see if I get an update on your conversations you've been having for supply agreements and -- are those limited to Pennsylvania? Or are you discussing anything outside the state and any of those with end users or more like the Imperial type of conversations that you've been having so far? Dennis Degner: Michael, I'll jump in here. I think in a lot of ways, our update is going to feel similar to what we shared at the July call, and it's still a very dynamic space. So I'll kind of start there where Alan and the team have seen a number of inbound phone calls and engagements with household names. I think that a lot of us on the call would know as end users for potential facility. I think right now, it's that phase of trying to look at site selection, where is the best location to put one of these facilities to have, I'll just say, access to long-term supply. And so that's part of the reason why we think we've been on the front end of many of these conversations. Again, inventory is playing a huge role in this conversation and also the diversification of gathering and regional transport that would allow our ability to help supply one of these facilities, again, with long-term reliable supply. I think it's still narrowing down on like in Liberty and Imperial as an example. We're seeing a lot of positive movement there in narrowing down to a final couple of potential end users. So it's hard to see at this point in time what that announcement time frame could look like, but know that, that's being actively worked really hard. I think once you see at that point, an end user truly get defined, then we'll be able to move forward with more party conversations around what a pricing structure could look like, both from a term and framework standpoint of whether it's tied to something that's a normal index? Or is it something that's got a floor and ceiling type structure that allows us to have some long-term support and then also provide some upside protection for those other end users striking that right balance. So more to come on this. We look forward to sharing more details as we get closer to announcement type time frames, but know that it is a very dynamic and busy space and Alan and the team at Range has been very active in a lot of that space. Michael Scialla: And Dennis, all those are pretty much inside of Pennsylvania at this point? Or are you looking outside of Pennsylvania at all? Dennis Degner: Yes. I would say the focus has been primarily within our producing region directly. But we also have seen, as you would imagine, with many of these potential offtake users, the willingness to talk about expansions. Expansions could both be there in the existing footprint that they would be planning on, and it could be outside the area. So again, given the transport that we have and the areas of the U.S. that it gets to and reaches, we've got some durability there once we start to put a framework in place that supports, I guess, again, that 5 9s of reliability, strong labor pool, all of the things that make the Pennsylvania region or Pittsburgh region a really advantaged area. We could see this starting to shift into other areas of their -- and regions of their business, again, given our transport diversification. Michael Scialla: Got you. And I want to -- my second one to ask about capacity out of the basin. You mentioned you picked up some FTE that became available. With that 3-year plan, does that require you to take on any additional takeaway? Or are you set there? And -- you mentioned MPLX keeping up with you. Any other infrastructure that needs to be put in place for you to execute on that 3-year plan? Dennis Degner: So as it stands today, I'll start with the MPLX question. The infrastructure that we've disclosed and that capacity -- those capacity additions that we've disclosed over the balance of the last year that is what is needed to deliver on our 3-year plan. So we're -- I'll use your word, we're set. Now it's just moving forward with construction and also commissioning of that infrastructure. So we're feeling really good about the time lines that we've communicated the production profile. And again, MPLX's history of demonstrating they can execute and direct these facilities. The transport is also complementary to our growth profile. Nothing else is needed at this point to deliver on that. And as you've heard us say a number of times, Michael, we can really be patient once we start to look beyond 2027 and either look to supply, create more growth that's thoughtful to address demand that's in basin or if there's other transport that becomes available because it's underutilized, we can be thoughtful about do we take on more transport or not. So we love the optionality and the patients factor that we can execute because of the inventory that we have. Operator: And our next question will be coming from Arun Jayaram of JPMorgan Securities LLC. Arun Jayaram: Dennis, I was wondering if you could provide maybe a little bit more details on what's going on with Liberty and the Imperial Land kind of project in Washington County? Dennis Degner: You bet. Arun, thanks for joining us. I tried to touch on this a little bit here just a few minutes ago. But I think at the end of the day, we're seeing that the conversations are very fruitful. We're seeing that the counterparties are getting down to our partners in this JV are getting down to what I would say is a lightning bonus round of the final few end users that could utilize the facility there and that footprint, along with thoughts around how they would expand in the future. So really difficult to date to nail down a time frame on when we think an announcement could further materialize. But ultimately, we think that it's going to take a few months to still kind of grind through these details. But the good news is it's a great location where Imperial has their surface development opportunity. And I think to maybe shed a small piece of light on the seriousness of this project, we've heard us talk about in prior meetings about the sites project at the state level and the regulatory climate, the governor's willingness to really put some dollars to work to help support some of these projects going from, we'll say, concept into reality. And this year, over the last several weeks, you saw Liberty announced that they were one of the early on and initial recipients of some of those funds to help support this project. And so we think that's a great sign, not just from a, we'll call it, conceptual planning phase, but also the state's willingness to support this as well. And ultimately, our supply of gas being right under the footprint of this particular site is just really ideal. So we think this is going to translate into expansion into other projects as well because of all the complementary components we've talked about, but it's a very busy space. I'll just say this, Alan and the team continue to have a number of conversations and helping support this along. So we're awfully optimistic. Arun Jayaram: Yes. We cover Liberty and they were pretty optimistic, Dennis, about inking some power deals relatively soon. So it would make sense. Maybe one question for you guys on what you're seeing in the global LPG market. Right now, we're seeing an environment where Far East propane and butane prices are below what we're seeing in Europe in the U.S. So I was wondering if you could maybe give us some thoughts on how you see the international LPG market trending next year? Obviously, and perhaps implications of a Trump the kind of trade deal, which could happen in the next few days or so and thoughts could that be something that opens back up U.S. exports to China? Alan Engberg: Arun, this is Alan Engberg. I head up the marketing piece at Range. So I'll take a stab at your question. We're -- overall, as Dennis mentioned earlier, we're pretty optimistic on the setup for going into next year. There's obviously been a lot of volatility and a lot of back and forth in terms of international dynamics on the political front, and we can't -- we can't predict what's going to happen there. Recent news this morning, this week has been positive. I think we're going to get to a good place. But in the meantime, I think it's important to note that from, let's say, an ethane side, exports are up year-on-year despite all the turbulence. And from an LPG standpoint, September year-to-date, exports are actually up, not up that much, but it's a few percentage points. When we look forward, going into just this year, next year, as Dennis had mentioned earlier, we see 700,000 barrels a day of LPG demand growth. And just to get into a little bit more granularity, that's 23 new PDH units that are still coming up and granted those are primarily in China. But it's also 127,000 barrels a day for LPG demand going into ethylene steam crackers. And then we've always got that res/com piece, which is pretty inelastic and is growing at around 2% to 2.5% a year. So you add all that up, and that is good strong demand. And if we look back just over the past year, 1.5 years out of the U.S., there's actually been constraints from an export capacity standpoint. We've been bumping up against the limit. And what we're going through right now is major export capacity expansions. So we're adding between now and the end of the decade, 42% to the U.S. export capacity for LPG. And in numbers, it's a big number. It's just under 1 million barrels per day of new capacity. We're confident, again, looking at the demand that we see set up for the rest of this decade being 1.4 million to 1.5 million barrels per day that export capacity is going to be well utilized. And as a result of that, as we mentioned in a prior call, we've taken on additional export capacity out of a new terminal in the Northeast, the Repauno terminal we'll have access to that probably starting late '26, early 2027. So overall, that lends itself to just, I think, strong demand pull on U.S. NGLs, ethane and LPG and for LPG in particular, we see propane relative to crude continuing to gain strength as we go through the period. Right now, we're at about 45%. That's higher than where we were last year at this time. Long-term averages have been around 60%. I think that's within the realm of possibility. So good overall for Range. Operator: And our next question will be coming from Doug Leggate of Wolfe Research. Douglas George Blyth Leggate: Gosh, there's a lot of moving parts in these supply agreements. So I wonder if I could take 2 pieces of them. The first is the prognosis for your realizations, whether you want to benchmark it, I look at it as a percentage of benchmark or in-basin discounts, whatever. What's kind of in my mind is you guys have got a lot of takeaway, obviously, out of the basin. But there's also, I think, a growing concern perhaps that the 2 lowest cost areas of the country are going to be the primary sources of supply for a lot of the onshore stuff specifically the Permian and the Marcellus. So I guess my question for you is, as you look to your growth story, how do you see your basis changing? My follow-up is specifically for Mark. Some of your peers have suggested that Range hasn't had any very large long-term supply agreement signed yet because you're not investment grade. And my question to you is your balance sheet is pretty pristine at this point. What's the holdup? What's it going to take for you guys for the credit indices to move you to investment grade? Mark Scucchi: Doug, it's Mark. I'll start with both parts of those questions, and no doubt Dennis will all chime in as well. So as we think about the supply agreements, I'd like to pull back and kind of highlight a couple of comments that Dennis and Alan have both made so far. And as we look at even this morning's call and the amount of time spent appropriately on the hot topics of the day, which is data center and in-basin demand and so forth. I think it's important to put that in context of Range's overall current portfolio and our marketing strategy. For everyone newer to the Range story, it's important to remember that 90% of our revenue essentially comes from outside the basin, half of our gas goes to the Gulf Coast, 30% goes to the Midwest. We've already entered into and completed 2 long-term 5-year plus deals with Japanese utilities, LNG exports out of the Gulf Coast. We've already done multiple 15-year-plus term deals with petrochemical partners, be the Canadian and European. These use pricing structures that could be NYMEX-linked. It could be Northwest European naphtha-linked. It could be ARA or FEI-linked depending on the liquids components. So international marketing, term deals, deals of size, deals of duration, spread across the U.S. and global markets with long-term customers is nothing new to Range. So as we look at these deals and negotiate with customers for in-basin demand, be it industrial, be it data centers, be it power with traditional customers like utilities, it's the same mindset. What is going to bring Range the best margin over the long haul? What is the best visible demand, durable demand that underpins growth and profitability for Range, as we highlighted in our scripted comments earlier. So realizations, pricing, that's clearly our priority. And while we may not have announced the first deals out there, the quality of discussions and the number of discussions that are ongoing in our marketing team are very encouraging, be it with the Liberty, Imperial joint marketing effort or be it our other discussions and project initiatives that we have underway. So these -- as we evaluate these deals, it comes back to what is additive to our portfolio. They will clearly be positive additions, and we'll get there when the right deal comes along. So as it relates to sources of supply, you're commenting on the lowest cost versus of supply, whether we want to talk in the Lower 48, whether we're talking to Haynesville, whether we're talking to Permian, quite frankly, the market needs all of it. And at the end of the day, if you fast forward just a couple of years and you look closer to 2030, well, by '28, we should be at -- by 2028, we should be at '28 Bcf exports be gas into LNG and quite a bit higher than that by 2030. So where is it all going to come from? And how does the U.S. managed cost of supply, specifically domestically for the consumer. Quite frankly, you need additional supply out of Appalachia and out of Southwest Pennsylvania. So that will happen. You're already seeing a lot of discussion around infrastructure, expansions and demand pull. The dynamic is shifting. You've already seen now on some recent announcements of who's subscribing to midstream capacity, and we also do that demand pull because of the recognized need for low-cost, long-duration gas in Southwest Pennsylvania. So bringing that all the way back to Range and your question of why haven't we announced a deal and does investment grade have anything to do with the current state of announced deals? I'd say as best as we understand it has absolutely nothing to do with it. Our credit rating has not come up at a single conversation with customers. Our leverage is below that of investment-grade peers and our bonds trade at investment-grade levels. As I mentioned earlier, we've already done long-term deals, multiple 5-year deals with Japanese utilities, international deals and 15-year term deals with international petchems. So again, marketing for us is about maybe getting the best deal, not necessarily the fastest deal. Dennis Degner: Yes, Doug, real quick. I'll just maybe close out with a couple of comments on basis and the view there. I mean, look, if you look at where base has really landed every since MVP came into service and you see now the conversation about growing demand, really, we see some durability in where basis is as it stands today. We've got in-basin. Our view is that there's roughly 5 to 8 Bcf a day of incremental demand that's going to materialize by the end of the decade. You've heard Mark and I touched on this a few different times I'd realize. But as we think about the go forward in our mind, really the demand is outstripping the supply. From a standpoint of you need to have infrastructure, it's going to play a huge part and we think at the end of the day, without incremental infrastructure this could be -- I'll just say, you could continue to see demand outstrip supply and further adding some strength to basis. However, we also know there is a willingness to -- with this current administration and at the same level to look at how you can support this in-basin demand growth. We think that balances out over the course of time. And again, what we're seeing at this $0.70 type level is something that's got durability, you could start to see some further strengthening in the future. That will remain to be seen, though. Douglas George Blyth Leggate: Guys, I appreciate the detailed answer. I wonder if I could just take it back, Mark, very quickly to the second part of my question. What do you think is going to take for the credit agencies to move you to investment grade, even if it's not an issue clearly from what you've said, but still, your balance sheet is better than most of your peers and you're still sub-investment-grade. Is that a scale issue? Or what do you think is behind that? Mark Scucchi: Yes. I think if you look at the publications from the rating agencies over the last several years, they have worked to keep up the evolution of the industry and their targets have moved somewhat. And you've touched on it, scale, just sheer production side several years ago was a focus for them. If you look at their most recent commentary, basically, we're checking all the boxes. I think with the growth plan we've already laid out there just organically. We should be checking all the boxes in the not-too-distant future. I'm not going to try to predict exactly when it may or may not happen, what I'll say is it will be a good byproduct of the quality of our assets, our breakevens, our full cycle or recycle ratios and so forth. So when we clear that hurdle in investment grade, I think we can clear that bar quite high and it will just come naturally from our operations and growth and production that we've laid out. So there's no -- there's nothing that's an encumbrance or a specific issue for them. So said differently, it will be a nice to have, but I don't think it's a need to have for marketing or other purposes. Douglas George Blyth Leggate: Great stuff, guys. I'm sure we'll get into this, and then I'll have more detail in a few weeks. Appreciate it. Operator: And our next question will be coming from Paul Diamond of Citi. Paul Diamond: Just wanted to quickly touch on your kind of thoughts on a couple of issues across the market. So curtailments and production modulation have seen this additional chatter as of late with some of your peers choosing that avenue to kind of address pricing volatilities. I guess how should we think about Range's kind of overall strategy towards that type of modulation or whether it's plus or minus or curtailments or is it more a steady state? Dennis Degner: Yes. Paul, thanks for joining us. If you were to look back over the balance of, let's just say, the past 3 to 5 years, I think what you would see is a couple of different strategies that Range has deployed. And one has been, we have actually looked at shut-in economics and we've curtailed some production when we felt like pricing warranted. And there was also a supportive reduction in cost associated with that production restriction or shut-in that we basically deployed several years ago. The other strategy you've seen us utilize is what you saw last year. And to some degree, what you've seen in this year's numbers as well, where last year, you saw us reshape the program where we had more of our liquids-rich activity and turn in lines in the first 6 to 9 months of the year, you saw us push our dry gas TILs deeper into the year, as you started to see fundamentals improve for the winter season. You see a little of that as well this year in 2025. If you look at the first half of the year, much of our focus has been more on the liquids rich side of our business. But again, that's on the being supported by the NGL uplift that you've come to see with that NYMEX plus type realization type impact that we see really becomes a force multiplier in our cash flow in our numbers that we report. And now what you've seen is us again, shape this year's program where the dry gas TILs are going into the second half of the year. Now balance of those went in, in Q3, but they were deep enough in Q3. You're really going to see more of the production effects show up in our Q4 numbers, which again, I know we touched upon in our prepared remarks today as we start to look at finishing the quarter and the year really strong here. So I would say we have looked at some shut-ins. We've done those over the years past. That's been more a little bit on a limited basis. What you have seen us do is think about shaping of our program where we think pricing signals would warrant the timing of that production to turn to sales. Q3 for us this year was business as usual. And so again, because of that shaping effort that we put in play, we feel like we were able to continue to execute, turn those wells in line and then get ready for the upcoming improving pricing markers, which we're already starting to see signs of that. Alan Engberg: And Paul, just to emphasize a couple of things that Dennis said, I think there's 2 key points and differentiating factors of Range's business that makes that calculus of curtailments will be different than our peers. First, 80% of our gas leaves the basin. So the curtailments of dry gas in basin that would have otherwise been sold at in-basin pricing. That math is different than our math when it's going out of basin to stronger markets. Second, as Dennis said, the NGL uplift. You can see it in our realized price year-to-date, Range's realized prices is $0.20 greater than Henry Hub. So our dynamic of marketing sales outlets combined with the mix of production, changes that calculus for us. So we certainly are very mindful and do the math just as Dennis said, but it's just the factors in that equation are somewhat different and give us a great setup. Paul Diamond: Understood. Makes perfect sense. And just one quick modeling follow-up. So keeping with the narrative of the 400,000 and excess inventory by year-end works out to 30 or so wells in linear fashion over the next subsequent 2 years. Is the right way to think about that, like true linearity. You have 4 wells, a little under 4 wells per quarter and kind of tranching out and then just building that into the TIL count or should there be more, I guess, seasonality or any other lumpy issues? Dennis Degner: Yes. Good question. I'm only chuckling at the lumpy comment because I think ultimately, when you start to go from the model to reality, there will be some dynamics. And one, we tried to touch on a little bit earlier, but that is with some of the new processing and gathering infrastructure goes into service towards the midpoint of 2026. So activity-wise, when you think about activity cadence and you think about capital, it will be a really consistent program of execution and then when you start to see that next step in production, it will be more toward the midpoint when you see that Harmon Creek processing bolt-on start to go into service. So activity wise, you're going to see the utilization of that inventory look pretty linear. What you're going to see on the production side is some slight increase and then you're going to see, as you would expect a step-up when you see the next wave of Harmon Creek processing come into place. But it's going to be influenced by the infrastructure expansions that we've announced and how they come into service in the balance of '26. But think about '26 and '27 is a fairly linear utilization of that inventory. Operator: And our next question will be coming from Greta Drefke of Goldman Sachs. Margaret Drefke: I just first wanted to start on the fact that given you are now well within your target net debt range, how are you evaluating allocation of free cash flow between share repurchases, further debt reduction or book marketing cash for potential other investment opportunities? Mark Scucchi: Greta, I'll take that one. So as we think about future allocation of capital and how we will elect to reinvest in the business, I think we can first look back at historical trends in what we have said we will do and what's borne out in the numbers. So first, the priority a number of years ago is deleveraging to your point, we're quite comfortably within the target range. And as you think about the cycles in the business, you can likely expect us to fluctuate and delever at some point in a particularly strong point of the cycle. You could expect some further deleveraging. And then another point in the cycle, we think about how best to use that balance sheet to create outsized value and opportunistic times. So again, to look backwards as perhaps an analog. In 2022, prices ran and Range bought back in $400 million in shares. But it was about 28% of free cash flow, softer prices, while we were still working on the balance sheet 2023 about 19% of cash flow -- free cash flow went to returns of capital in the form of both repurchases and dividends. As we got within our target and towards the mid and lower end of that, you've seen us lean more into those share repurchases and increase our returns of capital, while investing in the business, building the inventory and developing this growth plan. So 2023, 2024 and year-to-date this year, you've seen returns of capital be 19%, 31% and about 50% year-to-date this year. So those are just examples of the trends, what the business is capable of expect us to continue to do all of the above and try to execute in an efficient, opportunistic manner. When we see signs of weakness, we certainly have the willingness and capability of leaning in and buying shares. But most fundamentally, we have an extremely attractive inventory and highly profitable projects and a really exciting growth plan that's tied directly to market-driven demand and we'll continue to focus on that as well. Margaret Drefke: And I also just wanted to get your latest thoughts on M&A as it also continued to be a prevalent topical theme in upstream space here, acknowledging that you have significant low-cost inventory depth as you've outlined so far and on Slide 5. Are there any acreage packages potentially available that you believe could be accretive to Range's portfolio? Dennis Degner: Yes, Greta, I'll tackle that one. I think when you look around the acreage position that we have really the efforts to block up all of the acreage has really limited some of that opportunity. However, we do see some opportunities to pick up some what I'll call white space acreage that's in and around our footprint. Some of that's in the capital numbers that you see us reported on this year, where there's roughly up to $30 million in incremental spend above maintenance type levels to manage your land program where we have the ability to pick up some of that, I'll say, the open track leasing that allows us to very efficiently add some inventory and also extend lateral lengths in many of those cases. We think that's going to continue to exist for the next few years. Of course, as you would imagine, over the course of time, that gets -- that opportunity gets smaller and smaller. There's a few other parcels that -- in areas that we've got our eyes on that are right in the, I'll just say, the operating window of our footprint. Some of them are state parks. And -- no doubt that could present a little bit of a challenge to -- given where the state may be viewing leasing today. But you've seen a willingness from like Ohio as an example to consider leasing under their state parts. We think that's a good sign. And then on top of it, we have the surrounding operating footprint where we would be able to drill underneath maybe those type areas without having any service access. So there are some further opportunities right in and around where we operate today, high-quality inventory, and we think there will be those opportunities that surface in the future. Operator: And we are nearing the end of today's conference. We will go to David Deckelbaum of TD Cowen for our final question. David Deckelbaum: Let me be the caboose here, guys. I did just want to get your thoughts on -- you've commented a lot about your optimism -- excuse me, optimism around NGL markets and obviously in the natural gas markets. Just given the amount of international demand capacity that's coming online, particularly for markets like ethane, should we expect to see that percentage of your portfolio that you're directing internationally to increase? Should we anticipate that we're going to see some commercial agreements into '26 and '27 as new volumes are commissioned for '28? Or how do you think about, I guess, that marketing strategy and perhaps outlook for premium relative to Belvieu in the next couple of years? Alan Engberg: David, this is Alan. So yes, I appreciate your comments, and I'm glad you see it similar as we do. There is a tremendous amount of new demand coming on. We're going to be growing our business at the same time. So we're going to be able to supply into that. The proportion of our business on the LPG side, we're involved in international exports has been roughly around 80% of our production, which puts us at the highest level relative to our peers. And what's good about the additions to that capacity that we talked about that I referenced earlier is that, that percentage is going to stay about the same. So it will be growing, but it will be staying roughly 80%. And it will continue to have a fair amount of flexibility built into it, so that we can optimize between domestic and export markets, depending on the highest overall return. On the ethane side, similar type thing. There's -- as was mentioned previously, I believe by Mark, some of the expansions that we're seeing internationally are with people that we already have relationships with. So I wouldn't be surprised to see some more commitments in that space as we move forward. David Deckelbaum: Appreciate that. And just, I guess, to close out as a follow-up to that. As we think about the balance between gas and liquids, anything just in terms of area or geologically that would otherwise target like a mix shift over the next couple of years? Dennis Degner: Yes. I'll close this out for us today, David, on that one. I think if you look at our program, roughly our activity level should look very similar in the next few years to what you've seen on that allocation of a portion of the field to what you've seen over the last couple of years. But over the course of time, it's very reasonable to think that our production mix will continue to get slightly wetter. Our inventory is more weighted on the liquid side. You can see where the processing capacity that we have, getting commissioned and gathering. It's also focused on the wet side, coupled with the optimism that we've shared about the future of NGLs and what that demand growth looks like, we think it's all kind of hand in glove complementary to each other. So I would expect a similar production mix where you're going to see somewhere in the neighborhood of probably 65% to 70%, let's just say, approximate range of wet to super rich type activity. But then with an underlying 30 roughly percent of dry activity that also continues to keep that gathering system at a high level of utilization, very competitive returns, very comparable and allows us to continue to grow our NGL business as well over time. Operator: This concludes our question-and-answer session. I would like to turn the call back to Mr. Degner for concluding remarks. Dennis Degner: Yes. I'd just like to thank everybody for joining our call today. It's always exciting to share the results from our prior quarter. And so really appreciate everyone joining the call. As always, if you have any follow-up questions, please don't hesitate to follow up with our Investor Relations team, and we look forward to sharing our 2025 full year results and plans for 2026 at the next call. We appreciate you joining. Thanks, everyone. Operator: And thank you for your participation in today's conference. You may now disconnect.
Operator: " Mark Wilson: " Chris Chong: " Malcolm Bundey: " Rahul Anand: " Morgan Stanley, Research Division Paul Young: " Goldman Sachs Group, Inc., Research Division Lachlan Shaw: " UBS Investment Bank, Research Division Glyn Lawcock: " Barrenjoey Markets Pty Limited, Research Division Kaan Peker: " RBC Capital Markets, Research Division Ben Lyons: " Jarden Limited, Research Division Jonathon Sharp: " CLSA Limited, Research Division Mitch Ryan: " Jefferies LLC, Research Division Unknown Analyst: " Robert Stein: " CLSA Limited, Research Division Matthew Frydman: " MST Financial Services Pty Limited, Research Division Lyndon Fagan: " JPMorgan Chase & Co, Research Division Operator: Thank you for standing by, and welcome to Mineral Resources Analyst Call covering today's release of its September 2025 Exploration and Mining Activity Report. Your speakers today are Mark Wilson, Chief Financial Officer; and Chris Chong, General Manager, Investor Relations. A bit of admin before we kick off. [Operator Instructions] This call is being recorded with a written transcript being uploaded to the MinRes website later today. I will now hand over to the MinRes team. Mark Wilson: Thanks, Josh, and good morning, everyone. My name is Mark Wilson. I'm the CFO of Mineral Resources, and welcome to our quarterly call for September. In the office with me this morning, I have Chris Chong, Investor Relations. And today, we're joined on the line by our Chair, Malcolm Bundey. As usual, I'll first run through some highlights from the quarterly, which was released this morning, and then we'll be happy to take questions at the end. Beginning with the key highlights. I'm pleased to advise we've delivered another strong quarter across the business and as a result, confirm that we're on track for our volume and cost guidance for FY '26. Onslow Iron was a key highlight in the quarter. We shipped 8.6 million tonnes on a 100% basis in the quarter, which was a commendable performance from the team, noting that road upgrades were being conducted through almost all of the quarter. Project also operated at its full 35 million tonne per annum nameplate capacity between August and October, which, as announced this week, triggered a $200 million Morgan Stanley Infrastructure Partners payment, which we expect to receive in coming days. Securing that contingent payment is a strong financial outcome that rewards the operational excellence we're seeing at Onslow Iron. And I want to take a moment to thank the entire team for a huge effort to get us to that point. This range from the construction team to our approvals and heritage teams through the commodities and mining services teams. On the Board renewal front, Mel commenced as Chair on the first day of the quarter. We also announced the appointment of 2 new independent nonexecutive directors in the quarter, being Lawrie Tremaine and Ross Carroll. And after quarter end, we were pleased to advise the further appointments of Colin Moorhead and Susan Ferrier as independent nonexecutive directors. Turning to safety. The 12-month rolling TRIFR was 3.35, which was a 13% improvement quarter-on-quarter. That's a solid outcome and reflects less recordable injuries following the wind-down of construction activity at Onslow Iron. In terms of corporate, our liquidity remains strong and steady at $1.1 billion at 30 September, with net debt at $5.4 billion and importantly, net debt to EBITDA continuing to fall. I believe we're now past peak net debt, and we continue to see a clear pathway to deleveraging through the operations. As we've said previously, as Onslow Iron ramps up, our EBITDA is expected to increase, and our net debt to EBITDA will continue to decrease organically. The Onslow Iron carry loan, which to remind everyone, is the receivable from our JV partners for funding them into the project, is now being repaid with interest, with balance at the end of the quarter of $714 million. That's a decrease of over $50 million over the quarter despite some additional spend adding to the balance. Subject to commodity prices, we expect that balance to reduce more quickly in coming quarters. As foreshadowed during the quarter, we successfully refinanced our USD 700 million May '27 notes, extending the maturity out to April 31 at our lowest coupon rate of 7%. This represents the smallest spread over treasuries we've achieved, and I believe it reflects the bond market's understanding of our diversified business model and the improved quality of cash flows being generated in the business. In terms of Mining Services, quarterly production volumes were 81 million tonnes, steady over the prior quarter and notably representing growth of 19% year-on-year. Volumes were driven by the ramp-up of Onslow Iron to nameplate and were partially offset by reduced volumes at Mt Marion and a couple of the client sites. At Onslow Iron, we have -- sorry, we have incurred additional costs as a result of the use of contracted trucks, but we've also benefited from higher rates, which were designed to protect us through the first 15 months or so of operations. Those rates are now back to long-term rates. In terms of the broader market for mining services, third-party demand remains strong, and we see good growth opportunities with Onslow Iron being a great showcase of our capability. For Mining Services, we remain confident of hitting our guidance range of 305 million to 325 million tonnes for the year, implying 13% annualized growth. In terms of iron ore, total attributable shipments were 7.6 million tonnes over the quarter, up over -- sorry, up 30% over the quarter. The average quarterly realized price across both hubs was USD 90. That represented an 88% realization. We continue to see strong demand for our Onslow Iron product. I do, however, want to point out that realizations at our Pilbara hub are likely to reduce over the next 2 quarters as the contribution of ore from One Mana decreases ahead of Lamb Creek's ramp-up in Q4. As I flagged last quarter, with iron ore prices solid and the curve relatively flat, we've prudently hedged out about 1/3 of production to the end of calendar year '25, given the first half weighting of CapEx. We're currently assessing our strategy for the next calendar year. In terms of iron ore at Onslow, as I said, team is delivering excellent performance there. We've loaded 44 oceangoing vessels this quarter. And as of today, we've loaded a total of 136 vessels, and continue to be very pleased with the way the transshippers are performing. We have had an issue with the bouruster of one of the transshippers since the 7th of October, which means that for the last 3 weeks, we've been operating with 4. That bouruster is being repaired and expected to be back online early next week. Sixth transshipper was launched from China in the quarter, and we expect it to be commissioned by around June next year, as we flagged previously. Over the quarter, we had 202 -- on average, 202 road trains operating, 118 of the MinRes jumbo trucks, and 85 contractors with over 31,800 trips to port completed. With the private haul road upgrade completed, we're now operating unconstrained at normal speeds, and all the contracted road trains are now solely using our road. We do have the full fleet of jumbo road trains on site, and we're progressively reducing the number of contracted trucks being utilized in line with contract arrangements. We'll be able to continue to operate at the 35 million tonne per annum nameplate rate, but do expect some seasonality impacts through the typical cyclone season from November through to April. On the costs at Onslow, I've said previously that I feel like we have a pretty good grip on those. They came in -- the costs came in at $54 a tonne at the bottom end of guidance. And just confirming there were no capitalized operating costs as we had declared commercial production from 30 June. In terms of the Pilbara Hub, we shipped a total of 2.7 million tonnes, which was another strong quarter. PB costs came in at $83 a tonne, reflecting a higher contribution from Iron Valley. We do expect those hub costs to fall back within guidance over the year as we transition from One Mana to the lower-cost Lamb Creek operation in the second half. Turning to lithium. The lithium pillar continued the strong operational performance we've reported over recent quarters. Production across Mt Marion and Wodgina was 137,000 dry metric tonnes on an SC6 equivalent basis, with sales of 142,000 tonnes SE6. That's up 23% quarter-on-quarter. Average realized quarterly prices across both sites was USD 849 dry metric tonne on SE6 equivalent basis. That's up 32%. Wodgina delivered sales of -- sorry, 88,000 kilotonnes of SE6. That was helped by a ship that was scheduled for June slipping into early July. Production was up 6%, driven by improved recoveries of 67%. That followed the plant improvements that I mentioned last quarter, including the successful commissioning of high-intensity conditioning dewatering cyclones on the second and third processing trains, which is now complete. We achieved a FOB cost for Wodgina, SE6 equivalent basis of $733 per tonne. I just want to point out that we expect that cost number to rise in the second half. Essentially, we're moving from higher or upper levels of Stage 3 down. And as we do that, we're feeding ore that we'll see a little bit more dilution and lower recoveries through the plant, but we will then get to deeper and higher quality ore. In terms of Marion, Q1 sales were 55,000 on an SC6 equivalent basis, in line with the prior quarter, the cost coming in at $796 a tonne. Those costs are lower than guidance. And again, I just want to point out that we expect them to rise in the second half. We're transitioning from the central pit to the north pit. So the grade changes and the mining costs increase. Finally, to finish with energy, we did receive an independent resource certification for the Lockyer-6 well in October, post-quarter end, and we've now received $41 million for that as a final payment under that arrangement with Hamrock. Having completed those comments, I'm now happy to hand back to Josh to queue questions. Thanks. Operator: [Operator Instructions] Our first question today comes from Rahul Anand from Morgan Stanley. Rahul Anand: Look, I've got 2 questions. Firstly, in terms of Mining Services, you did talk about the 15-month rates coming off and the rates being lower. But then I guess, to offset that, you do have contractors going off the road. And I understand year-on-year, there's going to be a bit of a lower margin in terms of EBITDA per tonne. But how should we think about that margin progressing into next year? And how should we basically square the circle of these 2, I guess, opposing forces for the margin side of things? And I'll come back with the second. Mark Wilson: Yes. Thanks, Rahul. We generally talk in terms of the $2 a tonne number, and we said that we think that's a reasonable guide going forward. There is a little bit of up and down in the first half with the movements that you've described. We do get the benefit from that additional rate through the first quarter. So it might be a little bit up and down. But yes, generally, $2 over the year still seems right for us. Rahul Anand: And then, look, I just wanted to touch upon the lithium business. Obviously, very strong performance this period. And I guess the market is there to be able to supply as well. Two quick ones there are just around -- is there potential to sweat the assets a bit harder to kind of make use of this strong market in terms of volumes? And then any sort of progress update on that lithium business potential sale, as well, that's previously been talked about? Mark Wilson: I think that makes 3 questions in total role, but I'll answer them both. In terms of the lithium, we're very pleased with the way that business is performing. It's been performing well for quite some time now. We have pulled back on production, as we've said previously, we're running Mt Marion a little bit slower. And Wodgina, we're running a little bit over 2 trains on average over the period. We can push that third train on with relatively short notice when we choose to do so. But what we've said is that we won't be at clean ore to be able to feed 3 trains consistently until around November -- around this time next year. So there is capacity to go harder. We don't have any plans to push it harder at this point. In terms of any sort of process around lithium, I'm not going to comment specifically on lithium as such. What I will say is that Chairman in his letter to shareholders expressly referenced a willingness to consider inorganic deleveraging, and you should assume that's something that we're continuing to do. As we've said before, we've got a history of doing that. We've been doing that for the last 5, 7 years, and we'll continue to evaluate options. Operator: Our next question comes from Paul Young from Goldman Sachs. Paul Young: First of all, really strong operating performance. So well done on a good quarter. First question is on Onslow and with respect to actually costs, which were really, really good considering you're still running the contractor fleet. But I noticed the strip ratio was really low, only 0.3:1. So as you unwind the contractors, you're going to benefit there. But just on the strip ratio, maybe just over the near to medium term, how are you seeing that profile? Mark Wilson: Yes. So I just want to make it clear. Thanks, Paul. Nice to talk. Just want to make it clear for everybody. Those contractor costs don't come through that fog number. Those contractor costs sit in the mining services business because they have a mining services business has effectively a mine-to-ship contract. So the MineCo, Onslow Iron enjoys the benefit of a fixed price contract. And so that number of 54 reflects that price. So those costs have effectively reduced the margin in Mining Services, albeit, as I said earlier, offset by higher rates. So hopefully, that clarifies that. In terms of the strip, it is true that the strip at Onslow is low. It will revert in the short to medium term to 0.6. We are actually pulling tonnes now from Upper Cane, which actually has a strip of 0.1. So we expect to see low cost going forward, and we don't see upward pressure on that $54 into future quarters. Yes, we still think we'll be between guidance of 54 to 59. Paul Young: And second question, just on the hedging strategy, which has been great so far. I mean you hedged at 30 volumes at the end of the year. The market is tight. You can see that through your realizations. What is the hedging strategy next year? I know you said you're assessing it, but I would have thought that it'd be pretty compelling to hedge more at -- under the current structure into next year? Mark Wilson: Yes. We are considering it. There are a range of considerations that we're weighing up. We actually have locked a few tonnes away in January. We're using the same sorts of structures, zero cost collars with a floor -- the ones this year -- this calendar year, between a floor of 100 to 101 and a cap of around 106 to 108. We can get probably slightly better numbers in January, which we have in place for a small number of tonnes. We're looking at now extending that out. The market has moved a little bit over the last week, as you know. So it's something we're watching closely. But it is attractive at these prices, particularly as we move through this deleveraging phase. Operator: Our next question comes from Lachlan Shaw from UBS. Lachlan Shaw: So 2 from me. I suppose I just wanted to check with Onslow. So the August run rate, 38 -- in excess of 38 million tonnes per annum. And obviously, TSB 6 arrives within sort of 12 months. Just interested in how you're thinking about the ability of the asset to sort of sweat or push above that 35 million tonne per annum run rate sort of post '26. And I'll come back with my second question. Mark Wilson: Thanks, Lachlan. We're very pleased with the way the assets performed or the projects performed over the quarter. We have benefited from comparatively calm weather through the period. We have lost a number of days, but this is a quarter we would expect to do well. As you would expect from us, we're constantly looking at ways that we can improve productivity. We're searching for minutes literally in every aspect of the operation. What we've said consistently is the sixth transshipper should give us the capacity to go to 38 million tonnes per annum. We are trialing and have been trying for the last month or 2 channel passing of our transshippers, and we see the potential to possibly increase throughput by another 5% as a result. But we'll -- possibly, we'll see how we go through -- we'll continue running those trials over the coming months. But I think the headline number that we've got to remains unchanged that we see us getting up to 38 million with the sixth transshipper. Lachlan Shaw: And look, my second question, so just on the lithium side of the business and the MineCo, and obviously, reports around and being open to, I suppose, capital recycling. But I wanted to ask, can you help us understand -- I mean, how do you think about this business, and I suppose the optionality embedded in being exposed to the potential for fly-up pricing in lithium, there will be another cycle. We know that, versus obviously, a key motivation for doing or looking at this sort of transaction will be at the gear. But can you help us understand how you think about -- I mean, how do you sort of weigh all that up? Because I do know, obviously, spot prices are looking better. You're realizing a better price this quarter, and perhaps things are looking a little better into next year. So just interested in how the business thinks about those trade-offs. Mark Wilson: So what I'll say is I'll just repeat, Chairman's expressed very clearly an intention to consider inorganic deleveraging. Management is assessing a whole range of different possibilities. You should assume that anything we do on any of the assets, we will only transact if we see real value there. So we don't need to do a transaction today. We're really pleased with the way the business is performing. We're pleased with the cash it's generating. We can see that, as I said earlier, that clear line of sight to deleveraging through the performance of the business. Just to emphasize, we won't do anything unless we can see very strong value, both financial and strategic for doing something. I don't know that I can say much more than that. Operator: Our next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just if you could maybe help a little bit on the realizations for iron ore, 85% of Pilbara and 90% at Onslow. How much of that was due to the hedging you put in place? And just how much is that maybe quality as you start pushing Onslow because it was -- you were getting more like 80% realization? Mark Wilson: Yes. So Glynn, almost no impact from the hedging. We had maybe a couple of percentage points impact through prior period adjustments, but not substantial. Really, what we've seen is the whole market has tightened in terms of low-grade discounts over the quarter. There's been a shortage of supply into China, and we're seeing as the mills become more familiar with the Onslow product and figure out how to blend and optimize it through the plant, continuing to see very strong demand for that product. And really, they would take as much as we could give them. So very pleased with the way that's performed. But as you pointed out, even in the Central Pilbara, the discount has been tighter. So I think that's reflected in general market conditions. And we're seeing that continue into the early stages of this quarter. Glyn Lawcock: And then maybe just any update you can provide on discussions with the Pilbara Port Authority over the dispute on charges for Onslow? Mark Wilson: We've got a great relationship with the Port Authority. We work with them in a number of areas. I can't comment specifically on that matter because it's before the courts. Operator: Our next question is from Kaan Peker from RBC. Kaan Peker: Just on the parallel channel passing, just wanted to get an understanding of how the trials have gone. What needs to be seen to be rolled out? And why only 5% upside in capacity? A bit more detail around that? And I'll circle back with a second. Mark Wilson: Thanks, Kaan. The trials are performing well. We have to trial with each of the vessels. We have to trial with the different shifts. We have to trial with day and night. We have to trial with the different crews. So there's a whole number of elements that need to be trialed over a period of time. We're also working with the Chevron vessels passing in the channel and so on. So it just -- it's a process that we've agreed with the port authority. It takes time over a period of months. In terms of the 5%, we've modeled it out. We're taking a view. We can't assume that we can do that for every movement of the transhippers. So to get to that number, we've taken a view on the percentage to see how frequently we can utilize that opportunity. Kaan Peker: And then maybe the commentary around flotation at Mt Marion. You've sort of mentioned it before, but I think it's the first time seen a date of 1Q '27. Just wondering the CapEx for that and if that's been included in FY '26 guidance. Mark Wilson: In terms of the float, that's something we're still studying. So we're doing some -- we are doing a little bit of design work on it, design engineering work. We're working with our joint venture partners to understand what that looks like. But the actual work itself is not underway. When I say the work itself, the construction, we haven't taken a decision to do that. That's something that we'll talk with the Board about and with our JV partner about as we work through our updated capital allocation framework. Operator: Our next question comes from Ben Lyons from Jarden Securities Limited. Ben Lyons: First question, just on Onslow. Congratulations on a very strong quarter, obviously. And I understand your comments around the channel passing trials, et cetera. Just specifically on one of the transshippers, though, Montebello doesn't appear to have moved since very early in the month of October. So just wondering if there's any maintenance issues or operating issues or crew availability or whether you just don't have sufficient capacity to run all of those transshippers simultaneously at present. Mark Wilson: The Mondi is the vessel that I was referencing earlier when I said that one of the transshippers had a bowruster issue. So the portside bowruster was lost in operation. And just to be prudent, we basically moor it up whilst we repair it. And that's down from the 7th of October. As I said, we expect it to be back in service early next week. So it's not a capacity issue or anything like that. It's just an unplanned maintenance. Ben Lyons: Apologies, I did miss the first part of the call. And this one might have already been asked as well, but just on the iron ore hedging, just whether you've disclosed the rough pricing you've hedged away that sort of 33% of volumes for fiscal '26. Mark Wilson: Yes, no problem. One of the things I said earlier, and you might have missed it, was that we've only hedged out through calendar '25. So we haven't hedged the full financial year. We're actually waiting to see and understand better the impact of the change to the 61% index. So we've hedged the third out to the end of December. We've done that with a series of 0-cost collars with a floor of somewhere between 100 and 101 and a cap of $106 to 108. We've also got a few 0-cost forward sales, $102 to 105. So that's out to December. I also said that we've been able to hedge just a small volume of tonnes into January, and we're just reassessing what we might do through that first quarter next calendar year. Operator: Our next question comes from John Sharp from CLSA. Jonathon Sharp: Chris, congratulations on the ramp-up of Onslow, quite impressive results. And just the first question there around that, and a similar question to Lockheed sweating the assets, but more to do with the road trains. You've said that you're confident that you'll maintain the 35 million tonnes per annum as contractors come off. But are there any improvements that you see there with the road trains, whether it's cycle times, loading of trucks, anything that you're seeing there where you can improve? Or is that not a concern because maybe the transshippers are more of the concern? Mark Wilson: I think we've been consistent in saying that ultimately, the transshippers are the bottleneck. We did have some inefficiencies through that first quarter just because of the use of the public road at times, the use of large numbers of contracted trucks, which impact productivity when they're unloading, and so on. So we expect to see greater efficiency over the coming months, but we don't see the haulage as being the constraint. Jonathon Sharp: And just a question on the progress towards autonomous haulage. Can you just give us an update there? Is there any regulatory sort of certification that needs to be done, or anything to update us on there? Mark Wilson: Thanks, John. The benefit -- or one of the benefits of having the road upgrade completed is now that we can move back to trialing of the autonomy, which is now underway. So we are trialing a number of trucks with the autonomy. That's a process that we said is going to take some time. We need to collect all the data and do the analysis, and working closely with the regulator to satisfy ourselves and then the state of those systems. So we've said that that's going to be a second half of next year sort of thing before we can really know with certainty how it's tracking. But at this point, we're still very confident in terms of how it's shaping up. Operator: The next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Just wondering on within the lithium business, if I look at on an SC6 basis, there was a divergence between the ASP at Mt Marion and Wodgina. Can you help us understand this, please? Mark Wilson: Sure, Mitch. So a couple of things I'd point out. We're very, very happy with the price performance, in particular of Wodgina. And so we sell on spot. And obviously, in part, it depends on timing of sales and cargoes and the like. But I'd say that Wodgina's sales performance has been very strong through the quarter. So I think that, that delta between the 2 is possibly exaggerated to an extent by that. And the demand for that Wodgina product continues to be very strong, reflecting of the grade that we put through there. Marion, we tend to sell as a parcel with a combination of the higher grade and the lower grade. And so historically, the difference between the 2 has been about 5%. This quarter, it's 10%. I'd say it's in part due to the strength of the performance of Wodgina. There is a 10% discount applied to the S3 product, the 3.5. Mitch Ryan: And then staying at Marion, total tonnes mined were down materially quarter-on-quarter. How do we think about strip ratios and material movements in the mine plan going forward? Mark Wilson: Yes, it's a good pickup and consistent with what we're saying -- one of the benefits of Marion is we operate out of a number of pits. So we don't just have a single pit. So you shouldn't be -- and you haven't suggested this, but I'm talking about the market generally. I shouldn't be worried that we're high-grading or anything like that. We're just reshuffling, resequencing our mine planning. And you're right, we were able to benefit from lower strip at Marion through the quarter. And we did that in part to help manage CapEx. We've said before that we're conscious about the way that we're managing our capital through the business. And so we are going to sequence back to higher strip pits, and the life of mine average at Marion is 10 to 11. So that's one of the reasons why I called out costs going up in the second half as we do that. But just to emphasize, we still see costs for the year falling within guidance. Operator: Our next question comes from [ Hayden Burlow ] from [indiscernible]. Unknown Analyst: Really good result. Just a couple of questions from me. Mark, just on mining services. Just keen to get your sort of thoughts on external volumes and whether that you see some opportunities to grow, I guess, more into next year than this year, but just keen to see where that's at. And also in the Pilbara Hub, do we assume then lower volumes in this in the next quarter, just as you transition and get Lamb Creek going in Q4? Mark Wilson: In terms of the first question, mining services, as I said, I think the external market, the demand for the services is strong. The industry is generally strong with the others in the industry, not that we have any true competitors the way we operate, but others are focused on gold. We see significant pipeline of opportunity into calendar year '26 and beyond. So very comfortable with the outlook and prospects for that business. In terms of the volumes out of the Central Pilbara, it's more a shift between the mines. As the market understands, one of the challenges with the Iron Valley product, even though it's a great product, it's very high. And so we do need to blend it. Wonmana is there, but the grades are falling. And so that's one of the reasons why I called out lower realizations over the next 2 quarters as we do that blending with reducing grades before we get Lamb Creek on. And then Lamb Creek, we'll see the grade stabilize and the blended grade stabilize. It will also see the cost improve because of the strip is quite low. Operator: Our next question comes from Robert Stein from Macquarie. Robert Stein: Quick one on just CapEx, the $400 million. I assume that's front-end weighted into the first half of the year, and obviously, because guidance is still intact that we can expect a slower second half run rate? And I've got a follow-up. Mark Wilson: Rob, yes, that's an accurate assessment. Robert Stein: And then secondly, just the Hancock payment. So the $41 million that was results to date, the issue with the well being capped basically getting another drill rig back on site, and then the other remaining part of the contingent consideration is still accessible once you're able to access or drill that -- the second part of the well? Mark Wilson: No. So the Hancock arrangements now concluded with that payment of $41 million. The well that we referenced in the quarterly was another exploration well, and we weren't able to determine commercial volume to be able to take it to production. So we've got a program of drilling planned with Hancock. They're going to drill some material for opportunity for themselves, and JV will do some work over the coming months, but we have no intention to go back to that well. Operator: Our next question comes from Lyndon Fagan from JPMorgan. Our next caller is Matthew Frydman from MST Financial. Matthew Frydman: A couple of questions on mining services, please. Firstly, you mentioned in the release a bit of a reduction in third-party or client contract volumes. That sounded pretty minor. But is there anything you can do to quantify the drivers there, or whether that's a temporary or lasting impact? Mark Wilson: Yes. Happy to explain that a little bit better. We had an external site finish last quarter, and we had a new one start this quarter, and they didn't balance out. We did more volume with the terminating contract and the new contract through its start-up phase. So that's a timing thing. And then we had 1 or 2 sites where the client wasn't able to provide us with the sort of volumes that we would normally expect. But again, not significant in any sense. So just a temporary thing, I think best described as. Matthew Frydman: And then maybe following up on Hayden's earlier question, just, I guess, trying to quantify the next opportunity in mining services. I mean simple maths will tell us that even to grow volumes by a fairly modest 10%, it needs to be a 35 million tonne per annum contract. So what does the next opportunity in mining services look like? Is it partnering on more onslowsized developments? And I guess what sort of timeline do you expect in terms of yes, achieving some of those opportunities? Mark Wilson: I think you've identified that -- I mean, the business has got a fantastic track record of growth over many years. And I think you've identified one of the challenges, which is to continue to support that sort of growth rate for a number of years into the future. So it is something we talk about internally. We do think about how we allocate resources. We've got -- we do have -- we've got a wonderful team, but we've got a certain number of people. We need to make sure they're pointed to the right opportunities. And so we need to work with management and with the Board to make sure we're thinking about that capital need going forward. I can't talk about specifics as you would appreciate. But what I would say is that the market better understands the capabilities of that business as a result of the success of Onslow, and I'll probably leave it at that. Operator: We're going to try Lyndon Fagan again. Lyndon Fagan: Look, just wanted to check in again on Wodgina Train 3. I'm not sure if this got covered off, but given a better outlook for the market, what do you need to see to ramp it up? Mark Wilson: So the answer is that we've sought to be disciplined with supply. We have pulled volume out of the market. We do run that third train from time to time. We haven't set a hard number as such. We obviously track the market every day with the calls that we're making around sales. So we've got a pretty good view and feel for the market and what that outlook looks like in the short term. It's a JV asset as well. So any decision that we take around that needs to take into account the views of Albemarle. What I would say is we still -- we're holding to the guidance for this year. I think that's the best way to put it in terms of where we think sales production will be. Lyndon Fagan: And I guess if you decided at the end of this year, the market outlook was sufficient to bring it on, when -- how quickly could you go from that decision to Train 3 at nameplate across the whole operation? Mark Wilson: I think one of the interesting parts about that question is it highlights the optionality that sits inside the business generally. Specifically with respect to Train 3, we can turn that on overnight, and we can produce. In terms of having clean, consistent feed to support all 3 trains, that will be 12 months from now. We would be able to deliver production from 3 trains next week. But what we would see would be recoveries would fall, costs would be a little bit higher because we'd be dealing with more contact ore, and we'd have some dilution impacts on the plant. So on the mining and through the plant. So it's a choice that's available, but to get to nameplate with clean ore is going to be 12 months. Operator: [Operator Instructions] Our next question comes from Lachlan Shaw from UBS. Lachlan Shaw: Just a couple quick ones. So firstly, great result with the recent debt refinance. I'm just wondering, though, corporate spreads are pretty tight right now. You might be tempted to go early again on the next bond due November 27. Mark Wilson: We were very pleased with the market reaction when we came to market. There was a lot of appetite both out of Asia and out of the U.S. The bond -- the next bond has a call premium of $1.04 effectively. So it's a little bit expensive to go now. That will step down shortly. It's a broader conversation in terms of how we think about the capital stack and what we're doing. So we don't have any hard plans to go, but that's an option we're continuing to monitor. Lachlan Shaw: And then just a final one from me. So obviously, the haul road Donslow repair is complete, a really good outcome. As we're coming into the wet season and you sort of look at how that's all gone, are you comfortable that the sort of the risk areas along the road in terms of river crossings and potential for ling water to impact? Are you comfortable that's all being sufficiently addressed, and you've now got pretty reliable and resilient pathway through the wet season? Mark Wilson: One of the benefits of the somewhat painful experience earlier this year was that we got a better understanding of where the water sat and how it moves live as opposed to the modeling. And so you can assume that we've studied that. We've worked with that, and we've tried to address that in the work that we've done through that period up to September. So yes, I'm confident that the team has done that work. Operator: Our next question comes from Mitch Ryan from Jefferies. Mitch Ryan: Previously, you had disclosed plans to take Onslow well beyond 35 million towards 50 million tonnes with the deleveraging in sight. Is there any information to dust those plans off? Or what would you need to see to dust those plans? Mark Wilson: Mitch, thanks for the question. We're not changing our position. We see a potential to go to 38 with the sixth transhipper. We know that there's a huge amount of resource out there, but there's also a lot of work that will be needed to be done both on the resource and on port infrastructure to go materially higher. So that's something you can assume that we're talking about because we always have the medium to long term in mind. But for the short to medium term, there's no plans to change what we're saying. Mitch Ryan: And just with regards to the study of reintroducing float at Mt Marion, does that potentially use the existing float equipment there? Or will it need new equipment? Mark Wilson: There's potential to reuse some of it, but it will be largely new. And just we've talked about it a little bit today. Yes, the benefits of the float are clear in the sense that it would allow us to have a single product, and it should take -- subject to what the study -- final study says, we estimate it could take up to $100 a tonne out of the all-in sustaining cost of the operations. But ultimately, it's a capital investment decision. We have to take that through management and through the Board once we finish our analysis. Operator: There are no further questions. That concludes today's call. Thank you for your time, and have a great day. Please reach out to the MinRes team if you have any follow-up questions. You may now disconnect.
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: Good morning, and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on LG Display's Third Quarter of Fiscal Year 2025 Earnings Results. Suk Heo: Good afternoon. This is Heo Suk, Leader of the LG Display IR team. Thank you for joining our third quarter 2025 earnings conference call. Joining us today are CFO, Kim Sung-Hyun; Vice President, Choi Hyun-chul, in charge of Business Control and Management; Vice President, Kim Kyu Dong, in charge of Finance and Risk Management; Lee Kyung, in charge of Business Intelligence; Vice President, Kim Yong Duck, in charge of Large Display Planning and Management; Hong-jae Shin, in charge of Medium Display Planning and Management; Park Sang-woo, in charge of Small Display Planning and Management; and [ Hong Moon-tae ], Head of Auto Planning and Management. Today's conference call will be conducted in both Korean and English. For detailed performance-related materials, please refer to our disclosure or the Investor Relations section in the company's website. Please refer to the disclaimer before we begin the presentation. Please be informed that the financial figures presented in today's earnings release are consolidated figures prepared in accordance with IFRS. These figures have not yet been audited by an external auditor and are provided for the convenience of our investors. I will now report on the company's business performance in Q3 2025. Panel shipment grew Q-o-Q across the entire OLED product line, driven by the start of seasonality and supply for new small- and medium-sized OLED products. Revenue was KRW 6.957 trillion, up by 25% Q-o-Q and up 2% Y-o-Y. Operating profit reached KRW 431 billion, improving by over KRW 500 billion Q-o-Q and Y-o-Y. The improvement resulted from the growth in shipment and portion of OLED products as well as the company's ongoing intensive cost innovation activities. The number reflects around KRW 40 billion in onetime costs related to workforce efficiency activities, excluding which the business performance stands at approximately KRW 470 billion. Net income was KRW 1.2 billion, including the impact from the foreign currency translation gain with the exchange rate rising Q-o-Q. EBITDA in Q3 was KRW 1.4239 trillion with an EBITDA margin of 20%. Next is the trend in area shipment and ASP. In Q3, area shipment fell 1% Q-o-Q despite the seasonality and growing shipment of small and medium OLED product lines. This is following reduced shipment of low-margin midsized LCD models in line with our ongoing profitability-focused product portfolio management. ASP per square meter was $1,365, up 29% Q-o-Q, slightly outperforming the guidance. It was driven by the higher-than-planned growth in shipments of small and medium OLED products. It is an all-time high, resulting in part from the rising portion of OLED. Next is revenue share by product category. Mobile and Others, which has the largest share, reached 39%, up 11 percentage points Q-o-Q, led by panel shipment growth stemming from the seasonality and preparation for new products. In IT, while revenue grew on the back of sharp expansion in shipment of OLED panel for IT, there were larger changes in revenue in other businesses. As a result, its portion fell to 37%, shrinking by 5 percentage points Q-o-Q. The TV segment's revenue share was 16%, down 4 percentage points Q-o-Q. Auto segment's share was 8%, down 2 percentage points Q-o-Q. The share of OLED products out of total revenue was 65%, up 9 percentage points Q-o-Q and 7 percentage points Y-o-Y. As we continue to expand the performance of OLED-centric business structure upgrade, its impact is further solidifying our foundation for growth and profitability. Next is financial status and main indicators. Cash and cash equivalents in Q3 stood at KRW 1.555 trillion, largely unchanged Q-o-Q. As we keep downsizing nonstrategic businesses, for example, discontinuing the LCD TV business and enhancing operational efficiency, the size of essential working capital has also decreased. Debt-to-equity ratio was 263% and net debt-to-equity ratio 151%, down 5 percentage points and 4 percentage points, respectively, Q-o-Q, further strengthening our financial soundness. Next is Q4 guidance. Continuous growth is expected in area shipment of OLED products in Q4, while LCD shipment is expected to decrease as we keep running profitability-centered product portfolio. Accordingly, total area shipment is projected to grow in low single-digit percentage Q-o-Q. And for ASP per square meter, we saw much more pronounced increase in Q3 than usual, thanks to shipment growth of small and midsized OLED driven by seasonality and preparation for new product launches. And that is also why going into Q4, we anticipate another higher level of ASP compared to average quarters. However, it is expected to decline in low single-digit percentage Q-o-Q due to some factors such as mix change in small and midsized OLED products. And now let me hand over to our CFO, Kim Sung-Hyun. Sung-Hyun Kim: Good afternoon, everyone. This is the CFO, Kim Sung-Hyun. Let me thank you all for joining us at our conference call. Q3 this year was when we saw the results of our ongoing strategy to upgrade our business structure to be more OLED-centric and our strong initiatives for cost innovation beginning to come to fruition and manifest themselves into business performance. As mentioned earlier, Q3 saw an increase in shipment coming from the seasonality, coupled with the impact of concentrated shipment of small and medium OLED for new products, it has boosted OLED product group's revenue share up to 65%. Based on this, Q3 year-to-date business performance showed revenue of KRW 18.6093 trillion and operating profit of KRW 345 billion, continuing the trend of improvement and giving more visibility to a full year turnaround after 4 years. Despite the pressure on revenue from the discontinuation of the LCD TV business, it remained flat Y-o-Y, thanks to larger portion of OLED and premium products. Operating profit year-to-date improved by approximately KRW 1 trillion Y-o-Y. It is owed to the intense and speedy execution of strategic initiatives, including cost innovation and operational efficiency along with business structure upgrade. External uncertainties and the consequent shipment volatility are expected to persist in Q4. There still remain variables in the business environment, including macro-related real demand, intensifying competition among suppliers and supply chain stability, but we plan to address these challenges by prioritizing business efficiency initiatives. OLED products revenue share is expected to be similar Q-o-Q in Q4 with the annual share projected at a low 60% level. Incidentally, we are also planning for an additional workforce improvement program in Q4 as part of our ongoing cost innovation effort. The specifics cannot be disclosed in advance, but its impact on our financial performance is considered to be more than that of last quarter. The onetime cost occurred by this workforce improvement program will be offset after 1.5 years, providing positive impact on the business performance thereinafter. Next, let me share our plans and strategies by business segment. For small mobile business, we plan to ensure more stable operations by expanding panel shipments every year based on our technological leadership and stronger partnership with our customers. At the same time, we will keep broadening our future business opportunities by methodically implementing all future-proofing activities, including R&D and investments in new technologies. For IT OLED, which is part of our midsized business, we plan to respond to the growing demand in high-end tablet market with our Tandem OLED technology. And for the anticipated shift to OLED in the notebook sector, we will closely examine the market size and pace of change and respond effectively. Overall, we will enhance our responsiveness with differentiated approaches. Leveraging our long-standing technological leadership and mass production competitiveness, we will solidify our leading position in the market. We will also proactively respond to changing environment, including market demand and customers' requests through efficient utilization of our existing infrastructure. In IT LCD business, we remain focused on reducing low-margin products while focusing on B2B and differentiated high-end LCD segments. It is encouraging that this has led to meaningful improvement in profitability Y-o-Y. We will strengthen execution of our current initiatives to deliver improved results next year as well. For large panel business, where OLED's differentiated competitiveness is well recognized in the market, we will further solidify our leadership in the premium market with a various lineup of OLED panels offering unique value based on close partnership with strategic customers. We will continuously grow our business performance and intensify cost improvement initiatives to maintain stable business operations. Last is Auto. The market outlook is more positive than other product areas, led by expanding in-vehicle display adoption and accelerating enlargement of displays. While competition is expected to intensify, we plan to maintain our competitive edge and create differentiated customer value based on our solid market position and diversified technology and product portfolio. Finally, on investment. Our principle in CapEx execution remains unchanged, focusing on investment for future preparedness and business structure upgrade. Because our investment efficiency initiatives continue, CapEx this year is expected to be at high KRW 1 trillion range below last year's level. Moving forward, we will make prudent investment decisions while maximizing the use of existing infrastructure. New investments will be executed with profitability as the top priority. Thank you very much for your attention. Suk Heo: This concludes our presentation of business highlights for Q3 2025. We will now take your questions. Operator, please commence with the Q&A session. Operator: Now Q&A session will begin. [Operator Instructions] The first question will be provided by Gang Ho Park from Daishin Securities. Gang Ho Park: Congratulations on the good performance. Now I have largely 2 questions. Now I see that in the third quarter, the performance has risen sharply, and that appears to be on the back of rising revenue from the OLED panel as well as the revenue share of the OLED panel as well. Then the question is, does the company believe that it has the kind of structure that can sustain this kind of business performance down the road? And then related to this, traditionally, the company has been sluggish in the first half because of the strategy of its strategic customer. But then given the fact that it saw a good performance in the first half of this year, then does the company believe that this marks any change in the structure of the OLED market or the OLED business? And then based on that, then what would be the outlook for next year first half and also for the whole year? And the second question is, now in 2026, it appears that the macro uncertainties will continue and also competition continues to intensify even amidst the sluggish demand in the downstream. And as a result of this, then there could be some pressure from the customer to lower the ASP. Then how does the company intend to respond if such pressure should arise? And what is the company's strategy for continuous growth for the future? Choi Hyun-chul: This is VP Choi Hyun, in charge of the Business Control and Management responding to your questions. Now allow me to respond to the second part of your question first. And thank you very much for your interest in the company. Now it is true that in the past few years, the uncertainty and volatility in the external environment have continued. But then the company have continued also to expand our business performance every year based on internal capabilities based on our push to upgrade our business structure to be more OLED-centric and also to continue with the cost innovation activities. And as a result, despite the various factors coming from the outside, we were able to improve our performance, and we intend to keep demonstrating more stable performance down the road. Now looking back to the performance in the past 2 years, then last year, in 2024, we were able to narrow the loss by a very big margin of KRW 2 trillion from the previous 2023. And then for this year, although we still have the fourth quarter to go, we have the projection that we will be able to improve profitability by another KRW 1 trillion this year for the year. Now looking ahead, uncertainties in the external environment are likely to persist. But then as explained earlier, based on the stronger business fundamentals as well as the ongoing efforts at cost innovation, we will continue to work to further improve our business performance next year as well Y-o-Y. And looking ahead, we will continue to maintain stable business performance. And now it is true that there has been sluggish demand in the display market downstream and also stronger competition, making it difficult for any company to go for both growth and stable management of profitability at the same time. Having said that, the company will continue to try to expand our revenue and solidify our market leadership by increasing the OLED product portion, focusing more on high value-add and high-end products from global leaders and also developing the new growth engines based on differentiated technologies. And now with regards to your question about the panel price, I take it that it is a question about our maintenance of the profitability. Now based on our strong partnership with our customers, we will continue to operate an optimum pricing strategy, while at the same time, upgrading our product mix and continuing with our cost innovation and operational efficiency activities at the same time so that we can continue to expand our profitability. Suk Heo: We will take the next question. Operator: The following question will be presented by Mingyu Kwon from SK Securities. Mingyu Kwon: Congratulations on the good performance. I have 2 questions, and one is about the mobile. So it seems that the -- so I'm wondering about the market reception to the launch of new models by the North American customer. Now from media reports, it seems as if the reception for the standard model is better than expected, for the air model, perhaps less so. Then what would be the implications for the LG Display? For example, will there be any changes in the expected shipments or in the market share? And then the second question is now for the smartphone panel annual shipment target and the outlook for next year. So if there is a foldable product to be launched and also given the -- so given the likely launch of the foldable product and also the intensifying competition, then what is the possibility of shipment increase in 2026? If the company believes that shipment growth in 2026 is possible, then what would be the drivers for that? And then the last question is related to the small to midsized OLED. Now because of the restructuring in the Japan Display Inc., it is understood that LG Display is now the sole supplier for the smartwatch panels. Then what will be the volume, the annual volume of supply? And also what will be the contribution to the company's revenue and profit and loss? Park Sang-woo: This is Park Sang-woo, in charge of Small Display Planning and Management. Now for the smartphone business, the company has been achieving stable performance, thanks to our stronger competitiveness with our technology and production as well as across all areas of operation. And then in terms of the response to the new models by the customer, we understand that generally, it is quite positive. But then for the different models, the actual demand could be different. So this could also translate into some changes in the shipment plan based on the market trends. And now in the first half, despite the seasonality, there was a meaningful shipment growth by over 20% Y-o-Y. And then in the second half, thanks to the diversified product portfolio and stable supply system as well as the efficiency improvement, there has been improvement in profitability as well. So for the year, we are confident that we will be able to further expand our performance from last year. Now for the company, we believe that we have already have built up the technological know-how to flexibly respond to the diversifying needs from the customer. For example, by having a stronger capability in development and mass production of smartphone panels. And also by more efficiently utilizing the current infrastructure, we will be able to respond even more speedily and flexibly to new technologies and also growth in demand for different products. And looking ahead, we will continue to create stable performance by strengthening our quality competitiveness, continuing with our cost innovation efforts and preparing for the future technologies based on our close partnership with the customer. Now about the wearable devices, they are equipped with a number of different functionalities. And also across the society, we are seeing increased interest in health overall. So it seems as if the use of these products across the consumers' lifestyle in general is going to keep going up. So we believe that the outlook for the mobile OLED product market, including the smartphones is quite positive. The company already has the best technological leadership and production capability in the smartwatch panel business. And recently, there has been a change in the supplier status in the industry, which has also resulted in the growth of panel supply volume. And we believe that this will serve to further solidify the company's position in the premium wearable market. Now in terms of the annual supply volume, revenue, profitability and other information related to them are directly related to the customer. And thus, please understand that I am not in the position to discuss the details or the specifics. But then we will continue to create stable performance in the smartwatch panel business, utilizing our technological competitiveness and leading supplier status. Suk Heo: We will take the next question. Operator: The following question will be presented by John Heekyu Yun from UBS Securities. John Heekyu Yun: I have a question on the small mobile product. Now the market expectation is that in the second half of 2026, the North American customer will be launching a foldable smartphone product. Now then what would be LG Display's strategy for foldable smartphone panel business? And can you also share with us the status of the company's readiness for the product and technology? Park Sang-woo: Now for foldable products, there is growing anticipation from the market on the possibility of opening up new market segments for its differentiated form factor and the new user experience that it provides. Now if the foldable smartphone market becomes well established, then the product can also become the vehicle for trying out new technologies as the flagship model. So the company is closely monitoring the smartphone market trends as well as the demand outlook and is preparing for potential market growth. But for now, our strategy is to maximize the supply volume for the existing products so that we can continue to heighten our performance until we can get better visibility into the demand growth as well as opportunities for the company. So the company continues with the series of activities to strengthen our R&D and acquire new technologies. Now in the smartphone areas, if we can come upon more clearer opportunities, then we will build up our supply structure and expand our business opportunities after carefully reviewing the market acceptance of differentiated product as well as the market growth pace. Suk Heo: We will take the next question. Operator: The following question will be presented by Sun Kim from Kiwoom Securities. Sun Kim: I have 2 regarding the IT business. Now first, in IT, the LCD, the competition for LCD in IT is intensifying. And also, at the same time, the profitability is worsening. Then are there any plans for the company to downsize or even exit the LCD IT business as it has done so in the LCD TV? Or otherwise, what would be the strategy for the LCD IT business? And then second, now there is also outlook for growing adoption of OLED in the IT market as well. And in response to this, the -- your peers in the market are now making investment into the 8.6 Gen OLED. So what is the company's preparation or what are the company's activities in order to be ready for this potential adoption growth of OLED in IT? Hong-jae Shin: This is Hong-jae Shin, in charge of Medium Display Planning and Management. Now it is true that the medium product market remains overall sluggish, but then the company has been maintaining intense cost innovation activities. And as a result, we have been moving closer to our targeted performance, for example, making gradual improvement on our profitability, thanks to our focus on the high-end LCD technologies and differentiated competitiveness coming from OLED. In LCD, we are maintaining profitability-centric business management by the select and focused approach centered on strategic customers. And utilizing the company's technological advantage and global customers' partnerships, we continue to maintain our business based on B2B and high-end lineups. While at the same time, downsizing the low-margin models and improving profitability and enhancing stability. And for OLED, in particular, the company is providing various solutions to our customers based on the 2-track strategy of addressing new demand and preparing for future market. Now based on the company's differentiated competitiveness, we continue to respond to the growing demand of high-end monitors like gaming. And as a result, we are also seeing increase in the shipment of OLED panels for monitors. Now in the notebook business, it is expected that there is going to be a gradual transition to OLED. But then the company believes that we need to see additional and clearer signs of the market size, transition speed as well as consumers' acceptance. As such, the company remains closely watching the OLED notebook market size, while at the same time, we will be utilizing the existing infrastructure as much as possible for the technologies that can apply to future products. And by doing so, we will steadily make preparation for future technologies and mass production. Suk Heo: We will take one last question. Operator: The last question will be presented by Won Suk Chung from iM Securities. Won Suk Chung: Now I have a simple question about the OLED TV. So the macro uncertainties continue and also there is growing competition with the LCD products. And then at the same time, there are also reports that a domestic TV set-top company is intending to expand its OLED lineup as well. So what is LG Display's strategy and mid- to long-term target for the OLED TV business? Kim Yong Duck: This is Kim Yong Duck, in charge of Large Display Planning and Management. Yes, it is true that the uncertainties in the external environment and the business environment continue. But then for the company this year, we are projecting a mid-6 million unit level of large OLED panel shipment, which is growth Y-o-Y. Now compared to the LCD, the unique value of OLED panel appears to be more and more recognized in the market. And also pricing is nearing the range of affordability, enhancing further its acceptability in the market. And as such, for next year, the company is looking forward to another growth expecting 7 million units. And in particular, the gaming OLED monitor, so the demand for the gaming OLED monitor that is produced out of the large OLED fab is seeing meaningful growth. So for the large OLED panel, so we believe that the gaming OLED monitor out of the large OLED panel shipment, the share will be around low- to mid-teen percentage this year. The company continues to strengthen the fundamental competitiveness of OLED products as we also continue to diversify our product group. At the same time, we are maintaining very intense cost innovation activities and operational efficiency activities at the same time so as to continue to improve profitability of our large panel business. Of course, I cannot mention the specific profitability of each business segment, but then the results of all these multifaceted efforts are coming together to make a bigger contribution to the overall business performance. But of course, external uncertainties persist and competition between the different products is also intensifying as evidenced by the launch of various products that are in direct competition with OLED. So in response to these changes, the company will maintain our very strong cost innovation activities and also continue to build up our partnership with global top-tier customers so that we can maintain stable business performance. And last, the company's OLED capacity is 180,000 for Generation 8, out of which we are currently utilizing 135,000 for mass production. And down the road, we intend to flexibly run the capacity in linkage to actual demand. And we also have sufficient infrastructure to flexibly respond to any additional growth in the market demand. Suk Heo: Thank you very much. This concludes LG Display's Q3 2025 earnings conference call. We thank everyone for joining us today. Should you have any additional questions, please contact the IR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, ladies and gentlemen, and welcome to the HelloFresh SE Q3 2025 Results Call. [Operator Instructions] Let me now turn the floor over to your host, Dominik Richter. Dominik Richter: Good morning, everyone, and thank you all for joining our Q3 earnings call. At HelloFresh, we follow a powerful mission to change the way people eat forever. We've built the only scaled global player in both meal kits and ready-to-eat meals over the past 14 and 5 years, respectively. Our customers benefit from great tasting, healthy meals our wide-ranging variety of seasonal ingredients and global cuisines and the significant reduction of food waste, leading to a superior sustainability profile and lower CO2 emissions versus alternatives. The business is powered by our just-in-time supply chain, the largest of its kind in the world, and a data-driven marketing engine that allows us to reach and engage customers worldwide week in, week out. Over the past 12 months, we've enacted quite drastic changes, emphasizing unit economics improvement, profitability and a much improved customer experience over revenue growth in the short term. Those changes are resonating with customers and multiple customer satisfaction metrics are trending at record highs, indicating that we're both deeply embedded in customers' lives and successful with regard to our mission to change the way they eat. While we're still squarely in our efficiency reset phase with more underlying cost savings making their way through the P&L in the coming quarters, we're now starting the path to unlock even more favorable changes to the customer experience to eventually return to growth. Before I share more on this, let me start by introducing and welcoming our new CFO, Fabien Simon, who joined us about 6 weeks ago. Fabien has had an impressive career to date, most recently serving as the CEO of JDE Peet's, a leading CPG coffee and tea player. Prior to this, he was instrumental in building the JDE Peet's Group from the ground up as their CFO and partner of the investment holding JAB behind it, taking JDE Peet's public at the Amsterdam Stock Exchange. Earlier in his career, he spent 14 years at Mars, where he served in multiple finance leadership roles around the globe, among others, as the CFO of their pet care division. We really couldn't be more excited for Fabien to join us and help us write the next chapter for HelloFresh. At this stage, I also want to extend my gratitude and appreciation to Christian, who served as HelloFresh CFO for the past 10 years and has been instrumental in the growth of the company from about EUR 300 million in revenues when he joined to just shy of EUR 7 billion in revenues in 2025, while turning the business sustainably profitable. Christian's last day will be tomorrow. All the best, Christian, for your future endeavors. With that, let's turn to the highlights for our most recent Q3 quarter now. We observed a stable revenue trend in Q3 versus prior quarters, a decline of about 9% in constant currency, driven by a double-digit decline in orders, somewhat offset by a 4% increase in AOV. In meal kits, we saw a continuation of the trends previously seen, a sequential deceleration of revenue decline for the third quarter in a row with September exit rates showing further momentum. A similarly encouraging trend in RTE, where we saw September exit rates at better levels than in July and August, and we expect both of these trends to continue into Q4. Q3 adjusted EBITDA came in at EUR 40.3 million with the typical seasonality driven by marketing investment and ramp-up costs for our product launches in meal kits and RTE. Despite headwinds from FX rates and mix, we maintained a double-digit adjusted EBITDA margin in our seasonally weakest quarter in meal kits with both North America and also now International improving year-over-year. While Q3 net revenue performance in RTE suffered from lower order rates and customer retention seen in our H1 cohorts, we have turned a corner on many leading indicators, which are up sharply versus the lows seen in H1 this year. Similarly, we continue to be on track with our EUR 300 million efficiency program with about 70% of initiatives implemented, up from about 50% by the end of Q2. Free cash flow before leases has also been on a strong upward trajectory. Year-to-date, we have improved this metric by over EUR 140 million with 9-month year-to-date free cash flow at EUR 170.4 million. In previous interactions, we emphasized two priorities for 2025, delivering our EUR 300 million efficiency program and reinvesting into the product to materially improve the customer experience. These two priorities, efficiency and product reinvestment are not isolated efforts, they are interconnected and deliberately sequenced. Let me give you an update where we stand on both of them. With regard to our efficiency program, we continue to make meaningful progress. By the end of September, we had implemented about 70% of the entire program with the remainder to come in the next quarters. As a result, we are on track to implement about 80% of our efficiency program projects by year-end. Based on current run rate and the tight governance we have wrapped around the program, we feel confident that we will achieve the original EUR 300 million cost savings target or outperform it. The majority of these tailwinds will still work their full effect through the P&L and balance sheet in the coming quarters, given the lagged P&L effect of things like site closures, notice periods or software renewals. Crucially, though, the majority of these actions are permanent. They structurally lower our fixed cost base and improve margins on every order shipped in 2026 and beyond. Despite lower order volumes and significant product reinvestment undertakings year-to-date, these efforts resulted in structurally improved profit contribution margins, lower indirect costs and a leaner, faster organization already. The results are clearly visible. Free cash flow year-to-date is up 4x year-over-year and free cash flow per share is up over 5x year-over-year due to the additional reduction of shares outstanding given the ongoing share buyback program. We are now starting to put that foundation to work via the ReFresh strategy that I introduced in the last call. The flywheel is clear. Cost discipline funds product innovation, a great product drives retention and lifetime value, and improved retention unlocks profitable growth at scale. In Q3, we embarked on our most significant investments to date in the U.S.; in August for HelloFresh and in September for Factor. In meal kits specifically, we expanded to over 100 weekly options on the menu, up from about 60 at the beginning of the year and focused our menu expansion primarily on featuring new cuisines, additional ingredient varieties and many new never-before featured SKUs. We also invested in larger portion sizes and have upgraded the quality and aesthetics of our packaging, keeping our ingredients fresher for longer. The response has been really positive, especially among our most loyal and also lapsed customers who are typically at the highest risk of becoming bored or feeling too much sameness week-over-week in a limited options menu. Sentiment on both social media and across our internal customer satisfaction metrics has been great, and gives us confidence that this is the way to improve long-term customer happiness, retention and ultimately customer lifetime values. Our efforts to acquire fewer but higher-quality customers, combined with the recently launched ReFresh strategy have shown encouraging results across our active customer base year-to-date. Since embarking on our strategic pivot 12 months ago, we have improved average order rates materially versus 2023 and also in 2025 over the 2024 average. And we expect additional improvements on the back of the product investments we have launched in August going forward. This now starts to translate into a recovery of meal kit revenue, which we improved for the third quarter in a row in Q3, as you can see on the right-hand side of the page but even more forcefully when looking at September only, that's the very right-hand bar chart on that right-hand chart. We expect this trend to continue into Q4. Now let's turn to our RTE product group. As indicated in the last earnings call for Q2, we've been hard at work to overcome the temporary operational setbacks we had seen earlier in the year. I'm happy to report that we've made strong progress on many dimensions. We have reworked a lot of our food manufacturing process path. And as a result, we've been able to revert the majority of our meal catalog back to optimal reheat times. We will continue to work through the remainder of the catalog in Q4. We have also instituted and operationalized strict lab testing protocols for all of the new meals coming to our meal catalog. Consequently, we've been able to restore the week-over-week meal variety and menu retention in the earlier parts of Q3 as a first step. Based on this much better customer experience and more robust food manufacturing processes in place, we have then started to improve our meals and menus considerably from September onwards. This is what we call the Factor ReFresh. Since early September, Factor U.S. customers now have over 100 weekly meal options on the menu, up from 40 options in the start of the year. We dedicated additional meals to increase the depth of our GLP-1 range, and we now feature more than 3x the number of seafood meals versus prior periods. The menu expansion is supported by quality investments such as overall larger portion sizes and vegetable quantities as well as higher chicken quality and beef SKUs. We've also opened up additional regional zones for weekend deliveries, giving customers more choice around preferred delivery days and shortening the time from order to delivery of their meals. We've also launched a 4-meal plan to customers. This has been one of the most requested features and directly addresses the customer feedback that they feel overwhelmed by the minimum quantity of six meals per week that we previously had. We won't stop here though. In Q4, we will further continue to expand our menu by an additional 20% with a focus on a new salad range that we developed with a partner, introducing a new ready-to-eat format that does not require reheating per se. For the remainder of Q4, we have also slotted the launch of a number of new, never-before featured premium proteins such as veal sausage and short rib, which have tested really well in customer panels to date. Within the much expanded menu, we will make it easier for customers to navigate the whole menu by rolling out an AI meal recommendation engine that continuously learns which meals customers like best and are most suited to their preferences. With all these things we have implemented on those which are just around the corner, we continue to make big progress on step changing the customer experience. These efforts to date have already shown strong improvements in all of the leading indicators we track. The Net Promoter Score of new customers has trended up sharply since we fixed a lot of the operational issues in Q2 and early Q3. You can really see the sharp drop in Q1 and early Q2 and the continuous climb up since then on the left-hand chart on this page. In September, Net Promoter Score of new customers has been up by 18 points compared to the low point of the year observed in April. The predicted average order rate for new customers has similarly trended up by 12% in September since the lows observed in April and is now back above the historical averages. Finally, projected customer lifetime value has also improved in line with the improvements in AOR, although at a slightly smaller pace than AOR, given the associated extra costs we have absorbed in our margin while fixing all the operational issues throughout Q2 and Q3. While we are confident that we've taken decisive action and can see the success of these actions across all leading indicators, the Q3 output metrics such as revenue and our EBITDA were still heavily impacted by the performance of customer groups we had acquired in H1. You can see the lower order rates of these cohorts in the chart in the middle of this page and extrapolate how those lower order rates from 6 months ago had a compounding negative effect on Q3 orders. The trends for both revenue and margin did, however, improve over the course of the quarter with September marking the best month on revenue, and we feel confident that we can sustain the overarching trend into Q4 now. In summary, we fixed a lot of the customer-facing problems and the customer experience is back in a place where we feel confident starting to invest behind the brand again. Let's now take a look at our KPIs for the last quarter one by one, starting with orders. We've seen group orders at the same rate as we had in H1, down by about 13% year-over-year. In terms of product category, meal kits improved sequentially for the third quarter in a row. RTE worsened sequentially. As explained moments ago, this was primarily due to the low average order rate of new customers acquired during the first half of the year when we faced headwinds from all the food manufacturing-related changes, which drove down the customer satisfaction and early customer retention. Group AOV continued to increase year-over-year by about 4%, driven by our loyal customer base in meal kits who make up a larger portion of the customer base and the strong improvement to the value proposition we have delivered. Both geographic segments actually increased by about 5% like-for-like, but mix effects and adverse FX rates led to a 4% group AOV increase. Specifically, we benefited from customers taking larger baskets in Q3 versus the same period last year, lower incentives given the maturing customer base and selected price increases towards the end of the quarter. Taken together, the decline in orders and the increase in AOV drove a 9% year-over-year revenue decline in Q3, a marginal sequential improvement for the group. Geographically, North America revenues declined by 13% year-over-year, while International net revenues saw a 1.5% year-over-year decline. More interestingly, by product group, net revenues decelerated to a decline of 12% year-over-year, a third straight quarter of improvement. And again, we expect this trend to show up even more forcefully in Q4 for meal kits. For RTE, we saw revenue decline by about 5% year-over-year in constant currency, a result of the lower order numbers from the customers acquired 6 months ago. This was worse sequentially versus Q2. But as our leading indicators have improved sharply versus the lows in H1, we expect a clear reversal of that trend for Q4. Finally, we continue to grow our other segment by 44% year-over-year, while containing the adjusted EBITDA losses for that segment to the same level year-to-date than what we saw in 2024 and despite lapping much larger comparables. With that, I'd like to hand over to Fabien to go through the cost side of the business and update you on our free cash flow, share buyback program and guidance. Thank you. Fabien Simon: Thank you, Dominik. I'm very pleased to be here today presenting our Q3 results for the first time since joining HelloFresh a little over a month ago. We are at a pivoting time for HelloFresh. So I'm looking forward to joining Dominik and the rest of the team and to leveraging my previous experience to help HelloFresh successfully navigate this reset phase and beyond. Over the last month, I have already met some of you in the analyst and investor community, but I will, of course, be available after this quarter to discuss HelloFresh further. Let's now turn to Page 15 to discuss our contribution margin for the quarter. In Q3, the contribution margin came out at 24.5% of revenue, excluding impairments and share-based compensation. This is a touch better as a percentage of revenue than the same quarter last year. Although down in absolute terms, I would qualify it as encouraging, especially in the context of the volume decline, product reinvestment, residual operational issues in ready-to-eat and finally, some increasing complexity that comes from the step-up in our menu choice and personalization. The slight increase as a percentage of revenue had been possible, thanks to the efficiency program, which had been initiated by management. And that is on track to deliver what had been communicated earlier this year. If we look at it from a geographic lens, both North America and International have shown a degree of expansion in their contribution margin, which I understand is the first time in quite some quarter now where both improved at the same time. For the group, we remain on track to deliver the promised improvement of 100 basis points of contribution margin for full year 2025. On the next page, we show the evolution of our marketing spend for the third quarter of the year. With a marketing investment intensity around 20% of net revenue, the business is well invested. This percentage is slightly up versus the H1 trend, which is explained by the back-to-school seasonality, a moment when it makes sense to acquire customers when families are grappling with returning to a post-summer routine. Overall, the absolute amount spend reduced by about EUR 25 million in the quarter. But because it reduced less year-on-year than the revenue decline, the percentage increased versus last year. I think this is a result of the strategy shared over the last few quarters to acquire less but higher quality customers with better product offering while pursuing a higher marketing ROI. This is noticeable on the meal kit P&L, where we continue to see a step down in marketing spend in both absolute and percentage of sales. Yet there's still a meaningful amount invested, which was leveraged to target existing and prospect customers on our Hello ReFresh product upgrade. For ready-to-eat, as it was discussed during the previous Capital Market Day, we are continuing to invest in brand equity building for Factor and the other RTE brands in order to support long-term quality growth where we note increase in awareness from the uninterrupted investment. You can see the development of our adjusted EBITDA for the quarter as well as year-to-date on this page. Overall, the adjusted EBITDA went down by EUR 32 million in the quarter, which is in large majority driven by ready-to-eat, where we continued to invest in brand equity and products as shared just before. This is visible here on both product category level and as well at a geographic level in North America. On the positive side, you can note a stable absolute profitability in meal kit despite the tailwinds we referred earlier. And we managed to increase the adjusted EBITDA margin this quarter versus the same quarter a year ago. Similarly, the International side of the group kept the same adjusted EBITDA margin in Q3 than last year with a contribution margin almost stable in absolute terms. So again, besides the adjusted EBITDA setback in ready-to-eat, the overall profitability dynamic in the quarter and in year-to-date has been positively supported by the efficiency reset program as well as a targeted attempt to be diligent in our marketing spend. On to the next page now to review our free cash flow performance. So far, the free cash flow is presented excluding repayment of the lease liabilities, but expect it to be presented after those repayments going forward as it is, in my view, the true reflection of the cash flow generated from which we strategically decide to allocate capital. So with or without the repayment of this lease liability, there's a meaningful progress on free cash flow year-to-date by EUR 140 million on the existing definitions. This makes us on track to meet the guidance of more than doubling the free cash flow from last year. I think it's probably a good time to update on the share buyback program. In the first 9 months of the year, we repurchased a total of 11.1 million shares for a total value of EUR 97.6 million. 6.2 million shares were canceled in July, and a further 7.9 million shares are currently in the process of being canceled. So accounting for the impact of our share buyback program, the free cash flow before repayment of lease liabilities per diluted share in the first 9 months of the year was EUR 1.03 compared to EUR 0.18 for the comparative period in 2024. Looking now at the guidance. So with the benefits of 3 quarters of trading behind us, we can first confirm the latest commitment and as well take the opportunity to guide towards the most likely range. So first on top line. For Q4, as preempted in the previous slide, we are seeing sequential improvements for both ready-to-eat and meal kit in constant currency. Of course, we have to be mindful that a month does not make a quarter, but assuming that the current trend persists, meal kits are likely to post a high single-digit decline in Q4 from what had been so far a double-digit decline. Ready-to-eat should also see an improvement. However, with a slight delay in the recovery that we saw in Q3, the growth will likely remain negative in Q4 on a constant currency basis. So with that in mind and somewhat dependent on the path of the recovery of RTE in the next couple of weeks, we would likely be at a mid- to high single-digit decline level in Q4 in constant currency. Which means that for the year, we are trending towards the bottom end of the latest constant currency growth guidance, so at around minus 8%. On the bottom line, for Q3 adjusted EBITDA, we should expect a similar level than last year in absolute euro terms. So extrapolating that for the full year, we should trend towards the bottom half of the latest adjusted EBITDA range of EUR 415 million to EUR 465 million. Thank you. And with that, I'll hand over to the operator for the Q&A sessions. Operator: [Operator Instructions] The first question is from Joseph Barnet-Lamb, UBS. Joseph Barnet-Lamb: So in the deck, you show us on Slide 7 that meal kits only declined high single-digit constant currency in September, which is obviously incredibly encouraging. It's also a big customer acquisition month. So I guess there are two things related to that. Firstly, in order to obtain this performance, I assume you marketed harder. Can you just talk about the phasing of marketing within that quarter a little bit? And also what CAC looked like in September given the heightened spend? And secondly, related to it, I appreciate the month hasn't quite ended, but any indication you can give us on October would be helpful. I mean you've sort of given us some indication with regard to your guidance for Q4, but is it fair to assume that October has followed a similar path to September as well? Dominik Richter: Thanks for your question. Let me take that and give Fabien some time to settle into our Q&A session here. So high level, I think it doesn't make sense to kind of like comment on every single month. I think for Q4, we definitely feel very confident that we'll see a recovery -- a further recovery in meal kits revenues as Fabien just laid out. Month-over-month, I think you will also see that these trends continue that we've seen in September. But overall, there's always like a lot of different holidays, other stuffs, et cetera, so that you shouldn't kind of like always just look at every single month. But I do think that the trends that we saw for Q3, both on RTE and on meal kits will definitely persist into Q4 and into the full Q4. Now with regard to the first part of your question around marketing intensity and CACs, we're definitely still in the phase where we are -- especially for meal kits, I think, holding back a lot of spend. We don't comment on CACs generally because we think CACs are just one part of the overall equation. So what we try to optimize for is that for the -- every marketing dollar that we invest that we get the best return. We don't necessarily always get that by investing at the lowest CAC. You don't get it by investing at the highest CAC. You need to look at the customers that you acquire, what's the quality of them and how do you think they will trend over the next couple of quarters as they pay back the marketing investment. So we always look at the equation end-to-end rather than at one single piece of it. But for sure, what we have seen is that the product -- the ReFresh launch in the U.S. has allowed us to first launch the product and then advertise it both on own channels and also on other advertising channels that we're in. But we haven't been massively, massively kind of like stepping up our investment levels, especially not compared to last year. Operator: And the next question is from Luke Holbrook, Morgan Stanley. Luke Holbrook: I just got a question again on the RTE side, just to try and understand some of the challenges that you're facing that you're expecting declines in Q4 from growth before. How much of this do you think is more [Technical Difficulty]. Can you kind of just give us a bit more color on how we think about the EBIT margin being a bit weaker, but also growth too? Just break that down for us. Dominik Richter: Look, we've had a hard time understanding your question. Maybe you can repeat. Luke Holbrook: I'm just trying to understand why some of the EBIT margin is weaker, but also the [Technical Difficulty] the RTE side. Is this attributable to more competition from community and others? Is this more from the macro conditions? Like what is that you have on why the revenues and EBIT margins are a little bit weaker on the [Technical Difficulty]. Dominik Richter: We continue to have a hard time understanding your question exactly. I picked up a couple of parts and maybe can try to answer what I inferred. So high level, we've reworked a lot of our meal catalog in RTE, right, with additional lab testing with a reformulation of a lot of the process path. We're throwing additional labor sort of like on some of those things to fix the customer experience first. This was our first order of priority, making sure that we fix the customer experience. And certainly, over the course of Q2 and also in Q3, we have definitely like carried some additional cost as a result of it. I think now that the customer experience is restored, we can see positive momentum on lot of the leading indicators. We'll be focused a lot on Q4 and into the next quarters to basically be better on the unit economics and kind of like drive efficiency as much as possible. I hope that was going in the direction as I inferred from what I could hear from your question. Luke Holbrook: And perhaps [Technical Difficulty] just clarification then on the financial side. There's a EUR 20 million cash out on the working capital side [Technical Difficulty] what that was in Q3? And does that unwind in Q4 as well? Fabien Simon: Luke, let me take this one. So I understood your question was related to the Q3 free cash flow. So in Q3, the free cash flow was negative, minus EUR 80 million comparing to EUR 44 million negative last year. So a difference of about EUR 36 million. But I will -- if you look at it, it's all coming from the difference in adjusted EBITDA, which was EUR 32 million. So you have EUR 1 million or EUR 2 million on working capital, EUR 1 million or EUR 2 million on CapEx. But I would say it's exactly the same dynamic. So I would not overread a quarter of free cash flow in this business given the inherent seasonality. What is more critical is the year-to-date. And I'm very pleased with the significant improvement. But even more interestingly, if you look at the free cash flow after lease repayments, this year, it turned positive. Last year, it was negative EUR 36 million year-to-date. Now it's positive, a bit more than EUR 75 million, which is extremely encouraging. And in Q3, the free cash flow landed to the level where the management anticipated it to be, given the seasonality. Operator: And the next question is from Nizla Naizer from Deutsche Bank. Fathima-Nizla Naizer: So my question is around the ready-to-eat business as well. Could you remind us -- so if Q4 is going to be a quarter of declines again, when could the segment again return to growth? Would that be a Q1 '26 story or further out in the year as you continue to invest in the product? Some color there would be great. And maybe connected to that, how do you think of the shape of the group's growth when you look at 2026? Any sort of targets that you already have in mind that you can share with us? Because if this is a transition year, would next year then be the year of recovery and growth again? Some color would be great. Dominik Richter: So we're very happy with what we've seen in the leading indicators in Q3 and how we have restored them from the lows in H1 in RTE. So we think this will definitely be a positive tailwind into Q4. Now are we going to land at flat? Are we going to land at slightly negative, et cetera? I think this is always like within sort of like the margin of error, but we're very confident that we'll see a sequential improvement in RTE. And then we're in the middle of planning for the next year. I think generally, if you think about the drivers of the business, I would expect that we have better order rates in the business next year than what we've seen this year. If you think back to the lows that we've seen in H1, I think we should be able to stabilize our conversion volume. And so I think overall, if I look at the whole picture, I see no reason why we shouldn't be able to grow in RTE next year, but we go through the detailed bottom-up business planning over the next couple of weeks. And in the course of reporting our full year results, we'll also share more about the shape that next year will take. Operator: And next, we have a follow-up from Joseph Barnet-Lamb with UBS. Joseph Barnet-Lamb: Given I've managed to get to the front of the queue again, I might ask a couple, if that's okay. So firstly, on contribution margin, you saw a 0.2 percentage point increase year-on-year in the quarter. In Q2, you saw a 1 percentage point improvement. You mentioned the temporary RTE food manufacturer fixes weighing on this. Do we expect this to continue weighing in 4Q? Is it something that's fixed in sort of one go? Or is it something that's fixed progressively? That would be question one. Question two, there was a USDA recall relating to Listeria. That was in early October, so it wouldn't have impacted 3Q. What was the impact of this, both from a top line and cost perspective? And then -- well, maybe I'll stop there. I've got more. Fabien Simon: So maybe I can take the second part of the question and giving time to Dominik to answer the first one. On the Listeria issue, yes, you have seen indeed the communications on an issue related to a third-party manufacturer. We have been taking very precautionary measures to immediately seize it. And actually, there has been some impact in our Q3 numbers because there has been some inventory write-off that we had at the end of Q3, we decided to book this quarter, which was at EUR 1.7 million. And we may expect a few credits to customers to come in this quarter, but it will be a negligible amount because the issue has been well contained. Dominik Richter: On the contribution margin overall, I mean, there's always sort of like, obviously, Q3 is a seasonally weak quarter. So we absorb sort of like more of the fixed costs in Q3. Generally, there were definitely sort of like some additional costs in reworking some of the RTE manufacturing processes. I think overall, if you look at the substance of our improvement plan, at the substance of our efficiency program, then I think there's quite a bit more that we can clip on the contribution margin side over the next quarters. What we also had in Q3 was the ramp-up. If you think about meal kits 60 to 100 meals in September for RTE then also towards 100 meal menu, this usually is in the first 2, 3, 4 weeks when we introduce it temporarily has somewhat higher costs. That's what we saw in meal kits that has settled back down after 3, 4 weeks when we had some more routine with those processes. So I think really structurally, if you look under the hood, I think a lot of the efficiency metrics are doing pretty well. And I would expect that this is not a sort of like a setback or that the sort of like improvements are now kind of like trending heavily backwards. But that actually the program that we have and a lot of the underlying efficiency metrics, if you net out like some of the one-off impacts that we had in Q3, that there is definitely still ample room to improve further. Joseph Barnet-Lamb: Really helpful. If I can squeeze one more in. At the Capital Markets Day, you indicated that retention was 6% better at 10 weeks and 8.4% better at 20 weeks for your post-pivot cohort. With substantially more data behind you, can you now comment what happens beyond 20 weeks? I certainly don't expect you to give us any specific numbers, but at sort of 30 weeks or 40 weeks, is retention more than 8.4% better than the pre-pivot or less or similar? Any color on that you can give would be amazing. Dominik Richter: So I don't have the exact numbers top of mind. I didn't bring them to this call. But I think what you tend to see is product investments have a particularly good impact on sort of like the outer parts of a cohort. This is really where it addresses sort of like some of the concerns that customers have when they say that the menu kind of like tastes too much the same after I have used it for a long time. These are the things that we're really addressing with a lot of the product reinvestment initiatives. And to date, a lot of the initiatives tested in isolation have shown exactly that impact. And what the aggregate impact of that is, I would have to look up. But generally, I think what we should expect that the bulk of the impact of a lot of our reinvestments comes in the outer quarters of a cohort. Operator: And as we have no further questions in the queue, I will hand back for closing remarks. Dominik Richter: Thank you all for attending our Q3 earnings call. I think when we think back to the start of the year and the plans and objectives that we've laid out back then, we feel very good about our efficiency program. We feel very good about a lot of the organizational and leadership changes that we've made. We feel definitely that the velocity of the organization increased materially. We are very much on track with our recovery plan in meal kits. But obviously, sort of like the curveball that we've had to deal with over the course of the year was around the RTE performance. Here, I think a lot of the leading indicators are pointing to the success of the efforts that we have initiated, but we'll need to work through this to kind of like get both business lines then eventually return to growth and provide sort of like the outcomes that we're all working towards. Thanks a lot for attending our call and speak to you in the new year, most likely. Thank you. Bye-bye.
Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the Glaukos Corporation's Third Quarter 2025 Financial Results Conference Call. Copies of the company's press release and quarterly summary document, both issued after the market closed today, are available at www.glaukos.com. [Operator Instructions] Please note, this call is being recorded, and an archived replay will be available online in the Investor Relations section at www.glaukos.com. I'll now turn the call over to Chris Lewis, Vice President of Investor Relations and Corporate Affairs. Christopher Lewis: Thank you, and good afternoon. Joining me today are Glaukos Chairman and CEO, Tom Burns; President and COO, Joe Gilliam; and CFO, Alex Thurman. Similar to prior quarters, the company has posted a document on its Investor Relations website under the Financials and Filings Quarterly Results section titled Quarterly Summary. This document is designed to be read by investors before the regularly scheduled quarterly conference call. [Operator Instructions] Please note that all statements other than statements of historical facts made on this call that address activities, events or developments we expect, believe or anticipate will or may occur in the future are forward-looking statements. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our sales, products, pipeline technologies and clinical trials, U.S. and international commercialization, market development efforts, product approvals, the efficacy of our current and future products, competitive market position, regulatory strategies and reimbursement for our products, financial condition and results of operations, as well as the expected impact of general macroeconomic conditions, including foreign currency fluctuations, on our business and operations. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward-looking statements. Please review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investors section of our website at www.glaukos.com. Finally, please note that during today's call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Glaukos' ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release available in the Investor Relations section of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos Chairman and CEO, Tom Burns. Thomas Burns: Okay. Thanks, Chris. Good afternoon to everyone and thank you all for joining us today. In addition to discussing our record third quarter results today, we're also excited to provide an update on Epioxa, our groundbreaking advancement in corneal cross-linking for the treatment of keratoconus, following the FDA approval that we announced last week. Let's first start with the record quarter. Today, Glaukos reported record third quarter consolidated net sales of $133.5 million, up 38% on a reported basis or 37% on a constant currency basis versus the year ago quarter. As a result of our strong performance, we are raising our full year 2025 net sales guidance range to $490 million to $495 million compared to $480 million to $486 million previously. Our third quarter record results reflect a sustained growth acceleration in our business, driven by growing iDose TR adoption and utilization, along with our broader Interventional Glaucoma, or IG, initiatives globally. Within our U.S. Glaucoma franchise, we delivered record third quarter net sales of $80.8 million on strong year-over-year growth of 57%, driven by growing contributions from iDose TR, which generated sales of approximately $40 million in the third quarter. iDose TR, a first of its kind intracameral procedural pharmaceutical designed to continuously deliver glaucoma drug therapy for up to 3 years, continues to build commercial momentum, supported by positive clinical outcomes and surgeon feedback that reaffirms our view that with the launch of iDose TR, we are pioneering a brand-new therapeutic category that has the potential to reshape glaucoma management as we know it today. Our teams continue to make great progress in the execution of our detailed launch plans for iDose TR, and we're encouraged with the continuing growing momentum. Moving on, our International Glaucoma franchise delivered net sales of $29.4 million on a year-over-year growth of 20% on a reported basis and 17% on a constant currency basis. This strong growth was once again broad-based as we continue to scale our international infrastructure and execute our plans to drive MIGS forward as the standard of care in each region and major market in the world. Last month, we were pleased to commence commercial launch activities for iStent infinite in our key European markets at the ESCRS Annual Meeting in Copenhagen. Surgeons' initial interest levels for iStent infinite were very high during the meeting, reaffirming our view that EU MDR certification for our iStent infinite will help us not only maintain and grow our presence in Europe, but also advance and accelerate our broader IG initiatives globally in the years to come. And finally, our Corneal Health franchise delivered net sales of $23.3 million on year-over-year growth of 13%, including Photrexa net sales of $20.3 million. As discussed previously, our third quarter results reflect the continued impact of Photrexa realized revenues as a result of our entry as a company into the Medicaid Drug Rebate Program or MDRP. Our record third quarter results reflect strong execution against our key strategic priorities and are a testament to our evolution into a more diversified ophthalmic leader with transformational growth drivers that span across multiple geographies and disease states as we advance the standard of care in glaucoma and rare disease with iDose TR and [indiscernible]. Beyond that, we continue to advance a robust pipeline that supports our long-term best-in-class growth potential while remaining disciplined in capital allocation, focusing on ROI-driven investments and operational efficiency. This quarter, we saw continued gross margin accretion and maintain a strong balance sheet with $278 million in cash and no debt. Now let's shift to our Corneal Health pipeline. As you know, last week, we were delighted to announce the FDA approval of Epioxa, a groundbreaking advancement in corneal cross-linking for the treatment of keratoconus, a rare sight-threatening disease that is currently far too often undiagnosed and untreated. This approval marks a significant milestone for Glaukos and ushers in a new standard of care for keratoconus patients and practitioners with the first and only FDA-approved topical drug therapy that does not require removal of the corneal epithelium, the outermost layer of the front of the eye. As a reminder, Epioxa utilizes a proprietary combination of an oxygen-enriched novel therapeutic that is bioactivated by UV light in an incision-free procedure. This is a result of more than a decade of research focused on slowing or halting the progression of keratoconus while significantly improving patient comfort and minimizing recovery time to provide a new way forward for patients afflicted with this sight-threatening rare disease. The FDA approval is based on results from 2 prospective multicenter, double-masked Phase III pivotal trials that randomized a total of over 400 patients. Both trials successfully achieved their prespecified primary efficacy endpoints and demonstrated favorable tolerability and safety profiles. Keratoconus is a debilitating eye condition characterized by progressive thinning and weakening of the cornea that is often most aggressively advancing in patients under the age of 30. If left untreated, it can lead to loss of visual function and even blindness, and is one of the leading causes of corneal transplants in the United States. Approximately 90% of cases of keratoconus are bilateral and as many as 20% of untreated keratoconus patients ultimately require a corneal transplant. Conventional keratoconus treatments such as eyeglasses or contact lenses address visual symptoms only and do not slow or halt underlying disease progression. Before we discuss our plans for Epioxa, it's important to understand the historical journey of Photrexa, our first-generation cross-linking therapy that unlike Epioxa requires the removal of the corneal epithelium. The FDA approval of Photrexa as an orphan drug was a major breakthrough back in 2016 as it became the first and only FDA-approved pharmaceutical therapy shown to slow or halt keratoconus progression. Following our nearly $0.5 billion acquisition of Avedro in 2019, we have subsequently deployed several hundred million dollars in commercial and R&D investments to grow our Corneal Health franchise, driving new clinical trials, expanding our sales force and commercial reach, strengthening market access capabilities, and enhancing patient education and support programs. These efforts have successfully resulted in Photrexa becoming the standard of care as excellent real-world outcomes have helped preserve visions for tens of thousands of patients. While our disciplined commercial execution has delivered meaningful progress and our investments have made real impact on patients' lives over the past 6 years, the unfortunate reality is that the access to proper care still remains far too limited, evidenced by the fact that we are still only treating about 10,000 patients annually with Photrexa today. We estimate fewer than 1 in 5 actively diagnosed unstable keratoconus patients are getting access to Photrexa today, and many more are never diagnosed at all, an unacceptable reality for patients that we must change moving forward. To make matters worse, only 13% of treated patients are under the age of 18, which is when many patients are most vulnerable to significant disease progression and vision loss. Further, given the invasive nature and extended recovery associated with the current Photrexa procedure, many patients elect to delay or defer treatment. We estimate that as many as 40% of confirmed cases delay or decline Photrexa therapy, including procedures involving treated patients second time. This is simply not good enough for patients, and we are determined to do better for this rare disease community. Like other rare diseases, we believe there are several key factors contributing to why keratoconus remains too often undiagnosed and untreated today, including: 1, lack of awareness and under diagnosis; 2, misdiagnosis and a focus on managing symptoms rather than proactively treating the underlying disease; and 3, a burdensome and lengthy patient journey marked with reimbursement hurdles and fragmented care pathways. The FDA approval of Epioxa marks a pivotal moment, introducing the first incision-free treatment for keratoconus and offering a groundbreaking new therapy for patients. Just as important, it gives us the opportunity to reset and redefine our go-to market approach to better address this sight-threatening disease and truly expand patient access. With this approval, we plan to substantially increase our investments in patient awareness and access while addressing the longstanding challenges of underdiagnosed and under-treatment that have affected this rare disease community. Our new approach includes significantly enhanced awareness, education and detection campaigns, driven by increased engagements with the optometric community to establish KC detection centers, the development of a handheld KC screening device and expanded advocacy partnerships alongside new patient education efforts to identify and reach patients earlier. To ensure patients move seamlessly from awareness to clinical diagnosis and treatment efficiently, we will establish a network of engaged ODs and MDs and committed Epioxa sites of care that maintain the sense of urgency that these vulnerable patients deserve. In parallel, we will launch comprehensive patient services and support programs through our patient access liaison teams to streamline care coordination, demystify the insurance approval process and advance covered decisions where possible. These efforts are designed to support patients and families at every stage from awareness and diagnosis through ongoing treatment, making the entire journey as seamless, efficient and patient-friendly as possible. This approval is a culmination of unrelenting research, development and clinical efforts, and I want to thank our dedicated employees who have put in countless hours to make this approval a reality. We are also deeply grateful to the clinical investigators and participants in clinical trials who played instrumental roles in bringing Epioxa to the United States. Despite being a relatively young company, Glaukos has invested over $1 billion in R&D over the years to develop a robust pipeline focused on chronic and rare ophthalmic diseases. Our continued investment in R&D remains best-in-class, underscoring our commitment to going first and advancing the standard of care for ophthalmic patients worldwide into the future. We also just broke ground on a new 200,000 square foot research development and manufacturing facility in Huntsville, Alabama to support long-term growth and innovation, including the eventual production of Epioxa. As we hope you can see from our comments today, we are very excited by the significant potential Epioxa offers to patients living with keratoconus and believe it will deliver an exceptional value to patients, providers and the health care system. We've had several meaningful and informative conversations with key members of the physician and patient advocacy communities regarding this value in relation to pricing. Our approach for Epioxa reflects our commitment to responsible innovation, balancing clinical value, cost effectiveness and patient access. These principles help inform our pricing decision, which also reflects the significant investments we've made thus far and those we plan to make going forward for this rare disease. After several years of thorough and thoughtful evaluation based on these factors and supported by a robust set of internal pharmacoeconomic and published health economic analysis, we have established a wholesale acquisition cost for Epioxa of $78,500, which represents a significantly lower price versus nearly all other rare disease drugs, including those within ophthalmology. This is particularly true when you consider that Epioxa is unique as a single administration therapy that is capable of slowing or halting disease progression in the vast majority of patients that are diagnosed with this sight-threatening disease. We believe this not only provides a compelling value proposition for physicians and payers, but most importantly enables us to make a fundamentally different investment in patient and provider education and awareness to enable more patients over time to be properly diagnosed and treated at a younger age to preserve their needless loss of vision. Going forward, we anticipate Epioxa will be commercially available in the first quarter of 2026 under a miscellaneous J-code with a permanent J-code established by July 2026. As with all pharmaceutical launches, initial patient access will be gated by our site of care network deployment, and typical payer adoption headwinds and hurdles. But we're investing in the infrastructure, teams and processes necessary to get Epioxa to as many patients as soon as possible in 2026 and beyond. Given the significant advancement Epioxa represents in our commitment to ensuring patients gain access to state-of-the-art incision-free treatment for this rare debilitating disease, we made the decision to discontinue Photrexa commercial availability following a stage transition process in 2026. This transition will prioritize Epioxa as the primary treatment option, reflecting its safety, efficacy and superior patient experience. Photrexa will remain temporarily available for patients unable to access Epioxa due to coverage or geographic limitations. And we will transition all remaining patients through dedicated support programs designed to minimize disruption and ensure continuity of care. As we've discussed, with the launch of Epioxa, a critical focus of ours is to improve patient access to this sight-saving keratoconus treatment. With that in mind, in addition to our new awareness campaign and patient support programs discussed earlier, we will also deploy a new financial co-pay assistance program for eligible patients and intend to have a comprehensive specialty pharma option available for customers at launch. Our cross-functional teams have been hard at work putting these methodical plans together for several years now, and we are ready and excited to commence execution and make a difference in the lives of these keratoconus patients. The enthusiasm and energy for this new therapy and launch is palpable throughout our organization. In summary, Epioxa represents not just a breakthrough in science, but a breakthrough in how we deliver on our promise to provide the best possible care to patients. Epioxa is more than a product. It's a reset moment and new way forward for keratoconus care. We're proud to lead the way once again in forging a new path to drive expanded patient access and enhanced treatment standards. Finally, as discussed earlier, we are raising our 2025 revenue guidance to $490 million to $495 million versus $480 million to $486 million previously to reflect our third quarter outperformance and continued underlying momentum. We are also introducing a highly preliminary 2026 revenue guidance range of $600 million to $620 million. This preliminary outlook factors in our expectations as it relates to the continued commercial rollout for iDose TR, the surgical MIGS landscape, our International Glaucoma franchise as well as our Corneal Health franchise as we launch Epioxa and transition from Photrexa. We expect to refine this guidance range and provide additional commentary during our fourth quarter 2025 earnings call expected to be held in February 2026. In conclusion, our record quarter highlights the strength of our strategy and execution as we continue evolving into a diversified ophthalmic leader with multiple growth drivers. iDose TR is already driving meaningful growth today, and we expect Epioxa will begin to contribute in 2026 and beyond as our patient-oriented initiatives take hold. Combined with our robust pipeline that spans glaucoma, rare disease and retina in particular, along with our disciplined investment and strong balance sheet, we're well positioned to sustain our growth momentum and advance our mission to transform vision therapies for the benefit of patients worldwide. So with that, I'll open the call for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Tom Stephan from Stifel. Thomas Stephan: I'll start off with iDose, and I wanted to ask about the CAC meeting. Tom or Joe, maybe if you can discuss just the impetus or the rationale of the CAC, maybe from what you've gathered in conversations with the MACs? And then maybe more importantly, talk to us about sort of what your views are on the potential outcomes here. Joseph Gilliam: Sure. Tom, it's Joe. I'll start off. And as always, Tom can also add in any comments at the end here. I'd say that from a rationale perspective and maybe how we're viewing it from a macro standpoint is that we see this really as a step in the process of educating these MACs and really educating them all on, #1, the significant unmet need that iDose meets for glaucoma patients, as you all know; 2 and as importantly, the robust FDA and peer-reviewed Level 1 data evidence that supports its proper utilization in the care continuum; and 3, ultimately really establishing the patient access that our glaucoma patients and physicians deserve around the product. And clearly, if you think about this moving forward, you can make arguments both ways. And we've seen some of that play out, obviously, in the early commentary from the investor community. But in general, we're pretty confident that the considerable data behind iDose as an FDA-approved pharmaceutical, more high-quality evidence has been generated to support this pharmaceutical than virtually all of the glaucoma device solutions combined, including in at least 15 peer-reviewed publications, all that support and supported the FDA approval and the label that is, when you look at it, largely consistent with other pharmaceutical therapies in glaucoma. So I think there's a handful of different paths that can emerge as we go forward. But I think what's most important is that for these MACs, they're taking a step to make sure they understand and are educated on what we already know, which is that iDose is a game-changing solution with a lot of evidence and data behind it to change the treatment paradigm associated with the glaucoma patients here in the United States. So from that standpoint, we look forward to having that engagement and from them moving forward from a more educated basis to adjudicate the claims that come their way. Thomas Burns: I'll just add, if I can, Joe, let's talk about some of the data that we already have in hand. So we've got 2 Phase III clinical trials, which you're all aware of, to establish the NDA submission and PMA approval of over 1,000 patients that are validating the use of iDose in standalone glaucoma patients. And then more importantly, I think we've been prescient also as well as conducting a single-arm prospective study in combination with cataract surgery, which showed demonstrably powerful decreases in intraocular pressure, 11.3 millimeters from pretreatment means. We're conducting a prospective Level 1 study of iDose in combination with cataract versus cataract surgery alone. And we're also -- I think we were smart in also conducting a study that we're in the process of enrolling today, which is iDose in combination with iStent infinite versus iStent infinite alone. And so we expect those studies will validate what we expect to see, which is incremental and cumulative advantage of using these different products, all of which should be conscribed and used under the current label that we provided. Thomas Stephan: Really appreciate that color. And then my follow-up is just on Epioxa and congrats on approval. Maybe a quick 2-parter. Can you just elaborate a bit on sort of your confidence in executing with this level of pricing just in terms of payer coverage and reimbursement? And then how should we be thinking about 2026 for Corneal Health, just as we consider the moving parts with Epioxa ramping as well as Photrexa transitioning off? Joseph Gilliam: Sure. Thanks, Tom. I think as it relates to the coverage and continued access to -- or gaining access for Epioxa patients, I think like everything else, that's a process where there's education at the payer level around the benefits associated with this therapy and the real cost associated with the continued progression of the disease. And ultimately, as you heard Tom mentioned, the -- too often these patients proceeding towards corneal transplants and other outcomes, let alone the continued impact from the visual impact that keratoconus has on many of these patients. So I think we'll engage in that process as we go through it. We're confident, obviously, that we be able to get a best-in-class solution that works well for the patients afflicted with keratoconus. And so we look forward to engaging those conversations with the payer community. As it relates to 2026, part of the reason why we decided to give the preliminary guidance for the year is to make sure that that was factored in at a macro level into the guidance and our expectations. You heard Tom mention some of these, but as you think about Epioxa rolling out over the course of the year, we have work to do to obviously establish the site of care network, the drug availability itself timing in the first quarter, the reality of having a miscellaneous code throughout the first half of the year, the process of payers just updating their systems for the J-code in the second half of the year, and alongside of that customers updating their contracts and generally, what I'll call is the slow and methodical process of establishing proper payer coverage and patient access for any rare disease, Epioxa will be not dissimilar. So this is certainly one where we're expecting in the context of the way we think about the 2026 impact that we will come out of the gate crawling before we walk before we jog as we exit 2026. Operator: Your next question comes from the line of Adam Maeder from Piper Sandler. Adam Maeder: Congrats on the great quarter. Maybe just kind of piggybacking [Technical Difficulty] the preliminary [Technical Difficulty] $600 million to $620 million for next year. That's a little bit above consensus at the midpoint and companies don't typically guide [Technical Difficulty] to do so. And as we think about the different components of that revenue range [Technical Difficulty] versus [Technical Difficulty] each of those segments. And even if it's just as simple as should each of the different segments grow next year, that would be helpful. Joseph Gilliam: So Adam, you were breaking up pretty substantially, but aren't throughout that. I believe that you were asking for more context or color around the guidance range of 2026 of $600 million to $620 million and probably pushing a bit for a bit more granularity around the constituent parts of that. So assuming that I'm correct on that, I'll give you that answer which is good. I think as I mentioned before, we felt like it was prudent with what we're announcing in terms of the Epioxa approval, some of what Tom announced today to make sure that we establish what I'll call is a highly preliminary view of 2026 and to really anchor ourselves around what we think entering into the year where we're at here in October. Our goal and our plan would be to provide more granular views by franchise during the fourth quarter call. But what I can say from a macro standpoint is we feel confident in this early range and that a variety of paths through each of the franchises, if you will, U.S. Glaucoma, International Glaucoma and certainly the Corneal Health franchise, will enable us to meet the expectations of that $600 million to $620 million range that we've established. Adam Maeder: I wanted to ask for just a little bit more color around the iDose performance in the quarter, really good number there. Did [Technical Difficulty] that MAC that onboarded in early August? Just any color on how iDose is ramping as we head into Q4. And the second part of the question is really just around the utilization and kind of which patients are getting iDose? Is this being done totally in the standalone setting? How much is coming from combination with cataract? How much is with a second mg? Joseph Gilliam: Yes. Again, you're breaking out a little bit, but I think the question was largely around the iDose performance dynamics associated with that in the quarter and then a little bit more granularity on the breakdown of standalone versus combo cataract utilization. So obviously, we announced in the quarter approximately $40 million of sales for iDose, a very nice step-up from where we've been running in the second quarter coming into the third. That, I can say, was broad-based in terms of what drove it. All of the MAC regions, if you will, contributed to that growth as did growing early commercial and MedVantage utilization was a part of that. We saw new doctors picking up. We saw some who had maybe been a part of early trying and trialing now having maybe received their payments from 2024 starting to get back into providing high dose of the therapeutic option for their patients. So it was really high quality. And I would say in terms of some of the contributions from -- I couldn't hear you, but NGS obviously came online in August. Very early positive signs there. But realistically, the quarter itself looked very much like in terms of its mix, what we've seen in the second quarter, where about 80% of the overall volumes were in the more established MAC regions, if you will, of Noridian, Novitas and First Coast. So the growth balance was across the board, but the weighting was still towards the more established regions in the country, which is not a huge surprise at this point. With that NGS announcement, you wouldn't really expect to start seeing the impact of that until at best kind of the later part of this quarter and really as you start moving into next year. As it relates to the mix on the standalone versus combo cataract, as you know, that's not something we directly track. We obviously are providing iDose TR for the benefit of patients afflicted with glaucoma and how surgeons utilize that in the combination with anything else, including as a part of a combination cataract procedure, is not something that we know when it goes out the door. Anecdotally, we know that those areas that have a little bit more established track record of reimbursement and professional fees that the rate of utilization in combo cataract surgery is growing. That makes sense. Obviously, that's meeting the surgeon many times where they're already at, which is treating the cataract and trying to take care of the glaucoma disease in parallel. So we are seeing some growth in that in terms of the anecdotally of the overall mix, but it's largely in those regions where you have more established reimbursement than some of the other MACs where we're a little bit further behind. Operator: Your next question comes from the line of Larry Biegelsen from Wells Fargo. Larry Biegelsen: I guess, Joe, I wanted to start with Epioxa. What -- for those of us who have followed this a long time, know that when Photrexa -- when Avedro came out with the $3,000 or so ASP, there was some pushback. So you're obviously moving a lot higher here. So what data are you going to use with payers that gives you the confidence that commercial payers will cover it? And how are you thinking about the growth in the 10,000 patients, I think you said earlier treated per year with Photrexa today over time? Do you expect to grow that? Or could you actually lose some patients to off-label corneal cross-linking treatments? And I have one follow-up. Joseph Gilliam: Sure. I'll start, Larry, and then others can comment as we go forward here. But for Epioxa, I think that first and foremost, and obviously the reset moment as you heard Tom talk about, this is an education process. Just like you'll recall, to your point, having been around with Avedro back in the day as they first reimbursement around keratoconus itself with Photrexa is to remind the constituents that are out there, including the payer community, that this is a rare disease that by definition, you referenced it yourself when you're talking about 10,000 patients being treated. In fact, that's a uber-rare disease and pretty consistent with the type of treatment numbers as we understand it from indications or for other rare disease therapies in ophthalmology such as oxybate or Tepezza for thyroid eye disease. So when you compare from a payer perspective, the relative value of a single procedure that can slow or halt the disease progression of a condition like this, and you think about that patient population and the cost of the wholesale acquisition cost that Tom talked about, I think you're going to find that it compares pretty favorably to the broader rare disease landscape, including that within ophthalmology. I think more broadly than that, the conversation is one of education around what it takes to make sure that you're responsibly innovating in a category like this for rare disease and then what you have to do to drive meaningful change in awareness, in diagnosis, in detection and in patient access, as you heard Tom talk about. This is a different way of looking at the situation, but one that we had to look inwardly and ask ourselves, what do we have to do to meaningfully change the outcomes that we're seeing in terms of too many patients not getting access to a sight-threatening therapy in the form of Photrexa. As we move forward with Epioxa, that's exactly what we're committed to do. Now you asked about the 10,000 patients. I have no doubt that in the early days as you're working your way through the inevitable payer hurdles and the various things you have to do to drive education and get access through each individual payer that we'll face some headwinds there. But clearly, as we move forward, the whole reason for what we're doing is to meaningfully expand that number. And you heard Tom reference that we today believe we're treating 1 in every 5 patients who have uncontrolled or unstable keratoconus with Photrexa today. And so I hope that in the coming years, we'll put a meaningful dent in getting to what was, by definition, an uber-rare disease with 10,000 patients to what would be merely considered a rare disease in the 50,000 patient range. And that's something that we'll be hard at work at, but it's not something that's going to be turned on overnight in 2026 for sure. But it's the reason because each one of those patients deserve to get access to an FDA-approved incision-free topical therapy that can arrest or certainly dramatically slow the progression of that disease. Larry Biegelsen: That's helpful. I guess just for my follow-up, it truly is related. I guess I'm just thinking ahead as many people probably are '27, '28, '29 at $78,000 and 10,000 patients, and I assume 90% done bilaterally, the numbers get pretty big. Is there anything else? I mean, could you be doing 20,000 eyes in 2027, Joe? And should we be using an ASP of $78,000? Help us frame that beyond '26 for hopefully obvious reasons, these are big numbers. Joseph Gilliam: Yes. Well, first, I think you have to do a blended average over time. I wouldn't do $78,500 in your long-term models. Obviously, we are a member of the Medicaid rebate program. We do provide that discounting for that patient population as a part of this. So when you think about a blended WACC, and we'll talk more about that as we actually get into making that drug available. I'm certainly -- I think we went far enough in terms of providing our preliminary views on 2026. I'm not going to go that far as you'd like in terms of 2027 and beyond. I'll give you the bookend of what we're trying to target over a period of time in terms of meaningfully changing this for those patients. And I would add that whatever you assume in our models over the course of the next several years, you should also assume requisite investments associated with what we're talking about here to make sure that we're actually driving the awareness, the education and the detection necessary to achieve those outcomes that you're talking about in 2027 and beyond. Operator: Your next question comes from the line of Ryan Zimmerman from BTIG. Ryan Zimmerman: So maybe for you, Joe, a little bit on iDose. In the absence of the CAC meeting and kind of the permutations that could come out of that, I'm wondering if you could talk a little bit about how you think about the ramp of iDose. And I ask that kind of in the context of 2026. And do we think of iDose following the similar progression in kind of a linear fashion through 2026 and beyond? Is there a point at which you see an inflection occurring where kind of the scales tip, if you will? I'm wondering if you could kind of speak to that and kind of how you guys think internally about the progression and adoption of iDose over time? Joseph Gilliam: Yes, Ryan, I think that the world we live in is obviously multidimensional relative to when we're building models or we're trying to do this, and there's a lot of varying puts and takes when you think about that. But what we've clearly established is plus or minus a pretty solid linear type launch in its early days. I think it's hard to assess that without looking at the constituent parts of that, right? And as you said in the context of 2026, we sit here today having put up $40 million of revenue in the third quarter with, as I said earlier, 80% of that volume coming from the Medicare regions that represent about 50% of covered lives. So I think as we go forward, the CAC meetings, all the other education efforts that we're doing with these individual MACs to establish proper and appropriate fee coverage moving forward, that simply getting the Medicare arena to the right place of loan continues to leave us optimistic around what that means for 2026 and certainly beyond. And that's before, and I think you're touching on it a little bit, you start to think about that broader utilization that we're starting to see in some accounts across all patients who deserve to get access to iDose irrespective of what insurance type they have, whether that's commercial, whether that's Medicare Advantage or certainly Medicare fee-for-service or other areas. So as we make our way through and more and more folks is focused simply on treating the disease and less on the insurance type, I think that's when they're able to start focusing on really driving meaningful awareness in the standard-of-care shift that we think iDose represents for these patients' benefit. But until you get to that place where you've got a little bit more stability, if you will, around that broader, call it, market access landscape, it's hard for physicians to really focus holistically on the clinical care continuum. But once you get there, I don't want to say it will be an inflection, but I think it's what underpins our bullish optimism of what iDose will mean for Glaukos, for our customers and for our patients, not just for 2026, but for the next decade as we continue to change the standard of care. Ryan Zimmerman: Just related to the CAC meeting, the agenda was posted. The questions were posted a couple of days ago. I don't want to leave the witness here, Joe, and I don't know if you're going to comment to this, but I'm going to try anyway. And the questions kind of infer that the studies weren't long enough. And I don't know if you have a reaction to that. You kind of articulated this earlier. But is that your sense that you're going to be educating them on the robust kind of evidence that the totality of the data and that there is a misalignment in terms of understanding? Or do you feel like it's purely -- this is coming in with maybe a little more purpose given how fast this has kind of bubbled up, if you will, relative to the historical efforts we've seen in legacy MIGS. I'm just I'm trying to still understand kind of why this has happened as quickly as it did so early in the launch cycle of iDose. Joseph Gilliam: Yes. I think part of what you're talking about in answer to the latter is that we've also been trying to aggressively educate and advocate on behalf of our customers. I think if you take a step back, Ryan, and you think about how much enthusiasm there is in the clinical community around iDose and what it means for their patients and the outcomes they're seeing, all the things that led to the optimism that extends from that for you all in the investment community, that also leads to those physicians advocating to make sure that they're getting properly paid and the coverage associated with it. And I think a combination of that is probably what has led them to want to ask the questions of the broader advisory committee to make sure they understand. Anytime you go into one of those sessions, there's going to be questions within that that makes sense in the context of the way we or our physician customers look at this and other questions that do not. And I think this preliminary question list reflects exactly that. There are some in there that you can understand that where they're trying to understand the overall fit of iDose into the treatment paradigm, and they want to ask that question of a group of network of experts, if you will. But there are others in there that clearly show they have not yet quite understood both the data of which there's a lot. And so I don't hold that against anyone. That's an education process that has to take place here in the coming weeks, months, if not years, as we continue to try to streamline that broader reimbursement coverage. Operator: Your next question comes from Allen Gong from JPMorgan. K. Gong: Just as a quick follow-up to that. One question I do have is, you obviously won't get an LCD immediately after the CAC meeting, but should you get an LCD, what does that do to your coverage with the MACs that are currently holding out and the MACs that you're already working with? Will that change your relationship with the MACs that don't have you on the prophy schedule yet? Will that accelerate that process? Or will you still have to wait to get on prophy? Joseph Gilliam: Well, I think coverage and payment are 2 different things. And so from the standpoint that they attempt to appropriately value the procedural component associated with iDose, that process continues ongoing. We continue to have constructive dialogue with each of the 3 remaining MACs around that. Clearly, now we have with NGS being added 70% of Medicare lives with established professional fees and a whole lot of work that's gone in behind that to understand how to value that and price. So I think that process continues to unfold. What you're talking about in the kind of the way you asked it with LCDs and the like is much more around coverage determinations. And on that, I would just say that there are clearly scenarios that are positive for us, scenarios that present headwinds or areas where we have to educate them more fulsomely. But going into it, we don't have a bias in either direction in that regard. We're just focused on making sure that we're educating them properly and that they understand what they're looking at in terms of iDose. The one clear positive, I'll say, in any LCD that gets established is that alongside of that comes Medicare Advantage coverage policies as well. And so you do have to -- oftentimes, the I'll call it, commercial carriers that are behind Medicare Advantage policies, they will wait until formal LCDs are established to force them into having policies of their own. And so you can argue that there's certainly some opportunity associated with that should LCD ultimately emerge from this line of work. Operator: Your next question comes from the line of David Roman from Goldman Sachs. David Roman: I wanted just to come back to the market development and education efforts around Epioxa. So a lot of what you're laying out sounds like it actually more mirrors that of a more mass market disease and something that takes a lot of education. I don't know if it's direct-to-consumer. As I look across other sort of rare disease categories and I'm thinking more on the traditional pharmaceutical and biotech categories, there is a lot of investment around payer education and physician education. But maybe you could help us just give a little bit more flavor of some of the specifics around the investments that you're making and how we see those show up and over what time period? Joseph Gilliam: Yes, David, it's Joe. So I think counter a little bit, I'll start macro and then I'll give a little more micro for your question. But from a macro perspective, what you think of in terms of large population-based patient education initiatives are the legacy, I'll call it, direct-to-patient advertising commercials that you see on broadband television during various sporting events or whatever it may be that is there to help make sure there's awareness being driven. What's different with rare disease is it's much more of a needle in a haystack exercise. And so that effort -- those efforts around awareness and detection mirror that of that broader disease state or mass market, as you said, but they're done in a much more targeted way to make sure that you're trying to find those patients who are most applicable based on where they're at in their own disease journey. And so a lot more of that happens in different forums and different communities that are more digital in nature where folks are actively seeking out what's causing the change in their vision. It's important to take a step back here and remember that you heard Tom say this, but when only 13% of patients are being treated under the age of 18, and we know the vast majority of damage is happening or certainly starting to happen and accelerating in the teenage years and into the 20s and yet the vast majority of patients aren't getting access at that stage, you really have to redouble your efforts to find them much earlier in that journey based upon those early symptoms and the early things that could be signs of keratoconus to make sure that they're getting proper access to the detection and the various things that are necessary to at least diagnose them as a keratoconus suspect. And that's a really big investment from a commercial and marketing standpoint. And it's not just DTC, although that's obviously an important part of any education thing. There's a lot in terms of what you do with your field organizations. And just to put that in context a little more micro level, David, today, the majority or if not all of the treating physicians for Photrexa are in the MD community, but you're very much reliant upon the optometric community where these patients first present themselves most often with visual acuity issues. But there are 50,000 optometrists and numerous other opticians that serve a little bit as the primary care physician. So how you get to driving education awareness in that community, both digitally as well as with your sales force and other marketing-related activities, is a pretty significant investment. Now that part of it is really just the beginning in terms of driving awareness and education, if you will. You also have to then support in any time you have a needle-in-a-haystack patient, and again you heard Tom reference in the prepared remarks, but these patients -- if you think about the number of insurance plans that are out there and when you're really treating 10,000 patients, every single time one of those patients present themselves asking for access to Photrexa, not Epioxa. It's like this is the first time that that insurer has ever seen a claim because you're talking about 10,000 patients. There's 5,000 plans in the United States. So, to that point of really making sure you demystify the insurance process that you support them along that way with proper education as you go through that and ultimately to the extent qualify, provide them with assistance as they go through are all major, major investments for us. Now the last thing you asked, I think, is how that turns on. We're going to have -- and Alex can comment on this in the context of the broader P&L. We're going to have some of this happens right away. Some of it certainly picks up steam as we make our way into 2026 from the beginning. And then as we start to get the J-code established and our site of care network up and running in the second half, we'll try to elevate that up to, I'll call it, a full-scale effort supporting those patients in that process and their journey as we make our way and certainly as we exit '26 into '27. Operator: Your next question comes from the line of Richard Newitter from Truist. Richard Newitter: I might have missed it, but I just want to make sure I'm understanding the components of your updated '25 guidance and kind of how we should be thinking about the areas for 4Q and what's implied there. Can you just run through the segments? I know you provided a prior outlook for Corneal Health and I think it was flat to low single-digit growth for the year. Could you just give us a sense as to what we should be modeling for that business and what the trend should be in the kind of the iDose sequential trend? Joseph Gilliam: Yes, Richard, happy to. I haven't addressed it yet, obviously, other than us announcing the updated guidance range of $490 million to $495 million. I think first putting in context, the performance thus far in 2025 and obviously highlighted with the results in the third quarter has really continued to exceed our internal forecast. And based upon that, we did raise our expectations for the year. The biggest thing here in the fourth quarter is not new. We called it out on the last call, and that is to take into consideration the expected headwinds that may face our Corneal Health franchise in the fourth quarter as we and more importantly, our patients and customers prepare for the transition from Photrexa to Epioxa. Secondarily, I would say that the fourth quarter is a little bit more of an elevated or more difficult comp from a year-over-year growth perspective in our U.S. and International Glaucoma franchises as you're thinking about and kind of looking at dialing that in relative to where we've been in the last couple of quarters. As you think about individual franchises within that, I would say that for International Glaucoma, the dynamics here really remain unchanged from what we've talked about previously. We expect low double-digit growth in the fourth quarter based upon that slightly tougher comp that I mentioned and really combining that with the continued sort of competitive launch headwinds that exist in several key markets. So nothing new there. On the Corneal Health side, I referenced that I think a little bit of it -- you'll back into the expectations there. We do expect to see a fairly material year-over-year decline, and that's certainly implied in the guidance as we navigate that transition that I mentioned before. And we've already started to see some early signs of that emerge even here in October post the approval of Epioxa. And we've even seen patients now starting to come and ask about Epioxa in favor of the existing Photrexa therapy that may be offered to them. On the U.S. Glaucoma side, we expect growth in the mid-40% range year-over-year in the fourth quarter as our non-iDose business continues -- its stents and everything else continues to stabilize. We would expect a low single-digit decline in the fourth quarter. So continue on that progress back to, I'll call it, a more stabilized situation post the LCDs that have impacted that part of the business earlier in the year. And we do expect continued growth, obviously, in iDose TR. Although you may find implied in the guidance that it's tempered a little bit sequentially versus the current trends, just given many surgeons have pretty full cataract schedules throughout the remainder of the year. I think it's a little bit early to start seeing the benefit from the NGS, I call it, professional fee tailwind. And again, in general, this quarter is a bit of a tougher year-over-year comp from a growth standpoint. But I think what you'll find is that it continues to be largely all systems go across the majority of our business with the one step back being really in the Corneal Health franchise as we transition there. Richard Newitter: And then maybe just, well, actually 2 follow-ups. Consensus for iDose for '26 is somewhere in the $220 million to $225 million range, I think. Anything you can express in terms of comfort or not kind of there, just so we can benchmark ourselves as we put preliminary numbers out there? And then the second follow-up, just on the trial time lines that you were talking about for combo cataract and MIGS plus iDose. Can you just give us a sense as to when those that are going to read out and the ones that have read out, where they are? Joseph Gilliam: So I'll start, and then I'll let Tom comment on the trials associated with iDose continue to be ongoing. Really, Richard, as I mentioned earlier, I think we're going to stay with the broader guidance that we've given for next year of $600 million to $620 million. We'll talk a bit more on the constituent parts of that on the fourth quarter call. You referenced the consensus and iDose. Clearly, as we enter into next year, iDose is no longer the only, I'll call it, material variable that you all will be focused on in assessing. And so I want to make sure that we talk about that in the same context at the same time as we talk about our expectations for Epioxa and the Corneal franchise throughout the year. What I had said based on the earlier question was if you think about the third quarter results of $40 million, we're at this point already kind of on a $160 million run rate based again largely on the continued progress within the 3 MACs that have established professional fee coverages entering the quarter, that being Novitas, Noridian and First Coast. So I feel good about the momentum in that part of the business and where it's heading and what that will mean for 2026. But we'll get more granular on the exact numbers as we set or update our guidance for the full year when we get on the fourth quarter call. Tom? Thomas Burns: Yes, I'd be happy to answer the questions. We're looking at 2 pretty major Level 1 Phase IV clinical studies, and that's to look at iDose plus cataract versus cataract surgery alone, which we're currently enrolling. And as well, we're looking at a study that evaluates iDose plus infinite versus infinite alone. And so you can imagine the goals of both those studies will be to validate and to show the incremental advantage of using iDose in combination with cataract surgery and certainly iDose in combination with infinite versus infinite alone. So these are important studies as we go forward. And really, they're both currently under enrollment. It really will depend on when we choose to be able to show what length of data we want to show. And so I will probably prepare the investment community for a 2027 timeline, which would give us the ability to have really 6 months to a year of follow-up in each of these patients that we publish. And it may come as early as late 2026 if we choose to be able to terminate the study or, I should say, be able to look at these patients at earlier time points. Typically, 3 months would be the earliest that I'd be able to publish. So I'd set your parameters to look at a late 2026 to '27 with some very, very important follow-up clinical data for the use of iDose. Operator: [Operator Instructions] Your next question comes from the line of Mason Carrico from Stephens. Mason Carrico: So in the context of Epioxa pricing, can you just remind us how the bulk of Photrexa volumes are billed today? Do you guys utilize a book-and-bill strategy with clinics? And if so, how much of your volumes rely on that? Joseph Gilliam: Yes, Mason, with Photrexa today, we offer both buy-and-bill acquisition options as well as specialty pharmacy. The specialty pharmacy option is something that we've really brought online primarily over the last couple of years, and that's been a growing percentage of the overall mix. But beyond that, I'm not prepared to disclose the exact mix between those. But I will say that specialty pharmacy has become an increasing material portion of the overall acquisition mix. Operator: Your next question comes from the line of David Saxon from Needham & Co. David Saxon: Yes, just another one on Epioxa. So can you just talk about the cadence of getting coverage by commercial payers in 2026? I mean if Photrexa will be phased out next year, how much coverage do you think you can end the year with -- 2026 with? And then in terms of placing the new cross-linking machines for Epioxa, kind of what's the strategy there for either upgrading or trading out the current installed base? Joseph Gilliam: Yes, David, I'll start with -- on the capital equipment and establishing the site of care network. Epioxa does require a new piece of capital equipment and O2 system that will be made available. We are already now with the approval in hand, hard at work out in -- with customers to establish that changeover. As you might expect in a launch of this nature, we've got a variety of options for customers to acquire, to lease and to swap out their existing equipment to make sure that the capital equipment component is not an impediment to them getting into providing Epioxa as a therapeutic solution. For the payer coverage side, you may recall on prior calls that we've been investing pretty heavily in this part of our organization alongside our field-based reimbursement. And that team is already hard at work similar to establishing our site of care, but in this case with the payers around direct education efforts, meetings to make sure they understand what we disclosed here today in terms of the therapy, its benefit to patients, engaging with those in the medical community to make sure that they're educated around that and ultimately trying to establish that coverage. I think on the positive side, this is not the first launch in the category. And many payers already recognize that corneal cross-linking is the standard of care when it comes to arresting the progression of this sight-threatening disease. And from that standpoint, we need to educate them on the patient benefits of which there are many, and you heard Tom mention them during his remarks, as to the why behind the patient need to achieve access to Epioxa going forward. So that process is already well underway. We'll provide updates as we make our way throughout the year, but it's a little bit premature for us to establish benchmarks in terms of payer coverage expectations. I'm optimistic that when we engage in the conversation around the benefits that we're providing to the patients that are at the end of this that we'll move the needle as aggressive as we can with those payers to get that access going throughout the course of 2026. Operator: Your next question comes from the line of Joanne Wuensch from Citibank. Joanne Wuensch: I have so many questions. But I'm going to try and stick to my one, which is when you gave guidance for 2026, what is included in that for Epioxa? And what is included for that for iDose? I'm just trying to piece it all together because at that ASP, those numbers can ramp really fast. Joseph Gilliam: Yes. Thanks, Joanne. And so, as I mentioned before, I think we want to make sure that we were establishing an overall range for 2026 in light of the Epioxa approval and announcement and the number of moving parts. And for right now, I think I'll just leave it as what I said earlier that we're confident in that range, and we're confident there's a variety of paths that should enable us to meet those expectations. We'll provide a lot more color on our fourth quarter call around the individual constituent parts of that. But you raised a totally valid and somewhat obvious point in that with the wholesale acquisition cost and what that means in terms of -- relative to that, implied in there is a material step-down in the number of patients being treated with Epioxa in 2026 as we navigate all the things that I've already mentioned, including getting the site of care network established, the miscellaneous code before establishing the J-code, the time in which it takes to update the payers for that J-code in the second half. It will be a journey through the year of really getting the foundation underneath us so that we can be focused primarily on clinical care as we exit the year and head into 2027. Operator: Your next question comes from the line of Michael Sarcone with Jefferies. Michael Sarcone: I was just going to try to ask the mix case for iDose in a little different way. Joe, when you think about your internal modeling and what you're expecting for iDose maybe over the next 3 years, call it the midterm range, how do you think about the mix of iDose performed in the standalone setting versus combo cataract? Joseph Gilliam: I think that's very surgeon-specific. And if you look even at the adoption we've had now, our highest volume customers today do actually very little iDose in combination with cataract surgery. Clearly as you make the product available in that wider arena, the lower-hanging fruit for some surgeons who primarily focus on cataract surgery is for them to be doing it in combination. And so I think in the intermediate term, some of that "lower-hanging fruit" for that portion of community could drive the mix a little bit closer to or with a little bit more oriented towards the combo cataract setting. But certainly, as you get out into the 3-, 5- and 10-year time horizon, the vast, vast majority of it is interventional in nature and standalone being the key driver of our long-term opportunity. Operator: Your next question comes from the line of Anthony Petrone from Mizuho Group. Anthony Petrone: Maybe one on the follow-up discussion with FDA on iDose reapplications. You mentioned in the prepared comments and the materials for the third quarter that those discussions are still ongoing. So maybe just what is the latest there? And when do you expect FDA to make some sort of announcement on the supplement for iDose reapplications? And what is really the read-through of that element of the iDose story as we head into the CAC meeting on November 12? Thomas Burns: Yes, I'll be happy to take the first part of that question. So just to reiterate, the PDUFA date has already been established by the FDA. It will be January 28 of this coming year, 2026. And we expect then to get an answer to our appeal to be able to have readministration of the iDose device. As I've said many, many times before, we take a [indiscernible] approach to this. The reason we have iDose TREX already in a clinical trial and moving forward is to have the ability for surgeons to have a de facto exchange product available when their current implantations of iDose come to term in 3-plus years. And so we think we're in great shape from that perspective. As I've said before, and I'll choose my words carefully here, we are hopeful, but we're not counting on the FDA giving us the not to move forward with the readministration. Joseph Gilliam: As it relates to the -- I think your second part of your question on the CAC meeting and some of the considerations around there, it's actually, I think, a thoughtful question because it's important to think about iDose is an FDA-approved pharmaceutical with a label and its end use that's pretty similar to topical PGAs and other glaucoma medications. That's different than a medical device. And I say that because what matters in an FDA-approved pharmaceutical is what is the contraindications that are within it. And the -- currently, reimplantation is the primary contraindication for iDose TR. It's not whether it's utilized in combination with cataract surgery, other MIGS devices or heart medication for that matter. Today, iDose TR is approved with an open label that's very similar to topical PGAs. If indeed, as Tom is talking about, we were to achieve that the PDUFA date around reimplantation, that would bring that to remove or at least modify that contraindication and certainly help us in terms of opening up that part of the market. Operator: Your next question comes from the line of Danielle Antalffy from UBS. Danielle Antalffy: I was at the AAO meeting a few weeks ago and I felt like the takeaway from [Technical Difficulty] there looking for specific things, right, but was a focus on building out standalone MIGS practices. I attended a lunch session that was focused on that. And I'm just curious about how you guys think the launch of iStent infinite into standalone is going. Where you see standalone as a percent -- I'm not asking iDose, right? I'm asking for the total MIGS patient population here. Where you see standalone MIGS going over the next 3 to 5 years? And what are the sort of logistical things with practices that you think need to happen in order to enable continued growth in that market? Joseph Gilliam: Yes, Danielle, I think it's a great question and a good one here as we are wrapping up this conversation. I mean everything that we've been doing for a couple of years now and certainly as we are moving forward is around driving that standard of care towards interventional glaucoma and acting on behalf of these patients. And so from that standpoint, it doesn't surprise me, although I'm always happy to hear that as you were doing your checks and rounds at AAO, that you heard that same thing. Any time you have a profound standard of care shift, there are logistical hurdles. But the first one you have to get through is the clinical component of this and the clinical buy-in from the community. And you've heard us say this before, but I'll reiterate it, we couldn't be more happy with the receptivity from the physician community around the need to act on behalf of these patients in an interventional way. And whether that tool is iDose, whether that tool is iStent infinite or any of the other things that might be a part of their toolkit, if you will, in trying to tackle this sight-threatening disease, it's encouraging to hear that they continue to sort of move forward. But on the logistical side, it does change. It's changing the education of the optometry referral community. It's changing the scheduling blocks. It's changing the time and allocation of that time within their OR time, their surgery centers and the like. There's a lot that goes into this over time. It's about establishing proper reimbursement and market access for the various tools that are there to treat patients the way you want to treat them as a surgeon or a physician. So each one of these things play themselves out. And none of them are overnight success stories. Each one of the things you make incremental progress every day, every week, every month and every year. And I think it's why when we look out over a 3-, 5- or 10-year period, we're so optimistic about where this is all heading because it's all rooted in the right paradigm shift of clinical care. The rest of it we have to keep our head down and keep executing against that. And if we do that, you're talking about a market opportunity, as you heard me say many times, there are 21 million or 22 million eyes in the United States with ocular hypertension or glaucoma. 12 million to 13 million of those eyes today are already being actively treated, maybe imperfectly in the form of topical eye drops, but they're being treated. You compare that to what we're talking about in the earlier days of combination cataract and MIGS, where you had about 0.5 million eyes. So when we look at this over a prolonged period of time, we expect the vast majority of procedures irrespective of the tool to be done in that standalone and interventional glaucoma market, purely because of the relative size of those market opportunities and the clinical need for that. Operator: Thank you. And with no further questions in queue, I would like to turn the conference back over to the company for closing remarks. Thomas Burns: Okay. Thank you all for your time and attention today. And I want to thank you for your continued interest and support of Glaukos. Goodbye. Operator: This concludes today's conference call. You may now disconnect.