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Operator: Good morning, and good evening. Thank you all for joining the conference call for the SK Telecom earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on SK Telecom's Third Quarter of Fiscal Year 2025 Earnings Results. Jun Chung Hee: Good morning. I am Chung Hee-Jun, IRO of SK Telecom. Let us begin the earnings conference call for Q3 of 2025. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situation. Let me now present our CFO. Yang-Seob Kim: Good morning. This is Kim Yang-Seob, CFO of SK Telecom. The third quarter of 2025 was the period where we renew our mobile business by implementing the accountability and commitment program to overcome the cybersecurity incident and reassess company-wide AI capabilities, thereby renew our goals and determination for the future. In this quarter, the accountability and commitment program has had a significant financial impact. The consolidated revenue posted KRW 3,978.1 billion, 12.2% decline year-on-year. The M&A revenue fell by approximately KRW 547.7 billion year-on-year due to 50% tariff discount in August for all customers with the customer appreciation package and series of team membership discounts. The significant sales decline led to 90.9% year-on-year drop in operating income to KRW 48.4 billion. The net income turned negative due to the penalties from the cybersecurity incident. Given the unprecedented deterioration in the financial performance, the company inevitably decided not to declare dividends for the third quarter. While the financial impact of the incident continues to weigh on the results, we are fully committed to restoring stability and resuming dividend payments going forward. Now let me report on business updates. The fixed and mobile business are showing gradual recovery from the cybersecurity incident. The number of 5G subscribers increased by approximately 240,000 Q-on-Q to 17.26 million, and broadband and IPTV subscribers also recorded positive net additions. As part of our mobile business innovation, the company recently launched Air, a digital communication service exclusively for unlock device. Designed with an emphasis on simplicity and practicality based upon in-depth analysis of the needs of the customers in their 20s and 30s, this service is expected to play a key role in broadening our mobile customer base. The AI business is bringing together previously distributed AI capabilities under one structure. Functions and organizations, including AI DC, A dot B for enterprises, A dot service for B2C and global AI partnerships and investment and AI R&D are being reorganized into the AI CIC, establishing a more cohesive and efficient business structure. Revenue from the AI business achieved a 35.7% year-on-year increase in revenue, further expanding the foundation for achieving its mid- to long-term goals. Driven by the acquisition of the Pangyo data center and the award of the GPU leasing support program, AI DC revenue posted KRW 149.8 billion, up 53.8% year-on-year. The company continues to expand the scale and profitability of its data center operations. The Ulsan AI data center poised to be a key driver of data center revenue growth, held its groundbreaking ceremony in late August and is now under full construction. In addition, the company recently signed a memorandum of understanding with OpenAI to jointly build an AI data center dedicated for OpenAI in Korea's Southwest region, positioning itself to capture new opportunities in the rapidly evolving AI infrastructure market. Revenue posted KRW 55.7 billion, up 3.1% year-on-year. Officially launched in late June, AIX an AI agent designed for enterprise use, has received positive initial feedback as workplace AI tools that helps employees focus more on their core tasks. In this quarter, the service was rolled out to about 10 SK Group affiliates, including the company and is planned to be expanded to a total of 25 affiliates by the end of this year. Through its latest upgrade this quarter, A. has integrated cutting-edge ALM such as AX 4.0 and GPT5 while introducing a new AI message feature that alerts users to potential spam or phishing text. In addition, with its recent integration into T Map in September, A. is now accessible to a broader base of users, allowing more people to experience the service firsthand. Building on its long-standing expertise in LLM, the SK Telecom Consortium was selected in August as a core team for the proprietary AI foundation model project led by the Ministry of Science and ICT. Through the project, the company aims to further strengthen its AI competitiveness, pursue new business opportunities, and contribute to the development of sovereign AI. The past 6 months have been the most challenging period for SK Telecom since its founding. The entire organization has been fully mobilized to respond to the cybersecurity incident. While it served as an opportunity to emerge as a stronger and more secure company, it also led to the loss of many customers and continued financial impact. To move beyond this crisis toward recovery and renewed growth, the company has set a clear goal of driving continuous innovation in information security. We will strengthen execution across key areas such as increased security investment, adoption of next-generation technologies, and enhancement of the external verification system. In the telecom business, we will place customer trust restoration at the highest priority and focus on reinforcing our core competitiveness to reclaim our position as Korea's leading telecom company. At the same time, in the AI business, we will focus on delivering tangible results. SK Telecom is determined to turn this crisis into an opportunity for renewed growth and to emerge as a stronger, more resilient company. We sincerely ask for the warm encouragement and continued support of our investors and analysts as we embark on this new beginning. Thank you. Now we'll begin the Q&A. Operator: [Operator Instructions] The first question will be provided by Jae-min Ahn, from NH Investment & Securities. Jae-min Ahn: I have 2 questions. The first question is about dividends. During the presentation, you said that you will not declare the dividend for the third quarter, which is regrettable. And I'd like to hear about your focus on the fourth quarter dividend. And it might be a bit too early to discuss about the 2026 dividend policy. Can you give us a heads up as to whether the dividend of 2026 will return to the level of '24? The second question is about the performance. The third quarter's poor performance is something to be expected. And I'd like to ask you about the fourth quarter outlook because the free offering of the 50-gigabyte data and the discount are still ongoing. So, there could be the potential for the tariff down selling. So, I would like to hear about your 4Q performance outlook. Yang-Seob Kim: Thank you for this question. I'd like to respond to your second question first, the impact of the incident on the third quarter performance. The financial impact from the cybersecurity incident in Q3 was mostly reflected on the revenue side. Mobile revenue declined about KRW 500 billion Q-on-Q, nearly all attributable to the incident. The largest factor was the 50% discount on August tariffs offered to all customers as part of the customer appreciation package, while enhanced membership benefits also contributed to the revenue decline. On the cost side, KRW 134.8 billion of fines imposed by the Personal Information Protection Commission was recognized as a non-operating expense in Q3. As the customer appreciation package, such as additional data and the membership benefits, will continue through the year-end. So, some decline in mobile revenue is expected to persist in Q4, but the impact should be significantly smaller than in Q3. That said, Q4 typically involves concentrated spending activities, so a cautious approach is warranted regarding operating profit. While it is too early to provide detailed guidance for fiscal year '26 before finalizing management plans, the company aims to drive a steady recovery in mobile revenue through restored customer trust while maximizing cost efficiency to return to pre-incident operating profit levels. The company's AI business, including AI DC, continues to show solid growth momentum, which is expected to contribute to a turnaround in overall performance. Further details on FY '26 guidance will be provided once management plans are finalized. Thank you. So let me respond to the question about dividends for the whole year FY'25 and FY'26. As mentioned earlier, following a resolution by the Board, the company has decided not to declare a dividend for the third quarter. This was an unavoidable decision, taking into account the financial impact of the cybersecurity incident, cash flow condition, and overall financial stability. We ask for your kind understanding. As for the Q4 dividend, it is difficult to make any definitive statement at this time, but the Board will review the matter once the full-year performance and cash flow are finalized, taking into consideration the company's growth investment capacity, financial structure, and overall capital allocation balance. As the impact of the cybersecurity incident will be mostly reflected in 2025, the operations are expected to normalize from 2026, and all the operational improvement measures will be fully implemented. And we will make every effort to restore the dividend to the pre-incident level in line with improved performance. Operator: The following question will be presented by Heejin Lim from Citi Securities. Heejin Lim: I have 2 questions. First, is that this is the first earnings call after the incident and the implementation of the rectification measures. So, the question is that how much of the customers that you have lost in the previous quarter, you have regained in this quarter? And what are your plans to win back this customer? And I'd like to learn about your marketing plans. The second question is about the Air that was mentioned during the earlier presentation. So, it seems that the Air is a smart service that is offered at an affordable price range. So, I'd like to understand its implications on the top line and ARPU. Yang-Seob Kim: Thank you for this question. And this question will be answered by the marketing strategy team. Unknown Executive: After the contract cancellation fee waiver period ended on July 14, the company focused on rebuilding customer trust to reverse the market trend. Through these efforts, the customer churn was successfully contained in August and September, resulting in a net neutral balance between additions and losses. Going forward, rather than focusing on numerical recovery of the customer churn, which could overheat the market, the company plans to pursue qualitative recovery centered on strengthening fundamental competitiveness and improving customer and revenue quality. Through granular customer analytics, we provide optimized products, subscription methods, rate plans, and value-added services tailored to customer needs across different distribution channels. The recently launched air service is a prime example designed to meet diverse customer demand. The company will continue to enhance customer satisfaction by offering segment-optimized products and services while strengthening its overall competitiveness in the market. Yang-Seob Kim: So let me respond to your second question about Air. On October 13, the company officially launched Air, a digital communication service exclusively for unlocked devices. AI represents SK Telecom's new initiative to respond to the shift in mobile usage patterns among customers in their 20s and 30s towards SIM-only and fully digital experiences. It allows customers to complete all service procedures directly through the app without visiting offline stores. The service offers 6 simple rate plans focused on the most commonly used data tiers. While it does not support teamwork, team membership, fixed mobile bundles, or family discounts, it provides only the essential features at more affordable prices. While existing pay service cater to customers seeking a wide range of benefits such as family bundle discounts or device subsidies, Air is designed for unlocked device users who value digital convenience and practical benefits. Through the launch of Air, the company expects to meet the needs of wider customer base and broaden its marketing reach. By offering a new telecom service for unlocked device users, Air is expected to gradually expand the overall wireless subscriber base and continue to top-line growth. In terms of its price, it will be in the same range as the chief direct plan, so its impact on ARPU will be minimal. Operator: The following question will be presented by Sohyun Park from UBS. Sohyun Park: Two questions I have. The first question is about the Ulsan DC, this is something that you are working together with AWS and understand that the groundbreaking ceremony was held sometime at the end of August. So, I'd like to understand the progress of the Ulsan AI DC project. And when do you foresee the completion of this construction and the beginning of the operation? And if you have any additional plans to add other data center facility, please do share? The second question is about A. service. You have recently surpassed the 10 million subscriber landmark and now was able to secure a quite sizable user base. So, I'd like to understand if you have any plan to actually charge the service. Yang-Seob Kim: So thank you for this question. First question will be answered by the AI DC development team. And the second question will be answered by the AI growth strategy team. Unknown Executive: So let me respond to you about the progress of the Ulsan AI DC project. Construction of the Ulsan AI data center began on September 1 and is progressing smoothly according to the plan. The revenue from the Ulsan AI data center will follow a ramp-up structure and increasing in proportion to the utilization. The profit generation is expected from '27 and expected to grow steadily thereafter. The Ulsan AI data center will also serve as a key reference case marking SK Telecom's successful attraction of global big tech partners to Korea and will act as an important catalyst for future expansion of the company's AI data center business. In addition, the company is in active discussions with global investment firms and other major technology companies considering AI data center projects in Korea and across the broader APAC region, exploring various form of collaboration. Next, I'd like to discuss our data center expansion plan. As mentioned in the previous earnings call, the company aims to achieve KRW 1 trillion level revenue by operating a cumulative 300 megawatts or more of data center capacity by 2030. To this end, we are currently pursuing the construction of an additional AI data center in Korea Seoul, and the design work has just begun. Given that this location represents the last valuable site in Seoul with secured power capacity for data center development, it offers ample land to accommodate large-scale facilities. We anticipate a strong demand for the project. We will provide further details to the market as the project progresses and plans become more concrete. Ji Hoon Kim: This is the Head of AI Business Strategy, Kim Ji Hoon. Let me respond to your second question of the plan to charge the A. service. As of the end of September, the cumulative subscriber for A. has surpassed 10,560,000, and that is a growth of 8.3% versus the end of June. When we include the other A. function users outside of the A. app, which mainly refers to the phone and the BTD, and the total MAU exceeded 10 million as well. So, we were able to achieve this performance within 2 years from the official launch, the achievement, meaning that subscriber over 10 million and the AU exceeding 10 million. That is thanks to the continuous service sophistication and active expansion into the external platform. Last June, we have launched note and briefing. In August, we offered 4.0 update on the agentic workflow function has been added, and this has garnered a strong response from the users. In September, A. is made available in T Map and contributed further to the increase in AU. The B2C paid model will be reviewed -- are under review, and that will be most likely in the form of the subscription or the branded products centering around A. pillar services, and our target launching period is the first half of 2026. Until that time, we will continue to focus on improving usability of A.'s core services and expand the customer base. So, regarding the B2B profit model, including the A. agentic workflow, that will be implemented into the T Map, and we expect the revenue generation from the fourth quarter, and that will be the beginning, and we expect a gradual expansion of the revenue. Operator: The last question will be presented by Hong-sik Kim from Hana Securities. Hong-sik Kim: I will have to ask some difficult questions. Then you have started the quarterly dividend payout. But this quarter, you have decided not to declare the dividend. And from the perspective of the investors who have been waiting for this cash flow from the dividend, we are at a loss, and I'd like to understand more visibility into the future. And according to the business report, there are some companies that are showing higher degree of the visibility or the productivity when it comes to the dividend. So, in that line, I'd like to ask the company, do you have any plan for the future dividend? And if so, please share. So, if you are not able to provide any dividend for the third quarter, I believe that there should be some sufficient response going forward. So please specify them. And at this point, this is, I believe the high time that you need to revisit the plan to provide dividend on a quarterly basis because you have made the disclaim or announcement some time ago, but you are not able to provide this quarterly dividend for this quarter. So, this is extremely a regrettable situation, I have to say. And the second question is that according to the report that the ground or the basis of providing the dividend is the 50% of the consolidated net income. And it is our existing understanding is that it is adjusted consolidated net income, but it turns out the decision to waiver the third quarter dividend is based upon not adjusted, but the net income of this quarter. So does that suggest that in case of any future incidents that might involve the significant onetime expenses, then there will be some wavering of the dividend for the particular quarter. So please share with us your dividend profile. Yang-Seob Kim: So let me respond to your question. This is the CFO. So, as you might understand and appreciate that we have been providing the stable provision of the dividend based upon the strong performance. But due to these unforeseeable incidents that we're not able to provide the dividend for this quarter. As a CFO, this is an extremely unsettling situation, and I'd like to extend my sincere apology to the investors. So, we take your question and the feedback with great heart and try to figure out the best way forward. And I'd like to give you this commitment as a CFO that we will make every effort to normalize our business environment, and this is something that I will share the commitment to you on behalf of every single employee of SK Telecom. So let me respond to your question about the 50% of the adjusted consolidated net income. So, in relation to our shareholder return policy, the company classified items such as operating revenue and operating expenses, which arise from its principal business activities, as recurring income or loss items. And conversely, nonoperating income and expenses are not directly related to the operating activities are categorized as nonrecurring items. The administrative fine imposed by the PIPC this year is classified as a nonrecurring item. The customer appreciation packages, and the SIM card replacement costs are directly associated with the company's core business activities and therefore, are not regarded as one-off or nonrecurring items. The company's shareholder return policy, which is returning 50% of adjusted consolidated net income, represent a symbolic lower bound. This threshold expresses our commitment to provide dividends at a higher level than the minimum target. And historically, our dividend payout ratio has remained above this level. For additional inquiries, please contact our IR organization, and we will make sure that you get the full response. Jun Chung Hee: This concludes our Q3 '25 earnings call. If you have any further questions, please contact us. Thank you.
Richard Cathcart: Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended September 30, 2025. Thank you for joining us. I'm Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we'll begin our live Q&A session with our management team. Before we go on to discuss our results for the third quarter of 2025, I remind you that management may make or refer to, and this presentation may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website. Please note that this call is being recorded and a replay will be made available on our IR website as well. Our quarterly product updates video will now be released after earnings instead of alongside our conference call. So watch out for this coming into your inboxes in the weeks after our results disclosure. With that, let's begin with a short message from our CFO. Martin de Los Santos: Hello, everyone. This quarter, we continue to invest to capture the immense growth opportunities that are ahead of us e-commerce and fintech. We are exceptionally well positioned to drive financial inclusion, the offline to online retail shift in Latin America. Revenues grew by 39% year-on-year, marking the 27th consecutive quarter of growth above 30%. Our consistent top line growth comes as a result of the investments we have made across our ecosystem. The recent reduction in the free shipping threshold in Brazil has already delivered strong results with both GMV and items sold accelerating in the quarter. We also saw a strong growth in buyers with improved conversion rates, retention and frequency of purchase. Seller's are also benefiting from the increase in demand of the lower threshold is generating. More sellers are coming to our platform and the number of listings has increased sharply in the BRL 19 to BRL 79 price range. Higher transaction volumes helped us reduce unit shipping costs in Brazil by 8%, with slow deliveries enabling us to leverage on the unused capacity. Brand preference scores reached new record highs across the region, helped by our marketing investments and preshipment policies. We had a great quarter in Mexico with GMV growth accelerating and unit shipping costs in fulfillment continue to fall. Mercado Pago had a stellar quarter. Monthly active users growth accelerated as our NPS hit record highs in Brazil. This is the result of continued efforts to deliver the best value proposition to our users through UX improvements, our credit card and remunerated account products. This strong growth in asset under management and credit portfolio reflect the potential of Mercado Pago. Our credit card, which plays a key role in NPS and principality is growing very rapidly, driven by higher users and share of wallet. We have grown our loan portfolio without compromising credit quality, all-time low first pay defaults and more credit cards are reaching maturity. In Argentina, growth of GMV, buyers and TPV remained resilient in Q3, but trends slowed through the quarter due to the challenging macro backdrop. This impacts not only growth but also pressures our EBIT margin. Despite the headwind Argentina continues to be a very profitable market with strong long-term growth perspective. Operating income of USD 724 million, grew by 30% year-on-year. This demonstrates our ability to balance growth investments and profitability and the power of scale, which should continue to play in our favor. Our strategic investments in free shipping, logistics, 1P and credit card continued to deliver strong top line growth while putting some margin pressure. At the same time, this growth has enabled us to scale key OpEx lines such as product development and G&A expenses. We will continue to invest with discipline, focusing on the long-term potential and scale of our ecosystem. Thank you for your continued support. We will now move on to Q&A. Operator: [Operator Instructions] And today's first question comes from Andrew Ruben with Morgan Stanley. Andrew Ruben: So maybe a question on Argentina, you cited some macro challenges on GMV, TPV, higher funding costs. So I'm curious to understand first how these items evolved over the course of the quarter? And then second, on a related note, we know you've been through political cycles, but I'm curious following Sunday's election to hear your latest views on the Argentina economic outlook. And how this feeds into your plans for growth investments in the country, fulfillment centers, credit cards or otherwise. Martin de Los Santos: Andrew, it's Martin here. Thank you for your question. Yes, as you know, Argentina continues to be a very important market for us, not only because of the size of the opportunity, but because of the leadership position that we have in the country. So we, as always, we remain much more focused on continuing to improve the value proposition. As we always said, more than macro, the important thing about our business is what we do with our users and our platform. So we continue to invest in Argentina. We opened the second fulfillment center this quarter. We launched the credit card. So we are optimistic about the prospects for Argentina in the long term for our business. In the first half of the year, as you know, we had a very strong -- we saw very strong growth in both commerce and fintech. And in Q3, due to macro instability related to the midterm elections, we saw some slowdown of growth and some increases in interest rates will affect the consumption and increased our funding cost. Having said that, despite macro, we saw solid growth in Argentina, revenues grew by 39% year-on-year in U.S. dollars, 97% in local currency, items also grew by 34%. We had a very tough comp last year. Our credit book, even though we took a more cautious stance, grew by 100% year-on-year, and we maintained very solid healthy portfolio and very solid metrics in terms of NPLs or bad debt. So we are used to managing volatility. I think this quarter as an example to that. And then looking ahead, we think that hopefully some of the volatility will go away after the results of the elections. I will continue to be very optimistic in Argentina for the long term. It continues to be a very profitable market with a lot of growth potential for us in the future. Operator: Our next question today comes from Irma Sgarz with Goldman Sachs. Irma Sgarz: Can you talk a bit about the impressive growth in the active user base that you had. When you look at the 6 million to 7 million new quarterly active users that you added from the second to the third quarter, can you break down increase by brand-new users versus those that were previously active users, but perhaps not at each and every quarter and that just increase this frequency? And what are the demographics of the new users you're attracting? Is there -- is there -- potentially -- and I'm asking this because if there's a potential risk of those new users being a little bit more promotion focused so that it might churn if you were to pull back on any measures around couponing or marketing spend. And perhaps in that context, if you can talk about how we should think about marketing spend as we progress into next year, and whether we can come back to some degree of dilution to the investments that you're making there right now. Ariel Szarfsztejn: Ariel here. Pleasure to hear you. So we had an amazing quarter in terms of our user base. We grew the total unique buyers in our platform, very, very fast this quarter, reaching the 75 million active buyers that you are referring to. Out of those, more or less 4 million were new buyers to the platform. And then the others, there were buyers that did buy at some point in MercadoLibre, we believe both the total number of buyers and the number of new users are -- is very healthy, and it's a great testament of everything we are doing in MercadoLibre by improving the value proposition, both in Brazil, where we are lowering the free shipping threshold, take rates and so on, which you know, but also in the other countries, we had a great quarter in Mexico. We had a great quarter in Chile, Colombia, Argentina, which Martin was referring to. So we are excited with everything that is happening with the vibrancy that we are generating in our platform and the engagement and frequency that we see from those users that we're bringing into the platform. Martin de Los Santos: And Irma, it's Martin here. In terms of marketing spending, I think if you look at this particular quarter, it was represented about 11% of revenues, which is in line with what we saw last quarter in Q2. As we mentioned last quarter, we were stepping up a little bit of investment in user acquisition in terms of performance plus our affiliate channel. We invested more in our affiliate channel, which grew by 4x year-on-year, this is the way to attract new segments of the population, in particular, younger people and has been a very effective way of bringing more volume to our platform. So I think going forward, will continue with a similar range of investment. And as we said in the past, we are acquiring users. We have a very sophisticated methodology to acquire users to make sure that those users that we bring are actually contributing to profitability and are adding to the volume sold on our ecosystem. So we're very confident that the level of investment is the right one to support the growth that we are delivering quarter after quarter. Operator: Our next question today comes from Bob Ford of Bank of America. Robert Ford: Congratulations on the quarter. Ariel, can you comment on merchant adherence to your recent relative value notice in Brazil, the implied changes to the search algorithm and the qualification for promotional support. . And as competitive dynamics intensify, particularly in Brazil, how should we be thinking about cost structure and ancillary revenue streams? Ariel Szarfsztejn: Bob, Ariel here. So let me touch on price monitoring and seller adherence. Let me first start saying that this short-term initiative that you are starting to test for a handful of months as we -- as our competition is also testing their own initiatives for the same period. So as we said consistently over time, we want to have the best possible value proposition for buyers and sellers in our platform. We want to present users the best speed, the best prices, the best payment alternatives available for them, and we want them to buy more. And when they buy more, they will generate more demand for our seller base. And we believe it's natural for us to put in our storefront, the items that do generate the best experience for the customers. And with that to generate higher sales for our consumers. And that's why we are introducing this system in order to make sure that our buyers always see the most competitive offering and the best experience generating items in the MercadoLibre platform. Of course, this initiative is coming alongside our record investment levels, meaning faster logistics, more free shipping, lower shipping charges, discounts, lots of promotions and lots of coupons that we're going to invest during our Black Friday campaign. So we expect adherence to be high because this is the real way to improve the proposal for buyers and for sellers. As you know, our on-site real estate and our ability to invest is limited by nature. And for that reason, is that we want to make sure we make the best use of those limited and available resources for the merchants who are providing and the items that are providing the best experience for our customers. So it's too early to discuss results of that one, but we think this simple system will generate the right proposal for our buyers and for our sellers as well. Operator: Our next question today comes from Marcelo Santos with JPMorgan. And it appears we're not receiving any audio there. Let me get to our next caller, and that will be Josh Beck with Raymond James. Josh Beck: Yes. I wanted to ask a little bit about the unit costs on the shipping side. I believe you said it was down 8% year-over-year. I assume a lot of this has to do with better utilization and particularly some of the slow shipping efforts that you have. I don't expect a specific answer, but I'm curious how much headroom you think you have on this utilization angle? And then related to that, how much are you investing in robotics and automation on more of a mid- to long-term opportunity? Martin de Los Santos: Josh, it's Martin here. Let me just first clarify that the number that we disclosed is the lowering of the cost of shipping in Brazil is 8% Q-on-Q. So that's a decrease in cost of shipping in local currency sequentially. And the reason for that is because as we mentioned, the extraordinary growth that we're seeing in volume is helping us dilute fixed costs of our logistic operations has also enabled us to use spare capacity and be more efficient in the way we run our operation, in addition to the things that we do on a day-to-day basis in terms of improving efficiencies. So I think that's, for the most part, the main explanation for the lowering of cost. There is some room to continue optimizing the low shipping method in the future, but that will take some more time. I think for the most part, the decrease in cost is related to scale. Ariel Szarfsztejn: Yes. Just to complement, Ariel here. So the decline in cost per shipment, 8% Q-over-Q in Brazil, it's a great result for us. Bear in mind that this is not only impacting slow shipments, but this is a decline of the total cost per shipment in a country in which we are operating and dealing with strong pressure from -- coming from the extra volume. We believe that unit shipping costs should trend downwards over time, although this might not be a straight line. So there will be future gains that we will be able to capture through productivity and process improvements, but we need to continue iterating adjusting our systems, implementing technology. So to the second part of your question, we are deploying robotics. We are deploying technology in the different warehouses, we are testing and learning with different technologies in different places. And we're optimistic. We see great results in productivity, both and put away in picking and packing every time we deploy some type of technology around the people that work in our warehouses. Operator: Our next question today comes from Craig Maurer with FT Partners. Craig Maurer: I wanted to ask on the profitability of the credit card business, specifically the cohorts from last year. I believe you said they had been approaching breakeven, but I wanted to understand if that could become a tailwind going into next year? Osvaldo Giménez: Craig. So what we have been consistently saying is that cohorts that are older than 2 years old are profitable, and that continues to be the case. So the profitability of the overall portfolio of credit cards in a given country depends mostly on the mix of cohorts we have. And -- but that continues to be the case that for cohorts of 2023 and older than those in Brazil, they are already profitable. Operator: Our next question today comes from Vinicius Pretto with Itaú BBA. Vinicius Pretto de Souza: We've been discussing a lot to trade-off between GMV growth and profitability in Brazil. And this quarter, we saw the first response with GMV accelerating significantly, but contribution margin was one of the lowest levels in the past couple of years. When we think about these margin levels, do you view the margin investment made so far as sufficient to achieve your aspirations in terms of growth and market share given the recent developments in terms of competition, would you be willing to go below these levels in terms of margins to accelerate market share gains? Martin de Los Santos: Hi Vinicius, it's Martin here. I think, first, when we talk about margins, let's put this in context of growth. I mean we are -- we see a huge opportunity to grow not only in commerce, but also in fintech. And as we have consistently said, the main priority for us is to make sure that we capture those growth opportunities that we have ahead of us, and we will continue to invest behind those opportunities as we have done in the past, right? Last year, you saw when we invested on credit card, it requires some margin compression -- resulted in margin compression. But now as Osvaldo mentioned, the credit card is starting to mature and that turns around. This quarter, we invested significantly on the lowering of free shipping. As you can see, we had very strong results related to that with not only GMV, but if you look at items sold in Brazil, it accelerated from 26%, last quarter to 42% this quarter. So very strong acceleration of items and volume, new users, more engagement, better conversion rate. We have all-time high NPS levels in Brazil because of this measure. So I think it's important to put that in context. We are not managing the business for short-term margin. We are managing for long-term value creation. And we think that if we continue to sustain the levels of growth that we are delivering, we are in the right track. As we said in the past, we are not going to hesitate to invest behind that even if we put some short-term margin pressure. But in the long term, we continue to be very optimistic about the margin profile of our business as we continue to scale the business and as some of the investments that we're making continue to mature, such as the case of the credit card and 1P investments and many other things that we're doing throughout the ecosystem. Operator: Our next question today comes from Trevor Young of Barclays. Trevor Young: Great. Just on NIMAL, should we expect the same seasonal dynamics to play out in the coming quarters, such that 4Q should be up sequentially before we step down again in 1Q? And then as we head into next year, should we assume NIMAL remains pressured as you ramp up credit card issuance in Argentina and face potentially the same higher funding costs that you flagged this quarter even as those older cohorts in other countries get more profitable. Osvaldo Giménez: Hi Trevor, let me tell you a little bit of what has happened lately with NIMAL. I would say that the -- what we have seen is that change in terms of mix basically. We saw a reduction in the last quarter of NIMAL, mostly coming from when you look at the overall credit market, and then I will double-click on credit card. But overall credit, what we saw was a reduction of NIMAL, coming mostly from Argentina and driven by the increase in funding cost we saw last quarter, which was significant because of some instability in the market. But I would say that is rather constrained to that in Argentina, pretty much everything else was working similarly to prior quarters. Now when it comes to credit cards, what we're seeing is Brazil is getting to a point that we have enough older cohorts that nearly 50% of the volume of cards we have issued and TPV is already profitable. And so it will depend on the speed at which we continue issuing cards in Brazil, but that is a country where we should see in the medium term, I would say, the overall credit cards becoming profitable. That is not yet the case in Mexico when we started significantly later and still we are issuing cards at a volume that is very significant compared to the legacy we have. And when we look at those cohorts that are 2, 3 years older are a smaller part of the overall portfolio. And yes, as we mature in Brazil and eventually in Mexico, we will be accelerating the issuance of cards in Argentina, where we're just starting. So definitely, we'll be investing there for the next several years. Martin de Los Santos: As to complement in terms of seasonality, it's typically a little bit of seasonality in Q4, which is a little bit better than Q1, is weaker for collection. But I would say, for the most part, the fluctuations that you've seen over the last several quarters is related to mix, as Osvaldo mentioned, not so much for seasonality. Operator: Thank you our next questions today comes from Deepak Mathivanan with Cantor Fitzgerald. John Halpert: This is Jack on for Deepak. Kind of sticking with the Argentina credit card topic. Can you just provide any like early engagement metrics on the new credit card launch there? Maybe how is the adoption curve compared to Brazil? Is there any reason to think that, that kind of 2 years to breakeven stat that you guys have called out would be any different in Argentina? And then lastly, kind of where are the penetration rates you're targeting over the next 12 to 18 months? Osvaldo Giménez: So I'd say it's still very early to tell. We only launched a credit card in Argentina towards the end of the quarter. So there is not yet enough information. It's too early to comment on its performance. We -- as we have said in the letter, we are very confident that this will be a successful product because we have a huge user base in Argentina, and they are very engaged with Mercado Pago. And on top of that, because Argentina is a country where most of the credit card, nearly all of the credit cards charge a monthly fee, and we don't. So we believe that, that's a huge plus for [ uncard ]. And also it has good offers in the MercadoLibre ecosystem for those reasons and on our current cost network. So for all of these reasons, we are encouraged and we are excited about the opportunity, but I'd say it's still very early to comment on results because it was like only for a couple of weeks during the quarter. And we cannot comment on -- we cannot give guidance on 12 or 18 months, but we are very bullish with the product. Operator: Our next question today comes from Neha Agarwala with HSBC. Neha Agarwala: On the fulfillment centers, you mentioned that there's been a big increase in the number of shipments, would you require to add more fulfillment centers than what you already had on the road map? And if you can give us a bit more color on the further investments that we can expect in the coming quarters in Brazil, especially? And my second question is on the credit side of the business. In Mexico, there's a lot of competition coming in. What are the early trends that you're seeing? Which products have been doing very well with the Mexican consumers? And what kind of asset quality are you seeing in Mexico specifically? Ariel Szarfsztejn: Neha, this is Ariel. So before jumping into the answer to your question, let me rewind a bit and make one small comment on an answer that I gave to Irma before. So total number of unique buyers in the marketplace this quarter was indeed 75 million, but new buyers was actually 7.8 million -- million people, sorry, new buyers was 7.8 million. I did bring up the number of something like 4, which is the number for Brazil, but total LatAm, new buyers was 7.8 million, sorry, guys, if I mixed it for you guys. So going back to the question on fulfillment. Indeed, we saw a 28% quarter-over-quarter increase in volume in Brazil, which naturally puts pressure in our network capacity. Still, we were ready to manage that. Of course, having part of the volume in the slow method does help us manage the volume flowing through the different parts of the value chain. So to -- specifically to your question, we did not open any new fulfillment center that was not planned. And as you probably know, it's not so easy to open any warehouse of this type and this size from 1 quarter to the other. So we are not changing the super short-term plans, we feel that we have the capacity that we need to deal with the volume that is coming. But of course, we are always reevaluating the mid- to long-term capacity that we need to deal with the volume that we're bringing. And as part of that ongoing evaluation, we will, for sure, build the required capacity as to deal with the volume that will create. As we said over and over, fulfillment is strategic having speed fast and reliable network turns to be strategic for us in order to continue serving our customers to increase their retention, to increase their NPS and we'll continue investing behind logistics as we need to serve our customer. Osvaldo Giménez: And then when it comes to credits in Mexico, I think that we are very encouraged by what we're seeing about, by the size of the opportunity, we believe that we have a few advantages. One is the strength of our ecosystem in Mexico which gives us a huge distribution channel and also a lot of insights and that lets us issue cards and issue credits with a very small customer acquisition cost. When we look at the market in general, we already -- including banks, we are already the second largest financial institution in terms of monthly active users. Already #1 in terms of monthly downloads. So we are seeing how we are gaining a lot of traction in the Mexican market, both in consumer credit and in credit cards. And if you recall, during the first part of this year, we decelerated a little bit the additions of credit cards, but we have been reaccelerating again, and we are encouraged by the results we are seeing. So I'd say I'll summarize that we believe we have a flywheel where MercadoLibre facilitates a lot of what we do with regards to credits in Mexico. Operator: Our next question today comes from Jamie Friedman with Susquehanna. James Friedman: I wanted to ask about principality. You have these interesting call-outs in the shareholder letter on Page 2. You show that there's an 11-point increase in Brazil and 2 points in Mexico. I'm just wondering, one, how you're defining principality. And two, are there any services that you currently don't offer that you may contemplate offering financial services in order to further escalate the principality or do you have the things that you need? Osvaldo Giménez: So, I would say that we are excited by the growth in principality, which you mentioned, mostly in Brazil, but to some degree also in Mexico. The way we measure or we try to estimate principalities with some principality, if at least 50% of the income of a given client passes through Mercado Pago. And this, in some cases, we're able to assess to surveys and in other cases, with open banking data. And I would say we have already put in place the 2 of the most important things. And those are yielding account and a strong trade offering. And we -- what we don't have yet is the ability to collect your salary in the Mercado Pago account, in the case of Mexico, this is because we are not yet a bank. We are in the process of obtaining a banking license and that is a requirement. And in the case of Brazil, some people collect salary in Mercado Pago, mostly through portability. But this still is fairly small, and we believe there's a large opportunity there. Operator: Our next question today comes from João Soares with Citi. Joao Pedro Soares: Hi Martin and Ariel, Osvaldo. I wanted to double-click on an earlier question, and I think is important. I mean you are in the midst of an investment cycle, but at the same time, you're also gaining -- you're achieving operating leverage, especially on the product and development lines. So just wanted to understand, I mean, are you currently satisfied with the investment level that you're making. Is there any -- are there any areas -- additional areas that you could think use additional resources or should we think about this continued operating leverage across certain OpEx lines. I mean I just wanted to understand where you are at, at the current stage of investment? Martin de Los Santos: Hi João, it's Martin again. Yes, I think obviously, as I mentioned before, we are extremely satisfied with the results of the investment that we did. We actually announced it last quarter, right? Remember, last quarter, we showed only 1 month of investment. Now we're seeing the full effect of investment in the full quarter. So we're very excited about the results. The impact on the market place is really enormous. We talked about volume growing, but also a number of sellers and items listed on the range of BRL 19 to BRL 79 are growing very rapidly as well. So the supply side is also benefiting from this. So we're extremely happy. And on top of that, as we mentioned, we lowered the shipping costs, but still, this is a longer-term process where we're going to optimize the slow shipping layer of our logistic network. So we are optimistic about the investments, the results that we're seeing. And then on top of that, we continue to make investments in other areas of the ecosystem. 1P, as we mentioned, I think, on the letter, grew very rapidly this quarter as well. It continues to improve profitability, but still requires investments. The credit card, as Osvaldo mentioned, is still is very profitable the other cohorts. However, we continue to invest, and we are launching it in Argentina. There are some smaller initiatives that we continue to invest. We're opening new fulfillment centers. We increased our capacity -- capacity by 41% year-on-year, that required investments as well. So I think a lot of moving parts on that front. On the flip side, we mentioned in the letter, we're going at 39% year-on-year. As I said, 27 consecutive quarters of growth above 30%. This is something that no other public company has delivered of this time frame at the scale that MercadoLibre is doing it. So that obviously is helping us dilute fixed costs and we saw this quarter strong dilution on G&A and product development. So when you put all that together, I think we're optimistic about the long-term margin trajectory for our company. As I said before, we are very much focused on continuing to deliver growth in both fintech and commerce, and we will make the investments that are required to capture that those growth opportunities. As we have done in the past, we will continue to do with discipline, but we'll continue to invest. Ariel Szarfsztejn: Just to reinforce Martin's point, Ariel here. So we have amazing growth higher frequency from our buyers, record conversion rates, record retention rates for new buyers and record retention rates for existing buyers. We have more new buyers, we had our record high NPS in Brazil. We have more live listings and more sellers than what we had before. So indeed to Martin's point, we are very encouraged by the impact that we see -- we are having -- and this gives us great optimism about the foundations we are building as we look to be the driving force between shifting physical retail into e-commerce. And at the end of the day, that's our goal, right? We want to -- we know that the opportunity ahead of us is huge we need to continue reducing frictions of buying online and bringing more people into our platform. And while we do that, we need to continue finding efficiencies in order to fund that process. But definitely, we are excited and encouraged and very positive with the results we had this quarter. Operator: Our next question today comes from Marvin Fong with BTIG. Marvin Fong: I'd like to start with a few developments in recent months. I think you announced a B2B initiative as well as a partnership with Casas Bahia. And I just wanted to see if you could help dimensionalize the potential impact for that, not necessarily to your business per se. I know you won't speak to that specifically, but just kind of frame the opportunity for us. And how we should be thinking about the ability to drive future GMV growth? And then secondly, on the credit card, just overall, I noticed that the average loan size has been growing. And I know that you have a risk discipline to kind of start with small loans. So even though you're growing the issuing of new cards still continues to rise. So I just wanted to understand better like how are you loosening up or extending more credit to your borrowers from the outset? Or are you still kind of maintaining the same levels of underwriting and credit quality as you have been. So I just want to understand what's driving that dynamic. Ariel Szarfsztejn: Marvin, Ariel here. So let me start touching on Casas Bahia. So this is an exciting opportunity for us. I mean, while our 1P business continues to perform extremely well, we grew 1% year-over-year on FX neutral. Our strategy with 1P has always been to fill the gaps in selection or price competitiveness that 3P sellers were unable to fill. And as many times I've said, I think, in this call, we are a 3P preferred companies. And Casas Bahia is a seller that is able to bring more selection competitive prices to a category where we are under-indexing in market share. So our penetration in the total market for heavy and bulky items, white goods, in particular, is definitely below our average market share. So we are excited, we think -- and by the way, Casas Bahia not only brings selection and prices, they also bring some expertise in dealing with the logistics of those complex items to ship. So we are excited. We think this is complementary to everything that we are doing, both in 1P and 3P, and we believe this is another opportunity to continue improving the 2 sides of our network. I think to B2B, this is a multibillion-dollar opportunity for the super long run. For now, we are making the first steps into it. It will be long. We need to learn, we need to adjust. But again, we think it's another way to serve our customers and our seller base. Osvaldo Giménez: And Marvin, with regards to the credit card, I would say that we are definitely maintaining the same underwriting discipline that we had in the past, whenever we saw that there were worsening of NPLs, we were more cautious as we were towards the end of last year, early this year in the case of Mexico. And then as we saw that we were able to improve our models and continue to grow with NPLs under control and continue to increase the number of cards we issue, but always maintaining the same repayment target. We were more willing to issue more cards and that has been the case. In this process throughout this time, not only have we created new generations of credit models in each of the markets, roughly twice a year. But also, we have been able to improve the technology we use which allows us to upsell customers more frequently. And therefore, when we start working with someone and if they pay us back according to plan, we are able to every month or every couple of months, being able to increase the line if we deem that to be appropriate. So I would say we are comfortable. We have been able to accelerate the issuance of cards, and we are comfortable that we are doing this, maintaining the underwriting discipline that we had. Operator: Our next question today comes from Kaio Prato with UBS. Kaio Penso Da Prato: I have a question on the payment business, please. Can you talk a little bit about the pace of growth of the acquiring TPV in the ecosystem and more specifically about Brazil. Because in the country -- in the industry, we are seeing which is lower growth, at least on price TPV. And looking to your numbers, it implied a significant market share gain, which potentially accelerated actually this quarter with growth of around 28% year-on-year. So just wonder if you can share with us the drivers behind that and how sustainable is it going forward? Osvaldo Giménez: Absolutely, Kaio. So I think that you're right. What we're seeing is that we are both accelerating and growing faster than the market in Brazil. If you recall, a couple of years ago, we decided to pretty much change all of our go-to-market strategy in Brazil with regards to in-store to POS, and we were relying a lot on third party. We started building more on old sales force. We started building more our direct-to-consumers -- direct to consumers, both via MercadoLibre and via our own Mercado Pago. And those resulted in acceleration that started, I would say, over a year ago and has remained growing faster than the market for some time now. We are comfortable with that. And sort of the same thing has been happening in online payments. We also see an acceleration, particularly when it comes to credit card acquiring. We were more selective towards the beginning of this year when it comes to Pix acquiring because in some cases, we were working with very, very thin margins, and we decided that some customers were not having those price points, but we're really focused on credit card, and we have been able to gain share. And one more thing I'd like to point out is that this has been also the case in all of the other top markets. This has been the case in Brazil, in Mexico, in Argentina and Chile. So we're really comfortable with how we have been able to gain share in all of these markets. Operator: Our next question comes from Marcelo Santos with JPMorgan. Marcelo Santos: My question is regarding the other countries where you had very strong metrics across the board GMV revenues, TPV margins, which just disclose a bit of the initiatives that you are doing in these markets? If this was like MediLED or market-led and what to expect going forward? Ariel Szarfsztejn: Marcelo, Ariel here. So yes, we are extremely satisfied with the performance of the other countries. Let me give you some colors on the consolidated numbers for the commerce side. So GMV growth in Chile accelerated for the third consecutive quarter, while Colombia growth picked up more than 10 percentage points Q-over-Q, both trends driven by successful items. So we are increasing market share in both markets, particularly in Chile, the gain of market share has been stronger. So I would say there is no silver bullet to explain what's happening over there. It's more fulfillment, better logistics, lots and lots of work in selection strong work in demand generation, promotional activity and so on. NPS is higher Q-over-Q in Chile as well. So we are very pleased with the performance we had because it shows that what we are building is a very solid way -- a very solid base in which we can continue to grow, to bring, again, off-line retail into online and to continue consolidating our leadership in each market. Osvaldo Giménez: Let me add to that, Ari. If you want, on the fintech side, the 1 country where we had to focus the most, the new country we have focused most over the last couple of years has been Chile. And really, we are seeing the results of that. Our user base, our monthly user base is growing at 75% year-over-year. The yield in account is growing a lot, too, and we see an acceleration in the number of products our clients are using. So we are very excited about the results we are seeing in Chile. There are products still to be launched there, but we are very encouraged by the results we already saw. Operator: Our next question today comes from Pedro Caravina with [ Exxon ]. Pedro Caravina: Congratulations on the results. If I may, I wanted to hear from you how you are thinking about OpenAI's recent move into e-commerce? The launch its browser and partner with players such as Shopify, Walmart, and I was wondering how you're seeing potential opportunities or threats here? And could there be something similar in South America? Ariel Szarfsztejn: Pedro, Ariel here. So before jumping into OpenAI, let me say that we are extremely excited about the potential of agentic AI to enhance discovery, service and productivity within our ecosystem. There are several examples of things that we are doing on that regard. We just launched our own seller assistant, which is a conversational tool that gives sellers personalized advice and recommendations on how to manage data activity in our platform. In fintech, as you probably know, we just launched our first AI assistant that can help our users with a wide range of tasks like making or scheduling money transfer through a conversational platform, asking for questions on the user's operation and so on. But this is the first step of many to come for Mercado Pago and for MercadoLibre. I think to the specifics of your question, the key message there is that we need to continue to focus ourselves in building the best agentic experience within our platform, and that will give us optionality on what to do next and how to move forward. I think it's early to make comments on OpenAI and their partnership with Etsy, Shopify, and so on. We need to understand how this will develop in the long run, what role agentic AI will play in the relationship with consumers. And eventually, decide if there's something different that we need to do for sure. We need to put the technology in place in order to have an agentic experience in MercadoLibre and in Mercado Pago in the near term. Operator: And our final question today comes from Geoffrey Elliott with Autonomous. Geoffrey Elliott: You've talked a lot about what you're doing in Brazilian e-com and how you're growing, you're picking up share. But can you talk a bit about the competitive environment? Do you think that your competitors are behaving rationally? Or do you see any signs of irrational competition in the market? Ariel Szarfsztejn: Geoffrey. How are you? So let me start by saying something that I've said before here in this call that Brazil has always been an intensely competitive market. And I think the reason for that is that it's very attractive, large population, 1 of the 10 largest economies in the world, e-commerce penetration is still well below the global standards or benchmarks from the U.K., U.S. or China. So over the last 26 years, we've built a business with a formidable value proposition for buyers, for sellers, and this has put us in a position of market leadership. Our own market share in e-commerce has tripled since 2014, it has doubled since the pandemic, but we are still very, very small when you compare our sales in the country with the total retail sales. So the position that we've built with record of NPLs, record and preference, record retention, record conversion. This is something about the strength of everything we've done. And we are very confident that we can successfully compete against the different players in Brazil in the exact same way that we've been competing with many of them over the last 26 years. I can't speak for other players in the market, but we do not believe that anything we're doing is irrational. Just look at the results we are seeing from the lower free shipping threshold. That is a very rational move that significantly strengthens our competitive position, our ability to bring people in the online world that were driving satisfaction. We're driving retention. So as long as we maintain the strategy that served us in the past, which is to be always focused on the user and not on our competitors. We are confident that we will be able to be the platform of choice -- of choice, sorry, for buyers and for sellers in the long run. Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks. Martin de Los Santos: Thank you all for joining the call today and for your questions. As you heard, we're very excited about the results of Q3, in particular, with the results of the strategic investment that we're making the lowering of the free shipping threshold in Brazil has enabled us to accelerate growth in the marketplace and to continue to gain market share, which, by the way, grew by double over the past 5 years. The investment that we're making on credit, the credit card specifically, as Osvaldo mentioned, is maturing and helping us with profitability in addition to principality, which is very important for our fintech initiatives. So these investments have enabled us to continue to deliver growth, we delivered 39% year-on-year growth. As I mentioned earlier, that marks the 27th consecutive quarter of above 30% year-on-year growth, which is something remarkable really at the size of MercadoLibre today. So we are very excited about that. And again, looking forward to getting in touch with you once again in February when we deliver Q4 results, in the meantime, the Investor Relations team is available for further questions. Once again, thank you very much for your interest and good night. Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
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: Good day, ladies, and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, October 29, 2025. I will now turn the call over to Kyle Sauers, President and Chief Financial Officer. Please go ahead. Kyle Sauers: Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter 2025 earnings release. It can be found under the heading Financials, Quarterly Results in the Investors section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not statements of historical fact and are usually identified by the use of words such as will, expect, should or other similar phrases and are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We assume no responsibility for updating any forward-looking statements. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. We will be discussing adjusted EBITDA, which we define as net income or loss before interest, income taxes, depreciation and amortization, share-based compensation, adjustments for certain onetime or non-recurring items and other adjustments that are either non-cash or not related to our underlying business performance. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in our third quarter 2025 earnings release and our investor deck, which is available in the Investors Section of the RSI website at rushstreetinteractive.com. For purposes of today's call, unless noted otherwise, when discussing profitability, EBITDA or other income statement measures other than revenue, we're referring to those items on a non-GAAP adjusted EBITDA basis. With me on the call today, we have Richard Schwartz, Chief Executive Officer. We will first provide some opening remarks and then open the call to questions. And with that, I'll turn the call over to Richard. Richard Schwartz: Thanks, Kyle. Good afternoon, and thank you for joining us today. I'm pleased to report on another outstanding quarter that underscores the resilience of our business model and player-first approach. Our third quarter results demonstrate continued momentum and acceleration of growth across key markets, led by our continued outperformance in the online casino space. Before diving into our key quarterly performance, I want to highlight some important organizational enhancements to strengthen our leadership structure. We promoted Kyle Sauers to President and CFO, expanding his existing role to now oversee marketing, operations and commercial strategy in addition to finance. This change allows me to focus more deeply on innovation, online casino legalization and strategic growth opportunities, while Kyle drives cross-functional operational excellence across our existing markets. We've also elevated Rob Picard to Chief Strategy Officer, reflecting his contributions to our success. These changes position us well for continued execution as we scale our business. Congratulations to both Kyle and Rob. Now turning to our Q3 performance. Revenue reached a record $277.9 million, up 20% year-over-year, marking our 10th consecutive quarter of sequential revenue growth over the prior quarter. Notably, this growth was driven by very strong player acquisition and player engagement across our higher-value markets. Adjusted EBITDA of $36 million increased 54% year-over-year, demonstrating the operating leverage inherent in our business model as we scale. In total for North America, our MAUs increased 34% year-over-year, rising to 225,000. This represents our fastest quarterly user growth rate over 4 years and clearly off a much larger base of players. What makes these results particularly compelling is the continued acceleration of our growth in North American online casino markets, where we see the highest player value and retention. In our North American online casino markets, we delivered exceptional performance with 46% year-over-year MAU growth. This is also the second highest quarterly growth rate in over 4 years, again, achieved off a much larger starting player base. Even more encouraging, we've seen accelerating year-over-year growth in our North American online casino player base every single month since March, indicating a strong underlying momentum that extends well beyond any seasonal factors. While this rapidly growing player base is driven by our high-quality player experience and strong retention, we also had a record quarter as it relates to first-time depositors across the business, beating our prior high watermark by more than 10%, while doing so at very attractive customer acquisition rates. Turning to our performance in individual online casino markets. The breadth and scope of our success is encouraging. Delaware continued its noteworthy trajectory with 74% net revenue growth, demonstrating the sustained opportunity in this market even as it continues to mature. Michigan delivered 48% growth, its second fastest pace since Q1 2022. Even our most mature market, New Jersey, achieved 37% growth, the second fastest rate since Q1 2021, proving that established markets can reaccelerate with the right strategy and execution. Ontario grew 24%, its fastest pace since Q4 2023, while Pennsylvania delivered 15% growth, its fastest growth since Q3 2021. This broad-based acceleration of growth across markets of varying maturity levels validates our strategic approach of focusing on product differentiation and a high-quality customer experience. Our proprietary technology platform enables us to deliver unique gaming experiences that drive both customer acquisition and retention efficiently. In Latin America, we continued to build momentum with MAUs growing 30% year-over-year, climbing to a new record of 415,000 users. While Copa America in 2024 created a challenging year-over-year comparison in July, August and September both delivered over 50% growth, demonstrating the underlying strength of our LatAm operations extends well beyond major sporting events. Mexico revenue grew over 100% again this quarter, reflective of continued momentum and market share gains in that market. And in Colombia, while GGR again grew over 50%, net revenue was down 27% during the quarter due to player bonusing related to the temporary VAT tax. In Colombia, we continue to navigate the VAT tax environment. Our strategy of absorbing the tax impact while maintaining player experience has allowed us to grow our market position and continue to grow our player base at a fast pace. Our strong operational performance in Colombia positions us well for meaningful upside when normal tax conditions resume. As for the President's proposed 2026 tax reform, we continue to believe that Congress will not approve the proposed online gaming tax. Now I want to address several industry topics that I know are top of mind for investors. First, on prediction markets. We are monitoring this space closely. As a casino-first company, we see less direct competitive risk than sportsbook heavy operators. In fact, if prediction markets create tax revenue erosion concerns for states, this could accelerate online casino legalization as states seek more protected revenue streams, a development that would actually benefit RSI given our market-leading experience in online casino. The second industry topic is sweepstakes operators. The proliferation of unregulated sweepstakes products with games that look, feel and play identical to regulated online casino games presents both a challenge and an opportunity. The reality is that this online casino gaming is already occurring across the United States through these unregulated and illicit channels. These operators generally pay no taxes, are not subject to consumer protection or responsible gaming standards and often raise concerns about targeting minors. States are faced with a clear choice, continue to allow this untaxed, unregulated activity or they can legalize online casino gaming and regulate it properly, ensuring strong and consistent consumer protections for their residents and generating meaningful tax revenue for their states. We believe the right choice is obvious and the sweepstakes proliferation only strengthens the case for regulated online casino expansion. Looking ahead, our pipeline of opportunities remains robust. We're excited about our planned expansion into Alberta and anticipate launching in that market on day 1 when it goes live. This represents a significant online casino opportunity that leverages our proven success in similar markets, such as Ontario, where we continue to hit new quarterly revenue records. We are also actively monitoring legislative developments across multiple U.S. states where budget pressures and the need for new revenue sources are creating momentum for online casino legalization. As we look toward the remainder of 2025 and beyond, I'm confident in our strategic positioning. Our focus on markets that include online casino, our proprietary and innovative technology platform, our marketing efficiency and our operational excellence creates a sustainable competitive advantage that is difficult to replicate. The fundamentals of our business have never been stronger. We're growing fast, efficiently and profitably. Most importantly, we're doing so in a way that positions us for continued success in online gaming markets across the Americas. With that, I'll turn the call over to Kyle for a more detailed financial commentary. Kyle Sauers: Thanks, Richard. I'll now provide additional details on our third quarter financial performance and outlook. Third quarter revenue of $277.9 million increased 20% year-over-year, driven by exceptional growth across our North American online casino markets and partially offset by lower revenue in Colombia and some player-friendly sports outcomes in September. Once again, we see the results as demonstrating the consistency and durability of our business model. Online casino revenues grew 34% during the quarter, while online sports betting contracted 16% due to the elevated bonusing in Colombia. Regionally, revenue in North America grew 26%, while revenue in Latin America fell by 11%, similarly affected by the elevated bonusing in Colombia. Our gross margin was 34.0% during the quarter, reflecting continued improvement in mix shift to higher gross margin markets, but offset by player-friendly sports outcomes, which impacted Colombia results and bonusing and also, to a lesser extent, the increase in New Jersey gaming taxes. On the expense side, our disciplined approach continues to drive operating leverage. Marketing expense of $38.1 million was down 1% year-over-year while increasing sequentially by 5%. Richard mentioned this already, but it's worth reiterating, we had our highest North American monthly active user growth in 4 years, and we set another new record for first-time depositors for the entire company during the quarter, achieving this while further decreasing our cost to acquire players in North America by over 10% during the quarter, leading to continued leverage over our marketing investments, and this represents less than 14% of revenue. G&A expenses were $20.4 million, up 8% year-over-year, reflecting continued investment in our technology platform and operational capabilities to support our growth. As a percentage of revenue, G&A remained well controlled at 7.3%, and we continue to expect modest leverage over this line item as we scale. Adjusted EBITDA of $36 million increased 54% year-over-year, representing a margin of 13%. This demonstrates the significant operating leverage in our business model as we continue to scale. The strong flow-through from revenue growth to profitability underscores the quality of our revenue streams and the efficiency of operations. Looking at our key operating metrics, the strength of our performance becomes even more apparent. North American MAUs of 225,000 users with 34% year-over-year growth, our strongest quarterly performance in over 4 years. And more importantly, this growth is concentrated in our higher-value online casino markets. North American ARPMAU of $365 was down 5% year-over-year, which is expected given the impressive growth in the user base. As we've seen consistently, newer player cohorts start with lower spend levels and more bonusing before increasing engagement and player value over time. This is exactly the dynamic we want to see, rapid customer base expansion that will drive long-term value creation. In Latin America, MAUs reached 415,000, up 30% year-over-year despite the challenging Copa America comparison in July, the acceleration we saw in August and September with both months delivering over 50% growth and demonstrating the underlying strength of our LatAm operations. Our balance sheet remains exceptionally strong. We ended the quarter with substantial unrestricted cash of $273 million and no debt, providing significant flexibility for both organic growth investments and potential strategic opportunities. Our strong cash generation continues with meaningfully positive operating cash flow throughout the quarter. I'll also note that we have begun including our balance sheet and cash flow statement in our quarterly press release starting this quarter. Regarding our outlook, we remain confident in the momentum we've built and the opportunities ahead. The acceleration we've seen in North America online casino markets every month since March gives us confidence that this growth is sustainable and not merely seasonal. We continue to expect to maintain marketing leverage for the full year with marketing expenses growing at a lower rate than revenue. Our G&A investments are focused on areas that directly support our growth, particularly technology and product development capabilities that enhance our competitive differentiation. Looking at the fourth quarter and beyond, we believe we're well positioned to continue delivering strong performance. The seasonal strength we typically see in Q4, combined with our accelerating market trends positions us for a strong finish to 2025. We remain excited about our expansion opportunities, particularly in Alberta, where we expect to launch when that market opens. Our success in similar markets gives us confidence in our ability to capture meaningful market share quickly. In summary, Q3 represents another quarter of exceptional execution across all aspects of our business. We're growing faster, more profitably and more efficiently than ever before while building a foundation for sustained long-term success. Based on this continued strong performance, we're raising our full year revenue and EBITDA guidance. We expect 2025 revenue to be between $1.1 billion and $1.12 billion, up $35 million at the midpoint of $1.11 billion and representing a 20% year-over-year increase. For the full year, we anticipate adjusted EBITDA to be between $147 million and $153 million, up $10 million at the midpoint of $150 million, which is up 62% year-over-year. And one last reminder, our guidance includes only those markets that are live as of today. And with that, operator, we can open the line for questions. Operator: [Operator Instructions] Our first question comes from Dan Politzer with the company, JPMorgan. Unknown Analyst: This is actually [ Sam ] on for Dan. First, I think if we think about your updated guidance, it implies fourth quarter incremental margins at the midpoint of around 20%, which is below recent levels. I think you talked about some increased marketing in the fourth quarter, but is there any other color you could provide around puts and takes, maybe like a sports betting unfavorable holds from sport outcomes? Kyle Sauers: Yes. Thanks for the question, Sam. I think I'd point to, yes, the increased marketing spend. As we've pointed out in our prepared remarks, we've been having really good success bringing on a lot of new players and at attractive rates. So that's part of it. I think the other piece that I would put in there is just the ongoing VAT tax that goes through the end of the year in Colombia that's impacting gross margins and revenue growth down there a little bit. Unknown Analyst: And then there's some recent news coming out of Mexico, they're considering a potential increase in gaming tax rates. Was this something you were anticipating going into the year? And how would you kind of think about increased tax rates impacting kind of how you operate in that market? Kyle Sauers: Yes. We've been tracking that. I wouldn't say it was something that we anticipated heading into 2025, but it does appear that in Mexico, the gaming tax is likely to increase from a current rate of 30% up to 50%. There have been and should continue to be ways to reduce the effective rate below these amounts. But we'll keep you updated next year, assuming these changes get enacted and what that means for us and if there's any difference in the way we approach that market. Operator, I think we can go to the next question. Operator: Our next question comes from Bernie McTernan with the company, Needham & Co. Bernard McTernan: Maybe just to start and keeping on the LatAm theme. What should we be looking for in terms of like next steps for what's going on in Colombia and the VAT tax? And maybe, Richard, just gauge your, I don't know, probability of it going through or not, if it's still a high degree of confidence or not? Richard Schwartz: Sure. Yes. So Colombia, it is a situation where the President's tax reform does require congressional support. I think there's been some articles published over the last few weeks that sort of sometimes don't convey that clear picture that it does require congressional support, and we continue to feel there is not sufficient support by Congress to pass that. So you do -- if that doesn't pass, then the normal tax conditions should resume. That's sort of the state of things today, but November is going to be a very busy time in the political arena down there. The President remains unpopular and his party does. So it's still some work that's happening down there, but I certainly think that the current view is that the current tax reforms proposed will not be adapted. Bernard McTernan: Understood. And then, Richard, you also -- there was obviously the press release happened not too long ago, but then you mentioned on this call how there's the -- Kyle being promoted to President and allowing you to focus on more strategic, maybe bigger picture things. Just wanted to see if there's any commentary on maybe why now or if there's anything you could bring us under the -- like, the hood in terms of what you'll be focused on specifically? Richard Schwartz: Sure. First of all, I think Kyle deserves it, the opportunity -- he's done tremendous job for the company since he joined us and the support throughout the Board and colleagues, other executives and everyone in our community that follow our company, I think, has recognized how deserving it was. But ultimately, I also for myself realized that the impact to our company of having additional states legalizing online casino is very profound and very significant. And I believe, as I shared on prior calls, that there are opportunities to improve how our industry lobbies and the narrative, the messaging and hopefully, the impact of the opportunity will be stronger if I'm able to spend more time working with other colleagues from our peers to try to align folks in a way that hasn't really been aligned as much as we'd like in the past. So, I think, number one, online casino legalization requires a very strong and very dedicated effort to really try to move the needle in terms of accelerating the pace, and I think we'll be able to achieve some results with some additional time to focus on that. In addition, as we know, we hired a new CTO earlier this year. He's off to a tremendous start. And what I'm excited about is working with him and the team to continue to deliver experiences that are fun that players want to play and they can't get anywhere else. So at the end of the day, we want to continue to improve the innovation of our business and the differentiation, which has been the source of a lot of our success and why you see our ARPMAUs at such a high rate relative to others is because we have a constant flow of new ideas implemented in smart ways that consumers really enjoy and appreciate. And we have a team that loves building these fun experiences, but we need to do more of that. And I, as some of you know, have a long history in that part of the business on the product side, and I think it could be a great opportunity to kind of ensure that we have our next pipeline enhanced and coming through at a faster pace. So I'm really excited to focus on innovation as well. And then as you can also imagine, there's all these strategic opportunities in the industry, and we want to make sure that we have a proper focus on those and make sure that when we evaluate how to direct capital to get the highest returns that we're comparing all the opportunities, and there's a lot of them. So, we have to sort of make sure we have the right focus on those to ensure that when we do find the right ones, we are able to act and have proper support to make sure it's successful. So those are the sort of the things that I'm hoping to focus on. Bernard McTernan: Certainly, we feel the similar sentiment towards Kyle. Richard Schwartz: Appreciated. Kyle Sauers: Thank you. Operator: Our next question comes from Jordan Bender with company Citizens. Jordan Bender: So the state reported data doesn't always tell the whole story, but it does look like you got a little bit more promotional on the sports betting side of the business later in the quarter, which we can kind of see in your handle accelerating. Curious as to what you're seeing in the market that's making you lean in? And are you seeing anything elevated from your end or the market's end as we head into the fourth quarter here? Kyle Sauers: Yes. Thanks, Jordan. I don't think I would highlight anything dramatic that's happening within the industry. Obviously, everybody has their own strategy heading into football season that they're trying to execute. And we're -- I think probably like all operators, we're continuing to refine our bonusing in all of our different markets, and each market might look a little bit different, but making sure the bonuses are getting to the right players. So really, no big change in strategy there for us. Jordan Bender: And then if I can follow up in Colombia, if I caught it right, I think you said NGR down 27% in the quarter, which, if I heard that right, would kind of represent a pretty meaningful deceleration from what you saw in the first 2 quarters of the year. I guess, like is there anything structurally different from what you're doing in that market? Obviously, it ends here in a couple of months, but just curious on why the deceleration there. Kyle Sauers: Yes. So just to be clear, I don't think I would refer to it as a deceleration because the player count growth was still super strong. GGR growth was still super strong. This was about the bonusing that we're doing to offset the VAT tax on the players. And it was a bit more painful for us in Q3 in terms of the impact on net revenue. And part of that comes from better sports outcomes. And then because of that, you have players who have a little bit fuller balances in their accounts. So there's a little more churn with deposits and withdrawals, which creates more bonusing. So that's really, how I would describe Q3 as it relates to Colombia, but not a deceleration. It was more about the bonusing. Richard Schwartz: And I would just add that the handle, the gross gaming revenues, the player volumes are generally in line with the growth we were experiencing prior to the VAT tax implementation. So we continue to see really healthy growth in that market. Operator: Our next question comes from Ryan Sigdahl with the company, Craig-Hallum. Ryan Sigdahl: Really nice results. I want to start kind of in the U.S. and then we'll move to Latin America, like everybody else. But you announced some nice payment processing partnerships, Sightline Payments for an integrated debit solution. You have BurraPay for crypto. But you guys seem like kind of a leader, first mover on a lot of that stuff. Curious how those partnerships came about? Any metrics you're willing to give from a percentage of players that are using these or have adopted? And then kind of how you think about the cost savings versus potentially even customer retention features of these. Richard Schwartz: Right. Sure. I'll take that one, Ryan. Thanks for the comments on the quarter. Yes. So it really starts off with sort of a reputation that we developed over the years, I think, as a thought leader and an innovator in our industry. And when you have to pioneer new payment methods, in particular, it's extraordinarily complicated and requires not only engineering teams, but compliance, operations and every sort of partner and all stakeholders have to sort of align together and figure out really tough challenges and how to execute on them. And I think we've done it before as we have. We're a natural company that people want to partner with because we have a track record and a history of delivering new experiences to customers in a great way. In the case of Sightline, their Co-Founder, CEO and myself have a relationship going back many years, since they launched their business, and our teams get along extremely well. And we recognize that together we could deliver an experience that is solving a need that industry has, especially for us. And so we had a very collaborative and terrific relationship, and we launched that product, and we're really excited for it. But it's still very early and I don't have any metrics to share on this call and at this time. For BurraPay, other long-time executive industry approached us, again, for similar reasons, knowing that we have a great reputation, I think, and are able to pioneer new approaches. And similar to the Sightline experience, we were able to agree on a framework to work together and collaborate to deliver great experiences. So payments are key to our industry. And when you can innovate and find ways to solve players' friction, deliver more efficient experiences for them, and -- it makes a difference. And so we tend to do that in Latin America very well, and we're doing that equally as well, I think, in the U.S. market. Kyle Sauers: Yes. And the only thing I would add, Ryan, I think you hit on it, but there's 2 reasons for these types of innovations around payments. The first is, obviously, to have a great player experience and a journey where it makes it very easy for players to feel comfortable, trust the platform, get their money on and off the platform when they want. And then the second piece is to make sure that it's improving our financials and reducing costs over time. So when we can accomplish both of those things at the same time, that's a big win for us. Ryan Sigdahl: Yes. Then switching down to Colombia. We don't need to debate or likelihood of tax reform, we'll kind of wait and see how that all plays out. But to me, it's a positive regardless, curious, your thoughts on that. There's a great outcome, obviously, that it doesn't continue into next year and you get an immediate uplift. The other option is it does in some form. But my question is, do you expect operators to change strategies, behavior? I guess, to me, it felt like everybody was operating under a temporary -- this year absorbing the VAT tax because it was going to go away. But if it ultimately becomes permanent, people likely partially or stop doing that and actually results can improve next year regardless. Kyle Sauers: Yes. I think it's a good point. I think there's -- at either end of the spectrum for outcomes, it should be a better scenario for us next year. So I mean, if you just look at some of the numbers, for the year, GGR is up a little less than 60% and net revenue is about flat. But that includes the first couple of months of the year because the bonusing and the VAT didn't go into place until late February. So if you just looked at Q2 and Q3, GGR is up almost 65%, but net revenue is down almost 15%. So it gives you just kind of a decent perspective on the headwind from the extra bonusing that we're doing along with the other large operators. So then you jump to 2026, the VAT going away is obviously going to have a very solid impact on our revenue growth given that we've seen the GGR growing over 60%. And at the other end of the possible outcomes, as you point out, we think it's likely that all the operators would decrease the bonusing, take that bonusing away, which wouldn't be great for GGR, but it should be much better for us in net revenue and profitability. And then the other piece of it is, by the end of February we're lapping the bonusing that we started doing because of the VAT tax. So both of those could be beneficial for us. Operator: Our next question comes from Joe Stauff with the company, Susquehanna International Group. Joseph Stauff: I wanted to ask, Richard, on your comments about the sweepstakes market, what states that you operate in currently do you consider to have a pretty substantial headwind in terms of sweepstakes operators operating against you? Richard Schwartz: Well, remember, there's sweepstakes across poker and across sports and across casino. So, I guess a couple of large states have been fairly effective at having the regulators sort of issue cease and desist letters and removing some of the competition. I'll mention Michigan is one example and Delaware is another example. In other states where you operate with online sports betting and some efforts to legalize online casino in Virginia, a market that does still have sweepstakes, for example, Illinois still has it as well. So it's really a mix across the country of states that have been able to sort of exit the sweepstakes and others that have not. So, it's not a very clear cut. In some cases, some of the larger sweepstakes operators leave, but there's others that still stay. So it's not a very clear image and a lot of confusion sort of what the status is in some of those individual states. Joseph Stauff: Got you. So for iCasino in particular, maybe of your more material states, Michigan, Delaware or maybe the states where it's a little bit cleaner, whereas the other ones, not so much. Richard Schwartz: Yes, I'm not actually familiar with the latest in a couple of those other states other than the ones I referenced. Joseph Stauff: Got it. And in terms of just the reinvestment you did in the third quarter and the reacceleration, for instance, especially like in a state like New Jersey, if we think about the first-time depositors, which you said was a record, was it heavier in certain states than not? Or is it more kind of across the board? Kyle Sauers: Yes. Thanks, Joe. So for sure, it is concentrated in markets that have iCasino available. So I would include Ontario and that in addition to the states that we're in. That's where we -- we haven't been shy about the fact that we feel like we have very differentiated product and an advantage there. And so that's where our marketing investments should go, and it's clearly paying off. I mean, I think our 34% growth in our monthly active users in North America is impressive. But when you get to just the iCasino markets, and it was 46% year-over-year. That tells you that's where we're investing and that's where we're having a lot of success. Operator: Our next question comes from David Katz with the company Jefferies. David Katz: First question, Richard, I think you talked about prediction markets a little bit. But I'm not sure if you said whether you would be potentially looking into offering it if it became a legalized context to do so? Richard Schwartz: I don't think I addressed that, and I predicted you might ask this question. So the truth is, is that when it comes to prediction markets, the legality of it is being debated across the federal government and state jurisdictions right now. A handful of states, as you know, are actually pushing back against prediction markets as unauthorized offerings. At RSI, our focus is on our core business, delivering sustainable growth while navigating the regulatory landscape responsibly, which means that we aren't going to be a pioneer. While we're very innovative in a lot of ways, we're not going to be a pioneer in this category. But certainly, we have to have a even playing field ultimately, depending on whatever happens. But we're certainly monitoring it closely, aware of everything that's been happening and don't expect to be pushing any limits because we certainly respect the state gaming licenses and recognize that licenses are a privilege at a state level, not a rights. And so we have to be very cautious and make sure we're compliant with those stakeholders there that feel strongly on this topic. David Katz: Understood. And if I may, as my follow-up, Kyle, if I can still address you as Kyle. I noticed that there wasn't any share repurchase in the quarter. Just curious if there are sort of other uses there or what the philosophy was behind that. Kyle Sauers: Yes. Thanks, David. I'm still going to call you, David. Yes, we didn't do any buybacks during the quarter. I continue to think about future buybacks as being opportunistic rather than programmatic. So we're going to just remain flexible on how we use the buyback authorization and make sure that we're -- we've got a lot of dry powder for new markets that come along or other opportunities as well. Operator: Our next question comes from Jed Kelly with company Oppenheimer. Jed Kelly: Just on the iGaming growth in some of your more mature states, what -- can you kind of dig in more to what's driving that acceleration? Is it more product exclusive content or is it something you're doing on the bonusing or are you just getting share gains from other competitors? Kyle Sauers: So Jed, I'll start and maybe Richard will jump in here. But I think it's everything. So obviously, when you look at the monthly active user growth, that's not just about getting new people to the platform. That's having a great product and a differentiated experience and giving people a reason to come back every day. When it comes to bringing, like, people to the platform, which obviously we're doing quite well given that this quarter was a record for first-time depositors at the company, I think 10% higher than our previous record, which happened to be last quarter, and we're not spending any more money doing that. I think that tells you a lot about the quality of our marketing team and our marketing programs. We've done a lot to continue to add resources to that team, and they keep getting better and better. But the good news is that there's a lot of things we can still do better than we are today. But I think the fact that we're adding so many new users and then keeping them around says a lot about the momentum we have in the business. I think you probably heard it in the prepared remarks, but our year-over-year growth in monthly active users accelerated every quarter or every month sequentially since March through September. So that's -- I think that's pretty impressive, and we're very excited about that. Jed Kelly: And just as a follow-up, what do you think is more of a catalyst for further iGaming legislation? Is it prediction markets or sweeps? Richard Schwartz: Sure. I think both have a meaningful role to play, because in one case, prediction markets is reducing the sportsbook revenues potentially that states will be obtaining from the sports betting statewide frameworks that exist. If that happens, certainly, online gaming is a safer, more protected category of casino revenues that would be sustained. It certainly helps that online casino generates a 4x the tax revenues of sports betting. So as states have more financial pressures, and I think as the big federal bill starts to get implemented in the next couple of years, you're going to have increased financial pressures on states. And as we've seen some stakeholders in the discussion recognize online casino represents one of the very most available, accessible, proven, reliable opportunities for states to have a meaningful additional source of tax revenue. So, it's a financial element on sweepstakes, certainly, the fact that the size of that industry is not to be underappreciated. It's a multibillion-dollar industry, and there's a whole large volume of customers that could be online casino regulated customers that are right now playing these sweepstake sites. And I think it's interesting that when you do have folks opposing online casino being regulated, you don't have the same effort usually applied towards operating the sweepstakes market that already exists today. So certainly, the existence of it and the fact it's not taxed, and as I said in the prepared remarks, not tax doesn't protect consumers, really add no value to a state in any way. It just has a negative consequences versus the online gaming regulatory process and legalizing it adds a lot of value to states by protecting consumers and generating taxes and creating opportunities to fund resources to local causes and public services that need that sort of support. So I do think that these things are going to help plus the financial needs of states. And as I said earlier, having better alignment in our industry is really important. And as I have more availability, I hope to be able to focus on these things, I'm hoping to be able to deliver some accelerated efforts in some of the key jurisdictions that are important for us in the future. Operator: Our next question comes from Chad Beynon with the company Macquarie. Chad Beynon: I feel like we covered everything on iGaming. For sports betting, maybe wanted to ask one just in terms of how the customers have reacted just with in-play. So we have heard that there was, obviously, customer-friendly outcomes for American football and for soccer, I think, in September and for October, so that probably hurt hold. But just in terms of the in-play percentage helping hold, does that continue to look or does that continue to grow from a year-over-year perspective? And if we see normal outcomes, that could lead to a year-over-year increase in hold? Kyle Sauers: Yes. Thanks, Chad. So we have continued to see improvement in the percentage of betting that goes both to parlays, SGPs and to in-game. That's been an initiative for us for quite some time. So those trends have been positive for us. Interestingly on the hold, absolutely, there were some player-friendly outcomes, as you pointed out, and it's well publicized, particularly in September. So that did create some headwind. But I will point out that our sports hold in the U.S. actually hit its highest point in our history in Q3, even with those tougher outcomes. So I think that's a pretty good reflection of how our team has been able to continue to improve the product and the offering and drive players to a better mix of bets. Chad Beynon: And then on Colombia, again, I think previously, you've talked about the VAT tax representing roughly a low double-digit hit to EBITDA. You're doing things to offset it and you laid that out for the third quarter. But as we think about the guidance increase and maybe the outperformance in Q3, is it fair to say that maybe the beat -- I guess, some of it is probably coming from the MAU growth. But was there any type of a beat against that originally expected VAT impact? Kyle Sauers: So not positive. I understand the question exactly, but I'm going to answer and you can tell me if I got you here. I think when you look at Q3 and the guidance raise, it's probably -- it's more about continued acceleration in MAUs, so more players, outperformance in North American iCasino, actually really good operational performance in Latin America, but more pressure from the bonusing in Q3 than maybe we would have anticipated, and that's partly because of those good player or the player-friendly sports outcomes, I should say. Did that get to your question? Chad Beynon: Yes, answered like a President, thank you Kyle. Congrats. Kyle Sauers: Thanks. Appreciated. Operator: Our last question comes from Mike Hickey with the company Benchmark. Michael Hickey: Richard, Kyle, congrats on the quarter. And Kyle, congrats on the promotion. I dropped myself, guys early in the call. So this question seems obvious. But on the prediction market in states where you have market share, call it, Delaware, are you seeing any pressure from Kalshi, soon to be Polymarket in that state or states? And I have a follow-up. Richard Schwartz: Thanks, Mike. Yes, I'll answer that. No, the truth is we have not seen an impact to date from -- that we've noticed in those states where we operate the sports betting. So, we're still looking for that and certainly monitoring it, but we haven't seen much of an impact. Michael Hickey: Richard, do you see anything on the prediction platforms in terms of innovation that you would potentially integrate into your online gaming products, OSB products? Richard Schwartz: That's a good question. We have people look at it closely. I think we're still just trying to appreciate that while it's often described as a peer-to-peer experience, what we're seeing is that there are some large companies that are taking positions on one side of the equation and essentially almost replicating what a sportsbook is from, I guess, the house. I think when you start to -- I think the BFS industry had a lot of really smart pioneering things they did that sportsbooks could and should embrace as well in terms of how you communicate that propositions to players. And I think you're going to see which types of markets gain momentum in the prediction. And some of the things you might not expect will be the popular markets, and it's been up for companies like us to identify how we strengthen our own book. So I think the things we'll be paying attention to. But I would say it's almost still premature to really see a lot because, so far, what's been happening is that the prediction markets are less regulated than we are. And so perhaps you will start and are self-certifying in many cases, you start to see things happening in the future maybe that are worth us paying attention to. But what you've seen so far is really that industry trying to replicate sports betting and starting to say, well, we have same game parlays, so how can they do same game parlays. So I think right now, the direction is more of them trying to replicate what exists in our business. But at some point, I could see if that market was to exist, although obviously, it's a long way to know that's going to happen, then you certainly would start to see cross-pollination of ideas in the other direction, too. Michael Hickey: Last question from us. Does the -- do you think the Trump fight with the Colombian President, does that -- is that creating more or less support in Colombia for the President in his potential tax change? And then I guess, broadly speaking, kind of a mess in Colombia. I mean, does that sort of take down a little bit, I guess, your appetite to expand further? I mean, Brazil, Ecuador, Chile, Argentina, all really interesting regions, I think you're looking at maybe unlocking. But the sort of the mess in Colombia, I guess, sort of pull back in your desire to put capital to work in other countries in Latin America? Richard Schwartz: Yes. Maybe I'll take your second question first, and the answer is no, it doesn't really dampen our interest. It's a lot of effort to get experience right for Latin America. We believe those markets are at the infancy of growth. And as we see in our growth ourselves, there's lots of opportunity there, and it's a very large population across Latin America that are in the process of or will be legalizing online gaming in the future. So we certainly remain very excited for it. And frankly, some of the things that are happening in these regions are also happening here in United States across the different footprints here. So I don't think anything is -- anything is possible these days, it feels like with anywhere in the world. So I think certainly, we are excited for the LatAm market and think we will be able to control the things that we can and execute where we can and influence when we're able to in terms of how we sort of want frameworks to exist in a way that's viable. But I think we're excited for the future in LatAm. In terms of the Colombia question, we certainly haven't heard or seen any evidence of anything impacting us. Certainly, we've been a great citizen down there, continue to be very respected in that industry and feel really confident about the taxes we generate and the quality of the business that we run down there. So I think the answer would be no to your question. Operator: At this time, there are no more questions registered in the queue. I'd like to pass the conference back over to our hosting team for closing remarks. Richard Schwartz: Well, thank you for joining us today. We're excited about the road ahead and look forward to sharing our continued progress when we report our fourth quarter and annual results next year. Operator: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.
Operator: Good day, and welcome to Carvana's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Meg Kehan with Investor Relations. Please go ahead. Meg Kehan: Thank you. Good afternoon, ladies and gentlemen, and thank you for joining us on Carvana's Third Quarter 2025 Earnings Conference Call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at investors.carvana.com. The third quarter shareholder letter is also posted on the IR website. Additionally, we posted a set of supplemental financial tables for Q3, which can be found on the Events and Presentations page of our IR website. Joining me on the call today are Ernie Garcia, Chief Executive Officer; and Mark Jenkins, Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including, but not limited to, Carvana's market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. A detailed discussion of the material factors that cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Carvana's most recent Form 10-K and Forms 10-Q. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Carvana assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Our commentary today will include non-GAAP financial metrics. Unless otherwise specified, all references to GPU and SG&A will be to non-GAAP metrics, and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our shareholder letter issued today, a copy of which can be found on our IR website. And with that said, I'd like to turn the call over to Ernie Garcia. Ernie? Ernest Garcia: Thanks, Meg, and thanks, everyone, for joining the call. The third quarter was another incredible quarter for Carvana. We remain the most profitable and fastest-growing automotive retailer. These data points are exciting in isolation. Achieving them simultaneously is rare and points to an exceptional future. Achieving them by the margins we have been recently, profit margins more than 2x the industry average and growth over 40% when other public retailers are approximately flat points to something that is structurally different, something that is capable of achieving our ambitious mission of changing the way people buy and sell cars. That is exactly what we believe we are capable of, exactly what we are focused on making happen and exactly what the data is telling us we are marching toward every quarter. Q3 was another large step on the path to achieving our current goal of selling 3 million cars at a 13.5% adjusted EBITDA margin in the next 5 to 10 years. We're getting better as we get bigger, aided by the feedback inherent in our business, the benefits of scale and our continued pursuit of fundamental gains as well as the addition of foundational capabilities. The positive feedback flywheel is spinning. The data that powers our decision-making throughout the business is growing exponentially and allowing us to iteratively improve the models powering every decision across the business. Our sales growth allows us to keep growing inventory economically, constantly broadening customer selection. Year-over-year, our inventory turn time is approximately flat, yet our customers have nearly 50% more cars to choose from. And the benefits of scale are also allowing us to make investments that magnify these advantages. Over the last 18 months, we've added reconditioning capacity to 15 ADESA locations, allowing us to position inventory closer to our customers, reducing customer delivery time by a day in the last 5 quarters. We've developed our digital auction capability, ADESA Clear, delivering a best-in-class digital auction experience to our wholesale customers, allowing us to add wholesale capabilities to 12 of our inspection centers and counting. Having the strongest retail and wholesale channels to sell vehicles makes us a systematically better buyer of all cars from our customers and our partners. We've also been working on making dramatic improvements to delivery capability that will show up over time. We are currently using Phoenix as a test market to optimize our finance verifications, registration processes, vehicle staging, delivery scheduling systems and staffing models for speed. As a result, 40% of customers in Phoenix are now getting same or next-day delivery compared to 10% that get same or next-day delivery nationwide. On any given day, customers in Phoenix have about 2,500 cars available to be delivered that same day. That's worth pausing on and taking time to think through the implications. Thousands of vehicles that can be purchased in minutes and delivered in hours is a highly desirable and extremely difficult to replicate capability. Like all good things, this will take some time to optimize the rollout across the country, but it is coming. Another set of statistics that demonstrate meaningful progress are that today, more than 30% of retail customers now complete the entire process without any interaction with the customer advocate until their delivery or pickup appointment. For customers selling their car to us, this number is more than 60%. To make this possible, our business must be vertically integrated, data must be well organized and immediately accessible. Decisions have to be deterministic and automated. Workflows have to be concretely defined inside of systems and all that has to be wrapped in intuitive interfaces that make customers feel confident. It's hard. Our team is doing a great job, has detailed plans to keep making it better and is nowhere near satisfied. Looking forward, we continue to see opportunities for fundamental gains in every line item. Opportunities that will make our customer experiences simpler and more fun, will make our costs lower and will make our business more efficient. Our plan is to unlock these opportunities with the same discipline that has driven our success so far. Something that has always been true in the past remains true today and that we suspect will be true for a long time is that prioritizing our opportunities is the hardest part of making significant progress quickly. With constantly evolving technology, constantly evolving customer preferences and expectations and an ambitious group of thoughtful people, new opportunities emerge faster than we are able to take advantage of the ones we previously saw. With AI, this is more true today than it has ever been. The future is bright. Selling 3 million cars per year with 13.5% adjusted EBITDA margin in 5 to 10 years is very achievable. There's a lot left to do, and there's an excited team ready to do it. We will continue to aggressively pursue rapid progress, and we aren't tired. The march continues. Mark? Mark Jenkins: Thank you, Ernie, and thank you all for joining us today. The third quarter was another very strong quarter for Carvana that was driven by our team's continued focus on identifying further fundamental gains and operating efficiencies and developing foundational capabilities while also pursuing growth. We set new records for retail units sold, revenue, adjusted EBITDA and GAAP operating income. And for the first time, our annual revenue run rate exceeded $20 million, a significant milestone pointing toward the long-term scale of our business. Moving to our third quarter results. Unless otherwise noted, all comparisons will be on a year-over-year basis. Retail units sold totaled 155,941 in Q3, an increase of 44% and a new company record. Revenue was $5.647 billion, an increase of 55% and also a new company record. Revenue growth exceeded retail units sold growth, primarily due to higher average selling prices and traditional gross revenue treatment for certain vehicles acquired from a large retail marketplace partner. Consistent with past quarters, our growth in the third quarter was driven by our 3 long-term drivers of growth: a continuously improving customer offering, increasing understanding, awareness and trust and increasing inventory selection and other benefits of scale. Our strong profitability results in Q3 were again driven by our team's focus on driving fundamental gains and operating efficiencies as well as levering our overhead expenses. Non-GAAP retail GPU decreased by $77, primarily driven by higher retail depreciation rates. Non-GAAP wholesale GPU decreased by $168, primarily driven by higher wholesale depreciation rates and retail units sold growth outpacing ADESA marketplace growth. Non-GAAP other GPU increased by $63. This change was primarily driven by improvements in cost of funds and higher finance and VSC attach rates, partially offset by higher-than-normalized loan sales relative to originations in Q3 2024. Looking ahead to Q4, we expect sequential changes in retail GPU, wholesale GPU and other GPU in a similar range to last year, with the latter primarily reflecting sharing fundamental gains with customers through lower interest rates. In October, we expanded on several existing loan sale partnerships with agreements for the sale of up to $14 billion of future loan principal. First, we upsized and extended our Ally agreement for up to $6 billion of loan purchases through October 2027, an increase from $4 billion through April 2026. Second, we entered into a new loan purchase agreement with a loan sale partner for up to $4 billion of loan purchases through October 2027. Third, we entered into an additional loan purchase agreement with another loan sale partner for up to $4 billion of loan purchases through December 2027. The latter 2 agreements formalize existing relationships and establish defined expectations for sale volume and sales procedures throughout the agreement period, highlighting the significant fundamental strength of our vertically integrated finance platform. Q3 was another strong quarter for demonstrating the power of our model to lever SG&A expenses. Our 44% growth in retail units sold led to a $319 reduction in non-GAAP SG&A expense per retail unit sold. Carvana operations portion of SG&A expense decreased by $96 per retail unit sold, primarily driven by our operational efficiency initiatives. We continue to expect Carvana operations expense per retail unit sold to decrease over time as we deliver fundamental gains and operating efficiency. The overhead portion of SG&A decreased by $314 per retail unit sold, driven by continued leverage of our overhead expenses with greater retail units sold. Advertising expense increased by $139 per retail unit sold as we continue to take advantage of opportunities to invest in building awareness, understanding and trust of our customer offering. We expect advertising expense in Q4 to be similar to or slightly higher than Q3. We continue to see opportunities for significant SG&A expense leverage over time and as we scale, driven by both continued improvements in operational expenses as well as leverage in the fixed components of our cost structure. Net income was $263 million in Q3, an increase of $115 million. Net income margin was 4.7%, an increase from 4%. GAAP operating income was $552 million, an increase of $215 million and a new company record. GAAP operating margin was 9.8% and an increase from 9.2%. Adjusted EBITDA was $637 million, an increase of $208 million and a new company record. Adjusted EBITDA margin was 11.3%, a decrease from 11.7%. As previously discussed, our adjusted EBITDA is very high quality compared to many rapidly growing companies due to our relatively low noncash expenses, which we'll continue to lever with scale. We converted approximately 80% -- 87% of adjusted EBITDA into GAAP operating income, an increase from 79% last year. As previously noted, we currently carry many expenses that support retail unit sales capacity of over 1 million units and expect our GAAP operating income to grow faster than adjusted EBITDA over time. In the third quarter, we took additional steps to further strengthen our balance sheet with a continued goal to drive toward investment-grade credit ratios. In Q3, we retired the remaining $559 million of our 2028 senior secured notes, primarily through proceeds from $539 million of equity issuance through our ATM program. Following quarter end, we also retired $98 million of 2025 senior unsecured notes due October 2025, bringing our total quantum of corporate debt retired in 2024 and 2025 to $1.2 billion. With more than $2.1 billion of cash on the balance sheet, our net debt to trailing 12-month adjusted EBITDA ratio is now down to just 1.5x, our strongest financial position ever. Our results through Q3 position us well for a strong finish to 2025. Looking toward the fourth quarter, we expect the following as long as the environment remains stable. Retail units sold above 150,000, and adjusted EBITDA at or above the high end of our previously communicated range of $2 billion to $2.2 billion for the full year 2025. In conclusion, Q3 marked another outstanding quarter for Carvana. We remain very excited about progressing toward our long-term phase of driving profitable growth and pursuing our goals of becoming the largest and most profitable auto retailer and buying and selling millions of cars. Thanks for your attention. We'll now take questions. Operator: [Operator Instructions] The first question comes from Sharon Zackfia with William Blair. Sharon Zackfia: I guess the topic du jour is kind of subprime loans. And I know we can see a lot of your subprime loan performance and your prime loan performance through various different vehicles. But can you talk about kind of the health of the portfolio, whether you foresee needing to take incremental reserves there at all? And then separately, the timing of the formalization of these new third-party agreements, kind of what brought on that timing? Mark Jenkins: Sure. I can take that one. So the very simple answer on loan performance is our 2024 and 2025 loan originations are performing extremely well, both in an absolute sense and relative to industry comparables. I think some of the chatter out there about loan performance more broadly, we think has a lot to do with the 2022 and 2023 industry-wide cohorts, which did underperform initial expectations. I think most of the industry ourselves included tightened credit in late 2023. We certainly did, and we've maintained that tightness here through where we are today in 2025. As a result, our loans are performing strongly. I think the best evidence of that is twofold. One, just the stability and strength in our other GPU. And then secondly, the outside validation of having Ally upsized from $4 billion to $6 billion based on the performance trends that they're seeing and additionally, the addition of these 2 new purchase agreements, I think, are great validation of the strength that we're seeing given all the fundamental gains that we've made in the program over time. So I'll start there. In terms of the specific timing of these agreements, I think it's really just a continuation and a maturation. These 2 large agreements are with existing partners who we've been selling loans to over the preceding periods. Those previous loan sales have been more on a one-off basis. And so what these agreements do is effectively formalize the sales procedures and set volume expectations with those partners to essentially make more programmatic, the more one-off sales that we've already been doing. And so really, I think there -- the main point there is it's a maturation and a continuation of something we've already been doing, but now just in a more structured and formal way. Operator: The next question comes from Marvin Fong with BTIG. Marvin Fong: I hopped on just about 5 minutes ago, so I apologize if I missed this. But the OpEx, the operating expense per unit, I noticed ticked up sequentially, although it was down year-over-year. And I just wanted to understand, is that a better way to measure that metric? And can you just kind of talk about your future opportunities to continue to kind of like drive down your operations cost per unit, that would be great. Mark Jenkins: Sure. Yes. So I think it's useful to maybe break total operating expenses up into a few different categories. I think we -- let me break them into operations expense, overhead expense and advertising expense. I think we start with advertising expense. We are starting to invest in the multiple levers of our 3-part growth driving plan, which includes continued improvements in product offering, building understanding, awareness and trust and growing selection and driving other benefits of scale. Advertising hits the second of those. And so we have been investing in advertising as part of that longer-term 3-pillar growth plan. I think looking at overhead expenses, I do think we saw nice leverage year-over-year and some leverage quarter-over-quarter there. Within overhead, I think that's grown much, much more slowly than retail units. I think in recent periods, there's been some lumpy expenses there that we think are more transitory in nature that's caused it to be a little bit higher than it otherwise would be. But overall, we're seeing very strong performance there with nice leverage on a year-over-year basis and then to an extent on a sequential basis. Last, on operations expense. I think another place we've seen very strong gains on a year-over-year basis. That can bump around quarter-to-quarter, just depending on the presence of onetime items or other nonrecurring expenses. So it stepped up a little bit sequentially. But overall there, the trend is down, and we expect to drive that down further over time as we continue to drive fundamental gains in operating efficiency. Marvin Fong: Great. And if I could maybe sneak in one more. Just skimming the real-time transcript here. So I believe you said retail GPU will be similar to last year. And I was just kind of wondering what's sort of underpinning those dynamics? So are your recon and logistics efficiencies sort of being offset by the macro environment and what's going on with depreciation rates? Or just kind of maybe double-click on what's kind of behind the year-over-year flattish retail GPU guidance? Mark Jenkins: Sure. So I think let me first just hit Q4 seasonality. I think most listeners have a good sense of industry seasonality in Q4, but typically, it involves higher depreciation rates, both in the retail and wholesale markets. And then it's typically industry-wide, the lower period for demand, whereas other quarters have more strong depreciation rates in both retail and wholesale and stronger seasonal demand. As it relates to retail GPU, I think what we called out is we are seeing for Q4 sort of sequential change off of Q3 that is in a similar range to what we saw last year, driven by seasonality. I think that looking at year-over-year trends, I would say that the number 1 thing I would say we feel like we've seen is I think Q2 was a bit of a strong depreciation quarter in the retail market. We attribute that to some effects from the late March auto tariff announcements. I think on the contrary, Q3 was a bit of a softer depreciation quarter on a year-over-year basis. I think we would attribute that almost an offset to the Q2 strength. And so I think some of those depreciation dynamics would be the -- I guess, the one thing I would call out and also the thing that I mentioned in my prepared remarks about Q3 retail GPU. Operator: The next question comes from Rajat Gupta with JPMorgan. Rajat Gupta: Just on the fourth quarter, like unit commentary, should we -- I mean, it looks like the guidance would imply a little more normal industry seasonality type numbers, at least the low end of the guidance. I'm curious, is that a change in terms of how we should think about the seasonal behavior of the business from here? I know in most years in your history, you've always grown units sequentially from 3Q to 4Q. So we're a little bit surprised by the guidance this time. So curious if that is a change in how we should be thinking about seasonality? Or is it just more being conservative around the macro backdrop, anything you're seeing out there from a consumer backdrop standpoint? And I have a follow-up. Ernest Garcia: I'll jump on this one. I think it's largely more of the same. I think when you look at the last several years, Q3 to Q4 for us or for other retailers, there's a decent amount of variability in the shape that you see Q3 to Q4. And so I think we're taking that into account and we're guiding. But I think we continue to see extremely strong growth. You saw it this quarter. We expect that heading into Q4 and into next year. I think we're on a great path and everything remains the same. Rajat Gupta: Understood. Okay. And then just on the other GPU within that, just the ancillary product penetration. It looks like you're starting to chip away at that. Can you maybe size for us what the penetration levels are today in that business? Or how much was it up year-over-year? And curious like how we should think about benchmarking that? I mean if you look at some of the franchise retailers out there, they make right roughly $1,500 a unit or higher at a 45% penetration. I'm curious, is that kind of a benchmark in terms of the long-term opportunity there? Are we thinking about this differently? Any thoughts there would be helpful. Ernest Garcia: Sure. I think there's a number of parts to that. I think as a general matter, I think other GPU is an area with a couple of line items underneath it. And like everyone else in the business, it's an area where we believe there are fundamental gains to be had. And I think we've been working on those for a while, and I think we've got plans to continue to work on those, and we think there's certainly opportunity there. Just to generalize a bit, I think that's true in every GPU line item and every expense line item. We continue to feel like we've got extremely exciting opportunities and the hardest part is just prioritizing those. I think thinking about any part of our business, I think, relative to the kind of mature pre-existing automotive retail industry, I think, is a reasonable starting point. I think as a general matter, we've always sought to outperform the benchmarks that you would see if you compared us to the outside industry. But I think in ancillary products, I think something we want to make sure that we do is we deliver very simple, high-quality value-added products to our customers. And so I think that's a guiding principle that we'll make sure that we continue to adhere to. But there's definitely additional opportunity, and we definitely plan to go unlock it. Operator: The next question comes from Brian Nagel with Oppenheimer. Brian Nagel: So a couple of questions. My first question, look, we -- obviously, the results you put up there on the used car side are very, very strong. The question I want to ask, I mean, there's been other data points within the space that have suggested weaker, choppier used car demand. So is there anything you're seeing that's below the reported results that suggest a more difficult demand environment? And I guess maybe the ancillary to that is, is there something changing here to allow Carvana to capture even greater share in this most recent quarter? Ernest Garcia: I think as a general matter, I think things continue to look pretty similar at a high level is I think how we'd characterize things. I mean we're always paying attention. I think we get a good read on what things look like, obviously, looking at retail sales and also, as discussed earlier, looking at loan performance across the loan book. And I think as a general matter, things feel relatively stable. I think we're always paying close attention. And I think, as you alluded to, I think while we don't see signs of macro weakness today, that we're very well positioned if -- I guess, when that does come to pass. At some point, there will be cycles. And I think where we are from a financial performance perspective relative to the industry and then where we are from a cash perspective and a balance sheet perspective and where we are from a consumer offering perspective and a business scalability perspective, I think the sum of all that is very good. And so I think as a general matter, like I said, things look good. The most important ways that we measure ourselves is how are we performing relative to the industry in customer experience, in growth and in economics. If we're always progressing in those areas, we're going to be on a really good path because this is obviously a very mature industry. We know what the scale of the industry are and we know what the economics of the industry are. So I think that's the single most important thing, but nothing notable to call out. Brian Nagel: That's very helpful. And then my follow-up question, I guess, longer term in nature, but you mentioned in your script, just AI and to the extent to which AI is helping to enhance that consumer offering. And maybe if we could talk a little bit further about that. I mean as a consumer of Carvana now, where is AI helping my experience? And kind of how far along are you in this process now of integrating that technology? Ernest Garcia: I think we're pretty far along. Unfortunately, every company in the world knows they're supposed to talk about their AI strategy and every investor in the world knows that every company knows they're supposed to talk about their AI strategy. So I think what we try to do is we try to put in some anecdotes that are hopefully clear that demonstrate real capabilities. So I think there's 2 chats that we put in there that are super interesting and point to what we're capable of doing. One that we put in our shareholder letter, kind of -- it just shows a customer asking about a car and when it can be delivered and they ask for a specific color and they ask for a specific payment. And for that to be -- for this agent to be able to answer that question, it needs to be able to interact with our finance service, with our scheduling service, with our search service. It needs to be able to do a lot of things. And then it also, interestingly, in line, we drop an image of the car that is clickable and pulls them into the VDP. It has to be able to have a designed dynamically rendered response to the customer that is sort of like a very early iteration of a dynamic UI, which I think is really interesting. So there's at least kind of 4 key capabilities there. And those capabilities exist not to serve our AI processes and capabilities, they exist to serve our entire business. The entire business is built to be automated and self-service and simple for the customer. It's just traditionally been in more of a standard UI structure that is click and scroll. But I think as all these teams build these services and they embed all of the business logic into our systems, and then they make those systems and all that data readily accessible. It makes it very straightforward for us to build these very complex tools. I think we showed another one that's on the right of the page in the shareholder letter that is also very interesting and is interacting with very different data. And that shows a customer that is uploading their insurance document to kind of have that taken care of prior to taking delivery of their car. To do that, we have to know state-by-state rules. We have to be able to absorb the document. We have to be able to scrape down that document, convert that to data, apply that against business rules, figure out where we're in compliance and where we're not and then articulate to the customer what they need to do. And all that has to happen in an automated way. There's a number of systems that are required to do that. So I think those 2 chats, chat is one possible interface, but they sort of reveal the brain behind the chat. And I think across the business, there's very interesting things happening everywhere. We're generally a very technology-forward company with a lot of ambitious, curious, excited people. And I think as a result, we tend to adopt technologies very quickly. I think another very different but extremely fun anecdote that is pretty recent from inside of Carvana is our team calls these ambient agents. I don't know if that language is an industry term or it's just what they call them, but I think it's descriptive. We now have some agents that basically have triggers, so they don't require a human to pose a query. They just have triggers that can be data informed. A customer can run into a bug on a website, and it can automatically kick off an agent that then knows to go investigate that bug, try to figure out what's going on and then inform us what might be wrong. We recently had a version of that, that was triggered by one of the triggers that we set and no human kicked it off. It went and identified a bug. It suggested a solution. It wrote code. It sent it over to a person and then that person approved the code and the code was deployed. That's really like that's basically sci-fi from the perspective of 2 years ago. And I think that's also indicative of what's going on inside the company. So I think we are structured to benefit from this. And I think that we've got a lot of very high-quality people that are working very hard to make sure that we take full advantage of it. And I think that we're well on our way. Operator: The next question comes from John Colantuoni with Jefferies. John Colantuoni: I just wanted to start with the EV tax credits. Given your mix of EVs is greater than the industry average. Can you give us some perspective on how you see the elimination of the federal tax credits impacting demand for used cars in that space? And how you're making any necessary adjustments to minimize the impact on Carvana's growth trends? And I have a follow-up. Ernest Garcia: Sure. I think as a general matter, the expiration of those credits clearly mattered and clearly shift customer selection. I think the evidence so far is pretty clear that it's just a shift in preference of vehicles, not a change in aggregate demand, at least not one that is noticeable. So I think our system is well positioned to handle that. We've got -- our system is, for lack of a better description, sort of listening all the time to what our customers interacting with and what is that they want. And then we're making sure that we replace the cars that they want based on the actions that they're taking. And so we kind of have a system that pretty naturally adapts. And I think that what you'd expect, we have seen, we've seen a reduction in EV purchases as a result of the expiration of that credit. And I think the system has adapted in a way that in the numbers is basically not something that you really see or need to be called out. And then I think as a general matter, I think we continue to be believers in EVs. I think all these new technologies go through their positive moments and their tougher moments. And I think it is true that EVs are a very high-quality fundamental technology that's early in their curve. And we expect over time that they will make a come back, and we'll be well positioned for it when they do. John Colantuoni: Okay. Great. And you announced sort of a second franchise dealership acquisition last month. Can you talk about the results from your first foray into physical dealerships that made you acquire a second? I'd be curious if your findings suggest that this could be an area of investment for you in the coming years. Ernest Garcia: Yes. I appreciate the question. I think it remains early. It would be a bit premature to comment. So we're going to kind of stick to focusing on the core business and stay tuned for the future. Operator: The next question comes from Christopher Bottiglieri with BNP Paribas. Christopher Bottiglieri: First, I was hoping to delve into the same-day delivery test, which sounds pretty exciting. The logistics per unit went up for the first time, I think, in 10 quarters, which tells me people are using it significant. But can you just frame -- and obviously, it's going to pay for itself if there's a sales lift, but can you frame for us how performance in Phoenix is doing versus the control market that hasn't seen this type of increase or whatever you can tell us because it sounds like this might be an area you're going to invest in '26. Ernest Garcia: Sure. Well, I think, first of all, there clearly is a very clear relationship with speed and conversion, just like every other e-commerce business. I think that's something that we've seen across the business across time, and it's something that we continue to see in the business today. So I think that, that is a reason to focus on this and build this capability out. I think from a bigger picture perspective, we also just think it's tremendously differentiating and very exciting and kind of strategically important to be able to do something that other companies just simply can't do. And so we -- in my prepared remarks, I had my dramatic pause where I asked you to contemplate what it means to be able to buy thousands of cars in minutes and have them delivered in hours. But I really do think it's useful to think about what that means and what that looks like as it feeds back over time, and we get more and more inventory pools closer to more and more customers and those inventory pools get larger and larger and customers have more selection and we automate more and more of our processes and the speed and ease gets simpler. We think that we're building a machine that is qualitatively different and structurally different than any other machine that's out there. And so there's certainly -- we would expect for there to be conversion tailwinds as we continue to work on this in Phoenix. And then once we feel like we're in a really good spot, start to roll it out to more locations. But more importantly, we think it just continues to separate us as a completely different business and a completely different offering to consumers that will enable us to have completely different kinds of results over a very long period of time. Christopher Bottiglieri: Got you. That makes sense. And then wanted to parse the other GPU commentary out a little bit more. So it sounds like attach rate was up. You probably benefited from rate cuts because you don't perfectly hedge. There was another Fed rate cut in Q4. So that should be another tailwind that mitigates lapping that. But it sounds like you're going to reinvest that into the consumer proposition to offer lower rates to the consumer. I just wanted to, a, confirm that. And b, how do you think about beyond when there's some more rate cuts and you kind of lap this into '26? Do you feel like the rates go back up? Or how do you think about the value prop to the consumer on financing once the rates stop going down? Mark Jenkins: Sure. Yes. So I mean, I think we talked about some of the drivers of strength in other GPU. I think strong loan performance, strong performance on loan sale monetization and cost of funds. There's some positive trends we're seeing in finance attach. I do think those are driven by lower rates. We're also seeing some positive trends in ancillary product attachment rates as well. I think our viewpoint, and you'll notice we had a record in other GPU this quarter. It's our highest level ever. That's really driven by these fundamental gains that I was just pointing to. I think in Q4, our plan is to pass these fundamental gains back on to customers. So other GPU in we think we'll end up looking something much more like Q4 2024 rather than Q3 2025. And I think that's something we feel really great about. We really have driven meaningful fundamental gains in the finance and ancillary products platform, and that gives us an opportunity to pass some of those gains on to customers, for example, in the form of lower interest rates. Operator: The next question comes from Daniela Haigian with Morgan Stanley. Daniela Haigian: So first, clearly, Carvana has built a strong digitally enabled mousetrap in the dealer business. But how do you think about competition from new entrants such as Amazon that also have warehouse and logistics capabilities? How does that feed into your, I guess, expected return on ad spend? And then also on that same line is what is the biggest gating factor in your near-term growth curve? Ernest Garcia: I think as a general matter, we try to think about making sure that we're delivering the best customer experience as we possibly can. We try to make sure that we're paying close attention to every line item in the business and doing all the hard work that's necessary at the detailed level to constantly make sure everything gets better. And we try to focus less on any given competitor. I think that served us very well over time and brought us to this place where depending on what profit metric you're looking at, we're 2 to 2.5x as profitable as the average automotive -- the other average automotive retailers. And I think that to me, that's, I think, probably like the most important single way to look at this. I think there's a question about what new entrants can look like over time and how many there will be and what scale they will come at and what approach they will take. And those are all fair questions that we can all speculate on. But I think there are also facts that today, 98.5% of used cars and 99% of cars in some total are sold by traditional retailers that have the economics that we discussed earlier that are materially different than ours and aren't super well positioned to build a machine that looks like ours. And so I think to the extent that we just stay focused on ensuring that we've got a scalable business that's delivering great customer experiences with different economics, I think anything that is likely to come is unlikely to be powerful enough to change that 98.5% or 99% of the industry that looks the way it looks today. And so that's where I think continually, at least from my perspective, my personal favorite metrics are how are we doing from a growth perspective relative to the industry, how are we doing in customer experience versus the industry and how are we doing in economics versus the industry? Because I just think that when you have a capital-intensive business, that requires lots of work and lots of scale to deliver good customer experiences, you're competing against the industry, and it's unlikely the entirety of the industry can move very fast in light of all that capital investment that's necessary. You see all the things that we're having to do to move at the speed that we're moving. And I think what I would say is the simplest reduction of kind of what is the constraint. It's basically just the sum of effort across this large complex business where you're moving things and you're organizing people, and it's a lot to do. And I think that, that gates the speed at which you can run. And that's why we're doing all this work to make sure that we stay in front of ourselves. not certainly not what you asked about, but relevant, I think, in this conversation. We talked a lot about what we're doing with ADESA and ADESA Clear and our inspection centers, and we kind of put this new concept in the shareholder letter about having retail capabilities, wholesale capabilities or retail and wholesale capabilities at all these different centers across the country. That's the kind of work that you can see in that graph, that's us doing work as fast as we can that is very complicated to be able to unlock those capabilities over time. And I think it's positioning us well for a broad future, and it's indicative of the kind of work that's necessary to scale a business like this. Daniela Haigian: Great. And I guess on that piece of your moat of what you've built out on this physical business, you also have a very low capital intensity in building this out. I think a lot of your fixed costs are already embedded. And so as you think about making progress towards that 3 million unit target in 5 to 10 years, what do plans look like to expand production capacity beyond that 3 million? And what are the capital requirements to get there? Ernest Garcia: I think our eyes are as big as anyone out there. And I think the opportunity in front of us is very, very large. And I think there's no doubt that the goal that we're chasing today that is time bound is our current goal, and we expect to have other goals beyond that. I think it's premature to talk too much about those other goals because I think that we've got several years here of hard work to make sure that we get to the $3 million and the 13.5 million. But I think there's no question that there's opportunity beyond that. And I think that you can probably look at our past when we've attacked problems in the past to get a sense of what that future could look like. But I think it's early for us to be giving specific guidance and expectations on that today. Operator: The next question comes from Jeff Lick with Stephens. Jeffrey Lick: Congrats on a great quarter, guys. In terms of the sourcing environment, I was just curious if you can comment on any evolutions of that. I know your relationships or how you're doing business with some of the commercial rental providers has changed a little bit. And then also just as you grow into sourcing 600,000, 700,000, 800,000, 900,000 units, buying from people's driveway, just any evolution there would be helpful and just the color on that. Ernest Garcia: Sure. Well, I think the most important fundamental there is what we alluded to a bit a moment ago, it's just making sure that the business is structured to be a structurally better buyer of cars so that we can be a better partner to partners out there, and we can give very exciting bids to our customers. And I think if we divide the types of cars in the world into wholesale and retail with retail being defined as a car that we're well positioned to retail, it's very obvious that we are deeply structurally advantaged in buying cars that we are well positioned to retail. I think as one of the many benefits of partnering up with ADESA is that it put us in a spot where we're also structurally advantaged to be able to buy cars that are wholesaled. And then I think when we do the further work to unlock both wholesale and retail capabilities at the same locations, I think we become a better buyer again because not only are we well positioned to dispose of both types of cars, we're also well positioned to reduce the expenses that are traditionally inherent in the system that take the form of time and extra shipments and cost. And so I think we are doing the work today to go unlock those capabilities. In that graph, we've got 74 sites. We now have 41 that we label as wholesale only. That's the original 56 ADESA sites minus the 15 where we have added reconditioning capabilities. And so those 15 now represent both wholesale capable and retail capable sites. We have 6 sites that are just retail. Those are the 18 inspection centers that we had prior, minus the 12 where we've added ADESA Clear, which is a digital auction capability. And then we've got 27 that are both, which is the sum of the 12 inspection centers that have ADESA Clear plus the 15 integration sites where we've added reconditioning capabilities to ADESA. So we now have 27 sites where we're well positioned to handle any type of car very efficiently, not just because we have a great wholesale distribution channel and a great retail distribution channel, but also because we can do both more efficiently. So to me, that's the structural thing that we're doing. And I think the more progress we make there, the better position we're going to be. And then I think we continue to make progress with our partners. And I think there will probably be more to talk about there over time. But as long as we position the business for it very well, I think we continue to be in a great spot to take advantage of that. Jeffrey Lick: And when you get to the retailing of 2 million to 3 million cars, do you think the proportion of where you source will change much? Or will it be pretty much the same? Ernest Garcia: I think we'll see over time. I think it's early to call a shot there. I mean I think at like the simplest, most fundamental level, most of the used car market is customers swapping cars with each other. And then they just do it through many different mechanisms. That's not strictly true because you do have off-rental cars and then you do have cars that flow out of fleets. I think you could call kind of off-lease cars, something sort of in between because it is a customer car that makes it to another customer. But generally speaking, cars are just moving through some elaborate mechanism from one customer to another. So we think having the business of buying cars from customers is essentially important. I think there's many forms that can take over time. And then we think having a business of being able to buy cars very efficiently from business disposers of cars from fleets is also centrally important. And the machine is being constructed in a way where we feel like we're an advantaged buyer regardless of where cars are coming from. And then I think if you look at buying cars from customers, that is a slightly different offering than selling cars to customers. But now for probably 5 or 6 years, those 2 brands have grown pretty much in lockstep, whether you're looking at the percentage of cars that we're retailing that were sourced from customers or if you're looking at our wholesale to retail ratio, they bounce around a little bit. But generally speaking, they've been pretty consistent. And I think that just speaks to, a, the fundamental that largely this market is customers swapping with each other. And so there's a similar sized market to buy cars as there is to sell cars; and b, the fact that those 2 businesses are growing at about the same rate as we continue to grow our brand in a way that benefits both sides of the business. So like I said, I think we're well positioned either way. I think it's early to call our shot. We'll hope to succeed in both areas. Operator: The next question comes from Andrew Boone with Citizens. Andrew Boone: Ernie, you talked about scale in the beginning of your prepared remarks. And then you mentioned automation multiple times as we've gone through this call. Can we just step back? And can you just talk about what are the biggest opportunities that you have to increase automation as you do gain scale? Like what are the key variable costs that you guys can really drive down that still remains in the model? Ernest Garcia: Sure. Well, I'll point again to the anecdote because I just think that they communicate very well. So what I would say is if we look back to that chat that we demonstrated in the -- or that we showed in the shareholder letter that shows like an insurance document and the customer interacting with that, I think that gives you a sense of the kind of thing that can be done. It's basically just expanding automation at greater depth so that the entirety of the process can happen in an instantaneous way where very clear instructions are given to the customer. They know exactly what to do, and they're able to complete a task with no latency. I think that's been part of a progression over years as we've kind of built those capabilities. We first have to learn all the rules across different states. We have to make sure that those are written down and codified. We have to figure out what our particular rules are going to be for our business. We then have to go and find a way to get data to get uploaded into our site. And initially, that data is manually looked at and checked against business rules and the customers approve. And then you add the ability to scrape the data off of the document that's passed to us and then the tools are built to make that simpler. And then you scrape the data and you automate the checking of that data against that business logic. And so to me, it's just that constantly deepening level of detail of automation that is very valuable. And I think that's certainly valuable to reducing costs. I think what we at least tend to think is the maybe even more exciting thing is just being able to differentiate the offering. Just making sure that customers can know exactly what to do and shop with extreme confidence and get offers that are amazing. Going back to being able to sit there in minutes, look at thousands of cars can be delivered in hours. That requires -- that's a very different kind of offering that we think is very strategically valuable, but requires a lot of things happening in the background. So I think every part of the business, finance verifications, registration, customer care, every part of the business, continual gains in reconditioning and things that we're doing there, things in logistics across the business. I think there's opportunities to make every single workflow simpler and more automated, more repeatable and more scalable. And I think we've just been continually doing that work over and over. And hopefully, you feel like you see it showing up in the results. Andrew Boone: If I could sneak in one more quick one. How do you think about the guardrails of expanding same-day delivery? How do you guys think about making sure that rollout is smooth? And what are the profitability metrics that you guys are involving to make sure you guys are containing what may the cost for that? Ernest Garcia: Sure. Well, I think like anything in the real world, I think the first thing you have to do is you have to kind of aim for something that's hard and then you start to see what are all the constraints in the system that are causing you to be limited in what you're able to achieve and then you have to go attack the biggest constraint and then move on to whatever the next constraint is that emerges. And I think that's why we're working really hard in Phoenix right now to attack those constraints one at a time. And I think we've seen a lot of progress there. Phoenix looks like other markets in the country just several months ago. And now we've got 40% of customers getting same or next-day delivery compared to approximately 10% in the rest of the country. So we've obviously made rapid progress there. I think we will continue to try to progress in Phoenix. And then undoubtedly, the next step is going to be to roll that out to other inventory pools that are near large population centers, and we'll prioritize that intelligently. And then I think that's another place where you can kind of see the entire playbook. And then as we add more integration sites with ADESA, so we've got retail capabilities in more spots, then we can have inventory pools in more spots that are closer to more customers, and we can roll out that same-day delivery capability in more spots. So I think it's going to be a multifaceted, multistep approach over the next several years. But I think step 1 is proving out that we can do it at meaningful scale. I think that box is checked. Step 2 is making sure that we really nail it in Phoenix. And then step 3 will be continuing to roll it out from there. Operator: The next question comes from Michael McGovern with Bank of America. Michael McGovern: There's a lot of talk out there about the K-shaped economy where you have lower income cohorts of consumers seeing relatively more pressure relative to higher income. Curious if there's anything that you've been able to see on that front, demand trends between the 2, especially since your unit guidance implies some deceleration. Is there any notable deceleration from lower income cohorts specifically? Ernest Garcia: I really don't think we have anything interesting to say there, and apologies. I think there's no question that -- there's a lot of story lines out there that point in that direction. And I think in our data, we can look at sales data or we can look at credit performance data, and we can kind of try to cut it in many different ways. I just don't think that there's interesting super validating data points that we can point to for that story. I think what we see tends to look a lot more consistent than that particular story, but we'll obviously continue to pay attention, and we'll follow the data where it goes. Michael McGovern: Got it. And then in Phoenix specifically with same or next-day delivery, I'm curious, can you discuss kind of what you expect for GPU or EBITDA per unit or anything that you could give us kind of what that investment, if you will, looks like to deliver the cars more quickly? Or is it pretty seamless since you have that infrastructure there built out already? Mark Jenkins: Yes. I would say it's really more the latter. I think that the same-day delivery is really more about a technology investment at this stage and a process investment, making sure that it's a complex transaction. And in order to have same-day delivery, you need to nail every single aspect of a complex transaction accurately and in a short period of time. And so that's a technology focused investment. It's also -- it requires strong processes from the operators that are executing that. But that's really like the main investment. There's some incremental investment in staffing just to make sure that you have the capacity available to execute same-day delivery. And so you have a little more slack capacity there. But that's not a very large dollar amount in the grand scheme of things. The way that we're executing same-day delivery today, it's really more about a focus, a technology and process investment more so than a cost investment. Operator: The next question comes from Michael Montani with Evercore ISI. Michael Montani: I joined a minute late, but I did want to ask if you discussed at all the advertising expense. It sounded like that might be expected to go up. And I just want to see is that quarter-over-quarter or on a per unit basis? Any color that you could provide on that one? And then I had a quick follow-up. Mark Jenkins: Sure. I can take that one. The outlook that we gave for advertising expenses on a dollar basis for it to be similar in Q4 to this Q3, maybe slightly higher, but similar to slightly higher. And again, where that comes from is really just continuing to invest in building our brand, building awareness, understanding and trust of our brand is one of the 3 key pillars of our long-term growth strategy. Michael Montani: Okay. And then just on the wholesale GPU, were you signaling that, that could step down quarter-over-quarter by about 25% to 30% the way it did last year? And if that's the case, I was just thinking there could be opportunities for improvements given some of the enhancements you've made in terms of processes. So I just wanted to make sure I had that right or if there's anything else to dig into from a depreciation perspective, et cetera, to know. Mark Jenkins: So I think we really think of sequential changes on a per unit basis, what we called out. And so I do think that there's seasonality in a multiple of the GPU line items. I think in wholesale, that takes the form of higher wholesale depreciation rates in Q4, lower auction volumes in Q4 than other times of the year. So we do typically see a seasonal pattern there. And we called out something seasonal, something similar to last year sequentially on a per unit basis. Operator: Last question comes from Chris Pierce with Needham. Christopher Pierce: Can I just ask one big picture question. The 3 million unit goal, I guess, is that strictly around what determines when you could hit it earlier or later? Is that about adding recon scale personnel? Or is it about -- did you consider end markets or credit cycles or anything? I'd just love to know kind of big picture, how you came up with it, what drives it and what could pull it forward or push it back? Ernest Garcia: Sure. I would say at a high level, the time lines we provided there were 5 to 10 years, which correspond to 2030 to 2035. And I think the fast end of that is approximately 40% compounded growth and the slow end of that is approximately 20% compounded growth. I think as a general matter, we view that as largely driven by our ability to continue to execute is probably the biggest determinant of that. There's a lot of work that has to be done across the entire business to make sure that we're buying cars, reconditioning cars, delivering cars to customer long leg and last mile, handling customer questions and just scaling the entirety of the business. So I think there's a lot of work in there. And I think our execution is the primary driver that we think will dictate when we achieve that goal. Operator: That's all the time we have for questions today. I would like to turn the conference back over to Ernie Garcia for any closing remarks. Please go ahead. Ernest Garcia: Great. Thanks. Well, thanks, everyone, for joining the call. Carvana team, another awesome quarter. Thank you guys so much. You really have a lot to be proud of. I hope you are proud. I hope the high fives fly, and then let's come back tomorrow and keep it going. We have a lot more work to do. So thanks to all of you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to the 2025 9 months results announcement conference call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair of the Board; and Mr. Ignacio Lares, Chief Financial Officer. The results for the 9 months ended 30th September 2025 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange's and Budweiser APAC's websites. Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call may contain statements and future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that the Budweiser APAC's actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise. For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, see risk factors in the company's prospectus dated 18th September 2019 and the 2024 Annual Report published and any other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated. Percentage changes refer to comparisons with the same period in 2024. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized figures are non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2025 9 months results can also be found in the press release. It is now my pleasure to pass the time to YJ. Sir, you may begin. Yanjun Cheng: Thank you, Rick, and good morning, everyone. Thank you for joining our call today. Our performance in China has been challenged over the past few quarters, as our results have not delivered on the full potential of our brand and organization. While the overall industry has been impacted by soft economic cycle, which had been even more pronounced in our footprint and mix of channels, we have recognized clear opportunities to enhance our route to market and portfolio execution to better align our results to our capabilities. As a company of owners who struggle every day for operational excellence with our customers and consumers, we have been working in China to rightsize inventories and allocate resources. We have a clear view of where to improve. Our priority is to reignite growth and rebuild our market share momentum. We are moving with speed, focus and discipline to ensure that our business turns stronger, more efficient and better positioned to improve over time to outperform for the long term. I will now hand it over to Iggy to provide more on our performance in the first 9 months and the third quarter for 2025. Thank you. Ignacio Lares: Thank you, YJ, and good morning, everyone. In the first 9 months of 2025, total volumes decreased by 7%. Revenue decreased by 6.6%, while revenue per hectoliter increased by 0.4%. Our normalized EBITDA decreased by 7.7%, and our normalized EBITDA margin contracted by 37 basis points. In the third quarter, total volumes and revenue decreased by 8.6% and 8.4%, respectively, with ongoing challenges in China, partially offset by our performance in India. Revenue per hectoliter increased by 0.1%, driven by a positive geographic mix in India and revenue management initiatives in APAC East, partially offset by our performance in China. Our normalized EBITDA decreased by 6.9%, impacted by our top line performance, while our normalized EBITDA margin expanded by 46 basis points. Now let me discuss some highlights for each of our major markets. In APAC West, in the first 9 months of the year, volumes and revenue decreased by 7.9% and 8.7%, respectively, while revenue per hectoliter decreased by 0.8%. Normalized EBITDA decreased by 9.7%. In China, volumes in the third quarter decreased by 11.4%, impacted by continued weakness in our footprint and on-premise channels. Revenue decreased by 15.1%, while revenue per hectoliter decreased by 4.1%, impacted by increased investments behind innovations and brand activations as well as efforts to expand our in-home presence coupled with an adverse brand mix as we managed inventories. Normalized EBITDA decreased by 17.4%, impacted by our top line performance and operational deleverage. On that note, as YJ mentioned earlier, we have a clear view of where we look to improve in China and how to achieve this. Accordingly, we are focused on improving our top line performance through the following areas: further strengthening our route to market with an elevated focus on the in-home channel across online, offline and O2O; increasing investment in our mega brands, such as Budweiser, Harbin and Corona, to win in the Premium, Core+ and Super Premium segments now and as the industry recovers; leading innovation within the industry across packaging, brands and liquids to increase category participation and develop new consumption occasions; expanding our footprint through targeted geographic expansion; and restoring our excellence in execution. We made further progress in our channel expansion strategy in the third quarter, focused on premiumizing the in-home channel as in-home consumption occasions continue to develop. In the first 9 months of the year, the contribution of the in-home channel to our volumes and revenue increased as we began to extend our distribution within this channel. On the portfolio side, we continue to invest in diverse marketing campaigns and innovations to further increase the brand power of our portfolio, connect with consumers across more occasions and increase sales momentum. Corona expanded its signature Drinking with Lime ritual from bottles to cans with the launch of a full open-lid can design, which further reinforces the brand's differentiation and appeal. This innovation is now rolling out across online and retail channels to expand Corona's reach in in-home drinking occasions. Budweiser introduced Budweiser Magnum in a 1-liter can, broadening its consumer reach with a greater in-home presence while retaining its striking black and gold design. The new packaging format further highlights the brand's distinctive brewing and aging process as well as its unique flavor. On the digitization front, the usage and reach of BEES, our B2B wholesaler and customer engagement platform, continued to expand. As of September 2025, BEES was present in more than 320 cities across China. We continue to leverage technology to further enhance our commercial capabilities, optimize our route to market and strengthen our customer relationships. While our performance in China has been disappointing, our businesses in South Korea and India have continued to deliver solid results. In India, in the third quarter, we delivered double-digit revenue growth, which translated into a strong EBITDA performance, further compounded by the lapping of additional costs incurred in the third quarter of last year on projects to enhance the digitization and integration of both financial and nonfinancial information. In the first 9 months of the year, the Budweiser brand continued to grow ahead of the industry with the volume and revenue of our Premium and Super Premium portfolio increasing by double digits. In APAC East, in the first 9 months of the year, volumes decreased by 0.5% with revenue and revenue per hectoliter increasing by 1.8% and 2.3%, respectively. Normalized EBITDA increased by 0.3%, with our EBITDA margin decreasing by 46 basis points. In the third quarter, volumes in South Korea were flattish as we continue to offset ongoing industry weakness by outperforming the industry in both on-premise and in-home channels. Revenue and revenue per hectoliter both grew by mid-single digits, driven by our ongoing revenue management initiatives and a positive brand mix. Meanwhile, our EBITDA and EBITDA margin expanded substantially supported by a strong commercial performance and commodity tailwinds. We increased our commercial investment to bolster our competitiveness in the lead-up to Chuseok, one of the key selling periods in South Korea. From a portfolio perspective, we also unveiled recently Cass ALL Zero, South Korea's first nonalcoholic beer to emphasize a 4 Zero concept of 0 alcohol, 0 sugar, 0 calories and 0 gluten. And with that, YJ and I are here to answer any questions that you may have. Operator: [Operator Instructions] Our first question is coming from Lillian Lou from Morgan Stanley. Lillian Lou: Can you hear me? Ignacio Lares: Yes, very well, Lillian. Lillian Lou: I have 2 questions. One is about China. In particular, you mentioned in-home mix has been increasing but underlying -- and I would like to get more color about the brand performance, in particular, the major mega brands' performance relatively in third quarter. And also, what's the latest trend for Budweiser, Harbin Super Premium segments? That's my first question. I will ask the second one after that. Yanjun Cheng: Okay. This is YJ, Lillian. Thanks for your question. In terms of brand performance, let's talk about it by channel. By channel, on-premise got impacted by the industry in the past few years' weakness. We also got impacted as well. And also the new trend for the channel, which is in in-home O2O, that's one we have a gap, and we are working with the vendors, retailers to build a platform to fill the gap, what we have and which linked to the brand portfolio we have. The brand portfolio we have, which the consumer knows and love, we have rich portfolio. For the -- we've also focused on innovation to meet the consumer needs by channels, for example, Budweiser, fits the in-home channel, it created a 740 ml, a bigger can, which is a quite good performance in the in-home channel. And also in terms of O2O, we also create a Bud Magnum 1-liter can to fill the gap and the channel, O2O. And for the Super Premier, we see the O2O trend, the performance is quite good. We have a rich portfolio of Super Premier as a company we are. And give example, Corona, we also developed a full open-lid can, not only bottle with lime but also able to allow the consumer to drink Corona with lime in a full open-lid can. So those are -- talk about brand linked to the channel with the innovation. See the gap we have. See the soft weakness that we have in the Premier. Those are the actions we see -- we take in terms of channel investment, cooperation and also the innovation we develop. We see good trend on this. And also for the Core+, we are working hard on it. And we do have a very good example, the benchmark in Korea. You see the cost, so priority, I think to the innovation. There's a big innovation, big best practice we're going to apply and learn within the APAC. So -- but I try to break this by channel linked to the innovation and the gap we have, the action we take, investment we take, best practice we learn from Korea to be able to answer your question. Thank you. Lillian Lou: Thanks, YJ. My next question is about Korea. In Korea, we understand that the whole industry demand is still pretty weak and Budweiser and Cass are gaining market share. I'm trying to understand what is the latest demand trending into fourth quarter and next year and reacting to that, what the competition dynamic could shift to. Ignacio Lares: No, thank you for the question, Lillian. I'll take that one on Korea. So you're correct that the total industry remains soft, right, given the macroeconomics. The demand has been soft now for several quarters. If you take a look at maybe the economic indicators, we've seen CPI stabilized, so inflation has stabilized and consumer sentiment actually has been improving sequentially over the past few months. However, by the same token, the savings rate, right, for consumers has been on the rise, and that's despite inflation being under control and actually, interest rates being cut in Korea as well. So consumers are effectively acting as if they're under some level of pressure, and they're prioritizing essential spending, which, of course, includes food and utilities within that category. So this consumer frugality trend or kind of short-term effect is currently, of course, impacting overall alcohol consumption as well as the natural structural trade up, right, that you often see from lower-priced alternatives, such as Soju, of course, into beer, which has been long standing in Korea. But even within this context, right, you still see pockets of growth within Korea. And so we see nonalcoholic beer growing. We see flavored beer growing. We see RTDs outperforming. So these are also gaining popularity as they are in other developed markets or more developed markets, right, which presents, of course, opportunities for us as well. Then from a competition perspective, the way I would look at it is, I mean, the summer and the Chuseok selling periods are usually the most active, right, in terms of promotional activity, investment innovations, and this year really has been no exception. In this context, we're very pleased with the commercial results from the South Korea team in the third quarter. They continue to gain market share in both the on-premise and in-home channels, and that was led, of course, by the Core portfolio and by Cass, which helped to offset, of course, the soft industry, right, the soft demand, as we just discussed. But I think most importantly, perhaps the fact that the brands are very healthy there, the innovation pipeline has been very effective at solving consumer needs, right, in the last couple of years. In Core specifically, of course, we've continued to increase consumer participation in the category via nonalcoholic beer, flavored beer and several other liquid innovations, including Cass 0.0, the Cass ALL Zero, of course, that I discussed in my comments earlier, and then different variants, of course, the Cass Lemon Squeeze as well, not to mention, of course, HANMAC's Extra Creamy Draft can as well. On top of that, we're still focused, of course, on continuing to lead premiumization, which we see as an opportunity as well given it remains under-indexed in Korea relative to other more developed markets. So I think as we move into this last quarter of the year and into 2026 with our brand portfolio healthy, with it being very well supported by the route to market we have there and by the very strong team in Korea, we see ourselves as ready to continue to lead beer industry growth across Korea for the future. So I hope that answers your question. Thank you so much, Lillian. Operator: Our next question is coming from Wenbo Chen from CICC. Wenbo Chen: I have 2 questions. First is about channel inventory. We have seen ongoing progress with destocking in the third quarter. So could you please share what's our outlook for the China market in the fourth quarter and the coming year? And do we expect a rebound in the selling performance? Ignacio Lares: Wenbo, no, thank you for the question. I mean you're correct. We've been proactively taking steps, right, to adjust or manage our inventory in the current business environment, and that's with the intent, of course, of ensuring the health of our route to market, right? And we've been doing that since about the late third quarter of 2024. Our inventories as of the end of the third quarter this year, third quarter '25 are now actually lower than they would have been in the same period of last year. And that's both in terms of absolute inventory and days of inventory, and we would expect this, of course, to be lower than the industry average. So we've made good progress, I think, on the inventory front thus far. Going forward, we'll continue to manage our inventory very attentively, so we don't give an explicit outlook, but we always want to make sure that we're on top of inventories and managing it very attentively. And there will be adjustments, of course, based on sell-out trend changes as we move forward. However, we wouldn't expect these to be necessarily as significant as what we have done, of course, over the past year. So I hope that answers your question, Wenbo. Wenbo Chen: Okay. And my second question is about the in-home channel. We have made great progress in the in-home channel this year, and you just mentioned our optimized product mix. Could you also share the current penetration level of the in-home channel across the business in the first 3 quarters? And also, what are the plans for the further expansion in the fourth quarter in the next year? Ignacio Lares: Yes. First, thank you for the kind words. We've been working very hard, as YJ also mentioned, right, on making progress in the in-home, which is a big priority for us. And of course, you can see that in many of our markets. Maybe the way we tackle this is, I mean, first and foremost, with increasing disposable income and market maturity across China, we would expect both the in-home channel to continue to grow and the premiumization trend to take more root there over time. And this, of course, offers us one of the largest opportunities to expand our business moving forward. When we look at the current -- to your point on penetration, current level of the off-trader in-home channel in China, it's directionally 60-plus percent of the industry. However, it only accounts for a little bit more than 50% of our channel mix, right? So we still have a big opportunity to expand our presence closer to the industry average. And we know that the in-home will continue to grow its share of industry, as I mentioned, as the market continues to mature. So we'll hopefully catch both, right? Close the percentage mix here and its weight will increase rather over time. Then from a brand and portfolio perspective, and YJ was alluding to this earlier, right, in retail, it's essential to have a full portfolio, right? And you need to have various packages at each critical price point to fulfill different consumer demands. We're very fortunate, right, to have the portfolio that we have available to us. And the brand power of that portfolio is actually significantly higher than our market share, right? So we know that it offers the potential to drive far more penetration that we have today. We have solid plans here, and we're going to continue to invest behind our mega brands with the strong mega platforms we have to achieve that. The teams also continued to make progress on the right packs, right? So it's important to have the right assortment, as we were discussing, at the point of sale and to have key price points covered. And the biggest remaining opportunity, as we've shared before and YJ mentioned earlier on the call, is really on Core+, right, which is particularly relevant in the in-home channel. Then from a route-to-market perspective, the key to successful in-home expansion is really to expand the high-quality distribution network to be able to cover more points of sale. We've been doing that over the past couple of quarters going wider and deeper even in geographies where we already have a well-established presence. So we're developing new Tier 1 and Tier 2 wholesalers to help us expand to more points of sale. This takes time, of course, as you need to recruit wholesalers and build capabilities, right, to ensure that you have the right picture of success in every in-home point of sale. But the teams are very encouraged with the progress here and maybe 2 proof points I would probably give are: one, the contribution of the in-home channel to our total volume and revenue has continued to increase, so that focus is driving us in the right direction; and second of all, when we look at the in-home channel, actually, Premium and Super Premium's contribution within in-home is now outpacing that of Chinese restaurants, right? So we're seeing the in-home channel premiumize as the teams exert their energy and their efforts there. So I would echo YJ's points, right? I would say the team has the right plan and the right initiatives in mind. There's progress already on several of the portfolio and route-to-market areas, and now there's just a lot of work to do, a lot of work to be done, right, to scale this with consistent execution in the quarters to come. So thank you so much for the question, Wenbo. Operator: Our next question is from Chen Luo from Bank of America. Chen Luo: So I've got 2 questions. Both of them are on China. The first question is about our branding strategy. Early this year, we heard about our commitment to developing the Harbin brand nationwide, and most recently, channel [ checks ] seem to suggest that we are making even further commitment to the same strategy. Considering the rise of the local and regional brands and the very niche brands in China recently, do we think Harbin is strong enough to compete, especially to compete in Guangdong province. So this is our stronghold province, but we now see big pressure of share losses to local brands. Do we believe local consumers are willing to switch from Zhujiang or Liquan to Harbin, which originated from Northeast in China? Are we going to develop some regional brands to bond with local consumers given the success of Sedrin [ Lychee ] in Fujian province? So maybe I'll stop here. Later, I will ask my second question. Ignacio Lares: Okay. No, thank you for the question, Luo Chen. Maybe let me start here. I think if we didn't have confidence in Harbin, right, we wouldn't have prioritized it for our first offering in the Core -- in the RMB 8 price point, right? So if you think about it, Harbin has been a national brand for years and has a broad presence nationwide across different channels, right? It's -- given the amount of time the brand has existed for, given the presence in multiple provinces, it's one of the few truly national brands in China. In Guangdong specifically, the brand has been there for a long time, and we've been developing the brand, particularly in the on-premise channels but also, of course, in the in-home more recently, focusing historically more on the RMB 6 price point. As we expand into the in-home, we chose Harbin Icy GD Zero Sugar priced at that RMB 8 price point [ in CR ] to kind of leverage the brand power of Harbin, both nationally but also in Guangdong, which actually stacks up very well versus other local brands. So we're, of course, bullish on Harbin overall in Icy GD, in particular, based on that starting point from a brand power perspective. And then as YJ mentioned earlier, based on the superiority framework we have in place, where we test liquid, packaging, positioning, communication and value with consumers, we know that we have a superior offering, right, one that should outperform other offerings in the market at the price point at which its being offered. So we know we have a strong horse in the race. From that perspective, the sales volume of Harbin Icy GD Zero Sugar, we also actually tested with consumers where the volume would come from. And actually, most of that volume is either sourced from existing consumers trading up within our portfolio, so moving up from RMB 6 such as Harbin Icy into RMB 8 or also successful conversions from other local competitor brands, right? And so the fact that it has both a functional benefit and a specific partnership behind it, right, with the NBA, so zero sugar plus NBA partnership, made it a superior offering, which is explaining a bit that advantage that it has against other brands. By the same token, you're right. China is a very large country, and you need more than one brand to be successful. Harbin Icy GD Zero Sugar represents our first offering in that RMB 8 price point, and it is a priority for us to capture growth opportunities with this brand, but we know that we will need a portfolio over time. In other places, we might complement our portfolio with other Harbin innovations. We, of course, have local brands that have innovation opportunities, as you mentioned as well. Beyond Harbin, of course, we've got Sedrin in Fujian, which is doing very well, and I'm sure you would have seen it during your most recent visit there, Nanchang in Jiangxi, Big Boss in Jiangsu, Double Deer in Wenzhou and so on and so forth, right? So we can also invest behind some of these local brands, and we have a very solid innovation pipeline across different regions, which is designed to be tailored for local consumer needs and should be complementary to what we're doing on the Harbin brand today. So I think from a brand and portfolio perspective, we're in a good place. I think the key element, going back to YJ's point, will be the expansion of our in-home coverage and distribution and the enhancement of our trade execution. So I think the better those 2 things are done, the more we will get it at the portfolio that I just mentioned. So lots of work to do but the teams are committed to the brands, and they're actually quite excited about the growth potential that they show at this point. So I hope that answers your first question. Chen Luo: That's very helpful. The second question is about the channel in China. Despite our progress with the in-home channel, the on-trade channel is still witnessing quite big declines. How are we going to sustain the sales momentum in the on-trade channel? How are we going to cope with the rise of the new channels amid the increasing channel fragmentation? Ignacio Lares: Well, thank you for the question. Yes. So I think there's a couple of things. It's more of a question of the magic of the and versus or, right? We need to do well in both channels. We've been somewhat conservative on our expectations on on-premise recovery because, of course, the trend for consumer occasions growing in the in-home continues, and it's been taking place at a similar rate for a while. So in terms of on-premise recovery, we haven't really seen a significant improvement yet. By the same token, we continue to sustain our investment in the channel. This is still a critical place, right, to do brand building, to have effective innovation launches, et cetera. And it's very important for the health of many of our wholesalers. It will be very important for us to continue to invest here, particularly for when the on-trade begins to recover as well. In the interim, though, we're focusing on the factors that are more inside of our control, right? We're closely working with the distributors to optimize packaging assortment, right? And so the launch of different packaging examples like the ones YJ gave before on Budweiser and Corona and also Blue Girl are tailored for that current consumption environment. We're also investing significantly in trade execution, so I think brand promoters, targeted food streets, essentially things that allow us to elevate the consumer drinking experience and promote on-premise consumption in the areas and sub-channels that have been more resilient within there. But you're right, in terms of emerging channels, right, the instant retail, O2O and e-commerce channels continue to grow. They're a big focus for us moving forward. The O2O channel actually conveniently skews more premium, which is beneficial, right, to our in-home premiumization efforts, and we benefit from having a full portfolio there. And of course, the contribution of O2O to our in-home sales mix is also increasing. So yes, we're engaged with our wholesalers to utilize these platforms to drive traffic, to promote different drinking occasions for our full portfolio and to capture growth opportunities. So I don't think we can choose one or the other. I think we need to do a good job of maintaining the on-premise, while building a stronger in-home presence, which we're doing very actively today. Thank you for the question, Luo Chen. Operator: Our next question is coming from Mavis Hui from DBS. Mavis Hui: My first one is on low-alcohol beer. On the back of rising health awareness, what could be our impending strategies on product innovation and advertising and promotion to further seize market share in low-alcohol products? And do we have some expectations on -- or the targets on the proportion of our sales coming from light beers or alcohol-free products in 5 years' time? Ignacio Lares: Thank you for the question, Mavis. Yes. So where I would start is, I mean, we constantly interact with consumers to get feedback on their needs, and then we innovate, right, to ensure that our portfolio is providing balanced choices that meet these needs. And we're seeing nonalcoholic and low-alcohol beers gaining popularity in many markets. If you look at APAC overall, the development of both nonalc and low alc is actually quite different by market. So maybe I'll cover it by country. I think if you go to China, nonalc and low-alc beer is still a niche market today, right? And consumers have many different nonalcoholic options, which can serve as great alternatives in nonalcohol-appropriate occasions. However, when consumers drink beer, they generally still prefer to consume alcohol, right? So we're here present with Budweiser 0.0, with Corona Cero as well here in China, but it's more with the intent of growing the nonalcoholic beer segment in the right way and preparing for the future as the China market matures. If you move to South Korea, it's a bit different, right? Nonalcoholic beer is gaining popularity, and we expect, of course, that momentum to continue. There, we have several nonalcoholic product innovations behind Cass, right? So we have Cass 0.0. We have the all-new Cass ALL Zero, which we mentioned earlier, and we have flavored variants, right, like the Cass Lemon Squeeze 0.0 as well. So we're seeing success with different offerings there, and all of these offerings are actually quite helpful because in both the nonalcoholic and low-alcoholic space, they're increasing consumer participation in the category. They're providing incremental volumes, right, to the team there, so they're helping us to offset some of that industry softness we discussed before. And they're actually also incremental to our profitability as well. So it kind of serves all 3 purposes. And then if we move to India, right, the beer market has been traditionally dominated by hard liquor and very high alcohol percentages, right, so 40-plus percent ABV products. Beer is growing in India and strong beer, so think 6% to 8% ABV are a big part of the India beer market today. However, there's a growing trend, right, towards lower alcohol products, which favors, of course, the growth of the beer category overall in India. And yes, within this context, nonalcohol beers have a role to play. They'll help to provide consumers in India more choices, right, to match their needs and their lifestyles. And our leading nonalcoholic offerings in India today include Budweiser 0.0, flavored Budweiser, which is Green Apple and Hoegaarden 0.0, right? So I think each of the markets is in a different place. We haven't shared targets at a -- by market level, but we have high growth ambitions across the board. It's just a question of taking advantage of market maturity to make sure we have the right offerings in the right place, and we lead the development of the nonalcoholic segment as well. Thank you for the question, Mavis. Mavis Hui: And my second question is about India. Can we have some more updates on the biggest barriers to scaling up faster in India aside from religious or cultural diversity? For example, would it be the route to market, regulatory hurdles or maybe consumer education? And where do we see the most untapped growth opportunities in the market over the next 1 to 2 years? Ignacio Lares: Thank you for the question, Mavis. Look, in India, we're focused on consistent and sustainable top line growth, first and foremost, particularly given the maturity level of our India business. And of course, we want it that to translate both to bottom line and cash flow growth as well. In India, we have strong growth momentum. The Premium, Super Premium revenue, which is roughly 2/3 of our business in India today, grew by double digits, both in the quarter and year-to-date, right, first 9 months of the year. And the Budweiser brand, of course, continues to grow ahead of the industry. Premiumization continues to be the most critical driver, right, of EBITDA performance as well. We delivered strong results with double-digit revenue growth and significant EBITDA margin improvement, which you would have seen in our APAC West results. And of course, admittedly, this was on a softer base in the second quarter last year, but we still see the benefit of strong premium growth in our quarterly results. In terms of the industry overall, year-to-date, it continues to grow, which is also helpful, of course. As you'll recall, India has very low per capita consumption, so that's what makes the opportunity so enticing long term. The industry is expected to continue growing, and that's both in volume and revenue terms, and that's actually even before we consider the impact of moderation initiatives, which we see as an opportunity to unlock an even more exciting future for India. And I mean we're encouraged by a few things we've seen in the last few quarters, right? So the number of points of sale in some states, including Uttar Pradesh, for example, have increased. In Uttar Pradesh, they actually roughly doubled the number of outlets that are allowed to sell beer, so there's more than 10,000 points of sale of beer now. Some states are experimenting with low-alcohol bar retail vans, which can serve beer or wine. And as these become allowed and they're introduced in some key cities like Noida and Lucknow, we see, of course, that picks up consumer demand. And then in Maharashtra, we've also actually seen positive changes for both excise as well as how beer distribution can be done. So we see some signs in different places that help to advance the industry moving forward. And then among things we can control even through that period, productivity is also an important driver, right, of our ambitions in India. That will help us to drive EBITDA margins. And the way we're doing it is the supply chain teams continue to make progress here by benchmarking our best-in-class small breweries in China, which are referenced, looking at initiatives that they can replicate there in India, and we see very good progress on these initiatives that are helping us to accelerate profitability. So it's a bit of these different buckets, but hopefully, that answers your question as well, Mavis. Thank you so much. Operator: Our next question is coming from Anne Ling from Jefferies. Kin Shun Ling: I have 2 questions, 1 for China and 1 for Korea and Taiwan. So first, on the China side, on the commercial investment, how do you allocate resources between the on-trade and off-trade currently? And management mentioned previously the mega platform investment in third quarter '25. So would you share with us what is the ROE when you compare to like some of the previous initiatives? And looking ahead, how do you plan to allocate ad spend or marketing spend across different channels, for example, digital platform, entertainment or sports events? That's my first question. Ignacio Lares: Okay. Thank you for the question. A few things to unpack here, so let me maybe try and break it down into components. I think the first piece on mega platforms, I think we're very fortunate, right, to have access to the mega platforms. That's one of the big benefits that we have. And these, of course, would not necessarily make sense to pursue on an individual country basis, right? So here, we're very lucky that they're relevant with consumers in many markets, and we benefit from 2 things. We benefit from, of course, a more manageable cost by taking on these mega platforms at a global level and if we undertook them, of course, ourselves for 1 or 2 markets. But then we also get the opportunity to activate them with different brands in different markets based on consumer preferences and needs, right? So that's helped a lot to make the mega platforms high ROI initiatives in general. And then, of course, good examples of that would be things like FIFA, the Olympic partnership and many music platforms, right, a good example being Tomorrowland, which we'll be doing in Shanghai, right, later in November. In terms of commercial investments by channel and how we think about them, going back to maybe the question earlier, right, we're sustaining our investment in the on-premise channels because we still see them as critical for route to market, critical for brand building. So despite, of course, the pressure on the on-premise channels, they still play a critical role. By the same token, the incremental investments that we're making are going more towards the in-home channels, right, and especially as YJ was saying before, the emerging sub-channels, so to all instant retail, e-commerce, right? So as in-home occasions continue to develop, we're putting a larger proportion of our spend in that direction. And then given, of course, the market, right, has been shifting quite a bit, we look to continue to remain agile in the context of that macro environment. So as channels recover, et cetera, we're actually in quite an easy position to increase or adjust our spend accordingly. Then in terms of marketing spend or marketing investment specifically, the brand power of our portfolio is the critical element for driving premiumization, right? So that's our reference for market share growth potential. And from that perspective, we look to continue to give differentiated offerings to our consumers and drive more value, right, for our premium brands with unique experiences. In the kind of 9 months of '25, our investment as a percentage of revenue increased, and that was driven mainly by marketing investment on our mega brands and behind our mega platforms, right? So they're the FIFA focus, right, for Budweiser, the music focus for Budweiser, the NBA sponsorship and campaigns for Harbin have been the places where we look to continue to create premium and kind of trend-setting experiences. And these need to be rooted, of course, on consumer passion points. The second piece has been around innovations, right? So launching the Budweiser Magnum 1 liter that YJ mentioned, the Corona full open-lid can as well that YJ mentioned, which give us a chance to increase category participation and develop new consumption occasions as well, right? So if you think about the Corona full open-lid can, it allows consumers to have a lime experience in a can in in-home setting, which is something that, of course, is a much nicer experience than without it. And then the third area of focus is increasing direct consumer communication, right, so with differences from media channels and points of contact, making sure we increase our consumer reach and contact frequency to deliver that innovation and that mega platform messaging in the right way. So we'll continue to invest in diverse marketing campaigns and innovations, and the goal will be to further bolster the brand power of the portfolio to continue to connect with consumers, obviously, across more occasions and then, of course, to increase our sales momentum as we move forward. Thank you for the question, Anne. Kin Shun Ling: Got it. Got it. And my second question is on -- back to the Korea and also like the Taiwan custom update. And so would you give us an update on the status on the 2 -- these 2 recent event? Number one is that the current customer tax dispute, first reported in Feb '24 and then like in June, you also have an update on that. So I would like to get an update on the Korean dispute. And the second is the impact from the antidumping duties in Taiwan for the 4 months from July. So we understand both are like small events but would love to hear some comments from you. That's all my question. Ignacio Lares: Thank you for the question, Anne. So on the Korea customs tax side, I mean, the dispute is ongoing. What I can share is what we shared via the press release, which is obviously in 2023, right, during the year ending 2023. Oriental Brewery, which is a wholly owned subsidiary in South Korea recorded USD 66 million nonunderlying charge, and that related to a customs audit claim, right, which is reported in our financial statements that year. During the third quarter of this year, right, so the period ending 30th of September of 2025, OB recorded an USD 18 million nonunderlying charge, and that was related to these same customs audit claims but for the remaining audit periods. So accordingly, the aggregate amount of nonunderlying charges that are related, right, to such claims is now USD 84 million, and we shared that the potential penalty exposure was not expected to be material to the company. As you're well aware, we continue to vigorously defend against the customs tax dispute, which, as we mentioned in the past, can be a lengthy and potentially multiyear process. And we remain committed to upholding the highest standards of compliance across all our operations as well. On Taiwan, specifically, the -- there was a provisional tariff, which, you're correct, which is more than 33%, which was announced back in June. Since then, the rate has been slightly adjusted by 2.5 percentage points down to 31.3% in the third quarter. And of course, we're closely following the situation and continue to monitor for further updates in the months to come. But that's the only update thus far, right, a small adjustment down in the tariff rate in the third quarter. I think the point for us on Taiwan is we value the Taiwan market, and our priority there is ensuring that our consumers and our customers have full access, right, without any disruption to our portfolio of beers, the full portfolio of beers, right, they choose from. So we continue to carefully assess actions to support our wholesalers and local consumers with that perspective in mind. So I think that's all I have for those 2 topics, Anne. Operator: Our next question is coming from Leaf Liu from Goldman Sachs. Ye Liu: Can you hear me? Ignacio Lares: Yes, very well, Leaf. Ye Liu: I also have 2 questions. The first one is on the product innovation in Korea. We indeed deliver quite strong results in Korea, especially with ASP up 5%. So won't you discuss how to look at your future premiumization strategy in Korea? Also, any specific color on the performance of all the great new products launched in the recent 2 years, as you mentioned, Cass Zero and -- 0.0, Cass Lemon Squeeze? And also, will we continue to see strength in ASP and product mix in Korea going ahead? Ignacio Lares: Thank you for the question, Leaf. I mean South Korea, as we discussed previously, it's one of the more mature markets we have in Asia and the Premium segment is still quite underdeveloped, right, versus other similar markets. And the price and margin ladders in Korea are historically much more compressed than in other countries, so consumers have been less aware of the reasons really to pay a premium price for premium products. And this, of course, means that the premium mix growth in the past was not as pronounced as it could be. So I mean, we've been making an extensive effort, right, to drive premium experience at an expanded price, Premium to Core. We've been doing that in the on-premise channel, leading with Stella Artois, but the rest of the Premium portfolio has been helping there, too. And you've probably seen, right, the Perfect Serve program that the teams have been executing with Stella draft. So the toolkits that we provide there to bars and restaurants make the consumption experience far more elevated than historically would be the case. They strengthened our Premium brand equity and they allow consumers to pay more, right? And so in the on-premise channel, of course, the weight of premium beer has increased as a result. And actually, more recently, Stella Artois has taken the #1 position in premium draft as well, which the team is very proud of there. So in the past 3 years, it's really been about helping consumers to see the value of premium products, and this helps to expand the price ladder for premium products moving forward. And in terms of innovation or new products, right, we share your excitement about innovation in Korea. So thank you for the kind words. HANMAC Creamy Draft, which is priced at a premium to Cass, is gaining popularity in the on-premise channel. So the teams are quite pleased with that as well, and we continue to expand its presence in bars and restaurants. In the third quarter, actually, HANMAC grew by double digits, so it's reinforcing its position within the portfolio there. We also continue to increase consumer participation, as I was saying earlier, via non-alcoholic beer and some of the other flavored innovations, so Cass 0.0, Cass ALL Zero and the different variants of Cass Lemon Squeeze are doing very well there, too. So yes, we're very pleased with the healthy brand portfolio, the strong route to market and the people capabilities we have there, and we're excited to continue to lead the beer industry growth in Korea moving forward. Thanks for the question, Leaf. Ye Liu: That's very clear. And my second question is on group level cost. So how to look at any potential cost-benefits into next year with our 12-month rolling hedging scheme? Ignacio Lares: I mean, through the first 9 months of the year, our cost of goods on a per hectoliter basis has roughly been flattish, right, remained largely flattish. In fact, it decreased by 0.4%. So we've been taking advantage of commodity tailwinds this year, right, which is a product of 2024 hedged pricing, right, versus 2023 as well as the efficiency improvements that you count on us to do, and that's been partially offset by country mix, right, with Korea outperforming relative to China -- Korea and India performing relative to China. We've not really made any changes to our commodity hedging strategy, so you can still think directionally speaking around packaging material cost trends in the context of a roughly 12-month hedging policy. If you look at spot pricing, right, for the last few months, barley has continued to decline or been softer than the previous year even if in a more muted rate, so I think more like low single-digit decline. If you look at aluminum pricing in the market, it's continued to increase in 2025 versus 2024, so that one presents a bit of a headwind. It's now sitting in the high USD 2,000s per ton, whereas it was more low to mid-2,000s, right, at kind of bottom. Energy is a bit harder to predict and to hedge, but it's been mostly neutral thus far, right? So we don't really give a guidance, but if you just took a look at 2025 pricing versus 2024 pricing and you used a fairly simple view of hedging, you'd expect probably a slight headwind, right, in commodity pricing. As, of course, given we're already late in '25, we would be mostly hedged for next year. But I think the reality is the way we structure our business, and we've said this in the past, is to leverage our efficiency improvements and cost management initiatives to be able to manage, right, these types of changes. And given commodity escalations fairly moderated, it wouldn't be a stretch for us to ask our operations, right, to do their best to offset as much of the impact of commodities moving forward. So if everything goes this way, that should leave us a premiumization as ideally the most meaningful driver or variable, right, for cost of goods escalation as we move forward and look into 2026. So thank you for the question, Leaf. Operator: In the interest of time, our final questions will come from Linda Huang from Macquarie. Linda Huang: I have 2 questions regarding China. The first one is regarding for the net revenue per hectoliter because during the third quarter, we found that it's under the bigger pressure compared to the first half. So can you give us some of the context what is driving this? And then how do you see this trend going forward? Ignacio Lares: Yes. Thank you for the question, Linda. I mean, in the third quarter, our net revenue per hectoliter decreased approximately 4 percentage points, and this was a consequence of increased investments behind brand activations and our innovations with a focus, of course, on expanding our in-home presence, coupled with an adverse brand mix, particularly as we managed inventories as well. I mean we remain very agile in our investments, and within the context of the current consumption environment, that means where, how and how much we invest. If we look at the third quarter specifically, a greater proportion of our investments actually went to through-the-line campaigns, which were designed to provide as much value as possible to our consumers, to drive traffic for the in-home and to support our route to market in that regard as well. So you would have seen a lower net revenue per hectoliter with, on the other side, kind of a reduced sales package investment at the same time. So you could think of it as a bit of a switch in kind of investment mechanisms or areas of focus, right, with maybe more above-the-line or gross profit investment and less sales and marketing or SG&A investment. Despite the increased investment, though, both behind brands and innovations, the contribution actually of our Premium and Super Premium segments to our total revenue continued to increase in the quarter. And yes, equally important, I mean, we continue to maintain pricing discipline while investing, right? So we'll look to lead and grow the category and drive value for our consumers in a disciplined way. And so yes, as we move forward, we still expect premiumization will continue to be the primary driver for both top line growth and for margin expansion as well. Thank you for the question, Linda. Linda Huang: Yes. So the second one is regarding for industry because I also noticed that the private label trend is taking off in China, and there's many retailers right now, they also have their own beer brands. So does the company have any plan to work as an OEM with those retailers? Yanjun Cheng: Yes, Linda, this is YJ. Let me take this question. In terms of OER, I think the major thing that are linked to the people who like to have retail, like to have OEM is why is the consumer want to have a differentiation of the beer. And second one is with the current industry, the extra capacity and the efficiency in the breweries. So thanks for everybody really to our Fujian market and Fujian brewery back in the week of September 15. So you already see we are the company, how a rich portfolio can provide consumers the differentiation of the brand and package. So we have a big advantage in terms of differentiation that can meet consumers' needs. And second one, see the capability in the brewery and the efficiency we have in Fujian and also linked to the new technology, linked to the high quality growth. So we do have this kind of advantage in terms of differentiation of the brand and also efficiency improvement, the excellent program and the high technology we have. So that's all the advantage we have regard to make this happen. And let me summarize what we just talked about. First, in terms of brand portfolio, we have rich -- we got to strengthen this further to the consumer. And our route to market not only on-premise but also the new channels, in-home and O2O, that are going to invest and build our platform. And third one is the most important for us, after we have a plan, we have our initiative, the key is execution. So the execution, I'm talking about across 3 R: responsibility, resources and recognition. We're going to have the team on the field to own the plan and initiative, which is a very clear target and KPI to be able to track it. In terms of the resources, we're going to further invest the channel and also the brand. So we're going to use an excellent program to develop the best practice and the toolkit to help people to be able to implement the target we have. And at the end of the day, we're going to recognize people who's better, who's not good and recognize people and to reward and consequent people clearly. So those are the 3 I talked about. We also developed a platform we call [ One Bud ] platform between commercial and the supply chain to work together to make this happen. We are on the stage to build a 1-year plan for next year, so our direction is quite clear, keep the momentum and build -- see the gap we have, build a plan and the portfolio, the route-to-market execution and to have the next quarter as a bridge to bring our performance to be stabilized and further get -- improve time by time. So I want to use this opportunity to thank the analysts, investor for your attention to our performance. We're going to speed up the speed, focus and the discipline of the execution. Thank you. Operator: This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks. Yanjun Cheng: Thank you, Rick. As discussed on the call today, we recognize that our results are out of sync with the quality of our brand portfolio, route to market and people. We are actively correcting this by focus on strengthening our key portfolio offerings, speeding our in-home route to market and enhance our execution to capture future growth opportunities in China. We are pleased with the results of our business outside of China and looking forward, continue their momentum as we improve our results to be more in line with the potential of our business. Thank you all for joining us today, and I'm looking forward to speaking to you again soon. Operator: This concludes today's results call. Please disconnect your lines. Thank you.
Hanna Jaakkola: Dear all, warmly welcome virtually to Helsinki, and thank you for tuning in for Kesko's Q3 2025 Release Call. Results improved, positive development in all divisions is our headline. We also updated our guidance and are giving some outlook regarding next year. Our agenda today is the following: President and CEO, Jorma Rauhala, will give the Q3 presentation. We have here with us our Business Division Presidents, Ari Akseli for Grocery Trade, Sami Kiiski for Building and Technical Trade; and Johanna Ali for Car Trade; as well as CFO, Anu Hamalainen. After Jorma's presentation, it's time for questions, both by phone and via chat function. All materials related to Q3 can be found at our website, kesko.fi under Investors. My name is Hanna Jaakkola. I'm responsible for IR at Kesko. I will be at your service after the presentation for your questions and discussions. But now without further ado, Jorma, the virtual stage is yours. Jorma Rauhala: Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I am Jorma Rauhala, and I have now the pleasure to present Kesko's Q3 results. Result improved. Positive development in all business divisions is our headline. And what we do mean by positive development. For Grocery Trade, we saw a turn for better in Grocery Trade's market share and the rolling 12 months EBIT margin was 6.6%, which is definitely clearly above 6%. Also, grocery volumes in the market increased, which is positive. We saw also demand for quality products and services increasing. In Building and Technical Trade, the market was challenging, but we saw positive sales development in Denmark, Poland and Baltic countries. Also, Onninen sales in Finland increased for the first time in 2 years. In Car Trade, both sales and operating profit increased clearly. But now, I will give an overview of our business performance and open up elements behind the result. In the end, I'll present the updated guidance for 2025 and outlook for 2026. And after that, we are ready for the Q&A. Summary of Q3 2025. Kesko's result improved clearly and net sales grew in all 3 divisions. The result was actually better than we expected for Grocery Trade and Car Trade, but construction cycle improvement has still been slower than anticipated and the result in Building and Technical Trade was comparable or slightly below our expectations. The sales in Building and Technical Trade were in line with our expectations, but the sales margin was lower due to continued tight price competition in a challenging market. In Grocery Trade, net sales increased and comparable operating profit was at a good level. Sales development for grocery stores were close to market pace. In Building and Technical Trade, net sales increased supported by acquisitions. Also comparable operating profit increased. In Car Trade, net sales increased and comparable operating profit grew clearly. Kesko's history's biggest ever construction project, the shared Onninen and K-Auto logistics center Onnela was completed on schedule and below the original budget. Kesko updates its 2025 profit guidance, and we are now estimating that its comparable operating profit will be in the range of EUR 640 million to EUR 690 million. We estimate that in 2026, operating environment and result will improve in all divisions and in all operating countries. Net sales in Q3 totaled over EUR 3.2 billion. It was up by EUR 201 million. Net sales increased in all businesses. Rolling 12 months net sales increased to almost EUR 12.3 billion. In Q3, comparable operating profit was EUR 208.1 million and operating margin was 6.4%. Comparable operating profit increased by EUR 6.5 million. Kesko Senukai reported in the third quarter, its joint venture result for the whole 9-month period, and it was EUR 7.4 million. Excluding Kesko Senukai's January-June figures, operating profit increased by EUR 6.6 million. Comparable operating profit increased in Building and Technical Trade and in Car Trade and decreased in Grocery Trade. Rolling 12 months operating profit was EUR 651.2 million and operating margin was 5.3%. Return on capital employed was 10.6%. Return on capital employed increased in Car Trade, was down in Building and Technical Trade and in Grocery Trade compared to the year-end. Financial position. The amount of net debt was impacted by investments in store site and acquisitions. Cash flow from operating activities were at the last year's level despite the change in the Food Market Act in 1st of July, which shortened the payment terms. The estimated negative impact of the payment term change to Grocery Trade cash flow was approximately EUR 100 million. Capital expenditure totaled EUR 141 million. I'll open up investments on the next page. Net debt-to-EBITDA was 1.8. It increased, but is well below our maximum target of 2.5. Capital expenditure totaled EUR 141 million. We continued the investments in growth and the main CapEx in Q3 were store site investments in Grocery Trade and the constructions of Onnela, Onninen and K-Auto shared logistics center in Hyvinkaa, Finland. Expenses. Expenses have increased mainly due to acquisitions. Expenses, excluding the acquisitions, were up by only 1.3%. This is a good achievement taking into consideration the salary increases. Now to Grocery Trade, where we saw increased sales and a turn for the better in grocery market share development. In Q3, net sales totaled over EUR 1.6 billion and increased by EUR 36 million. Kespro's net sales declined by 0.2%. Rolling 12 months net sales totaled EUR 6.4 billion. In Grocery Trade, comparable operating profit for Q3 was EUR 117.5 million, and it declined by EUR 1.2 million. Profitability was strong, 7.1%. Kespro's operating profit declined by EUR 0.8 million. Rolling 12 months operating profit was EUR 424 million and operating margin was 6.6%. In Grocery Trade, net sales increased and comparable operating profit was slightly down. K Group grocery sales were up by 3.6%. Kespro's net sales were down by 0.2%, which was close to market pace. K-Citymarket non-food sales were up by 3.2% and profit improved. Customer flows continued to grow, thanks to the price program and campaigns. Online grocery sales were up by 9.9%, especially Click & Collect and fast deliveries increased. Online sales is 3.9% of total grocery sales for the whole 9 months period. General grocery price inflation in Finland was approximately 2.7%, but the price development in K Group stores was only 1.2%, especially thanks to our price program. Total grocery market grew approximately 3.9%, so the volumes in the market increased in Q3. Market share development for K Group grocery stores has strengthened during the year and was close to market pace in Q3. In the hypermarket segment, K-Citymarket won over market share in January, September, and I'm very pleased with this development. Even though Grocery Trade market remains price driven, there are signs of demand growing for higher quality products and services. Our measures are yielding results. Market share development for grocery stores is positive. I have been asked if our price program is enough to turn the market share. No, it is not. We need all these 3 elements: quality, price and network. If we look at the network, our main focus is on growth centers, and we are developing all our formats. In September, we opened a brand-new K-Citymarket in shopping center in Lempaala close to Tampere. The next one to open is K-Citymarket Paavola in Lahti, replacing the first ever hypermarket in Finland opened 1971. In '25 and '26, we are opening 6 K-Citymarkets, 12 K-Supermarkets and 20 K-Markets to strengthen our network and market position. Annual investments are expected to be around EUR 200 million to EUR 250 million in the whole grocery store site network in upcoming years. After Suomen Lahikauppa acquisition in 2016, our network in smaller format is extensive, and we have not opened hypermarkets in recent years. Much of the planned CapEx will be directed to hypermarkets. By 2030, the store site network will be updated in the right locations and meets upcoming legislative requirements. We announced this morning great news about new hypermarket opening plans in Helsinki metropolitan area. Getting new suitable locations in Helsinki area is very difficult, and I'm very pleased to announce these new hypermarkets. We will open a new K-Citymarket in shopping center ready in Kalasatama next to our headquarters. New store will open latest in 2028 and replace the current K-Supermarket. The area has grown fast and is expected to grow further quite heavily in the future. Shopping center Redi will be our fifth hypermarket in Helsinki and the second close to the city center. We have also acquired the majority of shopping center Tikkuri in Vantaa and have plans to start building a new K-Citymarket towards the end of the decade. Tikkuri is in the heart of Vantaa. This store will be the sixth in the city of Vantaa after Kivisto. Vantaa too is fast growing. In Espoo Kesko's, new zoning is now in place and construction works for the new K-Citymarket have started. The store is expected to open in 2028 and will be the third K-Citymarket in the growing and affluent city of Espoo. The common factor for all these new stores is urban shopping center location with great traffic connections for both public and private traffic. Price program launched in January removes obstacles for buying. The price program includes affordable everyday products. Prices have been cut on total 1,200 popular products. There are also relevant campaigns and personalized targeted benefits. Results have been promising, good sales development with good profitability. Customers have found the products with reduced prices well. Customer flows and average purchase has developed well. Also, daily basic purchases have increased, not only campaign sales. We will continue the price program with a long-term focus while keeping the profitability at a strong level, clearly above 6%. Quality is in our DNA, and the quality work is never ready. Raising the bar in quality offers significant sales growth potential. K-retailers and store-specific business ideas are our key competitive advantage. We have many excellent stores, but there is still too much variation between the stores when it comes to quality. It is critical to choose the right retailers to right locations. Rotation is normal. There are some 140 retailer changes each year. Key actions to increase quality is further sharpen each store-specific business idea. Also, we are focusing especially on renewing certain departments like bread and fruit and vegetables as well as K-Citymarket non-food. Extensive relevant selections are created by data and AI and digital services are being developed to make everyday life easier, both for customers and K-retailers. Now to Building and Technical Trade. Cycle is recovering, notable strengthening in technical trade sales. In Building and Technical Trade, net sales increased by EUR 106 million to over EUR 1.2 billion. The increase was supported by the Danish acquisitions. Net sales improved in comparable terms by 1.3%. In comparable terms, technical trade net sales improved by 3% and building and home improvement trade declined by 0.2%. Rolling 12 months net sales were over EUR 4.5 billion. Comparable operating profit for the Building and Technical Trade division totaled EUR 71.7 million and operating margin was 5.8% Operating profit increased by EUR 1.6 million. Kesko Senukai reported its whole January, September figures in Q3. Excluding Kesko Senukai joint venture result for the first half, the operating profit increased by EUR 1.7 million. Rolling 12 months operating profit was EUR 170.4 million and operating margin was 3.7%. Comparable operating profit increased, thanks to positive profit development in technical trade and Kesko Senukai reporting its joint venture result. In Building and Technical Trade, Q3 net sales increased and profit improved. Market demand was again weaker than anticipated, especially in new residential construction. Technical trade sales increased significantly, while profit declined compared to the last year. Building and home improvement trade net sales grew, thanks to acquisitions, but declined in comparable terms. Despite the increase in division sales, sales margin weakened due to continued tight price competition in a challenging market. In Finland, K-Rauta building and home improvement trade sales decreased slightly year-on-year. In Finland, Onninen sales increased for the first time in over 2 years. Norway, sales increased for Byggmakker and Onninen also profit improved. Denmark, Davidsen sales development was strong and integration of acquired companies is proceeding as planned. Sweden, ramp-up of converted K-Bygg stores continues, and it impacts negatively sales and profit development. Credit risk is well under control. Write-downs of overdue trade receivables totaled EUR 1.2 million. In Q3, Kesko Senukai reported its joint venture result for the whole January-September period. In Kesko's Q3 reporting, Kesko Senukai's joint venture result was EUR 7.4 million. Kesko Senukai did not report January-June quarter separately. Kesko Senukai's joint venture result for the first half was EUR 0.1 million negative due to inventory write-down. As we commented in July, in operational terms, performance was roughly in line with the previous year, and Kesko Senukai's joint venture result for the first quarter is typically negative. We have showed this picture many times already. And here, you can see now the Q3 development. We can see K-Rauta's and Onninen sales development in Finland since 2019 in this picture. Both have strong market shares. K-Rauta is the market leader in building and home improvement business in Finland and Onninen in technical trade. K-Rauta sales declined somewhat in Q3. Onninen, on the other hand, performed well and the sales increased for the first time since spring 2023. Here, we can see Onninen's main customer groups in Finland. Onninen serves extensively various construction segments. Technical contractors represent about half of the sales. These are, for example, plumbers and electricians. This technical contractor segment can be divided 50-50 into new construction and renovation and maintenance. 20% of sales goes to industry segment, which includes also shipyards and other industrial construction. Infrastructure represent also 20% of sales. The market in infrastructure has been better than in other forms of construction. And the remaining 10% is wholesale to retailers and other B2B customers. The fact Onninen's presence is so wide helps in different situations and cycles. The much discussed share of new residential construction is currently only about 1/4 of sales. But of course, when the cycle gets stronger, the share of new residential construction will increase. At the moment, nearly 60% of Building and Technical Trade division sales come outside Finland and the pace of construction cycle recovery varies between countries. In the map, we can see the sizes of the businesses in each country and how net sales in comparable terms have developed in Q3 compared to Q3 a year ago. There is a clear improvement in the southern part of the map, Denmark, Poland and Baltic countries reporting strong growth figures. Finnish sales I already presented. In Norway, Byggmakker sales have increased and Onninen were at the same level as last year. In Sweden, we still have work to do in our performance, getting the sales of converted stores up. Also, the market has been difficult in B2B business. But we see cycle turning even if the turn is lower than thought earlier. And now some words about Onnela logistics center. The center serves mainly Onninen, but also K-Auto spare parts. Construction was completed in August, and the move and ramp-up phase is happening during the quiet winter season. The center is fully operational at the end of Q1 next year. K-Rauta central warehouse, which is currently outsourced, will move to Onninen's former warehouse, which is also located in Hyvinkaa. This gives us synergies, for example, in staff resourcing. Onnela logistics center enables growth once the market strengthens and will bring efficiency benefits as volumes grow. The timing of this project was excellent. Original cost estimate was EUR 300 million and the actual cost was less than EUR 250 million. Onnela enables future growth. The center is clearly bigger and has more automatization than the previous warehouse. And there is possibility to expand the center in the future, too. And now to Car Trade, where strong profit development continued. In Car Trade, net sales for Q3 increased by EUR 60 million and were EUR 355 million. Net sales increased in new cars, used cars and services, but decreased in sports trade. Rolling 12 months net sales were over EUR 1.3 billion. The comparable operating profit totaled EUR 22.7 million and increased by EUR 4.9 million year-on-year. Operating margin was 6.4%. Rolling 12 months operating profit was over EUR 82.5 million and operating margin was 6.1%. Net sales and comparable operating profit grew clearly despite the market remaining challenging. Market demand for new cars continue to be still muted. Q3 first registration of passenger cars and vans up by 2.5%. First registration of brands represented by Kesko, up by 18.2% in Q3. This is a great achievement, and we gained heavily market share in new car segment. Good development is a result of attractive new car models and constantly improving operational excellence. Market trend in sales of used cars from dealerships to consumer was down by 0.1%, and our used car sales were up by 25%. Also, service sales increased. We are targeting to grow, especially in damage repairs and the servicing of cars 5 years or older. In sports Car Trade, net sales and comparable operating profit decreased, but market share grew. And now, specified profit guidance for 2025 and outlook for 2026. Profit guidance for 2025. Kesko Group's profit guidance is given for the year 2025 in comparison with the year 2024. Kesko's operating environment is estimated to improve in 2025, but still remain somewhat challenging. Kesko's comparable operating profit is estimated to improve in 2025. Kesko estimates that its 2025 comparable operating profit will amount to EUR 640 million to EUR 690 million. Kesko previously estimated that the comparable operating profit would amount EUR 640 million to EUR 700 million. The updated profit guidance is based on the results for January, September 2025 and the slower-than-anticipated cycle recovery in Building and Technical Trade in the third quarter. Key uncertainties impacting Kesko's outlook are developments in consumer confidence and investment appetites as well as geopolitical crisis and tensions. Outlook for 2026. The operating environment for Kesko is estimated to improve in 2026 in all divisions and all operating countries. Kesko's comparable operating profit is also estimated to improve in 2026 in all divisions and all operating countries. In Grocery Trade, B2C trade is estimated to pick up and the foodservice business to remain stable. In 2026, the comparable operating profit -- operating margin for the Grocery Trade division is estimated to stay clearly above 6% despite the investments in price and the store site network in line with Kesko's strategy for 2024-2026. In 2026, the comparable operating profit for the Grocery Trade division is estimated to improve on 2025. In Building and Technical Trade, the cycle has not improved in 2025 as expected at the start of the year. In 2026, the cycle is expected to improve moderately from an exceptionally low level. In 2026, the comparable operating result for the Building and Technical Trade division is estimated to improve on 2025 in all Kesko operating countries. In Car Trade market, new car sales are expected to remain muted compared to long-term levels, but to nonetheless grow compared to 2025. In 2026, the net sales and comparable operating profit for Kesko's Car Trade division are estimated to improve on 2025. To summarize, the result was good, and there was positive development in all divisions despite the challenges in Kesko's operating environment. In Grocery Trade, strategic measures are yielding results. Market share development for grocery stores has taken a turn for the better. Kesko's market share is strong. Consumer sentiment is moving to better direction and Grocery Trade market is showing signs of picking up. In Building and Technical Trade, sales were clearly up in Denmark, Poland and the Baltic countries. Technical trade sales grew. Construction cycle is strengthening, but at a more moderate pace than previously anticipated. In Car Trade, there was a good sales development in new and used cars and services. Sports trades outperformed the market. All 3 divisions are well positioned for market strengthening in 2026. Thank you. This was my presentation. I guess it's time for questions now. Hanna Jaakkola: Thank you, Jorma, for the presentation. Let's go to the Q&A now. So I will turn first to the conference call line, please. Operator: [Operator Instructions] The next question comes from Maria from Wikstrom. Maria Wikstrom: This is Maria from SEB. I still have a few questions. I would love to have a little bit more color. I'm starting with the 2026 outlook. And especially if we look at the Grocery Trade division, you are guiding for an adjusted EBIT to pick up in '26 from '25. And already, I mean, '25, we have a quite high level. So could you discuss a bit about your confidence on the earnings growth in Grocery Trade division next year? And what are your assumptions behind this growth assumption at this point in time, please? Jorma Rauhala: Okay. Thank you, Maria. All in all, about Grocery Trade, of course, we have now seen that, for example, now last quarter, Q3 was quite strong, also volume increase in the Finnish grocery market and also our performance when it comes to sales, market share and EBIT was quite nice. So we believe that more and more consumers are a little bit more confident. They are now buying more, let's say, very high-quality ready meals and fish and fruit and vegetables and things like that. So all in all, we think that the Finnish grocery market will increase next year. And also, we believe that our performance will be quite strong when it comes to market share. So no doubt about that, that what we stated that the EBIT on Grocery Trade will be clearly about 6%. Maria Wikstrom: And coming back to the market share question, I think you earlier have said that even you have lost the market share on the total Grocery Trade division, you have gained market share with the hypermarket concept. What is your view on the market share development in Q3? And if, I mean, do you think -- I mean, in order to facilitate faster market share growth that you would need to initiate new pricing actions? Or would this -- what you did in the beginning of the year be enough, I mean, for now? Jorma Rauhala: Yes. All in all, like I said, Q3 was very good when it comes to market share development. And the total market growth was 3.9%, and our growth was 3.6%. So we were very close on the market pace. And in hypermarket sector, we have gained market share whole year, which is very, very positive. And also now kind of supermarket segment, we were very close when it comes to market growth pace. We are losing market share on the smaller side, those neighborhood like K-Market. And biggest reason for that is that our store network has -- we have less stores, let's say, now. But all in all, I'm very confident that now Q3 was very much better than Q1 and Q2. And next year, especially, I believe that the next year will be the year that we will gain market share, and we will continue with this price program and the whole program kind of includes our pricing system. So no -- any big changes needed on that one. But I hope this opened a little bit more that. Maria Wikstrom: And then finally, I know this is a kind of a small thing in a big picture, but still wanted to get a little bit more insight on the turnaround and rebranding of the Swedish Building and Technical Trade business to K-Bygg, as you mentioned separately that, that was still eating into the profitability this year. So when do you expect I mean to reach the black numbers? And what is kind of the leeway that you see or trajectory that you see in the Sweden going forward, please? Jorma Rauhala: Yes. Okay. Thank you. Sweden and K-Bygg, Sami, you can take that one. Sami Kiiski: Thank you, Maria. So first of all, of course, we see the market a little bit recovering also in Sweden and more from B2C side. So consumer business is better than B2B. And of course, we need to remember that when we did this strategic move or change to concentrate our business to K-Bygg, it's mainly B2B business. So it's 80% B2B business. And of course, that is also affecting. But yes, we see that the market is getting better. And also, we see that our performance is getting better, particularly, of course, with the, let's say, old K-Bygg and then these converted K-Rauta stores are also gradually picking up now. And of course, it's a hard job to build up the B2B business. We need to be very close with the customers and also build up our offering to that direction. But I see already positive signs also. Jorma Rauhala: Continue a little bit good to understand also that is it something like 50 stores we have in Sweden, something like that. And now we are talking about 7 or 8 stores, which we have this a little bit problem, let's say, so. Sami Kiiski: Exactly. Jorma Rauhala: Yes. Maria Wikstrom: And then my final question is that, I mean, given that your leverage ratios were up slightly on the -- after the Q3. What is currently your appetite, I mean, for further acquisitions? I think we talk now about the Building and Technical Trade segment. Jorma Rauhala: Yes. Our strategy hasn't changed. So still, we are seeking growth also through acquisitions. And also, we have stated that very clearly that Sweden is the most critical one that we want to grow our business and in this Building and Technical Trade to make big changes through acquisitions. So we still are looking good targets in Sweden. Also, other countries could be possible, but clearly, Sweden is priority #1. Operator: The next question comes from Fredrik Ivarsson from ABG Sundal Collier. Fredrik Ivarsson: I've got 3 questions. I'll take them one by one. So first, if we could start with the slight margin contraction in BTT despite some like-for-like growth. What was the key drivers behind the slightly lower margin in B2B, please? Jorma Rauhala: All in all, maybe, Sami, you can take this one. But of course, it is still a weak market situation. And when the market situation is weak, the competition is very, very tight. And let's say, so that the volume is maybe not the biggest problem now. The gross margin is kind of a challenging one. But Sami, maybe you want to continue your... Sami Kiiski: Yes. Of course, that is quite natural that this kind of environment and also this kind of, let's say, market, it's natural that the price competition is, let's say, very hard in all the markets where we are in. And of course, particularly in technical trade, we see that also. And particularly, we see that, for example, only in Finland, business setup is good. It's working well. We see more price competition, of course, in this kind of project businesses. But our model is also so that we -- a big part of that is a service business. We have wide Onninen store network here in Finland, 60 -- almost 60 stores. And we see that there, we have a very good pace also. But of course, like I said, this kind of market, the price competition is hard. Fredrik Ivarsson: And then on the EUR 200 million to EUR 250 million store site investments, was that only in grocery or for the full group? I didn't catch that. Jorma Rauhala: Grocery. Grocery, yes. Fredrik Ivarsson: And can you remind us how this sort of stand in relation to historical levels? I recall, I guess total CapEx has been around EUR 300 million in grocery, but how much of that has been store site investments? Jorma Rauhala: How about colleagues, do you remember the figures? I remember that 2020-2021, we have much less what comes to those store site investments. But Ari, do you remember Ari Akseli: Yes. Exactly during this COVID time, it was the lowest level ever during my time in Kesko. It was something like EUR 100 million yearly. But typical level is between EUR 150 million to EUR 200 million yearly. Jorma Rauhala: Yes. Fredrik Ivarsson: So this is a slight acceleration, I would say? Jorma Rauhala: Yes, we can say yes, that's true. Hanna Jaakkola: To add, we have been saying this EUR 200 million, EUR 250 million for quite some time now. So this was not news this time. But to reminder that, that is the level. Jorma Rauhala: And also those 3 new super -- K-Citymarkets we announced this morning includes on those EUR 200 million to EUR 250 million. So no any extra investment because of those. Hanna Jaakkola: Yes, exactly. Fredrik Ivarsson: And then last question on my side, on the 2025 guidance, what do we need to see in order for you to reach the high end of the guidance? I guess, midrange implies around 8% EBIT growth. But in order for you to reach the high end, what do you need to see during the last 2 months of the year? Jorma Rauhala: Okay. So a couple of 3 months still to go or 2 months, let's say, so that, of course, all the businesses has performed better than we expected now. And of course, Christmas is there. If there would be an excellent Christmas, especially for K-Citymarket, and that would be -- but also it needs that the Building and Technical Trade market should recover a little bit faster. I would say those 2 are the main opportunities on that one. Hanna Jaakkola: Thank you, Fredrik. Anybody else on the line? Very good. There's one coming. Operator: The next question comes from Calle Loikkanen from Danske Bank. Calle Loikkanen: Just a couple of questions. If I start with the Kesko Senukai, I was just wondering about the inventory write-down that could you elaborate a bit on the reasons for this and also how big the impact of this write-down was in terms of euros? Jorma Rauhala: Yes. Anu, you can take that one. Anu Hamalainen: Thank you, Calle, for your question. If I put it like this, in July, we told that Kesko Senukai's Q2 figures for this year were according to last year at the same time. And it was according to that with the management report that we received. So the management report didn't show anything special. So what we did not receive back then was all figures. And for example, inventory, which is the reason why we couldn't report Kesko Senukai figures in Q2 as we need to calculate the Kesko Senukai inventory according to Kesko's inventory valuation principles. As such, I want to emphasize that this is normal and the inventory valuation could show pluses or it could show minuses, and we haven't opened this up earlier. So we have had both pluses and minuses during the previous years as well. So there is nothing special on that side. Why we wanted to open this up was that the inventory valuation will just tell you that the Kesko Senukai is operationally doing well. So there is nothing special on that side. So the inventory valuation could be something else during the last quarter this year. So we don't want to open up, unfortunately, these kind of valuations. Calle Loikkanen: But in terms of euros, I guess it was something like EUR 6 million or in that ballpark? Anu Hamalainen: Well, let's say, it was negative. Calle Loikkanen: And then secondly, I was wondering about the price competition in the technical trade business. And I was wondering that have you seen price competition accelerating now during this year? Or has it just continued to be that way, but you just now started kind of talking about it? And also, are you expecting any changes in the price competition now in Q4 and more importantly, in 2026? Jorma Rauhala: Okay. Sami, you can take that one. But if I understand right, it hasn't accelerated. It has been like that, let's say, at least this year, not any big changes on that one. And I think it's like say, quite normal on this time when the market cycle is very, very weak. And when the market will improve, I think that also that won't be so big problem. But Sami, is that something else you want to add? Sami Kiiski: Exactly. Like you said, we saw that it started, let's say, quarter 4, 2024. And like I said already, it's a little bit connected to these projects, which I think everybody are fighting for, I mean, our customers also more when the market is like this. So it's a very price-driven market in that, let's say, segment in a way. And there, we see this price competition to be quite heavy. But other than that, it hasn't changed a lot in the big picture. And like Jorma said, we are waiting that it should gradually go, let's say, better direction when the market is recovering also. And we need to remember also that this is also availability business. And it's not only the prices, it's also that you need to have good warehouses, you need to invest like we did now with Onnela, and this is much more than prices also. So in the long term, availability matters also. Operator: The next question comes from Miika Ihamaki from DNB Carnegie. Miika Ihamaki: This is Miika from DNB Carnegie. My first question is, you're noting here Davidsen sales development was good, creation of acquired firms proceeded as planned. I was wondering, did you realize any synergies during the quarter? If not, when are you expecting to realize them? And can you give any ballpark and naturally talk about a little bit how the integration is proceeding in Denmark overall? Jorma Rauhala: Sami, you can take this one. Denmark, yes. Sami Kiiski: Yes. I -- was it the Denmark market also, first of all or? Hanna Jaakkola: Yes. And how the integration is proceeding. Sami Kiiski: Thank you, Miika. Good question. And like we have told, so this the closing of these 3 companies were during the 2025. And of course, we started in February, as we all remember, and then the last one came in, in June. So the integration has actually went pretty well, I would say, or at least I'm very happy that it has been a big project. As we all understand, it's a big acquisition for us. Integration has been going well. We have been keeping our most important customers also happy. IT platforms are in place. The new branding is there. So we are really the national-wide player there and ready to expand also the business. So the platform is good. When it comes to synergies, I believe we don't open up the synergies so much. But of course, there's always synergies when we have -- when we are becoming, let's say, the big player and the national player and particularly when we are talking about B2B business and this heavy building materials. And of course, one big in a way, improvement and maybe also you can call it synergy is that we have much better logistics when it comes to growing areas like [ Zealand ] and Copenhagen area where we see more activity also now. So that's maybe to summarize of Danish business. But we are very happy to see that we are performing there and better than market also as a whole. Miika Ihamaki: And then my next question is that what is your expectation on specifically Finland Building and Technical Trade profits into next year on the basis of housing market recovery? So I would like to understand how much do you -- how much is your profit recovery dependent on the housing market in Finland? Jorma Rauhala: Sami, would you like to have this one? Sami Kiiski: Yes. We see also that, of course, we are also closely following what is happening with our customers and also what is happening with the housing market. I believe the message from the market has been also that it's gradually getting better, the market. And also it was, I believe, very well also opened up in Jorma's presentation that our business is not only depending of the new residential or new housing construction business. But of course, let's say, so that we are also waiting for that the market, let's say, come back or gradually improve. So then we will see, of course, that the effect will be there. It's 1/3 of our, for example, Onninen business is, in a way, connected to new housing market, and we can, of course, serve and sell much more equipment and technical and HVAC equipment and products there. So maybe to summarize, we believe that the market will be better. Also the forecast what we are having from euro construction also is showing that the [ for a contract ] it's going to be a better market. But maybe not the first part of the year. It's going to be better when we go a little bit further 2026. Hanna Jaakkola: No more questions from the conference call line. I have one question here coming from the chat. You mentioned already in Q2 report that construction recovery has been slower than expected during '25. And now in '26 outlook, you comment that it will be more moderate than previously anticipated. Has the view on construction recovery weakened further since the summer? Is the question. Jorma Rauhala: Thank you. Yes, we say that Q3 was weaker than we expected in summertime. But I think that in '26, we didn't say that it would be more moderate than previously anticipated. We say that it will be moderate growth, but no change, of course, because we haven't commented earlier '26. But the change was when it comes to Q3 was weaker than we expected on July. Hanna Jaakkola: Exactly. Jorma Rauhala: Yes. Hanna Jaakkola: But no more questions from the chat function, no more questions from the conference call line. I would like to thank you for very good comments and questions. And if you have any further discussion needs or questions, don't hesitate calling me. But I'd like to thank you from -- on behalf of the whole group here. Thank you. Jorma Rauhala: Okay. Thank you.
Operator: Good morning. Thank you for standing by, and welcome to Pluxee Fiscal 2025 Results Presentation. [Operator Instructions] I advise you that the conference is being recorded today, October 3. At this time, I would like to hand over the conference to Pauline Bireaud, Head of Investor Relations. Please go ahead, madam. Pauline Bireaud: Good morning, everyone, and thank you for joining us today for Pluxee's Full Year Fiscal 2025 Call. I'm Pauline, Head of Investor Relations at Pluxee, and I'm pleased to be here with all of you today for our second set of full-year financial results as a stand-alone listed Group. So today, I'm pleased to be joined by our CEO, Aurelien Sonet; and our CFO, Stephane Lhopiteau. Before we begin, let me quickly walk you through today's agenda. Aurelien will start with the highlights and key figures for the full year, followed by a focus on the main achievements in executing our strategic road map. Stephane will then take you through our financial performance in detail, as well as the evolution we are introducing to our capital allocation policy this year. And finally, Aurelien will conclude with our outlook for fiscal 2026 before we open the floor for questions. And with that, I will hand over to Aurelien. Aurélien Sonet: Thank you, Pauline, and good morning, everyone. I'm very pleased to be with you today. Fiscal 2025 was another very strong year, in which we executed our strategy with discipline and delivered above expectations across all key metrics. I want to sincerely thank our teams for both their commitment and excellent execution, which made these results possible even in a challenging environment. Let's look at the key highlights of the year in a nutshell. First, we continue to see strong momentum in new client acquisition with a growing contribution from SMEs year-on-year. Second, despite weaker portfolio growth, reflecting current macro uncertainties, we maintained a net retention rate of 100%, in line with our midterm objective. Lastly, our recent M&A transactions, a core pillar of our growth model, are already delivering positive revenue contributions. This translated into first, solid top-line organic growth, supported by continued strong momentum in Employee Benefits. Second, robust margin expansion, primarily fueled this year by operating improvements, underscoring the operating leverage of our model and the headroom for further margin gains. And third, an outstanding cash generation and conversion. Consistent with our disciplined approach to capital allocation and our commitment to revisit regularly our shareholder return framework, we have decided, with the support of the Board, to further enhance shareholders' returns for fiscal 2025. In addition to a higher dividend, we will launch a EUR 100 million share buyback program, reflecting our strong fiscal 2025 performance and reflecting our confidence in Pluxee's future prospects. Let's now take a look at our fiscal 2025 performance against our objectives on Slide 5. As just mentioned, we delivered across our 3 key financial objectives in fiscal 2025. We recorded a plus 10.6% organic growth in total revenues, fully consistent with our low double-digit objective. We achieved a significant expansion of plus 230 basis points in recurring EBITDA margin compared to plus 150 basis points previously. This demonstrates both the operating leverage of our platform and our ability to drive efficiencies. And finally, we delivered 89% recurring cash conversion, well above our target of above 75% on average for fiscal 2024 to 2026. So in short, we are clearly well ahead of our initial plan. In addition, I would like also to highlight that our free cash flow engine has expanded very materially from circa EUR 290 million in fiscal 2023 to EUR 417 million in fiscal 2025. This is a step change in the group's financial profile. These strong results have enabled us to revisit our shareholder return for fiscal 2025, as we will detail on Slide 6. Indeed, we have decided to introduce greater flexibility in our capital allocation policy for fiscal 2025 through a combined shareholder return approach that includes: first, a dividend of EUR 0.38 per share, up plus 9% compared to fiscal 2024 and representing a total dividend distribution of approximately EUR 55 million, subject to shareholder approval at our general assembly end of December; and second, a EUR 100 million share buyback program, leveraging our record cash flow generation and significant increases in our net cash position to further enhance value creation for our shareholders. Stephane will provide more details on this in his section. Before we go into the details of the strategic milestones reached in fiscal 2025, I'd like to take a step back and look at what the group has already delivered financially over the first 2 years of the plan, moving to Slide 7. Putting the group's financial performance over the past 2 years into perspective, there are really 2 key takeaways. First, it highlights the structural strength of our model and its strong conversion capacity. Consistent top-line growth translates into remarkable profitability and cash generation with recurring EBITDA CAGR at plus 14% reported and free cash flow CAGR up plus 20% over the past 2 years. Second, it demonstrates how resilient our model is. Even amid currency volatility across several of our core markets, we have been able to absorb over 7 points of ForEx impact on revenue in fiscal 2025, while continuing to deliver solid results. Now let's zoom on our strategic road map execution on Page 9. Pluxee has maintained strong business momentum through fiscal 2025, winning new clients and delivering solid commercial results even amid persistent macroeconomic headwinds across countries. Starting with new client development. We have once again outperformed our objective, generating EUR 1.5 billion in annualized PBV from new clients in fiscal 2025, well above our EUR 1.3 billion annual target. Our net client retention rate also remained consistently at 100%. This was achieved through a combination of improving client loyalty, further increase in face value, and steady cross-selling while absorbing end-user portfolio evolution, on which I will come back to. Looking more closely at the face value driver, which supports net retention, it contributed an incremental EUR 1.1 billion in business volume issued over the fiscal year. This means that we have already reached 80% of our EUR 3 billion target over 3 years. In addition, we are quite confident for the year ahead given the recent announcement in terms of increases in sales value legal cap in several countries. We will now take a closer look at each of these growth levers in the following slides, beginning with product offering on Slide 10. Over the past year, we have stayed focused on enhancing our offering, expanding both its breadth and depth to better serve our clients and consumers. Building on our strong Men food foundations, we have significantly broadened our portfolio to support consumer lifestyle, health, financial, and mental well-being alongside an expanding range of employee engagement solutions. At the same time, we are bringing all these benefits together in a single unified experience through Pluxee global consumer app. The programmatic rollout of the app is well underway. We are progressively expanding it across our key markets while accelerating the launch of new features and benefit integration to ensure continuous innovation for clients and our end users. The key strength of our global solution lies in its payment flexibility, being fully payment agnostic, it integrates the most popular digital payment options such as Google Pay, Apple Pay, and QR code solutions to ensure maximum convenience. Innovation drives our growth with AI being a key accelerator of both efficiency and creativity. In France, for example, our AI-powered chatbots already filter and direct requests to ensure that each user receives the right level of support at the most relevant stage of its journey. Together, this initiative strengthened our commitment to deliver a richer, intuitive, and seamless experience to our customers across our 28 countries. Product offering lies at the heart of our value proposition to clients. Let's look at how it fueled our commercial performance, starting with new client acquisition on Slide 11. The sales momentum has remained very strong over the year, allowing us to deliver more than EUR 1.5 billion in new client development with a positive contribution from our 3 regions. It has been sustained by several structural drivers, namely, first, the full activation of our high-performing commercial engine, powered by a strong sales discipline, advanced data-driven marketing, and an omnichannel client engagement. And second, a growing contribution from SME. As we continue to accelerate the penetration of this segment. Automation enables us to scale SME acquisition, which now represents 31% of total new business, highlighting the success of our digital self-service journey and our distribution partnerships. Let me briefly highlight 2 key contract wins that illustrate what I've just mentioned. First, our Brazilian team won a major employee benefits contract with Energisa, a leading energy provider in Brazil. This success was achieved through the full activation of our partnership with Santander, serving more than 20,000 additional end users. Second, we won a nationwide benefits program with Randstad, covering over 8,000 workers in Italy. I would like to take this opportunity to make a brief side comment on Italy. Following intensive efforts from our local sales team, we successfully managed to almost entirely absorb the regulatory change impact on merchant commissions. This was achieved by renegotiating with our clients to restore a sustainable balance between all the stakeholders. Looking ahead, supported by a solid and diversified pipeline, we are confident in our ability to deliver on our EUR 1.3 billion target in fiscal 2026. Let's now turn to how we are unlocking the full potential of our existing client portfolio on Slide 12. Over fiscal 2025, Pluxee continued to deliver strong performance across its existing client portfolio. Client loyalty improved by plus 20 basis points, and the group continued to demonstrate strong engagement to optimize existing client portfolio through further sales value increases and cross-selling. However, tougher macroeconomic context has translated into hiring increases and, in some markets, workforce reductions, especially in some European countries such as France and Mexico as well. This has progressively put a growing pressure on our end-user portfolio, which turned negative in H2. Despite this headwind, it has been another solid year in terms of net retention, maintained at 100%, demonstrating the strength and resilience of our business model. One notable example worth highlighting is the renewal of our long-standing partnership with Capgemini. We successfully won a major tender, resulting in a long-term strategic contract serving more than 68 active users across 9 countries. Beyond the business volumes, this renewal reinforces our position as a global trusted partner for our clients. It also offers strong potential for future value growth, supported by Capgemini's continued expansion and its increasing focus on employee engagement and retention. Altogether, this performance reinforces our confidence in the strength of our value proposition, our market positioning, and the resilience of our growth drivers even in a fast-changing macroeconomic context. Now that we have discussed organic growth, let's move on to our M&A strategy and how we've been progressing with recent integration on Slide 13. Since the spin-off, we have completed 8 transactions, comprising 1 strategic partnerships and 7 bolt-on acquisitions, including the most recent one signed in early fiscal 2026. We have been and we will remain guided by our clear strategic framework centered on 3 key priorities: expand business volumes to consolidate the group's market share, broaden our offering and product portfolio to deliver more value to both employers and employees, and enrich our technology capabilities to accelerate innovation, scalability, and end user engagement. Step by step, we are strengthening our track record in sourcing and acquiring targets while demonstrating our ability to successfully integrate them and generate growth synergies. Looking ahead, our M&A pipeline remains strong and diversified, spanning multiple geographies and deal sizes, consistent with our global strategic road map. Let's now take a closer look at how we are integrating these acquisitions and the tangible impact that they are already having on our strategic positioning and performance on Slide 14. All these recent partnerships and acquisitions are progressively delivering incremental value, including through initial synergy. Starting with Brazil, where our strategic partnership with Santander is showing strong traction. While Ben's integration has been seamless, maintaining a high level of client loyalty, the distribution agreement is now fully activated, allowing us to leverage the 4,500 Santander sales team, with around 22% of them having already sold at least one Pluxee solution. In less than a year, monthly business generated through the Santander distribution network has doubled year-on-year, confirming the value of this alliance as a growth accelerator. Still in Brazil, the acquisition of BenefÃcio Facil further enhances our multi-benefit offering by internalizing the employee mobility benefit. Integration is well advanced with 95% of the streams completed, and commercial traction is already picking up, driven by strong new client acquisitions, notably through Santander's distribution network. Turning to Spain. The successful integration of Cobee has propelled Pluxee to the #1 market position. It is built on our best-in-class multi-benefit platform, which offers a broad and diversified product range from health insurance to training, and our proven ability to engage employees through a fully digital, intuitive, and flexible experience. The results are tangible. Employee opt-in rates have increased by 50% on the client migrated, demonstrating both the appeal of the Cobee model and the success of our integration. Beyond growth, our ambition is also to generate sustainable profitability, as we'll see on Slide 15. One of the key pillars of our value creation journey is the group's strong potential for margin expansion. There are 2 main drivers behind this margin expansion. First, operating leverage generated by our highly scalable business model and our increasingly global operating model. This effect has been further amplified by the increased contribution of our latest M&A transactions and by the near full digitization of our business, with around 94% of our BVI now being digitized, including France, up to 90% at the end of the fiscal year. Second, efficiency gains driven by the normalization 18 months after the spin-off of our cost structure, combined with tight cost discipline and rigorous portfolio monitoring, constantly assessing product and country performance. This disciplined approach led, for example, in fiscal 2025 to the decision of exiting from Indonesia. The key point is that in fiscal 2025, the bulk of the EBITDA margin increase came from operating EBITDA of plus 235 basis points. This shift is particularly important as it shows that our margin expansion is now coming from structural operational improvements. Looking ahead to fiscal 2026, this trend should continue to intensify as Float revenues are expected to remain stable and therefore, dilutive to overall EBITDA margin expansion. Now before giving the floor to Stephane, I'd like to briefly touch on our sustainability road map, in which our strategy is fully embedded on Page 16. Our sustainability road map is built around 4 core values, each supported by clear measurable targets. First, Pluxee acts as a trusted partner, with 98.7% of our employees being trained in responsible business conduct. Second, we empower individuals while promoting diversity, with 40.6% of women currently holding a leadership position. Third, we strengthened local communities with EUR 7 billion in business volumes reimbursed to small and mid-sized merchants. And finally, we reduced our environment impact with the current 23% reduction in carbon emissions compared to our 2017 baseline. It is also worth noting that in fiscal 2025, we achieved an EcoVadis rating of 78 out of 100 and obtained our first CDP score of B, both reflecting the strong recognition of our sustainability performance. And with that, I will hand over to Stephane to go in more details on our financial performance. Stephane Lhopiteau: Thank you, Aurelien, and good morning, everyone. It's my pleasure to be with you today to present our fiscal 2025 results in more details, starting as usual with our business volume bridge on Page 18. The sustained growth in business volume issued or BVI has been one of the key growth drivers to Pluxee's top-line growth over fiscal '25. Over the year, total BVI reached EUR 24.5 billion. It was fueled by Employee Benefits BVI, which reached EUR 18.7 billion, up plus 7.6% or plus 8.5% when excluding the one-off effect related to the purchasing power program in Belgium. Such growth in Employee Benefits BVI was driven, as Aurelien already mentioned by: first, strong new client development across both large accounts and SMEs. Second, the net retention rate maintained around 100%, supported by enhanced client loyalty, further increase in face value, and steady cross-selling. And third, the positive contribution from recent M&A transactions through both growth synergies and favorable scope effect. However, performance was also affected by persistent macroeconomic headwinds, leading to increased pressure on end users portfolio across an expanding set of markets, notably Continental Europe and Mexico, and within sectors like temporary staffing, consulting, and manufacturing. On its side, BVI from other products and services remained stable in fiscal '25 at EUR 5.8 billion, a decline versus fiscal '24 due to the Public Benefit segment, reflecting the discontinuation of large programs during the year, primarily in Romania and Chile, the latter being fortunately partially renewed from March 2025 onwards. Let's now see how the BVI organic growth fueled our solid revenue organic growth on Slide #19. Total revenues reached EUR 1.287 billion in fiscal '25, up plus 10.6% organically, fully in line with the group's low double-digit growth target. On a reported basis, total revenues growth reached plus 6.4% year-on-year, including, first, a negative currency translation impact of minus 7%, coming mainly from operation in Brazil and Turkey, and to a lesser extent from Mexico. And second, a positive scope effect of plus 2.8%, primarily reflecting the integration of the Santander Brazil Employee Benefits activity as well as the acquisition of Cobee in Spain, Portugal, and Mexico, and of BenefÃcio Facil, in Brazil. Fiscal '25 total revenues were made of EUR 1.125 billion in operating revenue, up plus 10.3% organically, and EUR 162 million in float revenue, up plus 12.6% organically. This strong performance in fiscal '25 underlines Pluxee's ability to deliver sustained top-line growth in an increasingly challenging and volatile environment. In this context, we also managed to deliver a strong fourth quarter with total revenues growing by plus 9.6% organically, excluding a plus 2% scope effect and a minus 4.8% currency impact, and driven notably by strong performance in Latin America. Let's now take a closer look at the underlying trend behind both Operating and Float revenue, starting with Operating revenue on Page 20. The momentum in Operating revenue was driven by Employee Benefits, which reached EUR 963 million in fiscal '25, up plus 12% organically, excluding a minus 7.4% currency impact and a plus 3.3% scope effect. Strong business momentum in Employee Benefits was driven by a solid organic growth in business volume issued, particularly in Latin America and Rest of the World as anticipated, and the quick progressing of circa plus 20 basis points year-on-year to 5.1% on average. In Q4 '25, Pluxee generated operating revenue of EUR 265 million in Employee Benefits, delivering plus 11.6% organic growth, confirming the ongoing positive momentum. On other products and services generated operating revenue of EUR 162 million in fiscal '25, showing flat growth year-on-year, with the fourth quarter being slightly negative. This trend reflected the discontinuation of large public benefit contracts in Romania and temporarily in Chile, as well as the ongoing repositioning of Pluxee's offering in the U.K. and the U.S. As mentioned, operating revenue organic growth was mainly driven by Latin America and Rest of the World. Let's take a closer look at this on Slide 21. Turning to geographies. Regions delivered strong double-digit organic growth in fiscal '25, namely Latin America and Rest of the World, while Continental Europe was tempered by a challenging macroeconomic environment and a high comparable base. Starting with Europe. Operating revenue reached EUR 506 million, up plus 5.1% organically for fiscal '25 with a Q4 organic growth of plus 2.2%. While the group continued to benefit from solid momentum in Southern Europe, particularly in Spain, supported by the Cobee acquisition, growth was tempered by several factors in the region, including: first, the increasing challenging economic and political environment across the region. Second, adverse impact from public benefit program, especially in Romania, following postponed ordering or reduction linked to budget deficit measures. And third, a high comparison base from 2024 one-offs, such as the Belgium purchasing power program and the Paris Olympic Games. In Latin America, operating revenue reached EUR 429 million for fiscal '25, up plus 14.5% organically, excluding a plus 4.7% scope effect and a minus 13.3% currency impact. In Q4, organic growth in the region accelerated significantly to 19.8%. This strong performance was driven primarily by Brazil, notably fueled by the fully operational Santander partnership and the further penetration of the market, especially among SMEs. Commercial momentum also remained strong across Hispanic LatAm, particularly in Chile, where the [indiscernible] public benefit program was renewed from March 2025, even if with distinct economic terms. However, Mexico continued to face headwinds linked to U.S. policy changes. In Rest of the World, operating revenue totaled EUR 190 million in fiscal '25, up plus 14.2% organically, excluding a minus 7.7% currency impact, mostly due to the Turkish lira devaluation. Double-digit organic growth in the region was driven by Turkey, where the group continued to unlock increased sales value from existing clients and to penetrate further the benefits market through new contracts. As expected, performance in U.K. and U.S. remained below group standards, still affected by the ongoing business repositioning in both markets. Complementing operating revenue, let's now move to the float revenue performance analysis on Page 22. Fiscal '25, revenue growth slowed down compared to fiscal '24, even if still above initial expectations. Gross revenue reached EUR 162 million, up plus 12.6% organically, excluding a plus 3.4% scope effect and a minus 11% Q translation impact. In Q4, it continued to gradually decelerate to plus 7.6% organically. Organic growth in revenue over fiscal '25 was supported by higher business volume issued in nonrestricted cash, particularly in Latin America and rest of the world. However, this trend was not reflected in the overall float position remaining stable at EUR 2.7 billion at year-end due to the less dynamic trend in programs issued in restricted cash. The overall positive trend in volumes was reinforced by a higher average investment yield year-on-year, reaching 6% in fiscal '25 compared to 5.7% in fiscal '24 as a result of the group's efficient investment strategy tailored to local financial market conditions and the high interest rates in Brazil and Turkey. This section on top-line performance, let's now turn to profitability, starting with recurring EBITDA on Slide 23. Recurring EBITDA rose strongly, up plus 22.2% organically to EUR 471 million, up plus 9.4% on a reported basis. Recurring EBITDA margin reached 36.6%, up plus 202 basis points, including currency and effect, driven by solid operating profitability gains across all 3 regions. This robust performance was primarily supported by the inherent operating leverage embedded in the group's business model. It was further enhanced by the initial positive contribution from certain recently closed acquisitions, largely commented by Aurelien. The margin expansion also reflects efficiency gains achieved through: first, the strict cost base monitoring; second, our constant portfolio rationalization efforts; and third, the end of one-off effects related to the spin-off. Altogether, this translated into a plus 235 basis points organic expansion in recurring operating EBITDA margin, I mean, excluding [indiscernible]. It was further supported at the recurring EBITDA level by favorable flow-through from still growing flow of revenue, notably in Latin America and rest of the world. This strong growth in recurring EBITDA fueled solid performance further down the income statement, all the way down to adjusted net profit, as we can see on Page 24. Let me walk you through the key items below the recurring EBITDA line, starting with recurring operating profit, which stood at EUR 361 million, up plus 5.7% includes minus EUR 110 million of depreciation, amortization and impairment charges in fiscal '25 compared to minus EUR 89 million in fiscal '24, an increase mainly reflecting the amortization of intangibles acquired through the Santander partnership and the Cobee and BenefÃcio Facil business combination. Other operating income and expenses amounted to a net expense of minus EUR 26 million in fiscal '25 compared to minus EUR 92 million in fiscal '24, reflecting the expected normalization post spin-off, notably once the H1 '25 residual ISI [Indiscernible] cost had been accounted for. Net financial expenses totaled minus $17 million in fiscal '25 versus minus $20 million in the prior year. Gross borrowing costs declined slightly, driven by the nonrepetition of spin-off refinancing costs and more favorable financing conditions. Income tax expense amounted to minus EUR 100 million in fiscal '25, corresponding to an almost normalized effective tax rate of 31.4% compared to 39.5% in fiscal '24 due to the spin-off, including carve-out and other related one-off costs. Adjusted net profit group share reached EUR 221 million, up plus 8.4% year-on-year, while the adjusted basic EPS came in at EUR 1.52. This performance demonstrates a strong acceleration in growth and profitability throughout the P&L. We will now look at how these elements also translated into the strong cash generation and conversion that we delivered once again in this fiscal year on Page 25. We are indeed once again very pleased with our cash flow generation this year, up plus 10% year-on-year. We delivered a record recurring free cash flow of EUR 417 million compared to EUR 379 million in fiscal '24, resulting in a cash conversion rate of 89%, well above our 3-year average target of 75%. Let me detail the main factors contributing to this solid performance beyond the strong recurring EBITDA. CapEx amounted to EUR 98 million, representing a temporarily lower 7.6% of total revenue, mainly due to the finalization of the IT carve-out during the first half of fiscal '25. Nonetheless, the group maintained a strong investment focus over fiscal '25 in data and payment capabilities, technology innovation, and infrastructure, as well as cybersecurity, all essential to underpin future growth and efficiency improvements. Change in working capital, excluding restricted cash variation, stood at plus EUR 128 million, while fiscal '24 change in working cap was boosted by positive one-off effects, including the impact from the regulatory change in Brazil and from the Paris Olympic Games in France. Income tax paid decreased to minus EUR 86 million, reflecting the near normalization of the effective tax rate following the spin-off, as mentioned earlier. This strong cash generation and high cash conversion clearly demonstrates the group's disciplined execution, sustained operational efficiency and enhanced financial flexibility. This strong cash generation was also a key driver to fuel the further increase in the group's net financial cash position in fiscal '25, as we see on Slide 26.  The group's net financial cash position increased by plus EUR 108 million, up to EUR 1.163 billion of net cash as of year-end. It was mainly driven by the positive inflow from the EUR 417 million of recurring free cash flow, as we have seen. Main outflows over the year included, first, minus EUR 148 million linked to the payment and related impact of the acquisition completed in fiscal '25, notably Cobee, which was partly offset by the disposal of the nonconsolidated investment in Cobee.  And then these outflows included minus EUR 65 million related to dividend distribution to both shareholders and noncontrolling interest, minus EUR 5 million of other impacts related mainly to the cash out from other income and expenses, and the purchase of treasury shares, and minus EUR 47 million of currency effect on cash position, excluding [indiscernible] net cash position is also reflected in our BBB+ rating from S&P.  The strong [ Tepi ] net cash position allows us to actively deploy our capital allocation strategy, which I will review on Page 27 before handing over back to Aurelien. Since January '24, we have consistently reiterated that our capital allocation strategy relies on 3 central pillars: investing for future organic growth through CapEx, pursuing targeted and value-accretive M&A opportunities, and returning capital to shareholders.  First, we maintain our ambitious investment policy targeting to remain below 10% of total revenues in CapEx to support sustainable organic growth. Although this year's ratio was temporarily slightly below target, our investment focus remains strong, particularly in technology and data.  Second, we continue to deploy our targeted and disciplined M&A strategy. As Aurelien  highlighted earlier, all our recent acquisitions have fully met expectations, clearly evidenced by their progressive positive contribution to growth once integrated.  And lastly, we remain fully committed to returning value to our shareholders. Initial step in our shareholder return policy is the dividend. The shift last year to adjusted net profit as the basis for dividend payout sent a clear and confident signal to our shareholders. Accordingly, we are proposing this year to increase the dividend from EUR 0.35 to EUR 0.38 per share, representing a plus 9% uplift. In addition, we have a strong and accelerating free cash flow generation as well as a higher year-end net cash position in fiscal 2025.  As we are confident that this will not compromise our investment capacity for growth, we have decided a EUR 100 million share buyback program. This is a testament to our focus to shareholder returns and our confidence in the group's future outlook. And with that, I will now hand it over back to Aurelien , who will take us through our financial objective for fiscal '26 and the conclusion.  Aurélien Sonet: Thank you, Stephane. Let me now wrap up this presentation with our outlook. Back in January 2024, we set ourselves ambitious medium-term financial objectives. And over the first 2 years of the plan, we can clearly say that we have delivered and even outperformed on them. That said, the environment in which we operate is no longer the same. A more challenging macroeconomic context has created headwinds in several markets, making us enter fiscal 2026 with caution. However, we remain strongly confident in our structural growth drivers and in the significant potential for further margin improvement and robust cash generation.  Consequently, we are now committed to delivering for fiscal 2026, first high single-digit total revenue organic growth. This will be driven by solid momentum in Employee Benefits operating revenue, while other products and services are expected to remain dilutive to overall group growth, and float revenue should stay broadly stable in value based on the latest forward curves.  This high single-digit growth in fiscal 2026 would translate into a 3-year CAGR of at least plus 12%, firmly within the low double-digit range. Second, plus 100 basis points recurring EBITDA margin organic expansion, upgraded from the previous plus 75 basis points, backed by the group's significant potential for continued margin enhancement. This should translate into an overall margin expansion exceeding 500 basis points, well above our initial 250 basis points 3-year target. Third, above 80% recurring cash conversion on average over fiscal 2024 to 2026, representing a second upgrade from our initial 70% objective.  Now, before opening the floor to questions, I'd like to highlight once again that fiscal 2025 has been another very strong year. As we enter fiscal 2026, we look ahead with confidence, supported by solid fundamentals, a loyal client base, and a strong commercial pipeline, but also with prudence given the challenging environment that we face in several of our markets. Building on our strengths, we remain fully committed to executing on our long-term value creation road map. And with that, Stephane and I are very pleased to answer your questions.  Operator: [Operator Instructions]. The first question is from Julien Richer from Kepler Cheuvreux, Research Division.  Julien Richer: So 2 questions for me, please. The first one, you posted a low double-digit organic revenue growth in '25. '26 guidance is for revenue to grow high single digit. What proportion of this will be volume versus sales value increases? And how sustainable are these drivers if macro conditions soften? Second question on Cobee. Could you please elaborate on the cross-sell potential between your platform and Cobee, the impact of Cobee on your average revenue per user, and any early signs of scalability to other geographies, please?  Aurélien Sonet: So I'm going to start with your question regarding Cobee, Julien, and Stephane, you might answer the first question of Julien. So regarding Cobee, as we are mentioning, we see 2 very positive effects when we migrate our existing Pluxee clients on the Cobee's platform,  the first one is, as I was mentioning, is the activation of users because in Spain, it's not always collective benefits. It's more a salary sacrifice model. And so we see a boost in the level of activation. So this is the first driver. And the second one is the amount converted by the end user into benefits. And we see that the budget is increasing because the full range of benefits bring much more satisfaction and answers much more to our clients' employees. So those are the 2 strong synergies. And this is still the start, and it was our plan, and we see that we are meeting our initial plan. Now, in terms of expansion and rollout plan of our Cobee offering, we are already working in Portugal and in Mexico. And in both countries, we are seeing very encouraging signs. The market is answering quite positively, and for the moment, we really want, I mean, Spain, Portugal, and Mexico to be successful. So those are our top priorities for '26. Stephane, regarding the first question?  Stephane Lhopiteau: So, regarding your question about how much the high single-digit growth is going to be fueled by average face value versus volume. So, as a reminder for everyone, average face value increase is a key contributor to the growth in business volumes. But you're right, within this business volume, there are some factors like this increased average face value versus new client gain or some potential losses that we try to avoid as much as possible. So what I can tell you in terms of average face value contribution we are fully on track with our initial commitment, which was to deliver EUR 3 billion of increase in average face value over 3 years, and we have delivered more than EUR 1 billion in fiscal '24 and once again in fiscal '26, and we are targeting even though this is not a guidance, but we are targeting the same magnitude of increase in average face value in the coming fiscal year '26.  Operator: The next question is from Estelle Weingrod from JPMorgan.  Estelle Weingrod: On regulation, first, both France and Brazil, just where do we stand now? And what is your best guess on timing? The second one on the outlook as well. You're guiding for another strong year in terms of margin expansion. Can you just elaborate a bit more? What is it driven by? Have you identified new efficiency gains?  Aurélien Sonet: So starting with the regulation for France and Brazil. So France, at the moment, the main topic is about the 8% taxation measure that was introduced by the government on the all employee benefits. Quite recently, an amendment related to this measure and related to the cancellation of this measure was passed at the social committee level. So this is, I mean, a very good news for the 21 million French worker that would be impacted by this kind of measure.  Now discussions are still going on at the first chamber before going to the second chamber to the higher chamber. So we still remain vigilant regarding this topic, but it's a positive evolution.  Regarding the meal benefit platform, which has been our topic for the past almost 2 years, as you can imagine, for the moment, this is not the current priority of our existing government. But even though we don't have the visibility on the timing when the discussion will resume, I remain optimistic that this topic will be rediscussed first. And regarding the content of this reform, I would expect that it would contain similar measures, given that the past 3 governments came out with the same conclusion and recommendation. So from a timing standpoint, we don't have a clear visibility yet.  So, back to Brazil. So over the last months, the macro environment has been marked by still a relatively high level of inflation. So Lula government has been put under strong pressure to find solution to reduce the food inflation and to enable access to food for all consumers and to face or to help the government face the challenge, we remain in constant dialogue, both with the Ministry of Labor, but also the Ministry of Finance to discuss ways to enhance the meal benefit system the path and to do it over the long term.  So we do share a common objective, which is to ensure the sustainability and the extension of this program. And when we look more precisely at the different measures, so regarding portability and interoperability, so the decree that is required for this implementation is still pending on the portability, and we shared this during the last call. We've been actively engaged to establish the appropriate framework and based on the proposal that we submitted through our association. But there is no specific update since then.  And regarding other possible measures. As previously discussed, we are also closely monitoring the situation. And we'll come back to you in due time when there is a significant evolution, which has not been the case over the past months.  So this is for the regulation. And regarding how we plan to deliver 100 basis point margin expansion. First, we will continue to fuel our platform model with steady business volume growth, both organically and inorganically to fully capture the benefit of our operating leverage. Second, as mentioned by Stephane during the presentation, we continue to strengthen our cost discipline.  We are also implementing additional efficiency programs that includes process simplification, more selective investment allocation, and further digitalization of our processes. And indeed, these measures are designed to offset the impact of the slower top-line growth in order to sustain our EBITDA margin. And third, we've been reviewing our portfolio to ensure that our capital is deployed where we see the highest potential. And we share with you Indonesia. So this could include exit from smaller or less strategic markets or products.  Operator: The next question is from Justin Forsythe from UBS.  Justin Forsythe: I appreciate the 2 questions here. So the first one, I wanted to come back to the guidance a little bit. So I just wanted to first confirm that, that was only tied to the macro impacts that you were flagging.  And does that mean that we'll be back at low double digit once we've lapped or grown through these macro impacts? And it also sounds like face value developments have been quite positive since the last results, and more broadly. So I suppose it's fair to assume also that the benefit from face value is quite meaningfully offset by macro, maybe more so than before. Also, I wanted to talk a little bit about the SME penetration. I think you gave some color around the Capital Markets Day back in 2021 around where we sat different geographies. I believe France was 10%, Brazil was 20%. Maybe you could just update us on penetration levels today, because you seem to continue to flag the continued penetration of SME increasing. Aurélien Sonet: Okay. Thanks, Justin. Stephane, maybe you want to -- you take the first question regarding the guidance. Stephane Lhopiteau: So regarding the slight shift because it just a slight moving from low double digit to high single digit, which is still an exciting organic growth that we are targeting for fiscal '26. There are a number of factors that need to be considered. The first one is the change in the float growth. So, this is not a guidance because we are just guiding on total revenue. But as said by Aurelian during the presentation and clearly stated in the press release, we are guiding -- we are adding some color on the float revenue growth, and we are seeing it to remain stable in fiscal '26. And so, this means that the float revenue organic growth is going to be dilutive to total gross revenue. And if you do the math compared to fiscal year '25, you would see that this is going to hit the organic growth by 150 basis points approximately. So, this is the first factor. The second factor is this macro headwind that we are seeing basically in all the regions, which is going to drive lower growth from all the regions, even though it's going to remain with a good momentum in Latin America and rest of the world, but with a lower growth in Continental Europe for the reason we already shared and notably, this lower or even sometimes negative end user portfolio growth, which is going to weigh on our organic growth. And then on top of this, while the overall the Employee Benefit segment is going to remain very dynamic, we are facing some changes in other products and services we refer to these changes or headwinds during the presentation. The first one is that because of the macroeconomic environment, there are some public benefit contracts which are not renewed, which are postponed, and which is going to weigh on this from public benefit to the total revenue organic growth. And at the same time, we are repositioning ourselves in the U.S. and the U.K., which is temporarily weighing as well on this organic growth. And then something that we should not forget as well is that we delivered very strong growth in fiscal '24 and fiscal '25, which is creating a high comparison base, notably in Q4. If you look at the presentation again and what we delivered in terms of organic growth in Q4, which is a fantastic outcome result as part of what we are getting from this Santander partnership. Yes, this is creating a very high comparison basis. And in Q4 of '26, we might face lower growth, which is also contributing as well to a lower growth in fiscal year '26 versus fiscal year '25. So overall, in order to make it short and in terms of segment, we are still committed to deliver very high organic growth in terms of employee benefits, but lower for other products and services, which is going to be dilutive to the organic growth. Don't forget the impact of the float. I think that's it. We are not going to share more color for what is going to come further in '26. We are right now fully committed to deliver our 3-year plan, and we'll see later what we plan for '27. Aurélien Sonet: And then regarding your question on SME, so we shared with you the performance this year. I mean 31% of our total new business is coming from SME. This remains a top priority for our largest markets. And all of them contributed to this performance. So, we see the good traction. We mentioned this commercial engine. I mean and the processes and the end-to-end digital journey that we put in place this was implemented in all those markets. The momentum is good. But still, it's fair to say that we -- in some countries such as France, we see a slowdown due to the macroeconomic context because this uncertainty weighs on the decision of those small or mid-sized companies. And sometimes it could even have an impact on their own future. So, we still expect a strong contribution, but it's likely that there's going to be a slowdown in specific market. Having said this, regarding the penetration and just, I mean, more macro view, even though we did -- we delivered a great performance, there is still a high level of potential. The level of penetration remains still low. So overall, we still have a very good potential to capture. Justin Forsythe: Stephane, I think you said 150 basis points impact from the float growth change. By my math, that's roughly $19 million, $20 million impact tied to float. Is that the right math there? Stephane Lhopiteau: If you simulate 0 organic growth in float in '25, compared to the 12.6% that we delivered, you will end up with 150 -- a little bit more than 160 basis points impact overall. And so, this is what I was trying to explain. This is a way to assess it applying to fiscal '25, what we are sharing with you in terms of color for fiscal year '26. If you do it again, you will see that we have 100 -- a bit more than 150 basis points impact in our organic growth for '25. Operator: The next question is from Andre Juillard from Deutsche Bank. Andre Juillard: First, congratulations for this strong fiscal year '25 results. One question for me in reality. Just looking for more clarification about the capital allocation. You have a very strong cash net position of EUR 1.16 billion. You announced a share buyback of EUR 100 million this morning. That means that you will keep a very comfortable position with a cash net position. What do you plan to do with this cash? Is there a very strong pipeline of M&A? Or could we expect further good news in terms of return to shareholders? Aurélien Sonet: Stephane, do you want to answer? Stephane Lhopiteau: So regarding capital allocation, which has remained unchanged, we have a fully consistent calculation that we unveiled at the time of the Capital Market Day, and the purpose of which is to feed the organic growth with further CapEx to accelerate even more our organic growth by seizing opportunities in a disciplined and very targeted manner in terms of M&A and returning value to shareholders. So, we truly believe that there is a strong potential behind M&A opportunities in order, as I was saying to capture this highly underpenetrated market is there, and by seizing M&A opportunities, we could accelerate, expand our offering, acquire new tech, increase our market share. So, this really remains a very strong pillar in terms of development for Pluxee, even though we are very disciplined, cautious in order to make sure that every time we acquire a new company, this is for creating new value. So as Aurelien said, we have a strong pipeline that we will remain disciplined. That being said, we always said that we will be agile and that from time to time, we might accelerate return to shareholders. This is what we decided to do with strong support from the Board for this fiscal year '25. This is a step. We'll see. We'll see. There is no commitment at all. This is, I think, very good that some companies like Pluxee are highly performing, and companies are able to return value to their shareholders. This is one of our commitments.  Other commitments like growing as much as we can and as quickly as we can, by investing in CapEx, and seizing M&A opportunities. So I think this EUR 100 million share buyback program is really fully consistent and fully aligned with the request we also received from many investors, as well, that we are listening to our shareholders.  And to finish my answer, this is a very good sign of our confidence in the Pluxee potential. And we are aware of where the stock price is currently trading, and versus the value we consider we are able to create from this company. And so this is also a sign we wanted to share with the financial market.  Andre Juillard: So, as a summary, the message is step by step.  Stephane Lhopiteau: As always.  Operator: The next question is from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, you flagged that Q4 organic growth was impacted by the postponement of ordering of some large programs in Europe. Could you please offer more color on the potential size of those orders? And when do you expect it to resume? And then on free cash flow conversion guidance, which is about 80%, now you delivered close to 90% in the last 2 years. So next year, how should we be sort of thinking about it? Can we expect some catch-up CapEx there, given it was lower this year? And any other moving parts to that guidance, that would be helpful.  Aurélien Sonet: Stephan, do you want to answer Pravin's question regarding the free cash flow guidance and potentially the organic growth impact, I mean, from the program in Q4?  Stephane Lhopiteau: In terms of our free cash flow guidance, we delivered very strong cash conversion in fiscal year '24 and fiscal year '25, which is a good basis for improving our commitment to deliver over 3 years now 80% of cash conversion remaining, aware of the potential for working capital. We always made it very clear that good business is the strength of our business model. As long as we deliver growth, we have some positive effect on our free cash flow from the working cap variance.  However, this could be hit positively or negatively by some changes in some regulations, as this happened in '24, '23 with Brazil, and it was a positive effect. And we could also have some negotiation, notably related to the public benefit contract, where we could have some hit on the working cap. So this is why guiding you on an 80% average over the 3 years, this is another step-up in our guidance that you should take very positively. And this is over 80%. So, on average, over 80%. So we are not guiding on an 80% achievement, we are guiding on over 80% growth. Regarding the organic growth and the impact from the large programs, public benefit programs. So I don't have in mind the impact in terms of basis points.  But yes, there are some countries, especially in Western Europe, like Romania or Austria, for example, where some decisions were taken by the state, and because of some budget constraints, to suspend or to reduce some of these programs. So these programs remain very attractive because we are always very selective in this kind of program, making sure that they are accretive to our profitability. But they are weighing at least temporarily, and we'll see further on our organic growth, notably because we did good, very good in '24 and '25 in this segment, creating a high comparison base.  Operator: The next question is from Sabrina Blanc from Bernstein.  Sabrina Blanc: I have 2 questions from my part, please. The first one is that you have not mentioned a lot of cross-selling this morning. Can you come back on the evolution and potentially how it represents compares to the meal voucher? And my second question is regarding the retention, which went to 100%. Could we have more color on the different aspects of the retention compared to 2024 to understand where it comes from, the limited slowdown this year compared to last year?  Aurélien Sonet: Okay. Regarding the net retention, I mean, most of the evolution between '24 and '25 came from the evolution of the end user portfolio, which was contributing quite significantly in '24. And as we mentioned in '25, I mean, even on H2, it turned negative. So this is the main explanation that supports this decrease between '24 and '25.  And regarding the cross-selling evolution, we still see, I mean, a positive improvement, and actually, it translates our multi-benefit strategy. We mentioned Cobee, for example, which is definitely paving the way to a much stronger multi-benefits approach and a way for us to activate the full value from our existing clients.  Having said this, we know that we have much more potential. And so for us, it's going to be one of the drivers that will help us not only keep but boost our net retention for the coming years.  Sabrina Blanc: But could we have an idea of the weight of the, let's say, the solution which are not a milk voucher compared to the milk voucher in the operating revenues, for example?  Aurélien Sonet: What I would say is that the contribution coming from the cross-selling in percentage is higher than the overall growth.  Operator: The next question is from Joanne Jordan from ODDO BHF.  Joanne Jordan: Also, 2 questions from my side. First, can you share some comments on the early start of the gift card season, please? And second question, regarding the evolution of the take rate, it's up 20 basis points in '25. What are the main drivers behind this increase? Is it mostly coming from merchants or the client fee?  Aurélien Sonet: So, regarding the Christmas campaign, it's too early to give you, I mean, color. But I can tell you that, I mean, the teams in many geographies are on it as we speak. And for us, Q1 will be the moment when we will be in a position to give you a much more precise color. But to date, it's too early. But it's part of our plan. It's embedded into our growth trajectory. And again, I mean, more to come in the Q1 announcement. Regarding your second question on the take-up rate, Stephane?  Stephane Lhopiteau: So, regarding the take-up rate, there is a global trend over the last 4 years, and there is one happening in fiscal '25. So overall, as a reminder, and over the last 4 years, we have improved our take rate of 50 basis points and with a vast majority of this improvement coming from the increase in the client commission. And then from 1 year to another, there might be some slight changes. And when we compare '25 to '24, there is a bit of an increase on the merchant side as well, as long as we are able to deliver more value to the merchants, offering them new services, and having them notice how much we can bring to them. And there is also the mix effect.  So, we were not expecting an increase. If you remember last year when we guided you, we shared some color on the take rate, and we didn't have a specific target in terms of increasing the take-up rate, but this is the outcome of all the initiatives we took with some merchants with our merchant network in order to provide them with some additional services.  But again, I think the big trend is what you have to keep in mind over the last 4 years, we have increased our take-up rate by 50 basis points, with the vast majority of this change coming from the client side.  Operator: There are no further questions registered at this time. I will now hand it over to Aurelien Sonet.  Aurélien Sonet: Thank you, and thank you all for your attention this morning. In closing, I would like to reiterate our confidence in the future, supported by the strong performance delivered in fiscal 2025. Looking ahead, we remain deeply committed to establishing Pluxee as a sustainably profitable growth group over the long term. And with that, I wish you all a very good day.  Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Welcome to the Intrum Q3 2025 Report Presentation. [Operator Instructions] Now, I will hand the conference over to President and CEO, Johan Akerblom; and CFO, Masih Yazdi. Please go ahead. Johan Akerblom: Good morning, everyone. Thank you for listening. It's great to have you back for another quarterly earnings call. Today, we have a new setup. I am obviously in the new position, and I also want to sort of say hello to Masih, who's been with us now for, what is it, 8 weeks, roughly, almost? Masih Yazdi: Yes. Johan Akerblom: And yes, we will go through the Q3 results. In normal order, we will take you through the presentation, and then we'll open up for Q&A at the end. If we start with the quarterly, I think the quarter as such, it is a bit messy when you start looking at it. But a few things to highlight. I mean, on the underlying, we have a higher servicing income. The underlying business is, in general, performing well. The adjusted EBIT has been increasing 30% year-on-year, and we continue to report net profits. This is the third quarter in a row. And the leverage ratio is going in the right direction, and the investing volumes are increasing if we compare to Q1 and Q2 earlier this year. On the servicing side, we have now reached the 25% on an adjusted EBIT margin rolling 12 months. And on the investing side, I think the collections, they are slightly above the forecast again. However, the income is down, but I mean, that is on the back of the lower -- the book that we have, which is now at SEK 22.5 billion. If we go to the servicing a little bit more specific. I mean, this is the first quarter where we have an organic growth since 2022. I think it was Q3 2022, the last time. So, we're now actually not only improving the margins, we're also having a top line that is going in the right direction. We did grow in 10 out of 16 servicing markets. The pipeline is increasing. So, we've had a lot of focus on the top line. I think we discussed this earlier with you, and we continue to now see hopefully a bit of results from that. We're working closely with the entire sales organization. We're adding new people. We are upgrading. We are working with target lists, pipeline. We're working closely with churn. And the good thing is that there's still potential from our pricing program that should trickle through going into 2026. And we also see that the margin that we get on the new deals is higher than the current margin. On top of that, we also have now started, and that will be something we'll probably speak about a little bit more when we get to the Q4, what kind of ancillary business is there -- out there and what's the growth potential. Moving to the investing side. I think here, it's a bit of a -- I mean, the good thing is it's a quarter where we see the investments increasing. So, we're now at SEK 303 million. The IRR remains at a very high and comforting level. And I think for us, it's very important that the discipline on price is always going to be more important than the volume as such. Of course, we want to increase the volumes, but we will never increase the volumes on the back of being undisciplined on the pricing. We see that we are successful in smaller deals. But on the bigger deals, I think there is an overall market pressure on the downward side, and we have not gone all the way to meet that where the market is. We'll see where the market takes us going forward. And we're also working closely with Cerberus. So, half of the -- more than half of the deals has been done with them. And we now have deployed SEK 2.9 billion since we started in total. And the good thing is, I mean, we continue to extract value out of the portfolio. So, performance index remains above 100%. And if you compare to the original curve or original forecast, we're now at 109% in the quarter. I think, with that, I'm handing over to Masih, who will take us through the financials in a little bit more details. Masih Yazdi: Yes. Thank you, Johan, and good morning to everyone. I thought I'd start with going through all the one-offs we have. I think it's natural, both me and Johan, new in our positions to do a thorough analysis of the balance sheet, and what we've tried to do here is to apply a more conservative approach as well as trying to minimize items affecting comparability going forward. So, therefore, this quarter, we have a pretty messy quarter in terms of write-downs of impairments and goodwill and also some one-off tax items. So, as you can see, the reported EBIT is almost minus SEK 600 million. If you move that to the net income to shareholders, that has impacted by the gain we had on recapitalization of SEK 2.3 billion, and we have underlying financial expense of SEK 838 million. We had a couple of one-off tax items and underlying tax of SEK 158 million, which takes you to the almost SEK 400 million net profit. Then we have a goodwill impairment related to Spain, where the development has been more negative than was assumed in our goodwill calculations, and therefore, we have that impairment. And then we have some other impairments mainly of client contracts on the balance sheet that we have now written down. So, overall, a messy quarter, a lot of one-offs. But as I said, we have taken a conservative approach on the balance sheet, and we're hoping that you'll see much less of IACs going forward. If I move to the next slide, Slide 9, and look at the key financials for the group. As you probably have seen, income is down 3% compared to a year ago. More than half of that is FX related. At the same time, the cost trend continues to be positive, as you can see, and the cash generation has improved compared to a year ago. The leverage ratio has been restated. Again, here, a bit more conservative approach. We're looking at the nominal value of debt rather than the book value, which means that the leverage ratio is higher than it otherwise would have been had we used the old definition. With the old definition, it would be at 4.4. And I should also mention that full year 2024, without the discontinued operations, it would have been at 5.3. So, we are moving in the right direction in terms of leverage, but obviously, we want to move this even further going forward. If I move to the next slide and look at the underlying cost trend, you can see that we've had a strong cost discipline also in Q3, the run rate is now SEK 12.5 billion in terms of costs and costs are down 10% compared to the same quarter last year. And that is mainly driven by a reduction of FTEs, down about 1,000 people compared to a year ago. Moving into servicing. As Johan said, encouraging to see that we have organic growth in the quarter. The total income is flat, but that is completely driven by FX of a 3% negative effect, offset by organic growth of 3%. A lot of the one-offs is in the servicing business, so the EBIT is distorted by that. But if you look at the adjusted EBIT, it's up 27%, and it's also up 30% so far in 2025 versus the same period in 2024. We want to double-click on the leverage we have. What's happened in this company the last couple of years is a quite large shift in the composition of the business. If you look at the bars, you can see that 2 years ago, 24% of the cash generation was coming from the servicing business that has almost doubled to 43%. In our view, I think the general conception is that servicing is less risky than the investment business, which means that the cash flows generated from that business should be able to cope with a higher leverage. Here, we have assumed that our investment business has an LTV of 80% that should be financed by debt of 80%. And if we assume that the remainder of the debt on the balance sheet is in the servicing business, you can see that the leverage ratio for the servicing business is actually coming down quite a lot, especially the last few quarters, given the fact that the cash generation from the servicing business has improved quite a lot. I think if anything, this chart shows that we want to, going forward, take into account the riskiness of our business when we set our leverage targets so that it takes into account if we continue to derisk and have a larger share of our revenues and profit coming from servicing. Moving into next slide, Slide 13, investing. You've seen this, but the income is down. This is partly FX, but largely due to the lower investments compared to the amortizations we have. So, a smaller book value leads to lower income. We are collecting well on this portfolio, which means that income is down slightly less than the book value. Nevertheless, as Johan said before, we have done more investments this quarter. We want to do even more going forward, but we want to strike a good balance between pricing discipline and volumes. Moving to Slide 14. Looking at the debt and maturity profile. You can see that net debt is now at just below SEK 45 billion. We have about SEK 5 billion of cash, SEK 2 billion of that is restricted. It could be used to buy back bonds. The remaining cash is free will. And you can see the maturity profile with about SEK 12 billion of maturities in 2027, of which about half is the new money notes we've issued. I think with that, I'll hand back to Johan, and he'll do a couple of final remarks before we open up for Q&A. Johan Akerblom: Okay. So, I think, first of all, the quarter is a quarter where we see the underlying business performing well. It is positive to see a servicing top line year-on-year organic growth. I mean, I think we discussed and talked about this a lot. We are really emphasizing the top line, and we are putting a lot of effort in making sure that we get new business into the group. However, I think servicing business as such is a slow-moving business. It comes with RFP processes, there's onboarding, there's ramp-up, et cetera. But there's definitely an ambition to keep this top line growing. And the investing volumes, as we said, we will continue to have a balance between volumes and returns, but it's always good to see volumes going up when the returns remain high, and we will continue to focus on developing the partnership with Cerberus. The one-offs from the recapitalization and impairments, I'm sure we'll get a lot of questions on, so I'll leave that for the Q&A. And we have now reached a 25% margin. I think everyone expected us to reach it, but it's always good to reach a goal that everyone expects you to reach. So, it's a tick in the box. And we will come back when we present our full year results with the strategic review and also updated financial targets. So, I think with that, I think we can open up for questions. Operator: [Operator Instructions] The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: So, my first question is on the adjusted EBIT margin for servicing, which reached 25% in Q3, which is up from 18% a year ago. It seems to be driven primarily by cost reduction. How sustainable is this margin expansion? And what portion came from operational improvements versus onetime efficiencies? Johan Akerblom: I can start here. I mean, I think that the margin has proven to be sustainable. It's been proven to increase quarter-by-quarter. Given the focus that we now have on growing the top line, I think we will have to strike a balance between how much more margin improvements we want and how much do we want to actually put into our commercial proposition in order to grow the top line. And if you ask me, on the balance, I would say, I'm quite happy with 25% margin if I can grow my business at the same time. Jacob Hesslevik: All right. Perfect. And then, if we move to investing side, collection performance was 101% in this quarter, slightly better than a year ago at 98%, but cash EBITDA from investing still declined to SEK 1.35 billion from SEK 1.5 billion a year ago due to a smaller book. When should we expect cash EBITDA to stabilize or grow again given your stated intention to increase the investment pace? Johan Akerblom: I mean, it's a very tricky question to answer because I cannot predict how much we will invest over the next quarters. But the ambition is clearly that we want to get the investing business to flatten out. So, if you think about the decay, we've had over the last years in terms of portfolios going down, investment volume going down, now it's time to turn that around and stabilize. But we also said that we have a SEK 2 billion target. Let's make sure that we reach the SEK 2 billion target first, and then we'll get sort of to the next level. And by then, I think also we will have our, let's say, Q4 report, and we'll give more guidance on where we see a future portfolio. Jacob Hesslevik: Okay. And just finally, on your updated financial targets, you mentioned focusing on improving profitability, driving growth and strengthening the balance sheet. These can sometimes conflict with each other. So, which takes a priority if you face trade-offs? For example, would you sacrifice near-term growth investment to the 3.5x leverage target faster? Or how should we think? Johan Akerblom: I think in -- I mean, we need to address our leverage. That's the main priority. But then doing that, I think it's also important to always strike a balance between sort of short-term sacrifices and long-term gains. But I think we will give you more clarity on that when we talk again in 3 months' time. Operator: The next question comes from Patrik Brattelius from ABG. Patrik Brattelius: Can you hear me? Johan Akerblom: Yes. Patrik Brattelius: Perfect. So, my first question is to Masih as he comes in with a little bit of a new outsider's perspective. So, in your new role and given that you're new, can you talk a little bit how you view a sustainable and long-term capital structure in Intrum? And how do you think that should look in terms of leverage ratio? Masih Yazdi: Thanks, Patrick, for that question. A sustainable balance sheet is a balance sheet that is in better shape than the current balance sheet. I think that's clear for everyone. We'll come back with actual targets on that when we present the Q4 results. But generally, I would say that we need to take into account what the composition of the business will be in the future depending on how we grow our servicing and investing business, and we will take the different levels of riskiness of those 2 different business lines into account when we set new leverage targets. That's the hint I can give you in addition to what I started with saying that we need to be in better shape in the future than we are today. So that's the main priority of this company. That's going to be my main priority of -- myself as well, obviously. So yes, you need to give it some time. We'll come back, but the direction is clear. We need to be in better shape. Patrik Brattelius: Okay. And speaking of the balance sheet, you have some new money notes given out in connection with this restructuring. And to my understanding, those will partly be used to buy back bonds. So, can you talk about how much you aim to buy back with this? And when should we start seeing that these actions being taken? Masih Yazdi: Yes. I mean, we can use that money to buy back. We'll do that if we believe that, that's good for the company as a whole. We can't give you any timing of that. We will do that when we think that the timing is right, if we do it. But the whole purpose would be to make sure that we deal with the maturities we have in the sort of short term, the 2027s. But again, it's an opportunistic action tactics from us. So, we can't give you any timing on it. But if we feel that it's going to address the balance sheet to some extent, we'll do that. Patrik Brattelius: Okay. And servicing, it's growing with 3%. It's, however, below a little bit the old target level. Do you see that you need to invest more in the cost side in order for this to ramp up? Or is there anything you can do that wouldn't drive increased cost in the short term to ramp up income on this side? Johan Akerblom: I mean I'll start here and then Masih can add. But in servicing, I think the cost trend will always be sort of, on a relative basis, going down. We need to become more efficient. We need to be more automated. We need to be -- we basically need to build on a scalable platform. Are there short-term investments we need to grow -- we need to do to grow the servicing business? Nothing that is material from my perspective. But then, I think one of the key questions that we have that we will have to address in the sort of strategic review is also how -- what's the ancillary business that we can grow? Because right now, we are involved in some very important processes with our clients, and there could be opportunities to grow ancillary business out of that, that would be sort of a nice add-on to the business we run today. But -- and that could require CapEx. But I think that's something, again, we will have to come back to when we have done our own homework. Masih Yazdi: Yes. I mean if I add what's, I think, interesting with the servicing business is that there's a lot of legacy in that business, not just with Intrum, but with the whole business. And really improving the offering has a lot to do with becoming more cost efficient. So, it's actually the case that the more cost efficient we become, the more automated we are in that business, the better the offering will be to our customers and the more deals we will win at better margins. And so, in that business, it is not really a conflict between investing more and you seeing more higher cost in our P&L and winning business. I mean we are hiring salespeople now, but we're talking about 30 people, and we have almost 7,000 people working with collections within servicing. So, it's nothing compared to the base we have to work with in terms of becoming more efficient. Patrik Brattelius: Given that you were at the other seat of the table when you -- in your previous job, do you see any immediate actions that the Intrum could do in order to improve their -- the top line growth within servicing to win new inflow from, for say, banks? Masih Yazdi: There are things we're looking at in terms of how we price deals. We have a fairly large, fixed cost base. And obviously, the more servicing revenue we have on the platform, the smaller is the fixed cost base per deal, so to say. So, we are making some changes to how we price new deals. And I hope and we think that that change in financial steering will make us more competitive in new deals and still uphold or maybe even improve the margins from current levels. So yes, there are things we can do, and we're looking into it, and we're trying to apply it as quickly as possible. Patrik Brattelius: A very last question from my side is just on Slide 12. You -- on that changed composition of cash flows, you showed the total leverage. Can you -- the dotted line there, the servicing leverage, which we don't see a number for. Can you please share the detail what that level would be in Q3 '25? Can we get a reference? Johan Akerblom: Yes. I think if you look at where that dash line was a year ago, so it was above 10x, and now it's around 7x. So, it's a pretty strong deleveraging if you allocate some of the debt to the servicing business. So, it pretty much follows obviously the improved cash generation from that business. Operator: The next question comes from Ermin Keric from DNB Carnegie. Ermin Keric: I'll continue on Slide 12. Thank you for that, I've asked for a long time, so appreciate it. And just to hear a little bit how you're reasoning with the 80% LTV you're assuming on the investment. I suppose on the Cerberus Project Orange, you had 60%, if I remember correctly, on the Intesa SPV, it was 60%. Why do you feel 80% would be the kind of fair level to assume for investing? Johan Akerblom: I mean, you can argue whether it could be 60%, 70%, 80% or 90%. I don't think that's the main point. I think the main point is to show that irrespective of how much you allocate to it, if you allocate the remaining debt we have on the balance sheet to the servicing business with stronger cash generation in the servicing business, you would have seen a declining leverage for that business. I mean, coming from the banking world, a comparison I would make is that if you have a bank that is only doing consumer lending and then a few years later, it's only doing mortgages, you should probably view that bank as being less risky and therefore, would be allowed to have more leverage. And I think this is a -- it's a fair comparison with our business as we are more and more moving towards servicing, which we believe is less risky and therefore, should be allowed to have a higher leverage on. This doesn't mean that we will set leverage targets in the future that are less ambitious than the ones we've had, we just think it's important to take into account how the composition of our business changes. Ermin Keric: But if I can follow up on that, maybe I'm thinking about it the wrong way, but [indiscernible] the opposite. If you are a bank, when you have a lending book, you can have some leverage. If you just have commissions, you would have less leverage. Masih Yazdi: Well, I would -- yes, I mean, if you take a bank, it's typically the case that you have risk weights for the lending business and the riskier the lending is, the higher is the risk weight and therefore, the more capital you have to have. That's the way I would look at it. Johan Akerblom: Yes. And I wouldn't compare -- I mean, remember, when we do the servicing business, I mean, the contracts that we run are usually sort of 3 to 5 years. It's a long-term relationship, and it's also -- it creates quite a lot of stickiness. So, I think that's where we're coming from. Whereas on the investing side, in the end, it very much depends on what's your investment appetite and how much can you invest to continue to either replenish your portfolio, increase your portfolio or decrease your portfolio. So, it's going to be more sensitive in the short run in terms of your investment appetite. And then also, there's always a, I think, a question mark, at least from the market when you invest into these type of portfolios, will they actually yield the returns that you put up when you made the investment. Ermin Keric: Fair enough. Then moving over to the servicing side. Organic growth, now you're back to organic growth again, which I think is, of course, highly positive. Is -- around the 3%, is that a new baseline we should think about? And maybe extending the question a little bit, I suppose getting back to organic growth has been a focus for several years. Why have you tweaked now that's making it possible to do that while also doing it in a profitable manner? And maybe lastly on that question, the SEK 1.8 billion pipeline you mentioned, how should we think about that? What's your typical win rate? I suppose that's a gross number. How should we think about the underlying churn you have? So how much from that SEK 1.8 billion should we think about adding to your future income? Johan Akerblom: If we start with your first question, which is, is this a new sort of baseline? I think that one we will have to refer to when we come back in Q4. Then we will try to -- if we articulate something, it will be then hopefully answering your question. I think there were many questions in one. But churn, I mean, in general, we tend to manage churn in a good way. So, we actually don't lose that many contracts. And then there might be always -- I mean, contract could also be amended. So, there could be parts of what was in scope before is not in scope in the future. I mean a lot of clients, they usually use 2 or 3 providers to have benchmarks. So, the composition might change. When it comes to new business, I mean, as I said, we have a very high focus on this. And this is now about sort of moving the organization from a very margin sort of focused type of effort to something that is much more forward leaning and thinking about new business. So, coming back to your question around the pipeline, a lot of this business -- a lot of those tenders will materialize in Q4. It doesn't mean that that will bring income from the 1st of January. It means that we will start ramping up the new contracts during 2026. And for bigger contracts, the ramp-up period can be as long as 6 to 12 months, especially if it's with the banking client where you do sort of gradual steps. So, I think that the SEK 1.8 billion should be just seen as a -- there's a big amount out there. We're trying to get the biggest share out of it as possible. But I wouldn't sort of -- I wouldn't expect that, that just means that we suddenly add all these revenues from the 1st of January on top of what we have today. It's a bit more complicated than that. Ermin Keric: Got it. That's helpful. Then, just one final question. On cost, how much more is left to be done there? And I suppose common costs looked very strong this quarter, down almost SEK 100 million quarter-on-quarter. Is that a sustainable level that we should think about going forward? And I suppose generally with cost, have you compromised the servicing quality to an extent? Or have you been able to add more technology usage already now? Masih Yazdi: Yes, I can start with that. I think there is a lot more to be done on the cost side when I'm talking about the mid-to-long-term, and that has to do with applying new tech and making the manual processes more automatic. So, I think this business over time should have a clearly lower cost base than it has at this point. How quickly that goes obviously depends on how quickly we apply best practice from different markets we work in but also use tech in a higher degree than we have today. In terms of the central costs, I think that most of the work there has been done, but I still think that there is some more to be done. I would also add that if you look at the impairments we've taken in the quarter, those will just in itself lead to about SEK 300 million less cost in 2026 than otherwise would have been the case. So, we are obviously moving into '26 with a positive momentum on the cost side given the FTEs we have today compared to a few quarters ago. And we think that this is a long game where the cost trend should be downwards in the mid-to-long term. Then the question is, to what extent do you use that to reinvest in your business and grow top line even more? And to what extent do you allow it to improve margins. And that's a balance we need to sort of try to strike in the future. Operator: The next question comes from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So, I had one -- starting with one technical question. The gains you're making on the debt that you -- that has been written down, it seems like there is an element of mark-to-market of the outstanding debt. Is that something new or -- because you did write it down by SEK 3.5 billion, right? Masih Yazdi: Yes. It is a mark-to-market, which happens when you do the recapitalization. So, you use the bid price basically that establishes just after the recapitalization and the difference between that nominal value of the debt and the bid price leads to a gain for us as the bid price was lower than nominal level. Johan Akerblom: Exactly. Exactly. So, it's like a fair value adjustment. Markus Sandgren: Okay. But that is not going to be fair value going forward from here? Johan Akerblom: No. Markus Sandgren: Okay. And then secondly, I was thinking about the aging back book in investments. What's your take on the collection performance over time when the portfolio gets older? Is it kind of constant or is it gradually degrading? Johan Akerblom: I mean if your question is, if we will continue to collect according to our forecast or better, I think we have taken in -- I mean, when you do the portfolio and you put out the forecast, you obviously take into account the decay. And we have an ambition to continue to collect above the index. But I mean, any portfolio -- well not any, but most portfolios, they have a higher collection rate in the beginning rather than the end. But that's also why I think we emphasize that our investment pace should continue to increase because we need to replenish. Markus Sandgren: Okay. And then lastly, regarding the market. Now we've been through a rate hike cycle and rates are coming down. What's your feeling on your markets that -- I mean, how much should we expect the market to grow when rates are much lower now in the coming years? Johan Akerblom: You're talking about the servicing business? Markus Sandgren: Yes, servicing, yes, right. Johan Akerblom: I mean, I think there's a -- I mean, there are a few trends in the servicing business. I mean one is obviously the macro has an impact on, especially banks, utilities, telcos. But there's also a lot of new kind of business verticals that has had an impact on the market as such. I'm thinking about Buy Now Pay Later, the steady state of increase of consumer lending, new entrants, all of that. And then you have -- in many parts of Europe, we also have some of the traditional business that we see in the North, it doesn't even exist. So, I think we will continue to see this market sort of growing but not growing massively. And then, as I said, I think in the previous interview, when we plan, we have to plan for a normal business cycle, which means that we cannot plan for another euro crisis, real estate crisis, financial crisis. That's when things sort of shift around. But we should be able to replenish and grow the servicing business, just basically capitalizing on the fact that we are in every country, we meet every different dynamics. And then, on top of that, we hope we can also figure out what's the next step when it comes to ancillary business because we are closely tied to many clients, and there are services that we don't provide today that we can probably provide tomorrow. Operator: The next question comes from Angeliki Bairaktari from JPMorgan. Angeliki Bairaktari: Just 4 questions from me as well. First of all, with regards to the servicing pipeline of SEK 1.8 billion that you mentioned, can you give us some color on where those clients -- those new clients could be coming from in terms of sort of industry? Are we talking mostly about banks or other type of clients? And secondly, with regards to the organic servicing revenue growth, can you break the 3% down into regions like Northern Europe, Middle Europe and Southern Europe, like you've done in the past? Johan Akerblom: So, yes, on the first one, I think some of the bigger clients or potential clients in the pipeline are bank related because that's usually when you have sort of bigger size. But it is a mix, but the bigger contracts are bank related. I think when it comes to the growth, I don't have the numbers in my head. I don't know if you remember, Masih, but I think we -- I have -- yes, we need to -- let us come back to that. We'll just get the numbers. Angeliki Bairaktari: And if I just may ask a couple of questions on the leverage ratio and the debt. So, first of all, you mentioned, I think, in your remarks that you have restated the debt and the leverage ratio to now take into account the market value of the debt. Can you give us some more details? Maybe I misunderstood that. And why are you doing that? Because I thought the typical definition of leverage ratio for every company is just the nominal value of the debt divided by the 12 months EBITDA. So, if you can just give us some more color with regards to the restated calculation? And then second question on the debt. How do you plan to refinance the 2027 maturities at the moment? I appreciate that this may change, but based on where we currently stand, what would be the plan? Johan Akerblom: Yes. We haven't used the market value when it comes to the leverage ratio. So, we are using nominal value. The market value was referring to the effect of the recapitalization and that net gain we had. So, when calculating the leverage ratio, we do it exactly the way you described it. We look at the nominal value and the 12-month running cash EBITDA. On the refinancing, the 2027, obviously, we have a few quarters to go before we need to deal with that. The whole purpose is to put the company in a better position so that refinancing goes well. So, it's about continuing to improve the business, generating more cash, improving the top line, continuing to reduce costs. So, we can only sort of focus on the company and how we're doing operationally to put ourselves in a good position before we need to deal with that maturity. Angeliki Bairaktari: If I just may come back to the leverage ratio... Johan Akerblom: On the growth, just to answer your question, most of the growth is from Middle Europe, but we also have some growth in selected markets in the South, in particular, Italy. And then the North is fairly sort of neutral. Angeliki Bairaktari: Sorry, just to come back to the leverage ratio because I think you mentioned in the beginning that you have obviously reported 4.7, consensus was looking for 4.5. And I think you mentioned that under the old definition, it would be 4.4. So, I'm not sure what you have changed. If you can just explain what you have restated, if there's something that has been restated in the calculation. Johan Akerblom: Yes. So, now we are looking at the nominal value of the debt, whereas with the old definition, it was the book value, and the nominal value is a higher number. And therefore, the new definition leads to a higher leverage ratio than would have been the case with the old definition. Angeliki Bairaktari: Right. And are you -- is that because in your covenants, you have to use the nominal value of the debt? Or what is the reason behind the change? Johan Akerblom: Well, it is more in line with the covenants. So, it's not a perfect, but it's a very, very close proxy to how the covenants are set up. And we also did change because if we would have done the old method, we would basically take benefit out of this accounting adjustment, and that's why we say with the old definition, it should have been 4.4, but we think it's more right to actually look at the nominal value and then talk about 4.7. Operator: The next question comes from Alexander Koefoed from Nordea. Alexander Koefoed: Can you hear me? Johan Akerblom: Yes. Alexander Koefoed: Just coming back again there to the leverage ratio. Sorry if you get tired of it. But this view that you can lever the company more on service as opposed to investing. I think that has -- some would challenge that view, although I agree and appreciate that lower risk, everything else equal, would be possible to finance. But again, yes, I think Ermin alluded to it as well, having investable assets on balance sheet would also be financeable. So that view, has any of that been cleared with creditor group out of curiosity? Or is that strictly your own view? That would be my first question. And then maybe secondly, if I can ask on your non-recurring items and I think SEK 2 billion in one-offs related to restructuring. Is there any of that actual payments, bills you need to pay from that, that -- how much of that is a hit? And when is those costs expected to be completely over and done with also in your cash flow statements? Johan Akerblom: Yes. If I start with the first question, as I said before, this analysis of looking at the leverage for the different parts of our business will not mean that we will set a leverage target in the future that is less ambitious than we otherwise would. We just think it's fair for ourselves to look at the riskiness of the business when we do set that target. So, I think we're just basically alluding to that we will probably look at having different leverage targets for the 2 types of business that we operate. What that lands in terms of aggregate leverage, whether that's going to be a target that's at the 3.5x that we have today or what it's going to be more ambitious than that and what the time frame of that will be, we'll come back with it in Q4, we just think for ourselves and how to operate the business, it's good to look at different targets for the different business lines that we operate and take into account how we think that those business lines will develop going forward a few years from now. On your second question, yes. Anne Eberhard: Yes. It's Anne here. On your second question regarding the costs that went through from cash in the third quarter, around SEK 550 million went through as cash. And then I think you also asked about the tail, if there's anything more to come through. It's very, very small. I don't think there's anything material. Johan Akerblom: Yes. I mean, I would say, as for Q3, the recap is closed. And yes, going forward, it's sort of business as usual. Alexander Koefoed: Okay. No fine. I was just curious on it. So, appreciate that. Maybe a third question, if I can. And so just it appears that my interpretation of what you're saying is that growth ahead might be a tad difficult for you, I mean, also on lower FTE base that for you to capture any growth, maybe underlying growth seen in Europe for you to really capture that, you need to sort of invest in automations, et cetera, to actually release capacity with your employee base to actually capture this top line. Otherwise, it will be more or less a lost opportunity for you because there's not too much capacity left with the current FTE base. Is that a fair way to say it like that? Johan Akerblom: No. I mean, I think what we're saying is we have room to grow with the current capacity. We think that if we can be even more efficient going forward, we will naturally win even more business. So, part of the -- sort of by being the more efficient you are, the more attractive value proposition you have. So, I think we have a different take on that. I mean, today, we can grow. We have capacity to grow in every market. But the more efficient we become; the higher likelihood is that we can grow even more. Alexander Koefoed: Yes. Okay. That's fair enough. Understood. I think there is some comments in the market that Buy Now Pay Later loans are perhaps seeing particular growth. Would you capture any of that? Or would this bank-related clients coming in, would that be more to your larger ticket items, maybe not to the same growth? Or would you comment on that? Johan Akerblom: I think Buy Now Pay Later is a very interesting segment, and we're already working with it, and we have been successful to actually onboard more Buy Now Pay Later volumes just in the last 2 quarters. And it's a segment that we will continue to target. And I think it's a segment that, in particular, fits with our digital collection platform. And yes -- so, yes, I don't see any -- it's a big opportunity. Operator: The next question comes from Rickard Hellman from Nordea. Rickard Hellman: Hi, can you hear me? Johan Akerblom: Yes. Rickard Hellman: So, to start with, yes, to be sure, looking at the cash flow, you have very high interest paid in Q3. And I assume this is related to accumulated interest from the capitalization. And you said that we're more or less done with all the cash flow now. Is that also [ for ] interest? So, we will not see any more tails out of this on the financial side? Johan Akerblom: Yes. All the accrued interest was paid in Q3. Rickard Hellman: Super. We talked a lot about the growth in frequency. Just a follow-up on that also. Have you seen any changes from your bank customers around handling non-performing loans in terms of volumes and signs of earlier collections or earlier divestments of portfolios? Johan Akerblom: No, nothing that is particular for the quarter. I mean this continues to evolve differently depending on market, depending on the situation. I mean, for now, now we have a situation in Germany where you see the Stage 2 is going up. So, it's very -- there's no sort of a coherent trend across Europe. Rickard Hellman: Okay. I see. And then, of course, also, I'm not sure if you would like to answer, but -- and it has been discussed a lot around this Page 12 about leverage. But if you would have a fully service business, I mean, without any investing vehicle at all, what would you say a total leverage would be for such business? Johan Akerblom: I think -- again, I think that's something we will leave for the future. I think the point we're trying to make is not that -- I think the point -- we're just trying to show that our business has fundamentally changed. And the 2 legs, they have a very different type of business profile. And we will have to come back to this when we come with our Q4 strategic review and explain more how we see the future. But all things equal, we definitely have an ambition to become a much more resilient company when it comes to leverage. But we don't have a number for you. Rickard Hellman: So, fully understand. But as you also understand, I mean, this -- all this kind of discussion around leverage probably we have a lot of attention among investors and analysts. Johan Akerblom: Of course. So, I think the message that we -- if we want to conclude one message, it's that the leverage has to go down. I think it has to continue to go down and it needs to be sustainable. And we will tell you more in Q4 how we will make it happen. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: Hello, can you hear me? Johan Akerblom: Yes. Unknown Analyst: I have 2 remaining really, only. One is regarding the SEK 2 billion target that you were mentioning earlier in the context of your investment division bottoming out. I'm not really sure what target you were referring to there. If you could just repeat that again, that would be fantastic. And then obviously, you've just restructured. And if you're looking across to your competitors, say, in the U.K., for instance, after the restructuring can be before the restructuring. And so, I guess if you're looking at your own balance sheet and given your restructuring has also just been a very light restructuring, despite the complexion perhaps, how would you rate your options today to manage liabilities perhaps a little further? Johan Akerblom: First one, I mean, we have -- I think we've mentioned before that we have an ambition to invest SEK 2 billion per year, so roughly or SEK 500 million per quarter. That's the SEK 2 billion I'm referring to. And then I think on your question on leverage, I think Masih did answer that before. I mean the way we see is that we need to continue to operate our business in an improving fashion. We need to continue to become more efficient. We need to continue to improve our servicing business and adding top line growth. And then on the investing side, we need to, at the first instance, reach the SEK 2 billion per year as replenishing. And then we'll see what the next step is in terms of investment volumes. And that's the organic path on how we can delever. Unknown Analyst: And so, you're not currently looking at anything -- we shouldn't be expecting anything inorganic, so to speak, over the next, say, year? Johan Akerblom: I mean when we do a strategic review, we will look at all options, and we will see which one creates the most value. But the base case is obviously always that we move on organic path. Operator: The next question comes from Ines Charfi from Napier Park. Unknown Analyst: Hi, can you hear me? Johan Akerblom: Yes. Unknown Analyst: Just going back to the one-off. So, can you talk about the impairments, the goodwill impairments and what kind of -- what does that mean basically for the future? Johan Akerblom: Yes. I mean there are a few different impairments. The big one is the goodwill impairment we have done for Spain. As I said previously, it's related to what we thought would happen with that business and the actual performance, and we could see that the actual performance had been worse in the short term. And therefore, we felt that it would be conservative to do a goodwill impairment there. The other impairments mainly relate to client contracts we've had on the balance sheet, where you do the same kind of assessment of what kind of revenues you think you're going to generate from those customers going forward. And again, we've taken a conservative approach and have a lower assessment on those revenues, and therefore, we've done impairments there. And the remaining impairments relate to software we've had on the balance sheet that we've written down. And as I said before, what this means is that D&A will be lower than otherwise would have been the case going forward. And for 2026, we're talking around SEK 300 million lower D&A expense. Unknown Analyst: Okay. But just to understand that a bit more, does that mean -- like, should we expect kind of less -- I was trying to understand the impact of the -- in terms of collections, et cetera, going forward. Like would the impact be for the short term as in like next quarters? Or like how should I think about that? Johan Akerblom: There is no impact on collections. It's just an impact on the cost line, which will be -- everything else equal will be lower in Q4 and also lower in 2026. But this is not related to how collections will perform going forward. Unknown Analyst: Okay. And then, just looking at the maturity profile, Page 14. So just to be clear, you still have outstanding in 2025? Johan Akerblom: That's a term loan that we're paying back to some extent, and it's been -- it has been extended. So, it's not a -- yes, so it's nothing you need to be concerned about. Unknown Analyst: So that has been extended? Anne Eberhard: We're currently in negotiations on that. Johan Akerblom: Well, it should be done fairly short -- fairly soon. And it's not fully being -- I mean, it's partly being paid, partly is extended, and it's just to give us a bit more flexibility going forward. Unknown Analyst: Okay. So, I guess it will be dealt with... Johan Akerblom: Before we -- when we announced Q4, it's fully dealt with. Unknown Analyst: So partly extended and partly paid down. Johan Akerblom: Correct. Unknown Analyst: And just looking at the RCF, so what's the drawn amount as of 3Q? Johan Akerblom: RCF. Anne Eberhard: Sorry, say that again? Unknown Analyst: What is the drawn amount of the RCF? Anne Eberhard: It's around 11 point…. Johan Akerblom: 10 point -- yes, I mean it's almost fully drawn. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: One follow-up question really quickly. Can you give us some guidance on your sort of speed of collection going forward? Are you going to maintain the same rate of collection? Do you think you're going to maybe slow it down a little bit? What should be sort of a stable case from here, all else equal? Johan Akerblom: When you talk about our collection rate, in what context? Are you thinking about our investing portfolios or...? Unknown Analyst: Yes. I'm sorry, only the investing portfolio. Johan Akerblom: I mean the investing portfolios, they will -- it's hard to predict, but we've -- historically, we've been collecting slightly more than our forecast. And I think that's the ambition going forward as well. And then obviously, the amount of collections depends on the size of the book and the profile. Unknown Analyst: Yes. So, if -- I'm trying to picture it like this. If you are maintaining as many people as you were before, but you have a smaller book, then you would be churning that book or turning it over a little bit more quickly. Is that the idea? Or is the idea to shrink your collection engine, if I can call it like that, to maintain the same speed of working out the smaller book? Johan Akerblom: I mean, we're always trying to collect as much as possible. And then at the same time, we're trying to be more efficient in every collection. So, I think your analogy is not really the way it works in reality. But of course, if you have lower volumes, you need less people. But I mean, out of our 7,000 people working in collections, serving our own portfolios is just one part of it. I mean we have a much bigger book with our clients where we operate. Unknown Analyst: Yes. No, that I understand. So -- but I think I understand your answer. Operator: There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments. Johan Akerblom: So, thank you for a lot of questions today. I hope we've been able to clarify what is a little bit of a difficult quarter to understand, given all the one-offs. But I think as we pointed out, we're happy with the underlying. We're making progress. We're deleveraging. Cost continues down. We see a bit of servicing income growth and the investing portfolios are collecting slightly better than planned. And the investing volumes are higher than before. And, obviously, we want to further improve going forward. And we hope to see you when we present the Q4 and talk more about the way forward. Thanks a lot and have a great day.
Diego De Giorgi: Good morning, and good afternoon, everyone. Thank you for joining us today. First, I will take you through our third quarter results. After this, I will be joined by Bill, who is dialing in from our Dubai office today, and we will be happy to take your questions. In my remarks, I will be comparing the third quarter underlying performance year-on-year at constant currency, unless otherwise stated. It has been another strong quarter. We delivered 9% growth in profit before tax on the back of a 5% increase in income. Our growth engines have continued to deliver consistently with a record quarterly performance in Wealth Solutions and Global Banking. As a result, we are upgrading our 2025 income growth guidance to be towards the upper end of the 5% to 7% range at constant currency, excluding notable items. We had previously guided this to be at the lower end of the range. And more importantly, we now expect to deliver a return on tangible equity of around 13% in 2025. This exceeds our previous guidance of approaching 13% in 2026 and accelerates our delivery by a year. As Bill set out in the press release this morning, performance has been broad-based and is a testament to our sharper strategic focus on servicing our clients' cross-border and affluent banking needs. Looking now at the numbers for the quarter. The group delivered operating income of $5.1 billion, which was up 5%. This was underpinned by the strong performance in Wealth Solutions and Global Banking in the quarter. Operating expenses were up 4% and credit impairment was $195 million. As a result, profit before tax was up 9% to $2 billion, and our tangible net asset value per share was up $1.75 year-on-year. Now let me take you through the performance drivers in details. NII was up 1% on a quarter-on-quarter basis, largely driven by volume growth. Lower rates in Singapore led to a reduction in NII, but this was partly offset by improved WRB pass-through rates in Hong Kong as HIBOR rebounded. We have continued to manage our pass-through rates assertively. And although they remain above our medium-term expectations in CIB, we expect pass-through rates to reduce over time. Putting this all together, we still expect our 2025 NII to be down by a low single-digit percentage year-on-year. As usual, we have updated our currency weighted average interest rate outlook in the appendices to this presentation. This shows that we now expect a 55 basis point headwind in 2026, slightly higher than the 44 basis points when we last reported. Our non-NII engines continued to drive strong growth, and I will talk to each product driver in the segment section. Now turning to expenses. Operating expenses remained well controlled and were up 4% year-on-year, mainly driven by business growth initiatives and investments, which were partly funded by Fit for Growth and efficiency saves. We have achieved $566 million of run rate savings from our Fit for Growth program and have taken $454 million of restructuring charges since inception. Our 2026 total expense guidance remains unchanged at below $12.3 billion on a constant currency basis, which would be $12.4 billion at current FX forward rates. Credit impairment for the quarter was $195 million with an annualized loan loss rate of 24 basis points. WRB impairment was down in the quarter, largely due to optimization actions in our unsecured portfolios. In CIB, we took an impairment charge of $64 million, included within this is an additional precautionary $25 million overlay for clients who have exposure to Hong Kong commercial real estate. You will see more details in the appendices as usual, but nothing has materially changed since we last spoke to you. Our high-risk assets were up around $650 million quarter-on-quarter. This was driven by a sovereign downgrade into early alerts, partly offset by a reduction in the credit grade 12 portfolio. We continue to monitor our credit portfolio closely, and we are not seeing any new significant signs of stress emerging across the group. Underlying loans and advances to customers were up 1% or $2 billion quarter-on-quarter with the increase largely coming from wealth lending and mortgages. We have seen 4% underlying growth year-to-date, driven broadly across Global Banking, Wealth Lending and Mortgages. We continue to guide to low single-digit percentage growth in underlying customer loans and advances. Underlying customer deposits were up 2% or $11 billion quarter-on-quarter with growth largely from WRB. Turning now to capital. Risk-weighted assets were down $1 billion in the quarter. The increase in asset growth and mix was offset by a $1 billion reduction in market risk RWA and another $1 billion impact from FX. I would highlight that the annual operational risk or RWA increase, which is mechanically calculated from historical income, will take place in Q4 2025 rather than Q1 2026, bringing us into line with most other U.K. banks. We closed the quarter with a CET1 ratio of 14.2%, up 32 basis points quarter-on-quarter, excluding the impact of the $1.3 billion share buyback we announced in July this year. Now let's look at our business segments. CIB income for the quarter was $3 billion, up 2% year-on-year. This was driven by an impressive performance in Global Banking with income up 23%, supported by strong origination and distribution volumes and a solid performance in our financing, capital markets and advisory businesses. Transaction Services income was down 6% due to falling rates and margin compression in payments and liquidity, although it was up slightly when compared to the second quarter. Within our Global Markets business, Flow income was up 12% as we continue to support clients across the footprint. Episodic income was softer due to a lower level of market volatility relative to Q3 last year. On the next page, we have shown a long-term view of our Flow and Episodic income trend on a 12-month rolling basis since 2019. As a reminder, Flow is the larger part of our global markets income and primarily relates to client hedging activity. As such, it tends to be recurrent and programmatic. You will see that our Flow income is growing consistently at a double-digit CAGR as we illustrated at our CIB seminar. This growth has been driven by the investments we have made over the years in digitizing and expanding our product and geographical offering in order to drive future opportunities. Episodic income, on the other hand, is less predictable quarter-to-quarter as it tends to be event-driven. But as you can see from the chart, it has been a meaningful contributor to our Global Markets income over time. Looking forward, Flow income will continue to be a larger contributor to our Global Markets income, and we will continue to support our clients episodically as market opportunities present themselves. Moving to WRB. Q3 income was up 7% to $2.3 billion with another record quarter in Wealth Solutions, where income was up 27%. This was largely driven by structured products and managed investments, helping to increase investment products income by 35%. Bancassurance income was up 5%. Our affluent net new money in Q3 was $13 billion with a higher proportion of wealth sales than in the previous quarter as clients showed a higher propensity to buy Wealth Solutions given conducive markets. This brings total net new money year-to-date to $42 billion and puts us well on track to our $200 billion medium-term target for net new money. We onboarded 67,000 new-to-bank affluent clients in the quarter, continuing the trend of onboarding over 60,000 clients each quarter. Our affluent business benefits from our high levels of customer satisfaction as demonstrated by the fact that we now rank #1 in Net Promoter Score across 8 of our top 9 affluent markets as we continue to invest heavily within the affluent space. So to conclude, Q3 was another strong quarter as we continue to deliver consistently. Q4 has also started positively. We are upgrading our 2025 income growth guidance to be towards the upper end of the 5% to 7% range at constant currency, excluding notable items. We continue to track towards the upper end of this range for the 2023 to 2026 income CAGR. We now expect our return on tangible equity in 2025 to be around 13%, reaching our target a year early. But there is still much more to do as we reinvest into our differentiated areas of strength, delivering income growth and more importantly, improving returns. We will present updated 2026 return on tangible equity guidance at our full year results in February next year, and we will provide more details on our medium-term financial framework at our investor seminar in May. With that, I will hand over to the operator, and Bill and I can take your questions. Thank you. Operator: [Operator Instructions] And now we're going to take our first question, just give us a moment. And the question comes from the line of Joseph Dickerson from Jefferies. Joseph Dickerson: Great set of results here. Can you just discuss in the Wealth Business, the type of -- if you're able to, the type of margin pickup you get on the wealth investments? Because clearly, that's -- if you look at the year-on-year attribution of net new money, you're getting about 80% of the year-on-year growth now from wealth. I suppose some of that is as you say, linked to the markets, but could you discuss the type of margin pickup there? And then secondly, on capital, I note the reduction in your capital requirement by 22 basis points. I presume that that's not going to change your operating range number. But if you could comment on still the preference would be to do buybacks or I guess, how you think about returning excess capital? And then on the op risk point, I guess linked to that, is the op risk point going to have much of an impact on capital in Q4? William Winters: That's great, Joe. Thanks very much for the questions. I'm going to turn to Diego for both, but just a couple of high points. First is to note that the Wealth Business has demonstrated the net new money that comes into the bank via deposits is migrating at more or less the pace that we've always suggested would be the case into wealth products, and that's a good thing. Second is that the deposits themselves are profitable for us. But of course, you're asking about the margin pickup, which we can address in a little bit of detail. And third is that the leading indicators continue to be strong, which is new clients who are bringing new money into the bank. And as Diego mentioned in his opening comments, the fact that we continue to receive top marks in terms of customer satisfaction is a big driver there. Maybe just quickly before handing to Diego, I'll say I'm in Dubai for amongst other things, we're hosting what we call a leadership network of about 150 of the wealthiest families in our network. Last year, we did it in Hong Kong, this year in Dubai. Dubai is an up-and-coming booking center for us and wealth coming out of this region is an incremental driver beyond what has been driving wealth so far, which has been a broad range of our client base, but most specifically, as we called out, global Indians and global Chinese. The growth opportunities for us ahead are very, very strong. And the willingness of people to fly all over the world to spend a couple of days with us is a key indicator of that. So I just -- at the moment, building on some good feelings that's been building up for the past decade or so, feeling very good about this business. But over to Diego to expand on that and also talk to the capital point. Diego De Giorgi: Thank you, Bill. So on Wealth Management and margins, Joe, you will have seen that -- you are right, our return on assets has picked up a bit this quarter. You will also remember that we had a large conversion from assets under custody to assets under management a few quarters ago in the region of $40 billion, so a meaningful number on our total of assets under management, and we had signaled at the time that, that would reduce the return on assets for some time as they slowly find their way into Wealth Solutions. That is happening, and hence, that pickup. I think that as the business continues to shift towards Wealth Management and as the situation unfolds with highs and lows in the market, return on assets will continue to fluctuate like on many other metrics. I know I sound like a broken record. I always caution not to look at things too much on a simple quarterly basis. But it's true that the trend from that point of view is good, and it's certainly something that we encourage in terms of our actions as much as we can. 22 basis points on Pillar 2A indeed does not change our calculations in and by itself. And the op risk change in terms of moving it to the fourth quarter of this year, neither does that affect it in any way. It's just to get us more in line with how other U.K. banks are reporting. And the basis for calculation and everything else remains absolutely the same. So it's just a matter of timing. It doesn't impact our numbers in any way. Operator, next question, please. Operator: And now we're going to take our next question. And it comes the line of Kunpeng Ma from China Securities. Kunpeng Ma: Congratulations to this very strong quarter. I have a relatively long-term question for Bill. When we're looking for the next 5 to 10 years, I think it's going to be quite different than -- a bit different with the past 5 to 10 years. A lot of things have changed and will continue to change. I think in my mind, the current momentum will continue to be strong, but the extreme volatilities will be less, both geopolitically and in terms of business development. So Bill, could you please give us some of your observations or your thinking about the future development or trends for the CIB Wealth Management business in 5 or 10 years work. I know it's hard to make the final conclusion, but any color on kind of future trends will be quite helpful. William Winters: So Kunpeng, thanks very much for the question. You were cutting in and out a bit, but I think we got the gist of it. You're looking for the crystal ball on 5 to 10 years for our bank, China, in particular, and wealth within China more specifically. So the -- and it's not an inappropriate question at all because that's actually the kind of stuff that Diego and I and the Board talk about all the time, although we don't get much of a chance to talk about it in earnings calls. We will be talking about exactly that when we get together in May, and we're getting together in May in Greater China, Hong Kong specifically, with exactly those questions in mind. So what I can say broadly is that, yes, of course, the world is going to change a lot. There are going to be a few defining, I think, trends and transitions over a 5- to 10-year period. First and probably most relevant for us is the full implementation and incorporation of AI and advanced machine learning into business models at a very structural level. And I think Standard Chartered is very well prepared for that, but we're very early in that game, and there's much to be won and lost, as is everyone else. But we're investing heavily, and I think we're on the right track. Second and more obliquely is the digitization of money. The digitization of money will become pervasive, if not ubiquitous. And it will completely redefine the infrastructure supporting finance. And this is not something that businesses or individuals are necessarily going to see or be aware of. They're going to be relying on their intermediaries to help them navigate through the changes that are associated with the digitization of finance. Standard Chartered is at the front -- the leading edge in the digitization of money, and we intend to continue to be at the leading edge of the digitization of money. Third is adapting to a multipolar world. And we had the benefit this morning of having former Secretary of State, Kerry, addressed our family office network, and he spoke to this at some length. My question to him was, is this a good thing or a bad thing for those of us in business? And of course, we could argue it either way. But I think it would appear to us that as a bank whose fundamental role is to connect people and markets through periods of change and through periods of growth, that the incremental complexity of a multipolar world, but also the incremental opportunity is a huge opportunity for a network bank, which does not have the same degree of home market that many of our competitor banks do, but we do have a real edge in that home market, which is our own, which is the globe and which is the network. So I'm feeling really, really good about Standard Chartered's positioning for the next 5 to 10 years. Now all sorts of things could happen in the world that we could hypothesize about that could be wonderful. We could have a prolonged period of global peace. And right now, we're sitting in the most peaceful time in human history. It doesn't feel that way when we're thinking about wars in the Middle East and Ukraine, et cetera. But just broadly, we're sitting at a time of extraordinary peace, and we have the possibility that, that could become pervasive. How wonderful would that be? That's really good for business, right? Second is the power of the technology tools that we're developing could be fundamentally transformative. We suspect it will be and that will be a support for our business. And then third, as I mentioned, the ongoing reconfiguring of finance. We're trying to put ourselves at the leading edge there. I think that we are, and we're certainly intending to continue to invest to be there. So China is an integral part of that. We have a strong position in China. Chinese wealth will accumulate substantially. We intend to manage an increasing proportion of that off of a good base. So all in all, it's a good story. But I'd welcome any additional thoughts from Diego. Diego De Giorgi: No. I think this is terrific. Operator: Now we're going to take our next question, and it comes from the line of Aman Rakkar from Barclays. Aman Rakkar: I had two, please. I just wanted to interrogate net interest income, if I could, please. Your low single-digit expectation for the full year leaves a wide range of potential outcomes for Q4. I think it could be anywhere kind of from down 4% Q-on-Q to kind of up 1% Q-on-Q. So I don't know if you could help us there in terms of what a more realistic outturn is for Q4? And as part of that drivers, please, I'm interested -- I suspect you're not going to give us a guide on '26, but just interested in what you see as the kind of moving parts on net interest income, particularly the balance of deposit and volume momentum versus things like interest rates and pass-throughs, which might be a headwind? And then the second question was just around Wealth Solutions. Again, a really, really impressive print, not the first quarter. The investment products line, I just wondered what element of brokerage sits within that revenue. So clearly, the performance in Q3 in terms of brokerage revenues would have been supported by things like the Hang Seng turnover levels that were elevated. So could you just give us a sense of that element of the kind of revenue print in Q3? It's just to kind of get a clean read on wealth from here ex the kind of transactional element of it. William Winters: Thanks very much for the question, Aman. Diego was really hoping you were going to ask the question on NII. So I'm going to go straight to him, and he can carry through on the wealth question as well. Diego De Giorgi: Splendid. Thank you, Aman. So let me help you unpack the near term and slightly longer term into 2026. First of all, on 2025, so we get to the end of Q3 and we enter Q4 clearly in a better position on NII than we were expecting only 3 months ago, right? A number of things. We never take forecast on rates, et cetera, but we had indicated on the forwards. HIBOR ended up performing a little bit better than what the forwards were indicating. So we get here in a slightly better place. And I appreciate your point that depending on where you put yourself in that low single-digit guidance range, you get to a substantially different result for your quarter-on-quarter NII number. What I would tell you is that Bill and I are optimistic about the way that the quarter looks and optimistic about the way that net interest rate is developing. We're optimistic because we are managing it well. I'll come more to it when I talk to you about 2026 in a second. But we're managing it well from a point of view of PTRs because we are focused on it and because the quality of our liabilities matters to us a lot. And we are -- it's working well because the world post April 2 became a more liquid world more generally. It is not just us, it's our clients that tend to keep more liquidity, that liquidity is both in dollars and in local currencies. And in a market where liquidity is high, we can be more discriminating in terms of what deposits we take and what we don't and how we manage our PTRs. So generally speaking, a lot of optimism for Q4 of 2025 still within our guidance that we are giving. If we unpack 2026, let's start from the top. First and foremost, if you look at Page 17 on our currency weighted forward curves, as always, you will see that the rate impact that we are expecting now is a little bit worse than what we were expecting only a quarter ago, not a lot, but 11 basis points. So overall, we have some rate headwinds. This particular quarter, you have seen that our volume performance has been better than the negative impact of our rates and margin, as you see on Page 4 of our presentation. And the question is what will happen in 2026. We will have -- undoubtedly, as rates continue to decrease, we will have a positive impact in terms of volumes. We are up 4% year-to-date in terms of customer loans and advances. So we are somewhat ahead of what we would have expected. Will that continue in 2026? No crystal ball. But so far, things look relatively good from that point of view. Will we continue to manage PTR assertively? For sure. But as interest rates go down, managing them more assertively becomes more difficult. And so -- and we'll see also what happens to the general levels of liquidity in the market. Fourth impact. So rates, PTRs, volumes, fourth impact mix, we continue to remain focused. We are focused on high-quality liabilities. We are focused on high-quality liabilities coming from WRB over liabilities coming from CIB. And we are very focused on making sure that within those, we are focused on CASA rather than TDs, although as always, I would caution you, we like TDs in Wealth Management because as Bill said before, they are just the first step in then converting them into net new sales of Wealth Solution products. And in general, of course, we will continue to privilege deployment into client assets versus deployment in treasury. Last, more minor point, remember, the impact of our WRB market exits that we had indicated to you as $100 million roughly between now and the end of -- between when we announced them and the end of 2026. So these are the moving pieces for 2026. And we will see and we will continue to update you as the year starts and progresses. On Wealth Solutions, yes, it was an impressive print undoubtedly. It was very good to see that as we had signaled in Q2, as Bill said before, money moved from deposits into Wealth Solution products. I would tell you, it was a pretty bold move. It's true that equity was important. But when you think about equity, don't think that much about equity brokerage. We have mentioned it many times. There is no doubt that there is a component of equity brokerage. But remember that we are laser-focused on affluent customers and particularly the globally minded affluent customers. And those customers are long-term savers. They have mortgages with us. They have life insurance with us, and they have investments with us. Those investments tend to be stickier. And so yes, we benefit from a little bit of volatility and from optimism in the market, for sure. But you can see in those trends a large component of structural trends. I hope it's helpful. Operator: Now we're going to take our next question, and it comes from the line of Andrew Coombs from Citi. Andrew Coombs: If I could have a follow-up on NII, please, and then one on costs. So on the net interest income, as you say, better-than-expected result in the third quarter, and you've specifically called out the assertive pass-through management on your deposit book. At the same time, you reiterated the medium-term range of 60% to 75% in CIB and 35% to 50% in WRB. So can you just provide us some context what was the pass-through percentage in Q3? Do you then expect that to slightly reverse out in Q4 and 2026? Kind of what are the moving parts here and your thoughts on deposit pricing? That's the first question. Second question on Fit for Growth. We're almost 2 years into the plan now. You've done $0.6 billion of the $1.3 billion that you're guiding to by end '26, $1.5 billion total. You've taken almost $0.5 billion of restructuring charges, but a lot of the Fit for Growth is really happening next year, a lot of the additional cost saves, a lot of the additional restructuring charges. So can you just give us a feel for what's the step change between the last 2 years and next year in terms of deriving those Fit for Growth cost saves? William Winters: Thanks, Andy. Straight to Diego. Diego De Giorgi: Thank you, Bill. So from the top on NII, I'll give you a little bit more, but I think in the answer to Aman, I gave you already a lot of the moving pieces. So where is our pass-through rate today for CIB? Above our range, undoubtedly, and it's inside our range for WRB, by the way. The impact per percentage point of pass-through rates, roughly speaking, is in the region of $30 million, okay, in terms of the impact, if you're trying to model it in some way. Where do we go? I think we're reverting to the range is the answer. I did specify before that it's partially our own assertive management of it. It's partially the market conditions and the flash liquidity dollars and otherwise that currently is pervasive around our footprint. Does that continue into 2026? I don't know. I don't think that -- I hope that these long-term views about a better world do come to pass. But in the near term, I do think that we remain in a relatively fragmented and complicated world. So it's possible that, that elevated liquidity remains. I think if you have to take some assumptions, my assumptions are, as always, look at our long-term trends and think of a reversion to mean because deviations don't last forever. And you have some sense in terms of the sensitivity per point of PTR. On costs -- so on Fit for Growth, same guidance as before, really. We are happy with where we are for 2025. We will get to the objectives that we have set ourselves for 2025. We will not spend money in Fit for Growth beyond 2026. There will be no CTA beyond 2026. We are mindful of how we spend. And the bulk -- indeed, the bulk of the results will be in 2026, like we've always expected, 1 year fundamentally to get the program going, 1 year to get it running and then results accelerate. Some of the impacts, as you mentioned, will be felt beyond 2026. And if I take the question from FFG to the first word you mentioned, i.e., costs, the cost cap will remain exactly the same, $12.3 billion at constant currency or $12.4 billion at current FX. Andrew Coombs: I guess if I word it a different way, why have you felt the need to wait 2 years to implement these big restructuring charges now given that the Fit for Growth program was introduced a couple of years back? Diego De Giorgi: So I think we've told you before that the phasing of the spend is far from linear. And some of the bigger -- although the program is very well spread out over many different subprograms, it's clear that the bigger rocks take more time to be mobilized and more time for the money to be deployed. Nothing in particular there other than an irregular phasing of the spend. Operator: Now we're going to take our next question. And it comes from the line Kendra Yan from CICC. Jiahui Yan: My first question is regarding to CASA ratio. We've seen the CASA ratio of other major banks in Hong Kong actually increased Y-o-Y due to falling interest rates and ample liquidity. However, Standard Chartered's CASA ratio appears relatively stable. May I ask the reason for that? And do you have a strategy to increase the CASA ratio amid the medium to high interest rate environment nowadays to lower our future cost of liabilities? And my second question is regarding to the credit impairment. I see that on the presentation, Page 6, it mentions high-risk assets up from sovereign-related exposures. Could you please elaborate on which regions are primarily experiencing these risks? And are there any potential risks behind this change that we should pay special attention to? William Winters: Great. Thanks, Kendra. Just a quick comment from me and then I'll hand to Diego. Keep in mind that our Hong Kong business is relatively weighted to affluent customers. And the affluent customers, as we've discussed a couple of times in the context of our Wealth Business, are moving their money out of deposits into investment products, which is net-net a good thing. We're very liquid in Hong Kong. We've been quite disciplined in terms of our deployment of those deposits into the asset side of our balance sheet, including into mortgages. And so we're not -- not only we're not concerned about the quantum of CASA or proportion in our book, but it's something that we're actively managing. But Diego will have more color on both, I'm sure. Diego De Giorgi: Yes. So definitely 2 considerations there. First of all, we always have the ambition to reduce the cost of our liabilities and CASA in Hong Kong plays an important role. Remember that even though deposits in Hong Kong have gone up this quarter, when we attract deposits in Hong Kong, there is a large component of it that is Wealth Management deposits. So the fact that we continue to increase deposits and that we like the time deposits that we get from our customers before they get converted into Wealth Solutions is the reason why as long as they continue to grow and in general, they are good sources of funding for us. With the overall objective of increasing CASA, we are very happy with what we have achieved in Hong Kong this quarter and over the course of this year. By the way, it's been an excellent year for our business in Hong Kong, up 16% in terms of revenues this year. So all very good from that point of view. On your questions on sovereigns, they are obviously sovereigns in our footprint. I would really not read too much into it because we have had sovereign upgrades, and we had sovereign downgrades during this quarter that end up ending in different buckets. Neither of the 2 are particularly large or overwhelming. And by the way, they don't compound each other, but they offset each other. I would also tell you, which I think is probably more helpful in terms of broader thinking about sovereign exposures that sovereign exposures at a time when the dollar is not exactly strong, where interest rate in dollars are trending down and where liquidity in dollars is absolutely flush in the financial system. These are all indicators that go against stress in sovereign credit. And in fact, we haven't seen any particular signs of stress in sovereign credit. So to your point, to your final question, is this something that is warranted of special attention? The answer is definitely not. Operator: And now we'll go and take our next question, and it comes from the line of Amit Goel from Mediobanca. Amit Goel: Two questions from me. So one, I thought it was good the reiteration of the positive cost income jaws each year, so for next year too. When I'm looking at the kind of the $12.4 billion, it implies a couple of percent of potential cost growth. So I guess, basically, the message there that off of the very strong revenue print and obviously, even with the -- notwithstanding the net interest income headwinds, you expect revenue growth next year, at least in the kind of low single digits off of this base. So I just wanted to check that. And so obviously, it implies pretty good non-net interest income revenue growth. And then secondly, just on the Fit for Growth. So I guess, I mean, it's still running in terms of actual kind of integration costs -- or sorry, implementation costs a bit below the guide. So I mean, is there a bit of a pickup then into Q4? And the '26 cost guide, it seems to then be fairly independent of that spend. So I just wanted to, again, just to probe that a little bit more. William Winters: Great. Thanks, Amit. And maybe to repeat a little bit, but then I'll hand over to Diego. We've got 4 key pillars of our earnings growth and earnings driver, which are banking and financial markets, transaction banking. And all of these are performing well. As Diego mentioned earlier, the momentum is good in each case. Obviously, the transaction banking is affected by the interest rate trends. But when we look at the underlying operating trends, they're also good. And banking has been stellar this year. Financial markets has been very strong and then wealth, which obviously continues to be strong. So with a good base and good momentum in each of those that we think can carry through to next year, we feel obviously in a good position to reiterate our positive jaws. I think we've been cautious as well in terms of some of the guidance that we've offered. But I can tell you, Diego and I, and the rest of the team, we're completely focused on meeting and then if we can, if it's possible for us, to exceed that guidance. But for now, we focus on what we can do and focus on performance. But Diego? Diego De Giorgi: So very little to add to that. Between what Bill said and the picture you painted, Amit, it's exactly the right picture. It's all within our guidance. And yes, we are committed to both the cost cap and to positive jaws. And you are right that if we flag that with the fact that we have no guidance for 2026 NII and that we have pointed out all of the 5 moving parts in the discussion that we had before with Aman, it is true that non-net interest income will grow faster than net interest income. Those are powerful engines of growth as Bill has just expanded on. So no need to say more there. Yes, you're right. By indicating that we are going to be fine for our targets on Fit for Growth in 2025, we are implying that there is a pickup in Q4. And in terms of the independence of our commitment for 2026, I mean, it's difficult to say that they are completely uncorrelated, but it is true that the cost cap is a key commitment, and we are committed to the cost cap at $12.3 billion on constant currency, $12.4 billion at current currency, so undoubtedly. Operator: Now I would like to hand over to Manus Costello for any written questions. Manus James Costello: We have a couple of questions on RoTE online. The first comes from Rob Noble. Rob asks, your guidance is for around a 13% RoTE and to progress thereafter. Should we expect an increase in RoTE specifically in 2026? Or is the progress a more general comment? William Winters: Just quickly before I hand to Diego, it's a general comment, but one in which we have high conviction. But Diego, you can give the breakdown on minute by minute on the RoTE conversion. Diego De Giorgi: We have strong conviction. We are going to give you a return on tangible equity target specifically for 2026 when we give you full year results. And the way to look at it, it's a medium-term comment, but trends remain positive. So stay positive. Manus James Costello: Second question on RoTE comes from Gary Greenwood. Gary says, you've guided to a RoTE of around 13% for the full year and have delivered an annualized RoTE of 16.5% in the first 9 months, which implies you think the Q4 RoTE will be around 3%. So why do you expect such a big reduction in performance in the final quarter? William Winters: Thanks, Gary. We are singularly focused on building on the momentum coming out of Q3 and that we've indicated a couple of times through the early part of Q4. And to the extent that we can continue to capitalize on that momentum, market allowing and our own performance allowing, then we would hope to be able to do better. And I can tell you that's a singular focus. But our guidance is our guidance, and I think we want to be cautious in terms of how we adjust our guidance through time and really looking forward to stepping back in February and giving some fully refreshed guidance on 2026 and then a lot more context for the broader business in our May session. But Diego, any additional thoughts, most welcome as always. Diego De Giorgi: Nothing to add. I'm the cautious CFO, and we are cautious on guidance, and it's all going well. Manus James Costello: We'll go back to phone questions, please. Operator: And now we're going to take our next question. And the question comes from the line of Perlie Mong from Bank of America. Pui Mong: Can I just ask about Ventures? I think your guidance for cumulative loss for '25 and '26 is less than $200 million. But this quarter alone is over $110 million, if I'm looking at the numbers correctly. And this year so far is already running at $70 million, including the gain on sale last quarter. So I guess it implies a very large step-up in profitability in Ventures going forward. Just wondering where that's going to come from? Is it going to come from costs? Or is it going to come from maybe some disposals that you have in mind? So that's number one. And number two is, I just noticed that tax rate has been very low this quarter as well. I think running at about maybe 26%. Half 1 was also in the mid-20s. And that seems to be quite a bit below where you previously talked about maybe in the high 20s. So just wondering how we should think about that going forward? William Winters: Thanks for the questions, Perlie. On Ventures, we've seen continually improving operating performance in our digital banks. And of course, we're still in the investment phase. We're rolling out new products and services, including wealth and digital assets and other things, which are going quite well. But we would expect to see just in terms of the narrowing of the gap in the generation of returns from all the things you mentioned. Yes, I'm going to add income growth to the top of the line. We'll have ongoing expense management as we've had. And while lumpy and less predictable in terms of the timing, we'll see gains on sale as well. So we remain committed to our cumulative loss target in Ventures over the planning period. But Diego, why don't you add any color you'd like to that one and then pick up the tax rate question. Diego De Giorgi: Sure. Nothing to add other than I remind you, Perlie, that Mox and Trust do turn profitable during the course of -- in 2026, and that is an important part, an important component. On ETR, look, on ETR, one, first little caveat. Don't look at things too much on a quarter-by-quarter basis, but it's right that we are on a good path. And we are on a good path for a good reason, which is we are driving for a lower ETR. We just can drive for a lower ETR on a specific quarter-by-quarter basis. This particular quarter, a number of moving pieces, beneficial mix in terms of where we recognize, where we had profits, lower unrecognized U.K. tax losses, lower nondeductibles, some U.S. tax adjustments, lots of different small pieces that end up driving to a lower ETR. And yes, if I think of the ETR for this year, given we sit already at the end of the third quarter, does one think that within our long-term guidance that we are trying to lower ETRs to the high 20s, we are probably going to be in a good position within that context. The answer is yes. What you have to take from us is that it's an important priority of ours. It's something where whenever something is under our control, we do something about it. And sometimes, unfortunately, it's not completely under our control, and that's what introduces quarterly volatility, why I suggest to look at it on a relatively slightly longer-term basis. Thank you for the questions, Perlie. Operator: And we're going to take our next question, and it comes from the line of James Invine from Rothschild & Redburn. James Frederick Invine: I wanted to ask about growth in the affluent business, please, specifically net new money. So you've done over $40 billion so far this year. So you're kind of tracking ahead of your $200 billion target over 5 years. But you've got this big target to increase the relationship manager numbers by 50% or so. I presume that most of those people aren't even in the door yet. So why is your $200 billion target still the right one? Why isn't the net new money collection going to steadily increase as all these new relationship managers and the new wealth centers come online? William Winters: Well, that's a great question because we're certainly optimistic that we can continue to drive in this direction. We also know that the environment at the moment is extremely attractive. We know that the Wealth Business, like other businesses that we're in, has an element of cyclicality. And this cyclicality is linked, amongst other things, to optimism about the investment markets and the optimism in investment markets is very high at the moment. So that's a cyclical trend. But the underlying trends, you're absolutely correct. And we've had a good run this year. We are -- as we're finding, as we try to hire and are succeeding in hiring these relationship managers that we're an extremely attractive destination for RMs. It's not because we pay a premium. We don't. We pay a fair wage, but we give them a better platform off of which to deal, which obviously means that there are masses that they're going to make more money for themselves if they perform well off a platform that's easier to deliver strong results. And as Diego mentioned early on, the strong Net Promoter Score, the full breadth of products that we offer, the fact that we're an extremely attractive distributor for the world's best manufacturers, asset managers, insurance companies, et cetera, is a huge advantage. We don't compete with them because of our open architecture. So these are all things that are supportive of our ability to achieve the target that we set out, right? It's not a target actually. It's guidance that we've given. Let's make the distinction between the 2. And is there upside? Yes, absolutely. It will depend on a lot of things. But the execution part of that is going quite well. The market part of that, we can't control. But maybe a final note on that is that the diversity of products that we offer and the fact that we're targeted, of course, at the Private Bank segment, which is growing very well and has generated nice returns for us. Our sweet spot is the one notch below the ultra-high net worth, so the affluent, still substantial AUM, but they tend to be less competitive in terms of the number of banks that they're dealing with. And our products and our advice is highly suited to that client segment and our deployment of technology, AI and otherwise, is also highly suited to that cohort and it's higher margin than the ultra-high net worth segment, which is also attractive, right? So yes, I'm kind of answering your question by saying I agree with your proposition, but our guidance is our guidance, and it seems like an appropriate target at the time that we made it. And if we ever choose to update it, you'll be the first to know. Operator: And now we're going to take our next question, and the question comes from the line of Alastair Warr from Autonomous Research. Alastair Warr: I've got two questions, please, one on retail and one on the CIB side. In Retail, the ECL charge is down quite a bit on the run rate from really the last year or 2. So could you just give a little bit of color there on whether there's something improving on an underlying business basis that we can extrapolate from or if there's anything that's one-off in the quarter in there? And just on the CIB side, could you give a little bit of color on what the pipeline is looking at on the originate to distribute business? William Winters: Yes. Real quick, and I know Diego will add color as well. We have changed the structure of our bank. We've sold a number of our mass market consumer credit businesses. We've also refined our underwriting standards. So especially in markets that have experienced some periods of stress, Hong Kong and China, for example. So part of this is a deliberate shifting in the nature of the business. And that comes from a basic business model call, which is that we really -- frankly, we've got too much good stuff going on to feel the need to like bet on black or bet on red in terms of the overall consumer credit sentiment. Like we don't want to play beta in these markets. We want to play alpha in everything that we do. And we found it hard to generate alpha in unsecured consumer credit. And as I say, we would rather liberate the beta capital and deploy it in the things where we can play alpha. So there's an element of structural to it, for sure, which reflects the decisions that we've taken in terms of where we position our business. But we've also -- we're seeing, I'd say, a slight improvement across our markets in terms of the market-wide credit losses like beta in the markets where we operate. But that's -- Diego, feel free to -- you can contradict me on this one because we have not had that specific discussion in the last 16 hours. Diego De Giorgi: No contradiction at all. It's deliberate management actions and you see it quarter-by-quarter. You see it also across our network. It's tuning some of the CCPL ventures in China, for example, at times, selling a portfolio of credit cards in India. It's deliberate and it's in action. William Winters: And the CIB pipeline, the CIB pipeline is looking really good. We've said for several years now that we intend to significantly increase our pace of origination and that we intend to distribute the bulk of that, and we have, hence, the very active RWA management. You've seen the results in banking in the first 3 quarters of this year, which are very strong, and the pipeline continues very strong. So that's public capital markets, it's private capital markets, it's O2D, it's very important partnerships we've got in private credit, which we're continuing to expand on. It's the ongoing growth in our sustainable finance business, which is setting new records every quarter. Despite the shift in sentiment in some parts of the world, the bulk of the markets where we operate continue to be very focused on financing and transition to a low-carbon economy, and they see us as a very natural place to turn to for that kind of business. So pipeline is good in short answer to your question. Operator: And now we're going to take our next question, and it comes from the line of Ed Firth from KBW. Edward Hugo Firth: I just have two also. The first one was just about revenue guidance for this year. Because if I take your -- I think you said towards the upper end, but actually, if I just take the upper end of 7%, then unless my math is wrong, that's about $20.7 billion, which would imply -- I mean, you've done $16 billion already. So that would imply sub-$5 billion for Q4, which, I mean, I think I have to go back to '23 to see a quarter as poor as that. And yet all your talk on the call is about a strong start, a great pipeline, everything going well. So I'm just checking, should we just broadly ignore that as a guidance because it doesn't seem to really fit with anything else you're saying. So that would be my first question. And then the second question, in terms of RWAs, so I get that right, too early in the morning. I think you're saying again, single-digit growth for this year, but I think you're already up 5%. And I think you said op risk is going to come into Q4 as well. So are we -- is that sort of like an ex op risk? Or are we going to get a big reduction in market risk -- risk-weighted assets in Q4 as we've had in the past? Is that the way we should think of it? So those are two questions, if that's all right. William Winters: Thank you, Ed, and you're quite sharp for such an early time in the morning. So you should never ignore Diego, but you can listen to me as well, which is to say that we feel very good about the momentum in our business. We've had a good start to Q4. Our guidance is our guidance. And I think we've tended to err on the side of caution. But I can tell you, when we exit this call and go back to work, we're not focused on the guidance we've given or the corporate plan or the budget or what's implied in our share price. We're focusing on how to take a really good business with a really good pipeline and make a lot more money. And we feel quite good about that. So you'll put that into the pipe and decide which parts of it you want to smoke and which parts you want to leave in the ashtray. I'll just turn it over to Diego since you laid into him directly, and we'll pick it up from there. Diego De Giorgi: So I'm going to say nothing else because my CEO has come to my help, and I am grateful for that on the first question. Nothing else to say there. On RWAs, let me say, it's something that I think is important. Once again, no -- guidance is guidance, but do not read -- do not exaggerate the reading into what it moves, but do take care of the fact of 2 factors. One, we will deploy risk-weighted assets in the place where it makes us the highest return on tangible equity. It's not a matter that we think of reducing market risk-weighted assets in the next quarter or we think -- this is a very organic management. We have accelerated the velocity of capital in the bank, and we continue to do that. And we manage that very actively, so actively that at times, and you've seen this in Q1 and Q2 and you're seeing it again in Q3, there are quarters where we deploy risk-weighted assets in order to propel our business, and there are quarters in which we don't need it. And instead, we deploy leverage or we do it in other ways or we do it through fees. So it's difficult to forecast where do we go. I think that low single digits remains a good guidance for the course of this year. And if I can only put in one very minor cautionary point in all of this while maintaining the sunny outlook that Bill has so eloquently put out, I do point out that Q4 is seasonally the weakest quarter of any bank, and it's a weaker quarter for us. Again, not much to read into that other than history at work. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Bill Winters, for any closing remarks. William Winters: Great. Thanks very much, everybody, as well. I know it's a super busy day, and thank you for both preparing for the call, but then asking some very good and helpful questions. Thanks for the ongoing support. I think we'll wrap it up 1 hour in on time, on budget and look forward to seeing you next time. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Hanna Jaakkola: Dear all, warmly welcome virtually to Helsinki, and thank you for tuning in for Kesko's Q3 2025 Release Call. Results improved, positive development in all divisions is our headline. We also updated our guidance and are giving some outlook regarding next year. Our agenda today is the following: President and CEO, Jorma Rauhala, will give the Q3 presentation. We have here with us our Business Division Presidents, Ari Akseli for Grocery Trade, Sami Kiiski for Building and Technical Trade; and Johanna Ali for Car Trade; as well as CFO, Anu Hamalainen. After Jorma's presentation, it's time for questions, both by phone and via chat function. All materials related to Q3 can be found at our website, kesko.fi under Investors. My name is Hanna Jaakkola. I'm responsible for IR at Kesko. I will be at your service after the presentation for your questions and discussions. But now without further ado, Jorma, the virtual stage is yours. Jorma Rauhala: Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I am Jorma Rauhala, and I have now the pleasure to present Kesko's Q3 results. Result improved. Positive development in all business divisions is our headline. And what we do mean by positive development. For Grocery Trade, we saw a turn for better in Grocery Trade's market share and the rolling 12 months EBIT margin was 6.6%, which is definitely clearly above 6%. Also, grocery volumes in the market increased, which is positive. We saw also demand for quality products and services increasing. In Building and Technical Trade, the market was challenging, but we saw positive sales development in Denmark, Poland and Baltic countries. Also, Onninen sales in Finland increased for the first time in 2 years. In Car Trade, both sales and operating profit increased clearly. But now, I will give an overview of our business performance and open up elements behind the result. In the end, I'll present the updated guidance for 2025 and outlook for 2026. And after that, we are ready for the Q&A. Summary of Q3 2025. Kesko's result improved clearly and net sales grew in all 3 divisions. The result was actually better than we expected for Grocery Trade and Car Trade, but construction cycle improvement has still been slower than anticipated and the result in Building and Technical Trade was comparable or slightly below our expectations. The sales in Building and Technical Trade were in line with our expectations, but the sales margin was lower due to continued tight price competition in a challenging market. In Grocery Trade, net sales increased and comparable operating profit was at a good level. Sales development for grocery stores were close to market pace. In Building and Technical Trade, net sales increased supported by acquisitions. Also comparable operating profit increased. In Car Trade, net sales increased and comparable operating profit grew clearly. Kesko's history's biggest ever construction project, the shared Onninen and K-Auto logistics center Onnela was completed on schedule and below the original budget. Kesko updates its 2025 profit guidance, and we are now estimating that its comparable operating profit will be in the range of EUR 640 million to EUR 690 million. We estimate that in 2026, operating environment and result will improve in all divisions and in all operating countries. Net sales in Q3 totaled over EUR 3.2 billion. It was up by EUR 201 million. Net sales increased in all businesses. Rolling 12 months net sales increased to almost EUR 12.3 billion. In Q3, comparable operating profit was EUR 208.1 million and operating margin was 6.4%. Comparable operating profit increased by EUR 6.5 million. Kesko Senukai reported in the third quarter, its joint venture result for the whole 9-month period, and it was EUR 7.4 million. Excluding Kesko Senukai's January-June figures, operating profit increased by EUR 6.6 million. Comparable operating profit increased in Building and Technical Trade and in Car Trade and decreased in Grocery Trade. Rolling 12 months operating profit was EUR 651.2 million and operating margin was 5.3%. Return on capital employed was 10.6%. Return on capital employed increased in Car Trade, was down in Building and Technical Trade and in Grocery Trade compared to the year-end. Financial position. The amount of net debt was impacted by investments in store site and acquisitions. Cash flow from operating activities were at the last year's level despite the change in the Food Market Act in 1st of July, which shortened the payment terms. The estimated negative impact of the payment term change to Grocery Trade cash flow was approximately EUR 100 million. Capital expenditure totaled EUR 141 million. I'll open up investments on the next page. Net debt-to-EBITDA was 1.8. It increased, but is well below our maximum target of 2.5. Capital expenditure totaled EUR 141 million. We continued the investments in growth and the main CapEx in Q3 were store site investments in Grocery Trade and the constructions of Onnela, Onninen and K-Auto shared logistics center in Hyvinkaa, Finland. Expenses. Expenses have increased mainly due to acquisitions. Expenses, excluding the acquisitions, were up by only 1.3%. This is a good achievement taking into consideration the salary increases. Now to Grocery Trade, where we saw increased sales and a turn for the better in grocery market share development. In Q3, net sales totaled over EUR 1.6 billion and increased by EUR 36 million. Kespro's net sales declined by 0.2%. Rolling 12 months net sales totaled EUR 6.4 billion. In Grocery Trade, comparable operating profit for Q3 was EUR 117.5 million, and it declined by EUR 1.2 million. Profitability was strong, 7.1%. Kespro's operating profit declined by EUR 0.8 million. Rolling 12 months operating profit was EUR 424 million and operating margin was 6.6%. In Grocery Trade, net sales increased and comparable operating profit was slightly down. K Group grocery sales were up by 3.6%. Kespro's net sales were down by 0.2%, which was close to market pace. K-Citymarket non-food sales were up by 3.2% and profit improved. Customer flows continued to grow, thanks to the price program and campaigns. Online grocery sales were up by 9.9%, especially Click & Collect and fast deliveries increased. Online sales is 3.9% of total grocery sales for the whole 9 months period. General grocery price inflation in Finland was approximately 2.7%, but the price development in K Group stores was only 1.2%, especially thanks to our price program. Total grocery market grew approximately 3.9%, so the volumes in the market increased in Q3. Market share development for K Group grocery stores has strengthened during the year and was close to market pace in Q3. In the hypermarket segment, K-Citymarket won over market share in January, September, and I'm very pleased with this development. Even though Grocery Trade market remains price driven, there are signs of demand growing for higher quality products and services. Our measures are yielding results. Market share development for grocery stores is positive. I have been asked if our price program is enough to turn the market share. No, it is not. We need all these 3 elements: quality, price and network. If we look at the network, our main focus is on growth centers, and we are developing all our formats. In September, we opened a brand-new K-Citymarket in shopping center in Lempaala close to Tampere. The next one to open is K-Citymarket Paavola in Lahti, replacing the first ever hypermarket in Finland opened 1971. In '25 and '26, we are opening 6 K-Citymarkets, 12 K-Supermarkets and 20 K-Markets to strengthen our network and market position. Annual investments are expected to be around EUR 200 million to EUR 250 million in the whole grocery store site network in upcoming years. After Suomen Lahikauppa acquisition in 2016, our network in smaller format is extensive, and we have not opened hypermarkets in recent years. Much of the planned CapEx will be directed to hypermarkets. By 2030, the store site network will be updated in the right locations and meets upcoming legislative requirements. We announced this morning great news about new hypermarket opening plans in Helsinki metropolitan area. Getting new suitable locations in Helsinki area is very difficult, and I'm very pleased to announce these new hypermarkets. We will open a new K-Citymarket in shopping center ready in Kalasatama next to our headquarters. New store will open latest in 2028 and replace the current K-Supermarket. The area has grown fast and is expected to grow further quite heavily in the future. Shopping center Redi will be our fifth hypermarket in Helsinki and the second close to the city center. We have also acquired the majority of shopping center Tikkuri in Vantaa and have plans to start building a new K-Citymarket towards the end of the decade. Tikkuri is in the heart of Vantaa. This store will be the sixth in the city of Vantaa after Kivisto. Vantaa too is fast growing. In Espoo Kesko's, new zoning is now in place and construction works for the new K-Citymarket have started. The store is expected to open in 2028 and will be the third K-Citymarket in the growing and affluent city of Espoo. The common factor for all these new stores is urban shopping center location with great traffic connections for both public and private traffic. Price program launched in January removes obstacles for buying. The price program includes affordable everyday products. Prices have been cut on total 1,200 popular products. There are also relevant campaigns and personalized targeted benefits. Results have been promising, good sales development with good profitability. Customers have found the products with reduced prices well. Customer flows and average purchase has developed well. Also, daily basic purchases have increased, not only campaign sales. We will continue the price program with a long-term focus while keeping the profitability at a strong level, clearly above 6%. Quality is in our DNA, and the quality work is never ready. Raising the bar in quality offers significant sales growth potential. K-retailers and store-specific business ideas are our key competitive advantage. We have many excellent stores, but there is still too much variation between the stores when it comes to quality. It is critical to choose the right retailers to right locations. Rotation is normal. There are some 140 retailer changes each year. Key actions to increase quality is further sharpen each store-specific business idea. Also, we are focusing especially on renewing certain departments like bread and fruit and vegetables as well as K-Citymarket non-food. Extensive relevant selections are created by data and AI and digital services are being developed to make everyday life easier, both for customers and K-retailers. Now to Building and Technical Trade. Cycle is recovering, notable strengthening in technical trade sales. In Building and Technical Trade, net sales increased by EUR 106 million to over EUR 1.2 billion. The increase was supported by the Danish acquisitions. Net sales improved in comparable terms by 1.3%. In comparable terms, technical trade net sales improved by 3% and building and home improvement trade declined by 0.2%. Rolling 12 months net sales were over EUR 4.5 billion. Comparable operating profit for the Building and Technical Trade division totaled EUR 71.7 million and operating margin was 5.8% Operating profit increased by EUR 1.6 million. Kesko Senukai reported its whole January, September figures in Q3. Excluding Kesko Senukai joint venture result for the first half, the operating profit increased by EUR 1.7 million. Rolling 12 months operating profit was EUR 170.4 million and operating margin was 3.7%. Comparable operating profit increased, thanks to positive profit development in technical trade and Kesko Senukai reporting its joint venture result. In Building and Technical Trade, Q3 net sales increased and profit improved. Market demand was again weaker than anticipated, especially in new residential construction. Technical trade sales increased significantly, while profit declined compared to the last year. Building and home improvement trade net sales grew, thanks to acquisitions, but declined in comparable terms. Despite the increase in division sales, sales margin weakened due to continued tight price competition in a challenging market. In Finland, K-Rauta building and home improvement trade sales decreased slightly year-on-year. In Finland, Onninen sales increased for the first time in over 2 years. Norway, sales increased for Byggmakker and Onninen also profit improved. Denmark, Davidsen sales development was strong and integration of acquired companies is proceeding as planned. Sweden, ramp-up of converted K-Bygg stores continues, and it impacts negatively sales and profit development. Credit risk is well under control. Write-downs of overdue trade receivables totaled EUR 1.2 million. In Q3, Kesko Senukai reported its joint venture result for the whole January-September period. In Kesko's Q3 reporting, Kesko Senukai's joint venture result was EUR 7.4 million. Kesko Senukai did not report January-June quarter separately. Kesko Senukai's joint venture result for the first half was EUR 0.1 million negative due to inventory write-down. As we commented in July, in operational terms, performance was roughly in line with the previous year, and Kesko Senukai's joint venture result for the first quarter is typically negative. We have showed this picture many times already. And here, you can see now the Q3 development. We can see K-Rauta's and Onninen sales development in Finland since 2019 in this picture. Both have strong market shares. K-Rauta is the market leader in building and home improvement business in Finland and Onninen in technical trade. K-Rauta sales declined somewhat in Q3. Onninen, on the other hand, performed well and the sales increased for the first time since spring 2023. Here, we can see Onninen's main customer groups in Finland. Onninen serves extensively various construction segments. Technical contractors represent about half of the sales. These are, for example, plumbers and electricians. This technical contractor segment can be divided 50-50 into new construction and renovation and maintenance. 20% of sales goes to industry segment, which includes also shipyards and other industrial construction. Infrastructure represent also 20% of sales. The market in infrastructure has been better than in other forms of construction. And the remaining 10% is wholesale to retailers and other B2B customers. The fact Onninen's presence is so wide helps in different situations and cycles. The much discussed share of new residential construction is currently only about 1/4 of sales. But of course, when the cycle gets stronger, the share of new residential construction will increase. At the moment, nearly 60% of Building and Technical Trade division sales come outside Finland and the pace of construction cycle recovery varies between countries. In the map, we can see the sizes of the businesses in each country and how net sales in comparable terms have developed in Q3 compared to Q3 a year ago. There is a clear improvement in the southern part of the map, Denmark, Poland and Baltic countries reporting strong growth figures. Finnish sales I already presented. In Norway, Byggmakker sales have increased and Onninen were at the same level as last year. In Sweden, we still have work to do in our performance, getting the sales of converted stores up. Also, the market has been difficult in B2B business. But we see cycle turning even if the turn is lower than thought earlier. And now some words about Onnela logistics center. The center serves mainly Onninen, but also K-Auto spare parts. Construction was completed in August, and the move and ramp-up phase is happening during the quiet winter season. The center is fully operational at the end of Q1 next year. K-Rauta central warehouse, which is currently outsourced, will move to Onninen's former warehouse, which is also located in Hyvinkaa. This gives us synergies, for example, in staff resourcing. Onnela logistics center enables growth once the market strengthens and will bring efficiency benefits as volumes grow. The timing of this project was excellent. Original cost estimate was EUR 300 million and the actual cost was less than EUR 250 million. Onnela enables future growth. The center is clearly bigger and has more automatization than the previous warehouse. And there is possibility to expand the center in the future, too. And now to Car Trade, where strong profit development continued. In Car Trade, net sales for Q3 increased by EUR 60 million and were EUR 355 million. Net sales increased in new cars, used cars and services, but decreased in sports trade. Rolling 12 months net sales were over EUR 1.3 billion. The comparable operating profit totaled EUR 22.7 million and increased by EUR 4.9 million year-on-year. Operating margin was 6.4%. Rolling 12 months operating profit was over EUR 82.5 million and operating margin was 6.1%. Net sales and comparable operating profit grew clearly despite the market remaining challenging. Market demand for new cars continue to be still muted. Q3 first registration of passenger cars and vans up by 2.5%. First registration of brands represented by Kesko, up by 18.2% in Q3. This is a great achievement, and we gained heavily market share in new car segment. Good development is a result of attractive new car models and constantly improving operational excellence. Market trend in sales of used cars from dealerships to consumer was down by 0.1%, and our used car sales were up by 25%. Also, service sales increased. We are targeting to grow, especially in damage repairs and the servicing of cars 5 years or older. In sports Car Trade, net sales and comparable operating profit decreased, but market share grew. And now, specified profit guidance for 2025 and outlook for 2026. Profit guidance for 2025. Kesko Group's profit guidance is given for the year 2025 in comparison with the year 2024. Kesko's operating environment is estimated to improve in 2025, but still remain somewhat challenging. Kesko's comparable operating profit is estimated to improve in 2025. Kesko estimates that its 2025 comparable operating profit will amount to EUR 640 million to EUR 690 million. Kesko previously estimated that the comparable operating profit would amount EUR 640 million to EUR 700 million. The updated profit guidance is based on the results for January, September 2025 and the slower-than-anticipated cycle recovery in Building and Technical Trade in the third quarter. Key uncertainties impacting Kesko's outlook are developments in consumer confidence and investment appetites as well as geopolitical crisis and tensions. Outlook for 2026. The operating environment for Kesko is estimated to improve in 2026 in all divisions and all operating countries. Kesko's comparable operating profit is also estimated to improve in 2026 in all divisions and all operating countries. In Grocery Trade, B2C trade is estimated to pick up and the foodservice business to remain stable. In 2026, the comparable operating profit -- operating margin for the Grocery Trade division is estimated to stay clearly above 6% despite the investments in price and the store site network in line with Kesko's strategy for 2024-2026. In 2026, the comparable operating profit for the Grocery Trade division is estimated to improve on 2025. In Building and Technical Trade, the cycle has not improved in 2025 as expected at the start of the year. In 2026, the cycle is expected to improve moderately from an exceptionally low level. In 2026, the comparable operating result for the Building and Technical Trade division is estimated to improve on 2025 in all Kesko operating countries. In Car Trade market, new car sales are expected to remain muted compared to long-term levels, but to nonetheless grow compared to 2025. In 2026, the net sales and comparable operating profit for Kesko's Car Trade division are estimated to improve on 2025. To summarize, the result was good, and there was positive development in all divisions despite the challenges in Kesko's operating environment. In Grocery Trade, strategic measures are yielding results. Market share development for grocery stores has taken a turn for the better. Kesko's market share is strong. Consumer sentiment is moving to better direction and Grocery Trade market is showing signs of picking up. In Building and Technical Trade, sales were clearly up in Denmark, Poland and the Baltic countries. Technical trade sales grew. Construction cycle is strengthening, but at a more moderate pace than previously anticipated. In Car Trade, there was a good sales development in new and used cars and services. Sports trades outperformed the market. All 3 divisions are well positioned for market strengthening in 2026. Thank you. This was my presentation. I guess it's time for questions now. Hanna Jaakkola: Thank you, Jorma, for the presentation. Let's go to the Q&A now. So I will turn first to the conference call line, please. Operator: [Operator Instructions] The next question comes from Maria from Wikstrom. Maria Wikstrom: This is Maria from SEB. I still have a few questions. I would love to have a little bit more color. I'm starting with the 2026 outlook. And especially if we look at the Grocery Trade division, you are guiding for an adjusted EBIT to pick up in '26 from '25. And already, I mean, '25, we have a quite high level. So could you discuss a bit about your confidence on the earnings growth in Grocery Trade division next year? And what are your assumptions behind this growth assumption at this point in time, please? Jorma Rauhala: Okay. Thank you, Maria. All in all, about Grocery Trade, of course, we have now seen that, for example, now last quarter, Q3 was quite strong, also volume increase in the Finnish grocery market and also our performance when it comes to sales, market share and EBIT was quite nice. So we believe that more and more consumers are a little bit more confident. They are now buying more, let's say, very high-quality ready meals and fish and fruit and vegetables and things like that. So all in all, we think that the Finnish grocery market will increase next year. And also, we believe that our performance will be quite strong when it comes to market share. So no doubt about that, that what we stated that the EBIT on Grocery Trade will be clearly about 6%. Maria Wikstrom: And coming back to the market share question, I think you earlier have said that even you have lost the market share on the total Grocery Trade division, you have gained market share with the hypermarket concept. What is your view on the market share development in Q3? And if, I mean, do you think -- I mean, in order to facilitate faster market share growth that you would need to initiate new pricing actions? Or would this -- what you did in the beginning of the year be enough, I mean, for now? Jorma Rauhala: Yes. All in all, like I said, Q3 was very good when it comes to market share development. And the total market growth was 3.9%, and our growth was 3.6%. So we were very close on the market pace. And in hypermarket sector, we have gained market share whole year, which is very, very positive. And also now kind of supermarket segment, we were very close when it comes to market growth pace. We are losing market share on the smaller side, those neighborhood like K-Market. And biggest reason for that is that our store network has -- we have less stores, let's say, now. But all in all, I'm very confident that now Q3 was very much better than Q1 and Q2. And next year, especially, I believe that the next year will be the year that we will gain market share, and we will continue with this price program and the whole program kind of includes our pricing system. So no -- any big changes needed on that one. But I hope this opened a little bit more that. Maria Wikstrom: And then finally, I know this is a kind of a small thing in a big picture, but still wanted to get a little bit more insight on the turnaround and rebranding of the Swedish Building and Technical Trade business to K-Bygg, as you mentioned separately that, that was still eating into the profitability this year. So when do you expect I mean to reach the black numbers? And what is kind of the leeway that you see or trajectory that you see in the Sweden going forward, please? Jorma Rauhala: Yes. Okay. Thank you. Sweden and K-Bygg, Sami, you can take that one. Sami Kiiski: Thank you, Maria. So first of all, of course, we see the market a little bit recovering also in Sweden and more from B2C side. So consumer business is better than B2B. And of course, we need to remember that when we did this strategic move or change to concentrate our business to K-Bygg, it's mainly B2B business. So it's 80% B2B business. And of course, that is also affecting. But yes, we see that the market is getting better. And also, we see that our performance is getting better, particularly, of course, with the, let's say, old K-Bygg and then these converted K-Rauta stores are also gradually picking up now. And of course, it's a hard job to build up the B2B business. We need to be very close with the customers and also build up our offering to that direction. But I see already positive signs also. Jorma Rauhala: Continue a little bit good to understand also that is it something like 50 stores we have in Sweden, something like that. And now we are talking about 7 or 8 stores, which we have this a little bit problem, let's say, so. Sami Kiiski: Exactly. Jorma Rauhala: Yes. Maria Wikstrom: And then my final question is that, I mean, given that your leverage ratios were up slightly on the -- after the Q3. What is currently your appetite, I mean, for further acquisitions? I think we talk now about the Building and Technical Trade segment. Jorma Rauhala: Yes. Our strategy hasn't changed. So still, we are seeking growth also through acquisitions. And also, we have stated that very clearly that Sweden is the most critical one that we want to grow our business and in this Building and Technical Trade to make big changes through acquisitions. So we still are looking good targets in Sweden. Also, other countries could be possible, but clearly, Sweden is priority #1. Operator: The next question comes from Fredrik Ivarsson from ABG Sundal Collier. Fredrik Ivarsson: I've got 3 questions. I'll take them one by one. So first, if we could start with the slight margin contraction in BTT despite some like-for-like growth. What was the key drivers behind the slightly lower margin in B2B, please? Jorma Rauhala: All in all, maybe, Sami, you can take this one. But of course, it is still a weak market situation. And when the market situation is weak, the competition is very, very tight. And let's say, so that the volume is maybe not the biggest problem now. The gross margin is kind of a challenging one. But Sami, maybe you want to continue your... Sami Kiiski: Yes. Of course, that is quite natural that this kind of environment and also this kind of, let's say, market, it's natural that the price competition is, let's say, very hard in all the markets where we are in. And of course, particularly in technical trade, we see that also. And particularly, we see that, for example, only in Finland, business setup is good. It's working well. We see more price competition, of course, in this kind of project businesses. But our model is also so that we -- a big part of that is a service business. We have wide Onninen store network here in Finland, 60 -- almost 60 stores. And we see that there, we have a very good pace also. But of course, like I said, this kind of market, the price competition is hard. Fredrik Ivarsson: And then on the EUR 200 million to EUR 250 million store site investments, was that only in grocery or for the full group? I didn't catch that. Jorma Rauhala: Grocery. Grocery, yes. Fredrik Ivarsson: And can you remind us how this sort of stand in relation to historical levels? I recall, I guess total CapEx has been around EUR 300 million in grocery, but how much of that has been store site investments? Jorma Rauhala: How about colleagues, do you remember the figures? I remember that 2020-2021, we have much less what comes to those store site investments. But Ari, do you remember Ari Akseli: Yes. Exactly during this COVID time, it was the lowest level ever during my time in Kesko. It was something like EUR 100 million yearly. But typical level is between EUR 150 million to EUR 200 million yearly. Jorma Rauhala: Yes. Fredrik Ivarsson: So this is a slight acceleration, I would say? Jorma Rauhala: Yes, we can say yes, that's true. Hanna Jaakkola: To add, we have been saying this EUR 200 million, EUR 250 million for quite some time now. So this was not news this time. But to reminder that, that is the level. Jorma Rauhala: And also those 3 new super -- K-Citymarkets we announced this morning includes on those EUR 200 million to EUR 250 million. So no any extra investment because of those. Hanna Jaakkola: Yes, exactly. Fredrik Ivarsson: And then last question on my side, on the 2025 guidance, what do we need to see in order for you to reach the high end of the guidance? I guess, midrange implies around 8% EBIT growth. But in order for you to reach the high end, what do you need to see during the last 2 months of the year? Jorma Rauhala: Okay. So a couple of 3 months still to go or 2 months, let's say, so that, of course, all the businesses has performed better than we expected now. And of course, Christmas is there. If there would be an excellent Christmas, especially for K-Citymarket, and that would be -- but also it needs that the Building and Technical Trade market should recover a little bit faster. I would say those 2 are the main opportunities on that one. Hanna Jaakkola: Thank you, Fredrik. Anybody else on the line? Very good. There's one coming. Operator: The next question comes from Calle Loikkanen from Danske Bank. Calle Loikkanen: Just a couple of questions. If I start with the Kesko Senukai, I was just wondering about the inventory write-down that could you elaborate a bit on the reasons for this and also how big the impact of this write-down was in terms of euros? Jorma Rauhala: Yes. Anu, you can take that one. Anu Hamalainen: Thank you, Calle, for your question. If I put it like this, in July, we told that Kesko Senukai's Q2 figures for this year were according to last year at the same time. And it was according to that with the management report that we received. So the management report didn't show anything special. So what we did not receive back then was all figures. And for example, inventory, which is the reason why we couldn't report Kesko Senukai figures in Q2 as we need to calculate the Kesko Senukai inventory according to Kesko's inventory valuation principles. As such, I want to emphasize that this is normal and the inventory valuation could show pluses or it could show minuses, and we haven't opened this up earlier. So we have had both pluses and minuses during the previous years as well. So there is nothing special on that side. Why we wanted to open this up was that the inventory valuation will just tell you that the Kesko Senukai is operationally doing well. So there is nothing special on that side. So the inventory valuation could be something else during the last quarter this year. So we don't want to open up, unfortunately, these kind of valuations. Calle Loikkanen: But in terms of euros, I guess it was something like EUR 6 million or in that ballpark? Anu Hamalainen: Well, let's say, it was negative. Calle Loikkanen: And then secondly, I was wondering about the price competition in the technical trade business. And I was wondering that have you seen price competition accelerating now during this year? Or has it just continued to be that way, but you just now started kind of talking about it? And also, are you expecting any changes in the price competition now in Q4 and more importantly, in 2026? Jorma Rauhala: Okay. Sami, you can take that one. But if I understand right, it hasn't accelerated. It has been like that, let's say, at least this year, not any big changes on that one. And I think it's like say, quite normal on this time when the market cycle is very, very weak. And when the market will improve, I think that also that won't be so big problem. But Sami, is that something else you want to add? Sami Kiiski: Exactly. Like you said, we saw that it started, let's say, quarter 4, 2024. And like I said already, it's a little bit connected to these projects, which I think everybody are fighting for, I mean, our customers also more when the market is like this. So it's a very price-driven market in that, let's say, segment in a way. And there, we see this price competition to be quite heavy. But other than that, it hasn't changed a lot in the big picture. And like Jorma said, we are waiting that it should gradually go, let's say, better direction when the market is recovering also. And we need to remember also that this is also availability business. And it's not only the prices, it's also that you need to have good warehouses, you need to invest like we did now with Onnela, and this is much more than prices also. So in the long term, availability matters also. Operator: The next question comes from Miika Ihamaki from DNB Carnegie. Miika Ihamaki: This is Miika from DNB Carnegie. My first question is, you're noting here Davidsen sales development was good, creation of acquired firms proceeded as planned. I was wondering, did you realize any synergies during the quarter? If not, when are you expecting to realize them? And can you give any ballpark and naturally talk about a little bit how the integration is proceeding in Denmark overall? Jorma Rauhala: Sami, you can take this one. Denmark, yes. Sami Kiiski: Yes. I -- was it the Denmark market also, first of all or? Hanna Jaakkola: Yes. And how the integration is proceeding. Sami Kiiski: Thank you, Miika. Good question. And like we have told, so this the closing of these 3 companies were during the 2025. And of course, we started in February, as we all remember, and then the last one came in, in June. So the integration has actually went pretty well, I would say, or at least I'm very happy that it has been a big project. As we all understand, it's a big acquisition for us. Integration has been going well. We have been keeping our most important customers also happy. IT platforms are in place. The new branding is there. So we are really the national-wide player there and ready to expand also the business. So the platform is good. When it comes to synergies, I believe we don't open up the synergies so much. But of course, there's always synergies when we have -- when we are becoming, let's say, the big player and the national player and particularly when we are talking about B2B business and this heavy building materials. And of course, one big in a way, improvement and maybe also you can call it synergy is that we have much better logistics when it comes to growing areas like [ Zealand ] and Copenhagen area where we see more activity also now. So that's maybe to summarize of Danish business. But we are very happy to see that we are performing there and better than market also as a whole. Miika Ihamaki: And then my next question is that what is your expectation on specifically Finland Building and Technical Trade profits into next year on the basis of housing market recovery? So I would like to understand how much do you -- how much is your profit recovery dependent on the housing market in Finland? Jorma Rauhala: Sami, would you like to have this one? Sami Kiiski: Yes. We see also that, of course, we are also closely following what is happening with our customers and also what is happening with the housing market. I believe the message from the market has been also that it's gradually getting better, the market. And also it was, I believe, very well also opened up in Jorma's presentation that our business is not only depending of the new residential or new housing construction business. But of course, let's say, so that we are also waiting for that the market, let's say, come back or gradually improve. So then we will see, of course, that the effect will be there. It's 1/3 of our, for example, Onninen business is, in a way, connected to new housing market, and we can, of course, serve and sell much more equipment and technical and HVAC equipment and products there. So maybe to summarize, we believe that the market will be better. Also the forecast what we are having from euro construction also is showing that the [ for a contract ] it's going to be a better market. But maybe not the first part of the year. It's going to be better when we go a little bit further 2026. Hanna Jaakkola: No more questions from the conference call line. I have one question here coming from the chat. You mentioned already in Q2 report that construction recovery has been slower than expected during '25. And now in '26 outlook, you comment that it will be more moderate than previously anticipated. Has the view on construction recovery weakened further since the summer? Is the question. Jorma Rauhala: Thank you. Yes, we say that Q3 was weaker than we expected in summertime. But I think that in '26, we didn't say that it would be more moderate than previously anticipated. We say that it will be moderate growth, but no change, of course, because we haven't commented earlier '26. But the change was when it comes to Q3 was weaker than we expected on July. Hanna Jaakkola: Exactly. Jorma Rauhala: Yes. Hanna Jaakkola: But no more questions from the chat function, no more questions from the conference call line. I would like to thank you for very good comments and questions. And if you have any further discussion needs or questions, don't hesitate calling me. But I'd like to thank you from -- on behalf of the whole group here. Thank you. Jorma Rauhala: Okay. Thank you.
Diego De Giorgi: Good morning, and good afternoon, everyone. Thank you for joining us today. First, I will take you through our third quarter results. After this, I will be joined by Bill, who is dialing in from our Dubai office today, and we will be happy to take your questions. In my remarks, I will be comparing the third quarter underlying performance year-on-year at constant currency, unless otherwise stated. It has been another strong quarter. We delivered 9% growth in profit before tax on the back of a 5% increase in income. Our growth engines have continued to deliver consistently with a record quarterly performance in Wealth Solutions and Global Banking. As a result, we are upgrading our 2025 income growth guidance to be towards the upper end of the 5% to 7% range at constant currency, excluding notable items. We had previously guided this to be at the lower end of the range. And more importantly, we now expect to deliver a return on tangible equity of around 13% in 2025. This exceeds our previous guidance of approaching 13% in 2026 and accelerates our delivery by a year. As Bill set out in the press release this morning, performance has been broad-based and is a testament to our sharper strategic focus on servicing our clients' cross-border and affluent banking needs. Looking now at the numbers for the quarter. The group delivered operating income of $5.1 billion, which was up 5%. This was underpinned by the strong performance in Wealth Solutions and Global Banking in the quarter. Operating expenses were up 4% and credit impairment was $195 million. As a result, profit before tax was up 9% to $2 billion, and our tangible net asset value per share was up $1.75 year-on-year. Now let me take you through the performance drivers in details. NII was up 1% on a quarter-on-quarter basis, largely driven by volume growth. Lower rates in Singapore led to a reduction in NII, but this was partly offset by improved WRB pass-through rates in Hong Kong as HIBOR rebounded. We have continued to manage our pass-through rates assertively. And although they remain above our medium-term expectations in CIB, we expect pass-through rates to reduce over time. Putting this all together, we still expect our 2025 NII to be down by a low single-digit percentage year-on-year. As usual, we have updated our currency weighted average interest rate outlook in the appendices to this presentation. This shows that we now expect a 55 basis point headwind in 2026, slightly higher than the 44 basis points when we last reported. Our non-NII engines continued to drive strong growth, and I will talk to each product driver in the segment section. Now turning to expenses. Operating expenses remained well controlled and were up 4% year-on-year, mainly driven by business growth initiatives and investments, which were partly funded by Fit for Growth and efficiency saves. We have achieved $566 million of run rate savings from our Fit for Growth program and have taken $454 million of restructuring charges since inception. Our 2026 total expense guidance remains unchanged at below $12.3 billion on a constant currency basis, which would be $12.4 billion at current FX forward rates. Credit impairment for the quarter was $195 million with an annualized loan loss rate of 24 basis points. WRB impairment was down in the quarter, largely due to optimization actions in our unsecured portfolios. In CIB, we took an impairment charge of $64 million, included within this is an additional precautionary $25 million overlay for clients who have exposure to Hong Kong commercial real estate. You will see more details in the appendices as usual, but nothing has materially changed since we last spoke to you. Our high-risk assets were up around $650 million quarter-on-quarter. This was driven by a sovereign downgrade into early alerts, partly offset by a reduction in the credit grade 12 portfolio. We continue to monitor our credit portfolio closely, and we are not seeing any new significant signs of stress emerging across the group. Underlying loans and advances to customers were up 1% or $2 billion quarter-on-quarter with the increase largely coming from wealth lending and mortgages. We have seen 4% underlying growth year-to-date, driven broadly across Global Banking, Wealth Lending and Mortgages. We continue to guide to low single-digit percentage growth in underlying customer loans and advances. Underlying customer deposits were up 2% or $11 billion quarter-on-quarter with growth largely from WRB. Turning now to capital. Risk-weighted assets were down $1 billion in the quarter. The increase in asset growth and mix was offset by a $1 billion reduction in market risk RWA and another $1 billion impact from FX. I would highlight that the annual operational risk or RWA increase, which is mechanically calculated from historical income, will take place in Q4 2025 rather than Q1 2026, bringing us into line with most other U.K. banks. We closed the quarter with a CET1 ratio of 14.2%, up 32 basis points quarter-on-quarter, excluding the impact of the $1.3 billion share buyback we announced in July this year. Now let's look at our business segments. CIB income for the quarter was $3 billion, up 2% year-on-year. This was driven by an impressive performance in Global Banking with income up 23%, supported by strong origination and distribution volumes and a solid performance in our financing, capital markets and advisory businesses. Transaction Services income was down 6% due to falling rates and margin compression in payments and liquidity, although it was up slightly when compared to the second quarter. Within our Global Markets business, Flow income was up 12% as we continue to support clients across the footprint. Episodic income was softer due to a lower level of market volatility relative to Q3 last year. On the next page, we have shown a long-term view of our Flow and Episodic income trend on a 12-month rolling basis since 2019. As a reminder, Flow is the larger part of our global markets income and primarily relates to client hedging activity. As such, it tends to be recurrent and programmatic. You will see that our Flow income is growing consistently at a double-digit CAGR as we illustrated at our CIB seminar. This growth has been driven by the investments we have made over the years in digitizing and expanding our product and geographical offering in order to drive future opportunities. Episodic income, on the other hand, is less predictable quarter-to-quarter as it tends to be event-driven. But as you can see from the chart, it has been a meaningful contributor to our Global Markets income over time. Looking forward, Flow income will continue to be a larger contributor to our Global Markets income, and we will continue to support our clients episodically as market opportunities present themselves. Moving to WRB. Q3 income was up 7% to $2.3 billion with another record quarter in Wealth Solutions, where income was up 27%. This was largely driven by structured products and managed investments, helping to increase investment products income by 35%. Bancassurance income was up 5%. Our affluent net new money in Q3 was $13 billion with a higher proportion of wealth sales than in the previous quarter as clients showed a higher propensity to buy Wealth Solutions given conducive markets. This brings total net new money year-to-date to $42 billion and puts us well on track to our $200 billion medium-term target for net new money. We onboarded 67,000 new-to-bank affluent clients in the quarter, continuing the trend of onboarding over 60,000 clients each quarter. Our affluent business benefits from our high levels of customer satisfaction as demonstrated by the fact that we now rank #1 in Net Promoter Score across 8 of our top 9 affluent markets as we continue to invest heavily within the affluent space. So to conclude, Q3 was another strong quarter as we continue to deliver consistently. Q4 has also started positively. We are upgrading our 2025 income growth guidance to be towards the upper end of the 5% to 7% range at constant currency, excluding notable items. We continue to track towards the upper end of this range for the 2023 to 2026 income CAGR. We now expect our return on tangible equity in 2025 to be around 13%, reaching our target a year early. But there is still much more to do as we reinvest into our differentiated areas of strength, delivering income growth and more importantly, improving returns. We will present updated 2026 return on tangible equity guidance at our full year results in February next year, and we will provide more details on our medium-term financial framework at our investor seminar in May. With that, I will hand over to the operator, and Bill and I can take your questions. Thank you. Operator: [Operator Instructions] And now we're going to take our first question, just give us a moment. And the question comes from the line of Joseph Dickerson from Jefferies. Joseph Dickerson: Great set of results here. Can you just discuss in the Wealth Business, the type of -- if you're able to, the type of margin pickup you get on the wealth investments? Because clearly, that's -- if you look at the year-on-year attribution of net new money, you're getting about 80% of the year-on-year growth now from wealth. I suppose some of that is as you say, linked to the markets, but could you discuss the type of margin pickup there? And then secondly, on capital, I note the reduction in your capital requirement by 22 basis points. I presume that that's not going to change your operating range number. But if you could comment on still the preference would be to do buybacks or I guess, how you think about returning excess capital? And then on the op risk point, I guess linked to that, is the op risk point going to have much of an impact on capital in Q4? William Winters: That's great, Joe. Thanks very much for the questions. I'm going to turn to Diego for both, but just a couple of high points. First is to note that the Wealth Business has demonstrated the net new money that comes into the bank via deposits is migrating at more or less the pace that we've always suggested would be the case into wealth products, and that's a good thing. Second is that the deposits themselves are profitable for us. But of course, you're asking about the margin pickup, which we can address in a little bit of detail. And third is that the leading indicators continue to be strong, which is new clients who are bringing new money into the bank. And as Diego mentioned in his opening comments, the fact that we continue to receive top marks in terms of customer satisfaction is a big driver there. Maybe just quickly before handing to Diego, I'll say I'm in Dubai for amongst other things, we're hosting what we call a leadership network of about 150 of the wealthiest families in our network. Last year, we did it in Hong Kong, this year in Dubai. Dubai is an up-and-coming booking center for us and wealth coming out of this region is an incremental driver beyond what has been driving wealth so far, which has been a broad range of our client base, but most specifically, as we called out, global Indians and global Chinese. The growth opportunities for us ahead are very, very strong. And the willingness of people to fly all over the world to spend a couple of days with us is a key indicator of that. So I just -- at the moment, building on some good feelings that's been building up for the past decade or so, feeling very good about this business. But over to Diego to expand on that and also talk to the capital point. Diego De Giorgi: Thank you, Bill. So on Wealth Management and margins, Joe, you will have seen that -- you are right, our return on assets has picked up a bit this quarter. You will also remember that we had a large conversion from assets under custody to assets under management a few quarters ago in the region of $40 billion, so a meaningful number on our total of assets under management, and we had signaled at the time that, that would reduce the return on assets for some time as they slowly find their way into Wealth Solutions. That is happening, and hence, that pickup. I think that as the business continues to shift towards Wealth Management and as the situation unfolds with highs and lows in the market, return on assets will continue to fluctuate like on many other metrics. I know I sound like a broken record. I always caution not to look at things too much on a simple quarterly basis. But it's true that the trend from that point of view is good, and it's certainly something that we encourage in terms of our actions as much as we can. 22 basis points on Pillar 2A indeed does not change our calculations in and by itself. And the op risk change in terms of moving it to the fourth quarter of this year, neither does that affect it in any way. It's just to get us more in line with how other U.K. banks are reporting. And the basis for calculation and everything else remains absolutely the same. So it's just a matter of timing. It doesn't impact our numbers in any way. Operator, next question, please. Operator: And now we're going to take our next question. And it comes the line of Kunpeng Ma from China Securities. Kunpeng Ma: Congratulations to this very strong quarter. I have a relatively long-term question for Bill. When we're looking for the next 5 to 10 years, I think it's going to be quite different than -- a bit different with the past 5 to 10 years. A lot of things have changed and will continue to change. I think in my mind, the current momentum will continue to be strong, but the extreme volatilities will be less, both geopolitically and in terms of business development. So Bill, could you please give us some of your observations or your thinking about the future development or trends for the CIB Wealth Management business in 5 or 10 years work. I know it's hard to make the final conclusion, but any color on kind of future trends will be quite helpful. William Winters: So Kunpeng, thanks very much for the question. You were cutting in and out a bit, but I think we got the gist of it. You're looking for the crystal ball on 5 to 10 years for our bank, China, in particular, and wealth within China more specifically. So the -- and it's not an inappropriate question at all because that's actually the kind of stuff that Diego and I and the Board talk about all the time, although we don't get much of a chance to talk about it in earnings calls. We will be talking about exactly that when we get together in May, and we're getting together in May in Greater China, Hong Kong specifically, with exactly those questions in mind. So what I can say broadly is that, yes, of course, the world is going to change a lot. There are going to be a few defining, I think, trends and transitions over a 5- to 10-year period. First and probably most relevant for us is the full implementation and incorporation of AI and advanced machine learning into business models at a very structural level. And I think Standard Chartered is very well prepared for that, but we're very early in that game, and there's much to be won and lost, as is everyone else. But we're investing heavily, and I think we're on the right track. Second and more obliquely is the digitization of money. The digitization of money will become pervasive, if not ubiquitous. And it will completely redefine the infrastructure supporting finance. And this is not something that businesses or individuals are necessarily going to see or be aware of. They're going to be relying on their intermediaries to help them navigate through the changes that are associated with the digitization of finance. Standard Chartered is at the front -- the leading edge in the digitization of money, and we intend to continue to be at the leading edge of the digitization of money. Third is adapting to a multipolar world. And we had the benefit this morning of having former Secretary of State, Kerry, addressed our family office network, and he spoke to this at some length. My question to him was, is this a good thing or a bad thing for those of us in business? And of course, we could argue it either way. But I think it would appear to us that as a bank whose fundamental role is to connect people and markets through periods of change and through periods of growth, that the incremental complexity of a multipolar world, but also the incremental opportunity is a huge opportunity for a network bank, which does not have the same degree of home market that many of our competitor banks do, but we do have a real edge in that home market, which is our own, which is the globe and which is the network. So I'm feeling really, really good about Standard Chartered's positioning for the next 5 to 10 years. Now all sorts of things could happen in the world that we could hypothesize about that could be wonderful. We could have a prolonged period of global peace. And right now, we're sitting in the most peaceful time in human history. It doesn't feel that way when we're thinking about wars in the Middle East and Ukraine, et cetera. But just broadly, we're sitting at a time of extraordinary peace, and we have the possibility that, that could become pervasive. How wonderful would that be? That's really good for business, right? Second is the power of the technology tools that we're developing could be fundamentally transformative. We suspect it will be and that will be a support for our business. And then third, as I mentioned, the ongoing reconfiguring of finance. We're trying to put ourselves at the leading edge there. I think that we are, and we're certainly intending to continue to invest to be there. So China is an integral part of that. We have a strong position in China. Chinese wealth will accumulate substantially. We intend to manage an increasing proportion of that off of a good base. So all in all, it's a good story. But I'd welcome any additional thoughts from Diego. Diego De Giorgi: No. I think this is terrific. Operator: Now we're going to take our next question, and it comes from the line of Aman Rakkar from Barclays. Aman Rakkar: I had two, please. I just wanted to interrogate net interest income, if I could, please. Your low single-digit expectation for the full year leaves a wide range of potential outcomes for Q4. I think it could be anywhere kind of from down 4% Q-on-Q to kind of up 1% Q-on-Q. So I don't know if you could help us there in terms of what a more realistic outturn is for Q4? And as part of that drivers, please, I'm interested -- I suspect you're not going to give us a guide on '26, but just interested in what you see as the kind of moving parts on net interest income, particularly the balance of deposit and volume momentum versus things like interest rates and pass-throughs, which might be a headwind? And then the second question was just around Wealth Solutions. Again, a really, really impressive print, not the first quarter. The investment products line, I just wondered what element of brokerage sits within that revenue. So clearly, the performance in Q3 in terms of brokerage revenues would have been supported by things like the Hang Seng turnover levels that were elevated. So could you just give us a sense of that element of the kind of revenue print in Q3? It's just to kind of get a clean read on wealth from here ex the kind of transactional element of it. William Winters: Thanks very much for the question, Aman. Diego was really hoping you were going to ask the question on NII. So I'm going to go straight to him, and he can carry through on the wealth question as well. Diego De Giorgi: Splendid. Thank you, Aman. So let me help you unpack the near term and slightly longer term into 2026. First of all, on 2025, so we get to the end of Q3 and we enter Q4 clearly in a better position on NII than we were expecting only 3 months ago, right? A number of things. We never take forecast on rates, et cetera, but we had indicated on the forwards. HIBOR ended up performing a little bit better than what the forwards were indicating. So we get here in a slightly better place. And I appreciate your point that depending on where you put yourself in that low single-digit guidance range, you get to a substantially different result for your quarter-on-quarter NII number. What I would tell you is that Bill and I are optimistic about the way that the quarter looks and optimistic about the way that net interest rate is developing. We're optimistic because we are managing it well. I'll come more to it when I talk to you about 2026 in a second. But we're managing it well from a point of view of PTRs because we are focused on it and because the quality of our liabilities matters to us a lot. And we are -- it's working well because the world post April 2 became a more liquid world more generally. It is not just us, it's our clients that tend to keep more liquidity, that liquidity is both in dollars and in local currencies. And in a market where liquidity is high, we can be more discriminating in terms of what deposits we take and what we don't and how we manage our PTRs. So generally speaking, a lot of optimism for Q4 of 2025 still within our guidance that we are giving. If we unpack 2026, let's start from the top. First and foremost, if you look at Page 17 on our currency weighted forward curves, as always, you will see that the rate impact that we are expecting now is a little bit worse than what we were expecting only a quarter ago, not a lot, but 11 basis points. So overall, we have some rate headwinds. This particular quarter, you have seen that our volume performance has been better than the negative impact of our rates and margin, as you see on Page 4 of our presentation. And the question is what will happen in 2026. We will have -- undoubtedly, as rates continue to decrease, we will have a positive impact in terms of volumes. We are up 4% year-to-date in terms of customer loans and advances. So we are somewhat ahead of what we would have expected. Will that continue in 2026? No crystal ball. But so far, things look relatively good from that point of view. Will we continue to manage PTR assertively? For sure. But as interest rates go down, managing them more assertively becomes more difficult. And so -- and we'll see also what happens to the general levels of liquidity in the market. Fourth impact. So rates, PTRs, volumes, fourth impact mix, we continue to remain focused. We are focused on high-quality liabilities. We are focused on high-quality liabilities coming from WRB over liabilities coming from CIB. And we are very focused on making sure that within those, we are focused on CASA rather than TDs, although as always, I would caution you, we like TDs in Wealth Management because as Bill said before, they are just the first step in then converting them into net new sales of Wealth Solution products. And in general, of course, we will continue to privilege deployment into client assets versus deployment in treasury. Last, more minor point, remember, the impact of our WRB market exits that we had indicated to you as $100 million roughly between now and the end of -- between when we announced them and the end of 2026. So these are the moving pieces for 2026. And we will see and we will continue to update you as the year starts and progresses. On Wealth Solutions, yes, it was an impressive print undoubtedly. It was very good to see that as we had signaled in Q2, as Bill said before, money moved from deposits into Wealth Solution products. I would tell you, it was a pretty bold move. It's true that equity was important. But when you think about equity, don't think that much about equity brokerage. We have mentioned it many times. There is no doubt that there is a component of equity brokerage. But remember that we are laser-focused on affluent customers and particularly the globally minded affluent customers. And those customers are long-term savers. They have mortgages with us. They have life insurance with us, and they have investments with us. Those investments tend to be stickier. And so yes, we benefit from a little bit of volatility and from optimism in the market, for sure. But you can see in those trends a large component of structural trends. I hope it's helpful. Operator: Now we're going to take our next question, and it comes from the line of Andrew Coombs from Citi. Andrew Coombs: If I could have a follow-up on NII, please, and then one on costs. So on the net interest income, as you say, better-than-expected result in the third quarter, and you've specifically called out the assertive pass-through management on your deposit book. At the same time, you reiterated the medium-term range of 60% to 75% in CIB and 35% to 50% in WRB. So can you just provide us some context what was the pass-through percentage in Q3? Do you then expect that to slightly reverse out in Q4 and 2026? Kind of what are the moving parts here and your thoughts on deposit pricing? That's the first question. Second question on Fit for Growth. We're almost 2 years into the plan now. You've done $0.6 billion of the $1.3 billion that you're guiding to by end '26, $1.5 billion total. You've taken almost $0.5 billion of restructuring charges, but a lot of the Fit for Growth is really happening next year, a lot of the additional cost saves, a lot of the additional restructuring charges. So can you just give us a feel for what's the step change between the last 2 years and next year in terms of deriving those Fit for Growth cost saves? William Winters: Thanks, Andy. Straight to Diego. Diego De Giorgi: Thank you, Bill. So from the top on NII, I'll give you a little bit more, but I think in the answer to Aman, I gave you already a lot of the moving pieces. So where is our pass-through rate today for CIB? Above our range, undoubtedly, and it's inside our range for WRB, by the way. The impact per percentage point of pass-through rates, roughly speaking, is in the region of $30 million, okay, in terms of the impact, if you're trying to model it in some way. Where do we go? I think we're reverting to the range is the answer. I did specify before that it's partially our own assertive management of it. It's partially the market conditions and the flash liquidity dollars and otherwise that currently is pervasive around our footprint. Does that continue into 2026? I don't know. I don't think that -- I hope that these long-term views about a better world do come to pass. But in the near term, I do think that we remain in a relatively fragmented and complicated world. So it's possible that, that elevated liquidity remains. I think if you have to take some assumptions, my assumptions are, as always, look at our long-term trends and think of a reversion to mean because deviations don't last forever. And you have some sense in terms of the sensitivity per point of PTR. On costs -- so on Fit for Growth, same guidance as before, really. We are happy with where we are for 2025. We will get to the objectives that we have set ourselves for 2025. We will not spend money in Fit for Growth beyond 2026. There will be no CTA beyond 2026. We are mindful of how we spend. And the bulk -- indeed, the bulk of the results will be in 2026, like we've always expected, 1 year fundamentally to get the program going, 1 year to get it running and then results accelerate. Some of the impacts, as you mentioned, will be felt beyond 2026. And if I take the question from FFG to the first word you mentioned, i.e., costs, the cost cap will remain exactly the same, $12.3 billion at constant currency or $12.4 billion at current FX. Andrew Coombs: I guess if I word it a different way, why have you felt the need to wait 2 years to implement these big restructuring charges now given that the Fit for Growth program was introduced a couple of years back? Diego De Giorgi: So I think we've told you before that the phasing of the spend is far from linear. And some of the bigger -- although the program is very well spread out over many different subprograms, it's clear that the bigger rocks take more time to be mobilized and more time for the money to be deployed. Nothing in particular there other than an irregular phasing of the spend. Operator: Now we're going to take our next question. And it comes from the line Kendra Yan from CICC. Jiahui Yan: My first question is regarding to CASA ratio. We've seen the CASA ratio of other major banks in Hong Kong actually increased Y-o-Y due to falling interest rates and ample liquidity. However, Standard Chartered's CASA ratio appears relatively stable. May I ask the reason for that? And do you have a strategy to increase the CASA ratio amid the medium to high interest rate environment nowadays to lower our future cost of liabilities? And my second question is regarding to the credit impairment. I see that on the presentation, Page 6, it mentions high-risk assets up from sovereign-related exposures. Could you please elaborate on which regions are primarily experiencing these risks? And are there any potential risks behind this change that we should pay special attention to? William Winters: Great. Thanks, Kendra. Just a quick comment from me and then I'll hand to Diego. Keep in mind that our Hong Kong business is relatively weighted to affluent customers. And the affluent customers, as we've discussed a couple of times in the context of our Wealth Business, are moving their money out of deposits into investment products, which is net-net a good thing. We're very liquid in Hong Kong. We've been quite disciplined in terms of our deployment of those deposits into the asset side of our balance sheet, including into mortgages. And so we're not -- not only we're not concerned about the quantum of CASA or proportion in our book, but it's something that we're actively managing. But Diego will have more color on both, I'm sure. Diego De Giorgi: Yes. So definitely 2 considerations there. First of all, we always have the ambition to reduce the cost of our liabilities and CASA in Hong Kong plays an important role. Remember that even though deposits in Hong Kong have gone up this quarter, when we attract deposits in Hong Kong, there is a large component of it that is Wealth Management deposits. So the fact that we continue to increase deposits and that we like the time deposits that we get from our customers before they get converted into Wealth Solutions is the reason why as long as they continue to grow and in general, they are good sources of funding for us. With the overall objective of increasing CASA, we are very happy with what we have achieved in Hong Kong this quarter and over the course of this year. By the way, it's been an excellent year for our business in Hong Kong, up 16% in terms of revenues this year. So all very good from that point of view. On your questions on sovereigns, they are obviously sovereigns in our footprint. I would really not read too much into it because we have had sovereign upgrades, and we had sovereign downgrades during this quarter that end up ending in different buckets. Neither of the 2 are particularly large or overwhelming. And by the way, they don't compound each other, but they offset each other. I would also tell you, which I think is probably more helpful in terms of broader thinking about sovereign exposures that sovereign exposures at a time when the dollar is not exactly strong, where interest rate in dollars are trending down and where liquidity in dollars is absolutely flush in the financial system. These are all indicators that go against stress in sovereign credit. And in fact, we haven't seen any particular signs of stress in sovereign credit. So to your point, to your final question, is this something that is warranted of special attention? The answer is definitely not. Operator: And now we'll go and take our next question, and it comes from the line of Amit Goel from Mediobanca. Amit Goel: Two questions from me. So one, I thought it was good the reiteration of the positive cost income jaws each year, so for next year too. When I'm looking at the kind of the $12.4 billion, it implies a couple of percent of potential cost growth. So I guess, basically, the message there that off of the very strong revenue print and obviously, even with the -- notwithstanding the net interest income headwinds, you expect revenue growth next year, at least in the kind of low single digits off of this base. So I just wanted to check that. And so obviously, it implies pretty good non-net interest income revenue growth. And then secondly, just on the Fit for Growth. So I guess, I mean, it's still running in terms of actual kind of integration costs -- or sorry, implementation costs a bit below the guide. So I mean, is there a bit of a pickup then into Q4? And the '26 cost guide, it seems to then be fairly independent of that spend. So I just wanted to, again, just to probe that a little bit more. William Winters: Great. Thanks, Amit. And maybe to repeat a little bit, but then I'll hand over to Diego. We've got 4 key pillars of our earnings growth and earnings driver, which are banking and financial markets, transaction banking. And all of these are performing well. As Diego mentioned earlier, the momentum is good in each case. Obviously, the transaction banking is affected by the interest rate trends. But when we look at the underlying operating trends, they're also good. And banking has been stellar this year. Financial markets has been very strong and then wealth, which obviously continues to be strong. So with a good base and good momentum in each of those that we think can carry through to next year, we feel obviously in a good position to reiterate our positive jaws. I think we've been cautious as well in terms of some of the guidance that we've offered. But I can tell you, Diego and I, and the rest of the team, we're completely focused on meeting and then if we can, if it's possible for us, to exceed that guidance. But for now, we focus on what we can do and focus on performance. But Diego? Diego De Giorgi: So very little to add to that. Between what Bill said and the picture you painted, Amit, it's exactly the right picture. It's all within our guidance. And yes, we are committed to both the cost cap and to positive jaws. And you are right that if we flag that with the fact that we have no guidance for 2026 NII and that we have pointed out all of the 5 moving parts in the discussion that we had before with Aman, it is true that non-net interest income will grow faster than net interest income. Those are powerful engines of growth as Bill has just expanded on. So no need to say more there. Yes, you're right. By indicating that we are going to be fine for our targets on Fit for Growth in 2025, we are implying that there is a pickup in Q4. And in terms of the independence of our commitment for 2026, I mean, it's difficult to say that they are completely uncorrelated, but it is true that the cost cap is a key commitment, and we are committed to the cost cap at $12.3 billion on constant currency, $12.4 billion at current currency, so undoubtedly. Operator: Now I would like to hand over to Manus Costello for any written questions. Manus James Costello: We have a couple of questions on RoTE online. The first comes from Rob Noble. Rob asks, your guidance is for around a 13% RoTE and to progress thereafter. Should we expect an increase in RoTE specifically in 2026? Or is the progress a more general comment? William Winters: Just quickly before I hand to Diego, it's a general comment, but one in which we have high conviction. But Diego, you can give the breakdown on minute by minute on the RoTE conversion. Diego De Giorgi: We have strong conviction. We are going to give you a return on tangible equity target specifically for 2026 when we give you full year results. And the way to look at it, it's a medium-term comment, but trends remain positive. So stay positive. Manus James Costello: Second question on RoTE comes from Gary Greenwood. Gary says, you've guided to a RoTE of around 13% for the full year and have delivered an annualized RoTE of 16.5% in the first 9 months, which implies you think the Q4 RoTE will be around 3%. So why do you expect such a big reduction in performance in the final quarter? William Winters: Thanks, Gary. We are singularly focused on building on the momentum coming out of Q3 and that we've indicated a couple of times through the early part of Q4. And to the extent that we can continue to capitalize on that momentum, market allowing and our own performance allowing, then we would hope to be able to do better. And I can tell you that's a singular focus. But our guidance is our guidance, and I think we want to be cautious in terms of how we adjust our guidance through time and really looking forward to stepping back in February and giving some fully refreshed guidance on 2026 and then a lot more context for the broader business in our May session. But Diego, any additional thoughts, most welcome as always. Diego De Giorgi: Nothing to add. I'm the cautious CFO, and we are cautious on guidance, and it's all going well. Manus James Costello: We'll go back to phone questions, please. Operator: And now we're going to take our next question. And the question comes from the line of Perlie Mong from Bank of America. Pui Mong: Can I just ask about Ventures? I think your guidance for cumulative loss for '25 and '26 is less than $200 million. But this quarter alone is over $110 million, if I'm looking at the numbers correctly. And this year so far is already running at $70 million, including the gain on sale last quarter. So I guess it implies a very large step-up in profitability in Ventures going forward. Just wondering where that's going to come from? Is it going to come from costs? Or is it going to come from maybe some disposals that you have in mind? So that's number one. And number two is, I just noticed that tax rate has been very low this quarter as well. I think running at about maybe 26%. Half 1 was also in the mid-20s. And that seems to be quite a bit below where you previously talked about maybe in the high 20s. So just wondering how we should think about that going forward? William Winters: Thanks for the questions, Perlie. On Ventures, we've seen continually improving operating performance in our digital banks. And of course, we're still in the investment phase. We're rolling out new products and services, including wealth and digital assets and other things, which are going quite well. But we would expect to see just in terms of the narrowing of the gap in the generation of returns from all the things you mentioned. Yes, I'm going to add income growth to the top of the line. We'll have ongoing expense management as we've had. And while lumpy and less predictable in terms of the timing, we'll see gains on sale as well. So we remain committed to our cumulative loss target in Ventures over the planning period. But Diego, why don't you add any color you'd like to that one and then pick up the tax rate question. Diego De Giorgi: Sure. Nothing to add other than I remind you, Perlie, that Mox and Trust do turn profitable during the course of -- in 2026, and that is an important part, an important component. On ETR, look, on ETR, one, first little caveat. Don't look at things too much on a quarter-by-quarter basis, but it's right that we are on a good path. And we are on a good path for a good reason, which is we are driving for a lower ETR. We just can drive for a lower ETR on a specific quarter-by-quarter basis. This particular quarter, a number of moving pieces, beneficial mix in terms of where we recognize, where we had profits, lower unrecognized U.K. tax losses, lower nondeductibles, some U.S. tax adjustments, lots of different small pieces that end up driving to a lower ETR. And yes, if I think of the ETR for this year, given we sit already at the end of the third quarter, does one think that within our long-term guidance that we are trying to lower ETRs to the high 20s, we are probably going to be in a good position within that context. The answer is yes. What you have to take from us is that it's an important priority of ours. It's something where whenever something is under our control, we do something about it. And sometimes, unfortunately, it's not completely under our control, and that's what introduces quarterly volatility, why I suggest to look at it on a relatively slightly longer-term basis. Thank you for the questions, Perlie. Operator: And we're going to take our next question, and it comes from the line of James Invine from Rothschild & Redburn. James Frederick Invine: I wanted to ask about growth in the affluent business, please, specifically net new money. So you've done over $40 billion so far this year. So you're kind of tracking ahead of your $200 billion target over 5 years. But you've got this big target to increase the relationship manager numbers by 50% or so. I presume that most of those people aren't even in the door yet. So why is your $200 billion target still the right one? Why isn't the net new money collection going to steadily increase as all these new relationship managers and the new wealth centers come online? William Winters: Well, that's a great question because we're certainly optimistic that we can continue to drive in this direction. We also know that the environment at the moment is extremely attractive. We know that the Wealth Business, like other businesses that we're in, has an element of cyclicality. And this cyclicality is linked, amongst other things, to optimism about the investment markets and the optimism in investment markets is very high at the moment. So that's a cyclical trend. But the underlying trends, you're absolutely correct. And we've had a good run this year. We are -- as we're finding, as we try to hire and are succeeding in hiring these relationship managers that we're an extremely attractive destination for RMs. It's not because we pay a premium. We don't. We pay a fair wage, but we give them a better platform off of which to deal, which obviously means that there are masses that they're going to make more money for themselves if they perform well off a platform that's easier to deliver strong results. And as Diego mentioned early on, the strong Net Promoter Score, the full breadth of products that we offer, the fact that we're an extremely attractive distributor for the world's best manufacturers, asset managers, insurance companies, et cetera, is a huge advantage. We don't compete with them because of our open architecture. So these are all things that are supportive of our ability to achieve the target that we set out, right? It's not a target actually. It's guidance that we've given. Let's make the distinction between the 2. And is there upside? Yes, absolutely. It will depend on a lot of things. But the execution part of that is going quite well. The market part of that, we can't control. But maybe a final note on that is that the diversity of products that we offer and the fact that we're targeted, of course, at the Private Bank segment, which is growing very well and has generated nice returns for us. Our sweet spot is the one notch below the ultra-high net worth, so the affluent, still substantial AUM, but they tend to be less competitive in terms of the number of banks that they're dealing with. And our products and our advice is highly suited to that client segment and our deployment of technology, AI and otherwise, is also highly suited to that cohort and it's higher margin than the ultra-high net worth segment, which is also attractive, right? So yes, I'm kind of answering your question by saying I agree with your proposition, but our guidance is our guidance, and it seems like an appropriate target at the time that we made it. And if we ever choose to update it, you'll be the first to know. Operator: And now we're going to take our next question, and the question comes from the line of Alastair Warr from Autonomous Research. Alastair Warr: I've got two questions, please, one on retail and one on the CIB side. In Retail, the ECL charge is down quite a bit on the run rate from really the last year or 2. So could you just give a little bit of color there on whether there's something improving on an underlying business basis that we can extrapolate from or if there's anything that's one-off in the quarter in there? And just on the CIB side, could you give a little bit of color on what the pipeline is looking at on the originate to distribute business? William Winters: Yes. Real quick, and I know Diego will add color as well. We have changed the structure of our bank. We've sold a number of our mass market consumer credit businesses. We've also refined our underwriting standards. So especially in markets that have experienced some periods of stress, Hong Kong and China, for example. So part of this is a deliberate shifting in the nature of the business. And that comes from a basic business model call, which is that we really -- frankly, we've got too much good stuff going on to feel the need to like bet on black or bet on red in terms of the overall consumer credit sentiment. Like we don't want to play beta in these markets. We want to play alpha in everything that we do. And we found it hard to generate alpha in unsecured consumer credit. And as I say, we would rather liberate the beta capital and deploy it in the things where we can play alpha. So there's an element of structural to it, for sure, which reflects the decisions that we've taken in terms of where we position our business. But we've also -- we're seeing, I'd say, a slight improvement across our markets in terms of the market-wide credit losses like beta in the markets where we operate. But that's -- Diego, feel free to -- you can contradict me on this one because we have not had that specific discussion in the last 16 hours. Diego De Giorgi: No contradiction at all. It's deliberate management actions and you see it quarter-by-quarter. You see it also across our network. It's tuning some of the CCPL ventures in China, for example, at times, selling a portfolio of credit cards in India. It's deliberate and it's in action. William Winters: And the CIB pipeline, the CIB pipeline is looking really good. We've said for several years now that we intend to significantly increase our pace of origination and that we intend to distribute the bulk of that, and we have, hence, the very active RWA management. You've seen the results in banking in the first 3 quarters of this year, which are very strong, and the pipeline continues very strong. So that's public capital markets, it's private capital markets, it's O2D, it's very important partnerships we've got in private credit, which we're continuing to expand on. It's the ongoing growth in our sustainable finance business, which is setting new records every quarter. Despite the shift in sentiment in some parts of the world, the bulk of the markets where we operate continue to be very focused on financing and transition to a low-carbon economy, and they see us as a very natural place to turn to for that kind of business. So pipeline is good in short answer to your question. Operator: And now we're going to take our next question, and it comes from the line of Ed Firth from KBW. Edward Hugo Firth: I just have two also. The first one was just about revenue guidance for this year. Because if I take your -- I think you said towards the upper end, but actually, if I just take the upper end of 7%, then unless my math is wrong, that's about $20.7 billion, which would imply -- I mean, you've done $16 billion already. So that would imply sub-$5 billion for Q4, which, I mean, I think I have to go back to '23 to see a quarter as poor as that. And yet all your talk on the call is about a strong start, a great pipeline, everything going well. So I'm just checking, should we just broadly ignore that as a guidance because it doesn't seem to really fit with anything else you're saying. So that would be my first question. And then the second question, in terms of RWAs, so I get that right, too early in the morning. I think you're saying again, single-digit growth for this year, but I think you're already up 5%. And I think you said op risk is going to come into Q4 as well. So are we -- is that sort of like an ex op risk? Or are we going to get a big reduction in market risk -- risk-weighted assets in Q4 as we've had in the past? Is that the way we should think of it? So those are two questions, if that's all right. William Winters: Thank you, Ed, and you're quite sharp for such an early time in the morning. So you should never ignore Diego, but you can listen to me as well, which is to say that we feel very good about the momentum in our business. We've had a good start to Q4. Our guidance is our guidance. And I think we've tended to err on the side of caution. But I can tell you, when we exit this call and go back to work, we're not focused on the guidance we've given or the corporate plan or the budget or what's implied in our share price. We're focusing on how to take a really good business with a really good pipeline and make a lot more money. And we feel quite good about that. So you'll put that into the pipe and decide which parts of it you want to smoke and which parts you want to leave in the ashtray. I'll just turn it over to Diego since you laid into him directly, and we'll pick it up from there. Diego De Giorgi: So I'm going to say nothing else because my CEO has come to my help, and I am grateful for that on the first question. Nothing else to say there. On RWAs, let me say, it's something that I think is important. Once again, no -- guidance is guidance, but do not read -- do not exaggerate the reading into what it moves, but do take care of the fact of 2 factors. One, we will deploy risk-weighted assets in the place where it makes us the highest return on tangible equity. It's not a matter that we think of reducing market risk-weighted assets in the next quarter or we think -- this is a very organic management. We have accelerated the velocity of capital in the bank, and we continue to do that. And we manage that very actively, so actively that at times, and you've seen this in Q1 and Q2 and you're seeing it again in Q3, there are quarters where we deploy risk-weighted assets in order to propel our business, and there are quarters in which we don't need it. And instead, we deploy leverage or we do it in other ways or we do it through fees. So it's difficult to forecast where do we go. I think that low single digits remains a good guidance for the course of this year. And if I can only put in one very minor cautionary point in all of this while maintaining the sunny outlook that Bill has so eloquently put out, I do point out that Q4 is seasonally the weakest quarter of any bank, and it's a weaker quarter for us. Again, not much to read into that other than history at work. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Bill Winters, for any closing remarks. William Winters: Great. Thanks very much, everybody, as well. I know it's a super busy day, and thank you for both preparing for the call, but then asking some very good and helpful questions. Thanks for the ongoing support. I think we'll wrap it up 1 hour in on time, on budget and look forward to seeing you next time. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good morning. Thank you for standing by, and welcome to Pluxee Fiscal 2025 Results Presentation. [Operator Instructions] I advise you that the conference is being recorded today, October 3. At this time, I would like to hand over the conference to Pauline Bireaud, Head of Investor Relations. Please go ahead, madam. Pauline Bireaud: Good morning, everyone, and thank you for joining us today for Pluxee's Full Year Fiscal 2025 Call. I'm Pauline, Head of Investor Relations at Pluxee, and I'm pleased to be here with all of you today for our second set of full-year financial results as a stand-alone listed Group. So today, I'm pleased to be joined by our CEO, Aurelien Sonet; and our CFO, Stephane Lhopiteau. Before we begin, let me quickly walk you through today's agenda. Aurelien will start with the highlights and key figures for the full year, followed by a focus on the main achievements in executing our strategic road map. Stephane will then take you through our financial performance in detail, as well as the evolution we are introducing to our capital allocation policy this year. And finally, Aurelien will conclude with our outlook for fiscal 2026 before we open the floor for questions. And with that, I will hand over to Aurelien. Aurélien Sonet: Thank you, Pauline, and good morning, everyone. I'm very pleased to be with you today. Fiscal 2025 was another very strong year, in which we executed our strategy with discipline and delivered above expectations across all key metrics. I want to sincerely thank our teams for both their commitment and excellent execution, which made these results possible even in a challenging environment. Let's look at the key highlights of the year in a nutshell. First, we continue to see strong momentum in new client acquisition with a growing contribution from SMEs year-on-year. Second, despite weaker portfolio growth, reflecting current macro uncertainties, we maintained a net retention rate of 100%, in line with our midterm objective. Lastly, our recent M&A transactions, a core pillar of our growth model, are already delivering positive revenue contributions. This translated into first, solid top-line organic growth, supported by continued strong momentum in Employee Benefits. Second, robust margin expansion, primarily fueled this year by operating improvements, underscoring the operating leverage of our model and the headroom for further margin gains. And third, an outstanding cash generation and conversion. Consistent with our disciplined approach to capital allocation and our commitment to revisit regularly our shareholder return framework, we have decided, with the support of the Board, to further enhance shareholders' returns for fiscal 2025. In addition to a higher dividend, we will launch a EUR 100 million share buyback program, reflecting our strong fiscal 2025 performance and reflecting our confidence in Pluxee's future prospects. Let's now take a look at our fiscal 2025 performance against our objectives on Slide 5. As just mentioned, we delivered across our 3 key financial objectives in fiscal 2025. We recorded a plus 10.6% organic growth in total revenues, fully consistent with our low double-digit objective. We achieved a significant expansion of plus 230 basis points in recurring EBITDA margin compared to plus 150 basis points previously. This demonstrates both the operating leverage of our platform and our ability to drive efficiencies. And finally, we delivered 89% recurring cash conversion, well above our target of above 75% on average for fiscal 2024 to 2026. So in short, we are clearly well ahead of our initial plan. In addition, I would like also to highlight that our free cash flow engine has expanded very materially from circa EUR 290 million in fiscal 2023 to EUR 417 million in fiscal 2025. This is a step change in the group's financial profile. These strong results have enabled us to revisit our shareholder return for fiscal 2025, as we will detail on Slide 6. Indeed, we have decided to introduce greater flexibility in our capital allocation policy for fiscal 2025 through a combined shareholder return approach that includes: first, a dividend of EUR 0.38 per share, up plus 9% compared to fiscal 2024 and representing a total dividend distribution of approximately EUR 55 million, subject to shareholder approval at our general assembly end of December; and second, a EUR 100 million share buyback program, leveraging our record cash flow generation and significant increases in our net cash position to further enhance value creation for our shareholders. Stephane will provide more details on this in his section. Before we go into the details of the strategic milestones reached in fiscal 2025, I'd like to take a step back and look at what the group has already delivered financially over the first 2 years of the plan, moving to Slide 7. Putting the group's financial performance over the past 2 years into perspective, there are really 2 key takeaways. First, it highlights the structural strength of our model and its strong conversion capacity. Consistent top-line growth translates into remarkable profitability and cash generation with recurring EBITDA CAGR at plus 14% reported and free cash flow CAGR up plus 20% over the past 2 years. Second, it demonstrates how resilient our model is. Even amid currency volatility across several of our core markets, we have been able to absorb over 7 points of ForEx impact on revenue in fiscal 2025, while continuing to deliver solid results. Now let's zoom on our strategic road map execution on Page 9. Pluxee has maintained strong business momentum through fiscal 2025, winning new clients and delivering solid commercial results even amid persistent macroeconomic headwinds across countries. Starting with new client development. We have once again outperformed our objective, generating EUR 1.5 billion in annualized PBV from new clients in fiscal 2025, well above our EUR 1.3 billion annual target. Our net client retention rate also remained consistently at 100%. This was achieved through a combination of improving client loyalty, further increase in face value, and steady cross-selling while absorbing end-user portfolio evolution, on which I will come back to. Looking more closely at the face value driver, which supports net retention, it contributed an incremental EUR 1.1 billion in business volume issued over the fiscal year. This means that we have already reached 80% of our EUR 3 billion target over 3 years. In addition, we are quite confident for the year ahead given the recent announcement in terms of increases in sales value legal cap in several countries. We will now take a closer look at each of these growth levers in the following slides, beginning with product offering on Slide 10. Over the past year, we have stayed focused on enhancing our offering, expanding both its breadth and depth to better serve our clients and consumers. Building on our strong Men food foundations, we have significantly broadened our portfolio to support consumer lifestyle, health, financial, and mental well-being alongside an expanding range of employee engagement solutions. At the same time, we are bringing all these benefits together in a single unified experience through Pluxee global consumer app. The programmatic rollout of the app is well underway. We are progressively expanding it across our key markets while accelerating the launch of new features and benefit integration to ensure continuous innovation for clients and our end users. The key strength of our global solution lies in its payment flexibility, being fully payment agnostic, it integrates the most popular digital payment options such as Google Pay, Apple Pay, and QR code solutions to ensure maximum convenience. Innovation drives our growth with AI being a key accelerator of both efficiency and creativity. In France, for example, our AI-powered chatbots already filter and direct requests to ensure that each user receives the right level of support at the most relevant stage of its journey. Together, this initiative strengthened our commitment to deliver a richer, intuitive, and seamless experience to our customers across our 28 countries. Product offering lies at the heart of our value proposition to clients. Let's look at how it fueled our commercial performance, starting with new client acquisition on Slide 11. The sales momentum has remained very strong over the year, allowing us to deliver more than EUR 1.5 billion in new client development with a positive contribution from our 3 regions. It has been sustained by several structural drivers, namely, first, the full activation of our high-performing commercial engine, powered by a strong sales discipline, advanced data-driven marketing, and an omnichannel client engagement. And second, a growing contribution from SME. As we continue to accelerate the penetration of this segment. Automation enables us to scale SME acquisition, which now represents 31% of total new business, highlighting the success of our digital self-service journey and our distribution partnerships. Let me briefly highlight 2 key contract wins that illustrate what I've just mentioned. First, our Brazilian team won a major employee benefits contract with Energisa, a leading energy provider in Brazil. This success was achieved through the full activation of our partnership with Santander, serving more than 20,000 additional end users. Second, we won a nationwide benefits program with Randstad, covering over 8,000 workers in Italy. I would like to take this opportunity to make a brief side comment on Italy. Following intensive efforts from our local sales team, we successfully managed to almost entirely absorb the regulatory change impact on merchant commissions. This was achieved by renegotiating with our clients to restore a sustainable balance between all the stakeholders. Looking ahead, supported by a solid and diversified pipeline, we are confident in our ability to deliver on our EUR 1.3 billion target in fiscal 2026. Let's now turn to how we are unlocking the full potential of our existing client portfolio on Slide 12. Over fiscal 2025, Pluxee continued to deliver strong performance across its existing client portfolio. Client loyalty improved by plus 20 basis points, and the group continued to demonstrate strong engagement to optimize existing client portfolio through further sales value increases and cross-selling. However, tougher macroeconomic context has translated into hiring increases and, in some markets, workforce reductions, especially in some European countries such as France and Mexico as well. This has progressively put a growing pressure on our end-user portfolio, which turned negative in H2. Despite this headwind, it has been another solid year in terms of net retention, maintained at 100%, demonstrating the strength and resilience of our business model. One notable example worth highlighting is the renewal of our long-standing partnership with Capgemini. We successfully won a major tender, resulting in a long-term strategic contract serving more than 68 active users across 9 countries. Beyond the business volumes, this renewal reinforces our position as a global trusted partner for our clients. It also offers strong potential for future value growth, supported by Capgemini's continued expansion and its increasing focus on employee engagement and retention. Altogether, this performance reinforces our confidence in the strength of our value proposition, our market positioning, and the resilience of our growth drivers even in a fast-changing macroeconomic context. Now that we have discussed organic growth, let's move on to our M&A strategy and how we've been progressing with recent integration on Slide 13. Since the spin-off, we have completed 8 transactions, comprising 1 strategic partnerships and 7 bolt-on acquisitions, including the most recent one signed in early fiscal 2026. We have been and we will remain guided by our clear strategic framework centered on 3 key priorities: expand business volumes to consolidate the group's market share, broaden our offering and product portfolio to deliver more value to both employers and employees, and enrich our technology capabilities to accelerate innovation, scalability, and end user engagement. Step by step, we are strengthening our track record in sourcing and acquiring targets while demonstrating our ability to successfully integrate them and generate growth synergies. Looking ahead, our M&A pipeline remains strong and diversified, spanning multiple geographies and deal sizes, consistent with our global strategic road map. Let's now take a closer look at how we are integrating these acquisitions and the tangible impact that they are already having on our strategic positioning and performance on Slide 14. All these recent partnerships and acquisitions are progressively delivering incremental value, including through initial synergy. Starting with Brazil, where our strategic partnership with Santander is showing strong traction. While Ben's integration has been seamless, maintaining a high level of client loyalty, the distribution agreement is now fully activated, allowing us to leverage the 4,500 Santander sales team, with around 22% of them having already sold at least one Pluxee solution. In less than a year, monthly business generated through the Santander distribution network has doubled year-on-year, confirming the value of this alliance as a growth accelerator. Still in Brazil, the acquisition of BenefÃcio Facil further enhances our multi-benefit offering by internalizing the employee mobility benefit. Integration is well advanced with 95% of the streams completed, and commercial traction is already picking up, driven by strong new client acquisitions, notably through Santander's distribution network. Turning to Spain. The successful integration of Cobee has propelled Pluxee to the #1 market position. It is built on our best-in-class multi-benefit platform, which offers a broad and diversified product range from health insurance to training, and our proven ability to engage employees through a fully digital, intuitive, and flexible experience. The results are tangible. Employee opt-in rates have increased by 50% on the client migrated, demonstrating both the appeal of the Cobee model and the success of our integration. Beyond growth, our ambition is also to generate sustainable profitability, as we'll see on Slide 15. One of the key pillars of our value creation journey is the group's strong potential for margin expansion. There are 2 main drivers behind this margin expansion. First, operating leverage generated by our highly scalable business model and our increasingly global operating model. This effect has been further amplified by the increased contribution of our latest M&A transactions and by the near full digitization of our business, with around 94% of our BVI now being digitized, including France, up to 90% at the end of the fiscal year. Second, efficiency gains driven by the normalization 18 months after the spin-off of our cost structure, combined with tight cost discipline and rigorous portfolio monitoring, constantly assessing product and country performance. This disciplined approach led, for example, in fiscal 2025 to the decision of exiting from Indonesia. The key point is that in fiscal 2025, the bulk of the EBITDA margin increase came from operating EBITDA of plus 235 basis points. This shift is particularly important as it shows that our margin expansion is now coming from structural operational improvements. Looking ahead to fiscal 2026, this trend should continue to intensify as Float revenues are expected to remain stable and therefore, dilutive to overall EBITDA margin expansion. Now before giving the floor to Stephane, I'd like to briefly touch on our sustainability road map, in which our strategy is fully embedded on Page 16. Our sustainability road map is built around 4 core values, each supported by clear measurable targets. First, Pluxee acts as a trusted partner, with 98.7% of our employees being trained in responsible business conduct. Second, we empower individuals while promoting diversity, with 40.6% of women currently holding a leadership position. Third, we strengthened local communities with EUR 7 billion in business volumes reimbursed to small and mid-sized merchants. And finally, we reduced our environment impact with the current 23% reduction in carbon emissions compared to our 2017 baseline. It is also worth noting that in fiscal 2025, we achieved an EcoVadis rating of 78 out of 100 and obtained our first CDP score of B, both reflecting the strong recognition of our sustainability performance. And with that, I will hand over to Stephane to go in more details on our financial performance. Stephane Lhopiteau: Thank you, Aurelien, and good morning, everyone. It's my pleasure to be with you today to present our fiscal 2025 results in more details, starting as usual with our business volume bridge on Page 18. The sustained growth in business volume issued or BVI has been one of the key growth drivers to Pluxee's top-line growth over fiscal '25. Over the year, total BVI reached EUR 24.5 billion. It was fueled by Employee Benefits BVI, which reached EUR 18.7 billion, up plus 7.6% or plus 8.5% when excluding the one-off effect related to the purchasing power program in Belgium. Such growth in Employee Benefits BVI was driven, as Aurelien already mentioned by: first, strong new client development across both large accounts and SMEs. Second, the net retention rate maintained around 100%, supported by enhanced client loyalty, further increase in face value, and steady cross-selling. And third, the positive contribution from recent M&A transactions through both growth synergies and favorable scope effect. However, performance was also affected by persistent macroeconomic headwinds, leading to increased pressure on end users portfolio across an expanding set of markets, notably Continental Europe and Mexico, and within sectors like temporary staffing, consulting, and manufacturing. On its side, BVI from other products and services remained stable in fiscal '25 at EUR 5.8 billion, a decline versus fiscal '24 due to the Public Benefit segment, reflecting the discontinuation of large programs during the year, primarily in Romania and Chile, the latter being fortunately partially renewed from March 2025 onwards. Let's now see how the BVI organic growth fueled our solid revenue organic growth on Slide #19. Total revenues reached EUR 1.287 billion in fiscal '25, up plus 10.6% organically, fully in line with the group's low double-digit growth target. On a reported basis, total revenues growth reached plus 6.4% year-on-year, including, first, a negative currency translation impact of minus 7%, coming mainly from operation in Brazil and Turkey, and to a lesser extent from Mexico. And second, a positive scope effect of plus 2.8%, primarily reflecting the integration of the Santander Brazil Employee Benefits activity as well as the acquisition of Cobee in Spain, Portugal, and Mexico, and of BenefÃcio Facil, in Brazil. Fiscal '25 total revenues were made of EUR 1.125 billion in operating revenue, up plus 10.3% organically, and EUR 162 million in float revenue, up plus 12.6% organically. This strong performance in fiscal '25 underlines Pluxee's ability to deliver sustained top-line growth in an increasingly challenging and volatile environment. In this context, we also managed to deliver a strong fourth quarter with total revenues growing by plus 9.6% organically, excluding a plus 2% scope effect and a minus 4.8% currency impact, and driven notably by strong performance in Latin America. Let's now take a closer look at the underlying trend behind both Operating and Float revenue, starting with Operating revenue on Page 20. The momentum in Operating revenue was driven by Employee Benefits, which reached EUR 963 million in fiscal '25, up plus 12% organically, excluding a minus 7.4% currency impact and a plus 3.3% scope effect. Strong business momentum in Employee Benefits was driven by a solid organic growth in business volume issued, particularly in Latin America and Rest of the World as anticipated, and the quick progressing of circa plus 20 basis points year-on-year to 5.1% on average. In Q4 '25, Pluxee generated operating revenue of EUR 265 million in Employee Benefits, delivering plus 11.6% organic growth, confirming the ongoing positive momentum. On other products and services generated operating revenue of EUR 162 million in fiscal '25, showing flat growth year-on-year, with the fourth quarter being slightly negative. This trend reflected the discontinuation of large public benefit contracts in Romania and temporarily in Chile, as well as the ongoing repositioning of Pluxee's offering in the U.K. and the U.S. As mentioned, operating revenue organic growth was mainly driven by Latin America and Rest of the World. Let's take a closer look at this on Slide 21. Turning to geographies. Regions delivered strong double-digit organic growth in fiscal '25, namely Latin America and Rest of the World, while Continental Europe was tempered by a challenging macroeconomic environment and a high comparable base. Starting with Europe. Operating revenue reached EUR 506 million, up plus 5.1% organically for fiscal '25 with a Q4 organic growth of plus 2.2%. While the group continued to benefit from solid momentum in Southern Europe, particularly in Spain, supported by the Cobee acquisition, growth was tempered by several factors in the region, including: first, the increasing challenging economic and political environment across the region. Second, adverse impact from public benefit program, especially in Romania, following postponed ordering or reduction linked to budget deficit measures. And third, a high comparison base from 2024 one-offs, such as the Belgium purchasing power program and the Paris Olympic Games. In Latin America, operating revenue reached EUR 429 million for fiscal '25, up plus 14.5% organically, excluding a plus 4.7% scope effect and a minus 13.3% currency impact. In Q4, organic growth in the region accelerated significantly to 19.8%. This strong performance was driven primarily by Brazil, notably fueled by the fully operational Santander partnership and the further penetration of the market, especially among SMEs. Commercial momentum also remained strong across Hispanic LatAm, particularly in Chile, where the [indiscernible] public benefit program was renewed from March 2025, even if with distinct economic terms. However, Mexico continued to face headwinds linked to U.S. policy changes. In Rest of the World, operating revenue totaled EUR 190 million in fiscal '25, up plus 14.2% organically, excluding a minus 7.7% currency impact, mostly due to the Turkish lira devaluation. Double-digit organic growth in the region was driven by Turkey, where the group continued to unlock increased sales value from existing clients and to penetrate further the benefits market through new contracts. As expected, performance in U.K. and U.S. remained below group standards, still affected by the ongoing business repositioning in both markets. Complementing operating revenue, let's now move to the float revenue performance analysis on Page 22. Fiscal '25, revenue growth slowed down compared to fiscal '24, even if still above initial expectations. Gross revenue reached EUR 162 million, up plus 12.6% organically, excluding a plus 3.4% scope effect and a minus 11% Q translation impact. In Q4, it continued to gradually decelerate to plus 7.6% organically. Organic growth in revenue over fiscal '25 was supported by higher business volume issued in nonrestricted cash, particularly in Latin America and rest of the world. However, this trend was not reflected in the overall float position remaining stable at EUR 2.7 billion at year-end due to the less dynamic trend in programs issued in restricted cash. The overall positive trend in volumes was reinforced by a higher average investment yield year-on-year, reaching 6% in fiscal '25 compared to 5.7% in fiscal '24 as a result of the group's efficient investment strategy tailored to local financial market conditions and the high interest rates in Brazil and Turkey. This section on top-line performance, let's now turn to profitability, starting with recurring EBITDA on Slide 23. Recurring EBITDA rose strongly, up plus 22.2% organically to EUR 471 million, up plus 9.4% on a reported basis. Recurring EBITDA margin reached 36.6%, up plus 202 basis points, including currency and effect, driven by solid operating profitability gains across all 3 regions. This robust performance was primarily supported by the inherent operating leverage embedded in the group's business model. It was further enhanced by the initial positive contribution from certain recently closed acquisitions, largely commented by Aurelien. The margin expansion also reflects efficiency gains achieved through: first, the strict cost base monitoring; second, our constant portfolio rationalization efforts; and third, the end of one-off effects related to the spin-off. Altogether, this translated into a plus 235 basis points organic expansion in recurring operating EBITDA margin, I mean, excluding [indiscernible]. It was further supported at the recurring EBITDA level by favorable flow-through from still growing flow of revenue, notably in Latin America and rest of the world. This strong growth in recurring EBITDA fueled solid performance further down the income statement, all the way down to adjusted net profit, as we can see on Page 24. Let me walk you through the key items below the recurring EBITDA line, starting with recurring operating profit, which stood at EUR 361 million, up plus 5.7% includes minus EUR 110 million of depreciation, amortization and impairment charges in fiscal '25 compared to minus EUR 89 million in fiscal '24, an increase mainly reflecting the amortization of intangibles acquired through the Santander partnership and the Cobee and BenefÃcio Facil business combination. Other operating income and expenses amounted to a net expense of minus EUR 26 million in fiscal '25 compared to minus EUR 92 million in fiscal '24, reflecting the expected normalization post spin-off, notably once the H1 '25 residual ISI [Indiscernible] cost had been accounted for. Net financial expenses totaled minus $17 million in fiscal '25 versus minus $20 million in the prior year. Gross borrowing costs declined slightly, driven by the nonrepetition of spin-off refinancing costs and more favorable financing conditions. Income tax expense amounted to minus EUR 100 million in fiscal '25, corresponding to an almost normalized effective tax rate of 31.4% compared to 39.5% in fiscal '24 due to the spin-off, including carve-out and other related one-off costs. Adjusted net profit group share reached EUR 221 million, up plus 8.4% year-on-year, while the adjusted basic EPS came in at EUR 1.52. This performance demonstrates a strong acceleration in growth and profitability throughout the P&L. We will now look at how these elements also translated into the strong cash generation and conversion that we delivered once again in this fiscal year on Page 25. We are indeed once again very pleased with our cash flow generation this year, up plus 10% year-on-year. We delivered a record recurring free cash flow of EUR 417 million compared to EUR 379 million in fiscal '24, resulting in a cash conversion rate of 89%, well above our 3-year average target of 75%. Let me detail the main factors contributing to this solid performance beyond the strong recurring EBITDA. CapEx amounted to EUR 98 million, representing a temporarily lower 7.6% of total revenue, mainly due to the finalization of the IT carve-out during the first half of fiscal '25. Nonetheless, the group maintained a strong investment focus over fiscal '25 in data and payment capabilities, technology innovation, and infrastructure, as well as cybersecurity, all essential to underpin future growth and efficiency improvements. Change in working capital, excluding restricted cash variation, stood at plus EUR 128 million, while fiscal '24 change in working cap was boosted by positive one-off effects, including the impact from the regulatory change in Brazil and from the Paris Olympic Games in France. Income tax paid decreased to minus EUR 86 million, reflecting the near normalization of the effective tax rate following the spin-off, as mentioned earlier. This strong cash generation and high cash conversion clearly demonstrates the group's disciplined execution, sustained operational efficiency and enhanced financial flexibility. This strong cash generation was also a key driver to fuel the further increase in the group's net financial cash position in fiscal '25, as we see on Slide 26.  The group's net financial cash position increased by plus EUR 108 million, up to EUR 1.163 billion of net cash as of year-end. It was mainly driven by the positive inflow from the EUR 417 million of recurring free cash flow, as we have seen. Main outflows over the year included, first, minus EUR 148 million linked to the payment and related impact of the acquisition completed in fiscal '25, notably Cobee, which was partly offset by the disposal of the nonconsolidated investment in Cobee.  And then these outflows included minus EUR 65 million related to dividend distribution to both shareholders and noncontrolling interest, minus EUR 5 million of other impacts related mainly to the cash out from other income and expenses, and the purchase of treasury shares, and minus EUR 47 million of currency effect on cash position, excluding [indiscernible] net cash position is also reflected in our BBB+ rating from S&P.  The strong [ Tepi ] net cash position allows us to actively deploy our capital allocation strategy, which I will review on Page 27 before handing over back to Aurelien. Since January '24, we have consistently reiterated that our capital allocation strategy relies on 3 central pillars: investing for future organic growth through CapEx, pursuing targeted and value-accretive M&A opportunities, and returning capital to shareholders.  First, we maintain our ambitious investment policy targeting to remain below 10% of total revenues in CapEx to support sustainable organic growth. Although this year's ratio was temporarily slightly below target, our investment focus remains strong, particularly in technology and data.  Second, we continue to deploy our targeted and disciplined M&A strategy. As Aurelien  highlighted earlier, all our recent acquisitions have fully met expectations, clearly evidenced by their progressive positive contribution to growth once integrated.  And lastly, we remain fully committed to returning value to our shareholders. Initial step in our shareholder return policy is the dividend. The shift last year to adjusted net profit as the basis for dividend payout sent a clear and confident signal to our shareholders. Accordingly, we are proposing this year to increase the dividend from EUR 0.35 to EUR 0.38 per share, representing a plus 9% uplift. In addition, we have a strong and accelerating free cash flow generation as well as a higher year-end net cash position in fiscal 2025.  As we are confident that this will not compromise our investment capacity for growth, we have decided a EUR 100 million share buyback program. This is a testament to our focus to shareholder returns and our confidence in the group's future outlook. And with that, I will now hand it over back to Aurelien , who will take us through our financial objective for fiscal '26 and the conclusion.  Aurélien Sonet: Thank you, Stephane. Let me now wrap up this presentation with our outlook. Back in January 2024, we set ourselves ambitious medium-term financial objectives. And over the first 2 years of the plan, we can clearly say that we have delivered and even outperformed on them. That said, the environment in which we operate is no longer the same. A more challenging macroeconomic context has created headwinds in several markets, making us enter fiscal 2026 with caution. However, we remain strongly confident in our structural growth drivers and in the significant potential for further margin improvement and robust cash generation.  Consequently, we are now committed to delivering for fiscal 2026, first high single-digit total revenue organic growth. This will be driven by solid momentum in Employee Benefits operating revenue, while other products and services are expected to remain dilutive to overall group growth, and float revenue should stay broadly stable in value based on the latest forward curves.  This high single-digit growth in fiscal 2026 would translate into a 3-year CAGR of at least plus 12%, firmly within the low double-digit range. Second, plus 100 basis points recurring EBITDA margin organic expansion, upgraded from the previous plus 75 basis points, backed by the group's significant potential for continued margin enhancement. This should translate into an overall margin expansion exceeding 500 basis points, well above our initial 250 basis points 3-year target. Third, above 80% recurring cash conversion on average over fiscal 2024 to 2026, representing a second upgrade from our initial 70% objective.  Now, before opening the floor to questions, I'd like to highlight once again that fiscal 2025 has been another very strong year. As we enter fiscal 2026, we look ahead with confidence, supported by solid fundamentals, a loyal client base, and a strong commercial pipeline, but also with prudence given the challenging environment that we face in several of our markets. Building on our strengths, we remain fully committed to executing on our long-term value creation road map. And with that, Stephane and I are very pleased to answer your questions.  Operator: [Operator Instructions]. The first question is from Julien Richer from Kepler Cheuvreux, Research Division.  Julien Richer: So 2 questions for me, please. The first one, you posted a low double-digit organic revenue growth in '25. '26 guidance is for revenue to grow high single digit. What proportion of this will be volume versus sales value increases? And how sustainable are these drivers if macro conditions soften? Second question on Cobee. Could you please elaborate on the cross-sell potential between your platform and Cobee, the impact of Cobee on your average revenue per user, and any early signs of scalability to other geographies, please?  Aurélien Sonet: So I'm going to start with your question regarding Cobee, Julien, and Stephane, you might answer the first question of Julien. So regarding Cobee, as we are mentioning, we see 2 very positive effects when we migrate our existing Pluxee clients on the Cobee's platform,  the first one is, as I was mentioning, is the activation of users because in Spain, it's not always collective benefits. It's more a salary sacrifice model. And so we see a boost in the level of activation. So this is the first driver. And the second one is the amount converted by the end user into benefits. And we see that the budget is increasing because the full range of benefits bring much more satisfaction and answers much more to our clients' employees. So those are the 2 strong synergies. And this is still the start, and it was our plan, and we see that we are meeting our initial plan. Now, in terms of expansion and rollout plan of our Cobee offering, we are already working in Portugal and in Mexico. And in both countries, we are seeing very encouraging signs. The market is answering quite positively, and for the moment, we really want, I mean, Spain, Portugal, and Mexico to be successful. So those are our top priorities for '26. Stephane, regarding the first question?  Stephane Lhopiteau: So, regarding your question about how much the high single-digit growth is going to be fueled by average face value versus volume. So, as a reminder for everyone, average face value increase is a key contributor to the growth in business volumes. But you're right, within this business volume, there are some factors like this increased average face value versus new client gain or some potential losses that we try to avoid as much as possible. So what I can tell you in terms of average face value contribution we are fully on track with our initial commitment, which was to deliver EUR 3 billion of increase in average face value over 3 years, and we have delivered more than EUR 1 billion in fiscal '24 and once again in fiscal '26, and we are targeting even though this is not a guidance, but we are targeting the same magnitude of increase in average face value in the coming fiscal year '26.  Operator: The next question is from Estelle Weingrod from JPMorgan.  Estelle Weingrod: On regulation, first, both France and Brazil, just where do we stand now? And what is your best guess on timing? The second one on the outlook as well. You're guiding for another strong year in terms of margin expansion. Can you just elaborate a bit more? What is it driven by? Have you identified new efficiency gains?  Aurélien Sonet: So starting with the regulation for France and Brazil. So France, at the moment, the main topic is about the 8% taxation measure that was introduced by the government on the all employee benefits. Quite recently, an amendment related to this measure and related to the cancellation of this measure was passed at the social committee level. So this is, I mean, a very good news for the 21 million French worker that would be impacted by this kind of measure.  Now discussions are still going on at the first chamber before going to the second chamber to the higher chamber. So we still remain vigilant regarding this topic, but it's a positive evolution.  Regarding the meal benefit platform, which has been our topic for the past almost 2 years, as you can imagine, for the moment, this is not the current priority of our existing government. But even though we don't have the visibility on the timing when the discussion will resume, I remain optimistic that this topic will be rediscussed first. And regarding the content of this reform, I would expect that it would contain similar measures, given that the past 3 governments came out with the same conclusion and recommendation. So from a timing standpoint, we don't have a clear visibility yet.  So, back to Brazil. So over the last months, the macro environment has been marked by still a relatively high level of inflation. So Lula government has been put under strong pressure to find solution to reduce the food inflation and to enable access to food for all consumers and to face or to help the government face the challenge, we remain in constant dialogue, both with the Ministry of Labor, but also the Ministry of Finance to discuss ways to enhance the meal benefit system the path and to do it over the long term.  So we do share a common objective, which is to ensure the sustainability and the extension of this program. And when we look more precisely at the different measures, so regarding portability and interoperability, so the decree that is required for this implementation is still pending on the portability, and we shared this during the last call. We've been actively engaged to establish the appropriate framework and based on the proposal that we submitted through our association. But there is no specific update since then.  And regarding other possible measures. As previously discussed, we are also closely monitoring the situation. And we'll come back to you in due time when there is a significant evolution, which has not been the case over the past months.  So this is for the regulation. And regarding how we plan to deliver 100 basis point margin expansion. First, we will continue to fuel our platform model with steady business volume growth, both organically and inorganically to fully capture the benefit of our operating leverage. Second, as mentioned by Stephane during the presentation, we continue to strengthen our cost discipline.  We are also implementing additional efficiency programs that includes process simplification, more selective investment allocation, and further digitalization of our processes. And indeed, these measures are designed to offset the impact of the slower top-line growth in order to sustain our EBITDA margin. And third, we've been reviewing our portfolio to ensure that our capital is deployed where we see the highest potential. And we share with you Indonesia. So this could include exit from smaller or less strategic markets or products.  Operator: The next question is from Justin Forsythe from UBS.  Justin Forsythe: I appreciate the 2 questions here. So the first one, I wanted to come back to the guidance a little bit. So I just wanted to first confirm that, that was only tied to the macro impacts that you were flagging.  And does that mean that we'll be back at low double digit once we've lapped or grown through these macro impacts? And it also sounds like face value developments have been quite positive since the last results, and more broadly. So I suppose it's fair to assume also that the benefit from face value is quite meaningfully offset by macro, maybe more so than before. Also, I wanted to talk a little bit about the SME penetration. I think you gave some color around the Capital Markets Day back in 2021 around where we sat different geographies. I believe France was 10%, Brazil was 20%. Maybe you could just update us on penetration levels today, because you seem to continue to flag the continued penetration of SME increasing. Aurélien Sonet: Okay. Thanks, Justin. Stephane, maybe you want to -- you take the first question regarding the guidance. Stephane Lhopiteau: So regarding the slight shift because it just a slight moving from low double digit to high single digit, which is still an exciting organic growth that we are targeting for fiscal '26. There are a number of factors that need to be considered. The first one is the change in the float growth. So, this is not a guidance because we are just guiding on total revenue. But as said by Aurelian during the presentation and clearly stated in the press release, we are guiding -- we are adding some color on the float revenue growth, and we are seeing it to remain stable in fiscal '26. And so, this means that the float revenue organic growth is going to be dilutive to total gross revenue. And if you do the math compared to fiscal year '25, you would see that this is going to hit the organic growth by 150 basis points approximately. So, this is the first factor. The second factor is this macro headwind that we are seeing basically in all the regions, which is going to drive lower growth from all the regions, even though it's going to remain with a good momentum in Latin America and rest of the world, but with a lower growth in Continental Europe for the reason we already shared and notably, this lower or even sometimes negative end user portfolio growth, which is going to weigh on our organic growth. And then on top of this, while the overall the Employee Benefit segment is going to remain very dynamic, we are facing some changes in other products and services we refer to these changes or headwinds during the presentation. The first one is that because of the macroeconomic environment, there are some public benefit contracts which are not renewed, which are postponed, and which is going to weigh on this from public benefit to the total revenue organic growth. And at the same time, we are repositioning ourselves in the U.S. and the U.K., which is temporarily weighing as well on this organic growth. And then something that we should not forget as well is that we delivered very strong growth in fiscal '24 and fiscal '25, which is creating a high comparison base, notably in Q4. If you look at the presentation again and what we delivered in terms of organic growth in Q4, which is a fantastic outcome result as part of what we are getting from this Santander partnership. Yes, this is creating a very high comparison basis. And in Q4 of '26, we might face lower growth, which is also contributing as well to a lower growth in fiscal year '26 versus fiscal year '25. So overall, in order to make it short and in terms of segment, we are still committed to deliver very high organic growth in terms of employee benefits, but lower for other products and services, which is going to be dilutive to the organic growth. Don't forget the impact of the float. I think that's it. We are not going to share more color for what is going to come further in '26. We are right now fully committed to deliver our 3-year plan, and we'll see later what we plan for '27. Aurélien Sonet: And then regarding your question on SME, so we shared with you the performance this year. I mean 31% of our total new business is coming from SME. This remains a top priority for our largest markets. And all of them contributed to this performance. So, we see the good traction. We mentioned this commercial engine. I mean and the processes and the end-to-end digital journey that we put in place this was implemented in all those markets. The momentum is good. But still, it's fair to say that we -- in some countries such as France, we see a slowdown due to the macroeconomic context because this uncertainty weighs on the decision of those small or mid-sized companies. And sometimes it could even have an impact on their own future. So, we still expect a strong contribution, but it's likely that there's going to be a slowdown in specific market. Having said this, regarding the penetration and just, I mean, more macro view, even though we did -- we delivered a great performance, there is still a high level of potential. The level of penetration remains still low. So overall, we still have a very good potential to capture. Justin Forsythe: Stephane, I think you said 150 basis points impact from the float growth change. By my math, that's roughly $19 million, $20 million impact tied to float. Is that the right math there? Stephane Lhopiteau: If you simulate 0 organic growth in float in '25, compared to the 12.6% that we delivered, you will end up with 150 -- a little bit more than 160 basis points impact overall. And so, this is what I was trying to explain. This is a way to assess it applying to fiscal '25, what we are sharing with you in terms of color for fiscal year '26. If you do it again, you will see that we have 100 -- a bit more than 150 basis points impact in our organic growth for '25. Operator: The next question is from Andre Juillard from Deutsche Bank. Andre Juillard: First, congratulations for this strong fiscal year '25 results. One question for me in reality. Just looking for more clarification about the capital allocation. You have a very strong cash net position of EUR 1.16 billion. You announced a share buyback of EUR 100 million this morning. That means that you will keep a very comfortable position with a cash net position. What do you plan to do with this cash? Is there a very strong pipeline of M&A? Or could we expect further good news in terms of return to shareholders? Aurélien Sonet: Stephane, do you want to answer? Stephane Lhopiteau: So regarding capital allocation, which has remained unchanged, we have a fully consistent calculation that we unveiled at the time of the Capital Market Day, and the purpose of which is to feed the organic growth with further CapEx to accelerate even more our organic growth by seizing opportunities in a disciplined and very targeted manner in terms of M&A and returning value to shareholders. So, we truly believe that there is a strong potential behind M&A opportunities in order, as I was saying to capture this highly underpenetrated market is there, and by seizing M&A opportunities, we could accelerate, expand our offering, acquire new tech, increase our market share. So, this really remains a very strong pillar in terms of development for Pluxee, even though we are very disciplined, cautious in order to make sure that every time we acquire a new company, this is for creating new value. So as Aurelien said, we have a strong pipeline that we will remain disciplined. That being said, we always said that we will be agile and that from time to time, we might accelerate return to shareholders. This is what we decided to do with strong support from the Board for this fiscal year '25. This is a step. We'll see. We'll see. There is no commitment at all. This is, I think, very good that some companies like Pluxee are highly performing, and companies are able to return value to their shareholders. This is one of our commitments.  Other commitments like growing as much as we can and as quickly as we can, by investing in CapEx, and seizing M&A opportunities. So I think this EUR 100 million share buyback program is really fully consistent and fully aligned with the request we also received from many investors, as well, that we are listening to our shareholders.  And to finish my answer, this is a very good sign of our confidence in the Pluxee potential. And we are aware of where the stock price is currently trading, and versus the value we consider we are able to create from this company. And so this is also a sign we wanted to share with the financial market.  Andre Juillard: So, as a summary, the message is step by step.  Stephane Lhopiteau: As always.  Operator: The next question is from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, you flagged that Q4 organic growth was impacted by the postponement of ordering of some large programs in Europe. Could you please offer more color on the potential size of those orders? And when do you expect it to resume? And then on free cash flow conversion guidance, which is about 80%, now you delivered close to 90% in the last 2 years. So next year, how should we be sort of thinking about it? Can we expect some catch-up CapEx there, given it was lower this year? And any other moving parts to that guidance, that would be helpful.  Aurélien Sonet: Stephan, do you want to answer Pravin's question regarding the free cash flow guidance and potentially the organic growth impact, I mean, from the program in Q4?  Stephane Lhopiteau: In terms of our free cash flow guidance, we delivered very strong cash conversion in fiscal year '24 and fiscal year '25, which is a good basis for improving our commitment to deliver over 3 years now 80% of cash conversion remaining, aware of the potential for working capital. We always made it very clear that good business is the strength of our business model. As long as we deliver growth, we have some positive effect on our free cash flow from the working cap variance.  However, this could be hit positively or negatively by some changes in some regulations, as this happened in '24, '23 with Brazil, and it was a positive effect. And we could also have some negotiation, notably related to the public benefit contract, where we could have some hit on the working cap. So this is why guiding you on an 80% average over the 3 years, this is another step-up in our guidance that you should take very positively. And this is over 80%. So, on average, over 80%. So we are not guiding on an 80% achievement, we are guiding on over 80% growth. Regarding the organic growth and the impact from the large programs, public benefit programs. So I don't have in mind the impact in terms of basis points.  But yes, there are some countries, especially in Western Europe, like Romania or Austria, for example, where some decisions were taken by the state, and because of some budget constraints, to suspend or to reduce some of these programs. So these programs remain very attractive because we are always very selective in this kind of program, making sure that they are accretive to our profitability. But they are weighing at least temporarily, and we'll see further on our organic growth, notably because we did good, very good in '24 and '25 in this segment, creating a high comparison base.  Operator: The next question is from Sabrina Blanc from Bernstein.  Sabrina Blanc: I have 2 questions from my part, please. The first one is that you have not mentioned a lot of cross-selling this morning. Can you come back on the evolution and potentially how it represents compares to the meal voucher? And my second question is regarding the retention, which went to 100%. Could we have more color on the different aspects of the retention compared to 2024 to understand where it comes from, the limited slowdown this year compared to last year?  Aurélien Sonet: Okay. Regarding the net retention, I mean, most of the evolution between '24 and '25 came from the evolution of the end user portfolio, which was contributing quite significantly in '24. And as we mentioned in '25, I mean, even on H2, it turned negative. So this is the main explanation that supports this decrease between '24 and '25.  And regarding the cross-selling evolution, we still see, I mean, a positive improvement, and actually, it translates our multi-benefit strategy. We mentioned Cobee, for example, which is definitely paving the way to a much stronger multi-benefits approach and a way for us to activate the full value from our existing clients.  Having said this, we know that we have much more potential. And so for us, it's going to be one of the drivers that will help us not only keep but boost our net retention for the coming years.  Sabrina Blanc: But could we have an idea of the weight of the, let's say, the solution which are not a milk voucher compared to the milk voucher in the operating revenues, for example?  Aurélien Sonet: What I would say is that the contribution coming from the cross-selling in percentage is higher than the overall growth.  Operator: The next question is from Joanne Jordan from ODDO BHF.  Joanne Jordan: Also, 2 questions from my side. First, can you share some comments on the early start of the gift card season, please? And second question, regarding the evolution of the take rate, it's up 20 basis points in '25. What are the main drivers behind this increase? Is it mostly coming from merchants or the client fee?  Aurélien Sonet: So, regarding the Christmas campaign, it's too early to give you, I mean, color. But I can tell you that, I mean, the teams in many geographies are on it as we speak. And for us, Q1 will be the moment when we will be in a position to give you a much more precise color. But to date, it's too early. But it's part of our plan. It's embedded into our growth trajectory. And again, I mean, more to come in the Q1 announcement. Regarding your second question on the take-up rate, Stephane?  Stephane Lhopiteau: So, regarding the take-up rate, there is a global trend over the last 4 years, and there is one happening in fiscal '25. So overall, as a reminder, and over the last 4 years, we have improved our take rate of 50 basis points and with a vast majority of this improvement coming from the increase in the client commission. And then from 1 year to another, there might be some slight changes. And when we compare '25 to '24, there is a bit of an increase on the merchant side as well, as long as we are able to deliver more value to the merchants, offering them new services, and having them notice how much we can bring to them. And there is also the mix effect.  So, we were not expecting an increase. If you remember last year when we guided you, we shared some color on the take rate, and we didn't have a specific target in terms of increasing the take-up rate, but this is the outcome of all the initiatives we took with some merchants with our merchant network in order to provide them with some additional services.  But again, I think the big trend is what you have to keep in mind over the last 4 years, we have increased our take-up rate by 50 basis points, with the vast majority of this change coming from the client side.  Operator: There are no further questions registered at this time. I will now hand it over to Aurelien Sonet.  Aurélien Sonet: Thank you, and thank you all for your attention this morning. In closing, I would like to reiterate our confidence in the future, supported by the strong performance delivered in fiscal 2025. Looking ahead, we remain deeply committed to establishing Pluxee as a sustainably profitable growth group over the long term. And with that, I wish you all a very good day.  Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Welcome to the Intrum Q3 2025 Report Presentation. [Operator Instructions] Now, I will hand the conference over to President and CEO, Johan Akerblom; and CFO, Masih Yazdi. Please go ahead. Johan Akerblom: Good morning, everyone. Thank you for listening. It's great to have you back for another quarterly earnings call. Today, we have a new setup. I am obviously in the new position, and I also want to sort of say hello to Masih, who's been with us now for, what is it, 8 weeks, roughly, almost? Masih Yazdi: Yes. Johan Akerblom: And yes, we will go through the Q3 results. In normal order, we will take you through the presentation, and then we'll open up for Q&A at the end. If we start with the quarterly, I think the quarter as such, it is a bit messy when you start looking at it. But a few things to highlight. I mean, on the underlying, we have a higher servicing income. The underlying business is, in general, performing well. The adjusted EBIT has been increasing 30% year-on-year, and we continue to report net profits. This is the third quarter in a row. And the leverage ratio is going in the right direction, and the investing volumes are increasing if we compare to Q1 and Q2 earlier this year. On the servicing side, we have now reached the 25% on an adjusted EBIT margin rolling 12 months. And on the investing side, I think the collections, they are slightly above the forecast again. However, the income is down, but I mean, that is on the back of the lower -- the book that we have, which is now at SEK 22.5 billion. If we go to the servicing a little bit more specific. I mean, this is the first quarter where we have an organic growth since 2022. I think it was Q3 2022, the last time. So, we're now actually not only improving the margins, we're also having a top line that is going in the right direction. We did grow in 10 out of 16 servicing markets. The pipeline is increasing. So, we've had a lot of focus on the top line. I think we discussed this earlier with you, and we continue to now see hopefully a bit of results from that. We're working closely with the entire sales organization. We're adding new people. We are upgrading. We are working with target lists, pipeline. We're working closely with churn. And the good thing is that there's still potential from our pricing program that should trickle through going into 2026. And we also see that the margin that we get on the new deals is higher than the current margin. On top of that, we also have now started, and that will be something we'll probably speak about a little bit more when we get to the Q4, what kind of ancillary business is there -- out there and what's the growth potential. Moving to the investing side. I think here, it's a bit of a -- I mean, the good thing is it's a quarter where we see the investments increasing. So, we're now at SEK 303 million. The IRR remains at a very high and comforting level. And I think for us, it's very important that the discipline on price is always going to be more important than the volume as such. Of course, we want to increase the volumes, but we will never increase the volumes on the back of being undisciplined on the pricing. We see that we are successful in smaller deals. But on the bigger deals, I think there is an overall market pressure on the downward side, and we have not gone all the way to meet that where the market is. We'll see where the market takes us going forward. And we're also working closely with Cerberus. So, half of the -- more than half of the deals has been done with them. And we now have deployed SEK 2.9 billion since we started in total. And the good thing is, I mean, we continue to extract value out of the portfolio. So, performance index remains above 100%. And if you compare to the original curve or original forecast, we're now at 109% in the quarter. I think, with that, I'm handing over to Masih, who will take us through the financials in a little bit more details. Masih Yazdi: Yes. Thank you, Johan, and good morning to everyone. I thought I'd start with going through all the one-offs we have. I think it's natural, both me and Johan, new in our positions to do a thorough analysis of the balance sheet, and what we've tried to do here is to apply a more conservative approach as well as trying to minimize items affecting comparability going forward. So, therefore, this quarter, we have a pretty messy quarter in terms of write-downs of impairments and goodwill and also some one-off tax items. So, as you can see, the reported EBIT is almost minus SEK 600 million. If you move that to the net income to shareholders, that has impacted by the gain we had on recapitalization of SEK 2.3 billion, and we have underlying financial expense of SEK 838 million. We had a couple of one-off tax items and underlying tax of SEK 158 million, which takes you to the almost SEK 400 million net profit. Then we have a goodwill impairment related to Spain, where the development has been more negative than was assumed in our goodwill calculations, and therefore, we have that impairment. And then we have some other impairments mainly of client contracts on the balance sheet that we have now written down. So, overall, a messy quarter, a lot of one-offs. But as I said, we have taken a conservative approach on the balance sheet, and we're hoping that you'll see much less of IACs going forward. If I move to the next slide, Slide 9, and look at the key financials for the group. As you probably have seen, income is down 3% compared to a year ago. More than half of that is FX related. At the same time, the cost trend continues to be positive, as you can see, and the cash generation has improved compared to a year ago. The leverage ratio has been restated. Again, here, a bit more conservative approach. We're looking at the nominal value of debt rather than the book value, which means that the leverage ratio is higher than it otherwise would have been had we used the old definition. With the old definition, it would be at 4.4. And I should also mention that full year 2024, without the discontinued operations, it would have been at 5.3. So, we are moving in the right direction in terms of leverage, but obviously, we want to move this even further going forward. If I move to the next slide and look at the underlying cost trend, you can see that we've had a strong cost discipline also in Q3, the run rate is now SEK 12.5 billion in terms of costs and costs are down 10% compared to the same quarter last year. And that is mainly driven by a reduction of FTEs, down about 1,000 people compared to a year ago. Moving into servicing. As Johan said, encouraging to see that we have organic growth in the quarter. The total income is flat, but that is completely driven by FX of a 3% negative effect, offset by organic growth of 3%. A lot of the one-offs is in the servicing business, so the EBIT is distorted by that. But if you look at the adjusted EBIT, it's up 27%, and it's also up 30% so far in 2025 versus the same period in 2024. We want to double-click on the leverage we have. What's happened in this company the last couple of years is a quite large shift in the composition of the business. If you look at the bars, you can see that 2 years ago, 24% of the cash generation was coming from the servicing business that has almost doubled to 43%. In our view, I think the general conception is that servicing is less risky than the investment business, which means that the cash flows generated from that business should be able to cope with a higher leverage. Here, we have assumed that our investment business has an LTV of 80% that should be financed by debt of 80%. And if we assume that the remainder of the debt on the balance sheet is in the servicing business, you can see that the leverage ratio for the servicing business is actually coming down quite a lot, especially the last few quarters, given the fact that the cash generation from the servicing business has improved quite a lot. I think if anything, this chart shows that we want to, going forward, take into account the riskiness of our business when we set our leverage targets so that it takes into account if we continue to derisk and have a larger share of our revenues and profit coming from servicing. Moving into next slide, Slide 13, investing. You've seen this, but the income is down. This is partly FX, but largely due to the lower investments compared to the amortizations we have. So, a smaller book value leads to lower income. We are collecting well on this portfolio, which means that income is down slightly less than the book value. Nevertheless, as Johan said before, we have done more investments this quarter. We want to do even more going forward, but we want to strike a good balance between pricing discipline and volumes. Moving to Slide 14. Looking at the debt and maturity profile. You can see that net debt is now at just below SEK 45 billion. We have about SEK 5 billion of cash, SEK 2 billion of that is restricted. It could be used to buy back bonds. The remaining cash is free will. And you can see the maturity profile with about SEK 12 billion of maturities in 2027, of which about half is the new money notes we've issued. I think with that, I'll hand back to Johan, and he'll do a couple of final remarks before we open up for Q&A. Johan Akerblom: Okay. So, I think, first of all, the quarter is a quarter where we see the underlying business performing well. It is positive to see a servicing top line year-on-year organic growth. I mean, I think we discussed and talked about this a lot. We are really emphasizing the top line, and we are putting a lot of effort in making sure that we get new business into the group. However, I think servicing business as such is a slow-moving business. It comes with RFP processes, there's onboarding, there's ramp-up, et cetera. But there's definitely an ambition to keep this top line growing. And the investing volumes, as we said, we will continue to have a balance between volumes and returns, but it's always good to see volumes going up when the returns remain high, and we will continue to focus on developing the partnership with Cerberus. The one-offs from the recapitalization and impairments, I'm sure we'll get a lot of questions on, so I'll leave that for the Q&A. And we have now reached a 25% margin. I think everyone expected us to reach it, but it's always good to reach a goal that everyone expects you to reach. So, it's a tick in the box. And we will come back when we present our full year results with the strategic review and also updated financial targets. So, I think with that, I think we can open up for questions. Operator: [Operator Instructions] The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: So, my first question is on the adjusted EBIT margin for servicing, which reached 25% in Q3, which is up from 18% a year ago. It seems to be driven primarily by cost reduction. How sustainable is this margin expansion? And what portion came from operational improvements versus onetime efficiencies? Johan Akerblom: I can start here. I mean, I think that the margin has proven to be sustainable. It's been proven to increase quarter-by-quarter. Given the focus that we now have on growing the top line, I think we will have to strike a balance between how much more margin improvements we want and how much do we want to actually put into our commercial proposition in order to grow the top line. And if you ask me, on the balance, I would say, I'm quite happy with 25% margin if I can grow my business at the same time. Jacob Hesslevik: All right. Perfect. And then, if we move to investing side, collection performance was 101% in this quarter, slightly better than a year ago at 98%, but cash EBITDA from investing still declined to SEK 1.35 billion from SEK 1.5 billion a year ago due to a smaller book. When should we expect cash EBITDA to stabilize or grow again given your stated intention to increase the investment pace? Johan Akerblom: I mean, it's a very tricky question to answer because I cannot predict how much we will invest over the next quarters. But the ambition is clearly that we want to get the investing business to flatten out. So, if you think about the decay, we've had over the last years in terms of portfolios going down, investment volume going down, now it's time to turn that around and stabilize. But we also said that we have a SEK 2 billion target. Let's make sure that we reach the SEK 2 billion target first, and then we'll get sort of to the next level. And by then, I think also we will have our, let's say, Q4 report, and we'll give more guidance on where we see a future portfolio. Jacob Hesslevik: Okay. And just finally, on your updated financial targets, you mentioned focusing on improving profitability, driving growth and strengthening the balance sheet. These can sometimes conflict with each other. So, which takes a priority if you face trade-offs? For example, would you sacrifice near-term growth investment to the 3.5x leverage target faster? Or how should we think? Johan Akerblom: I think in -- I mean, we need to address our leverage. That's the main priority. But then doing that, I think it's also important to always strike a balance between sort of short-term sacrifices and long-term gains. But I think we will give you more clarity on that when we talk again in 3 months' time. Operator: The next question comes from Patrik Brattelius from ABG. Patrik Brattelius: Can you hear me? Johan Akerblom: Yes. Patrik Brattelius: Perfect. So, my first question is to Masih as he comes in with a little bit of a new outsider's perspective. So, in your new role and given that you're new, can you talk a little bit how you view a sustainable and long-term capital structure in Intrum? And how do you think that should look in terms of leverage ratio? Masih Yazdi: Thanks, Patrick, for that question. A sustainable balance sheet is a balance sheet that is in better shape than the current balance sheet. I think that's clear for everyone. We'll come back with actual targets on that when we present the Q4 results. But generally, I would say that we need to take into account what the composition of the business will be in the future depending on how we grow our servicing and investing business, and we will take the different levels of riskiness of those 2 different business lines into account when we set new leverage targets. That's the hint I can give you in addition to what I started with saying that we need to be in better shape in the future than we are today. So that's the main priority of this company. That's going to be my main priority of -- myself as well, obviously. So yes, you need to give it some time. We'll come back, but the direction is clear. We need to be in better shape. Patrik Brattelius: Okay. And speaking of the balance sheet, you have some new money notes given out in connection with this restructuring. And to my understanding, those will partly be used to buy back bonds. So, can you talk about how much you aim to buy back with this? And when should we start seeing that these actions being taken? Masih Yazdi: Yes. I mean, we can use that money to buy back. We'll do that if we believe that, that's good for the company as a whole. We can't give you any timing of that. We will do that when we think that the timing is right, if we do it. But the whole purpose would be to make sure that we deal with the maturities we have in the sort of short term, the 2027s. But again, it's an opportunistic action tactics from us. So, we can't give you any timing on it. But if we feel that it's going to address the balance sheet to some extent, we'll do that. Patrik Brattelius: Okay. And servicing, it's growing with 3%. It's, however, below a little bit the old target level. Do you see that you need to invest more in the cost side in order for this to ramp up? Or is there anything you can do that wouldn't drive increased cost in the short term to ramp up income on this side? Johan Akerblom: I mean I'll start here and then Masih can add. But in servicing, I think the cost trend will always be sort of, on a relative basis, going down. We need to become more efficient. We need to be more automated. We need to be -- we basically need to build on a scalable platform. Are there short-term investments we need to grow -- we need to do to grow the servicing business? Nothing that is material from my perspective. But then, I think one of the key questions that we have that we will have to address in the sort of strategic review is also how -- what's the ancillary business that we can grow? Because right now, we are involved in some very important processes with our clients, and there could be opportunities to grow ancillary business out of that, that would be sort of a nice add-on to the business we run today. But -- and that could require CapEx. But I think that's something, again, we will have to come back to when we have done our own homework. Masih Yazdi: Yes. I mean if I add what's, I think, interesting with the servicing business is that there's a lot of legacy in that business, not just with Intrum, but with the whole business. And really improving the offering has a lot to do with becoming more cost efficient. So, it's actually the case that the more cost efficient we become, the more automated we are in that business, the better the offering will be to our customers and the more deals we will win at better margins. And so, in that business, it is not really a conflict between investing more and you seeing more higher cost in our P&L and winning business. I mean we are hiring salespeople now, but we're talking about 30 people, and we have almost 7,000 people working with collections within servicing. So, it's nothing compared to the base we have to work with in terms of becoming more efficient. Patrik Brattelius: Given that you were at the other seat of the table when you -- in your previous job, do you see any immediate actions that the Intrum could do in order to improve their -- the top line growth within servicing to win new inflow from, for say, banks? Masih Yazdi: There are things we're looking at in terms of how we price deals. We have a fairly large, fixed cost base. And obviously, the more servicing revenue we have on the platform, the smaller is the fixed cost base per deal, so to say. So, we are making some changes to how we price new deals. And I hope and we think that that change in financial steering will make us more competitive in new deals and still uphold or maybe even improve the margins from current levels. So yes, there are things we can do, and we're looking into it, and we're trying to apply it as quickly as possible. Patrik Brattelius: A very last question from my side is just on Slide 12. You -- on that changed composition of cash flows, you showed the total leverage. Can you -- the dotted line there, the servicing leverage, which we don't see a number for. Can you please share the detail what that level would be in Q3 '25? Can we get a reference? Johan Akerblom: Yes. I think if you look at where that dash line was a year ago, so it was above 10x, and now it's around 7x. So, it's a pretty strong deleveraging if you allocate some of the debt to the servicing business. So, it pretty much follows obviously the improved cash generation from that business. Operator: The next question comes from Ermin Keric from DNB Carnegie. Ermin Keric: I'll continue on Slide 12. Thank you for that, I've asked for a long time, so appreciate it. And just to hear a little bit how you're reasoning with the 80% LTV you're assuming on the investment. I suppose on the Cerberus Project Orange, you had 60%, if I remember correctly, on the Intesa SPV, it was 60%. Why do you feel 80% would be the kind of fair level to assume for investing? Johan Akerblom: I mean, you can argue whether it could be 60%, 70%, 80% or 90%. I don't think that's the main point. I think the main point is to show that irrespective of how much you allocate to it, if you allocate the remaining debt we have on the balance sheet to the servicing business with stronger cash generation in the servicing business, you would have seen a declining leverage for that business. I mean, coming from the banking world, a comparison I would make is that if you have a bank that is only doing consumer lending and then a few years later, it's only doing mortgages, you should probably view that bank as being less risky and therefore, would be allowed to have more leverage. And I think this is a -- it's a fair comparison with our business as we are more and more moving towards servicing, which we believe is less risky and therefore, should be allowed to have a higher leverage on. This doesn't mean that we will set leverage targets in the future that are less ambitious than the ones we've had, we just think it's important to take into account how the composition of our business changes. Ermin Keric: But if I can follow up on that, maybe I'm thinking about it the wrong way, but [indiscernible] the opposite. If you are a bank, when you have a lending book, you can have some leverage. If you just have commissions, you would have less leverage. Masih Yazdi: Well, I would -- yes, I mean, if you take a bank, it's typically the case that you have risk weights for the lending business and the riskier the lending is, the higher is the risk weight and therefore, the more capital you have to have. That's the way I would look at it. Johan Akerblom: Yes. And I wouldn't compare -- I mean, remember, when we do the servicing business, I mean, the contracts that we run are usually sort of 3 to 5 years. It's a long-term relationship, and it's also -- it creates quite a lot of stickiness. So, I think that's where we're coming from. Whereas on the investing side, in the end, it very much depends on what's your investment appetite and how much can you invest to continue to either replenish your portfolio, increase your portfolio or decrease your portfolio. So, it's going to be more sensitive in the short run in terms of your investment appetite. And then also, there's always a, I think, a question mark, at least from the market when you invest into these type of portfolios, will they actually yield the returns that you put up when you made the investment. Ermin Keric: Fair enough. Then moving over to the servicing side. Organic growth, now you're back to organic growth again, which I think is, of course, highly positive. Is -- around the 3%, is that a new baseline we should think about? And maybe extending the question a little bit, I suppose getting back to organic growth has been a focus for several years. Why have you tweaked now that's making it possible to do that while also doing it in a profitable manner? And maybe lastly on that question, the SEK 1.8 billion pipeline you mentioned, how should we think about that? What's your typical win rate? I suppose that's a gross number. How should we think about the underlying churn you have? So how much from that SEK 1.8 billion should we think about adding to your future income? Johan Akerblom: If we start with your first question, which is, is this a new sort of baseline? I think that one we will have to refer to when we come back in Q4. Then we will try to -- if we articulate something, it will be then hopefully answering your question. I think there were many questions in one. But churn, I mean, in general, we tend to manage churn in a good way. So, we actually don't lose that many contracts. And then there might be always -- I mean, contract could also be amended. So, there could be parts of what was in scope before is not in scope in the future. I mean a lot of clients, they usually use 2 or 3 providers to have benchmarks. So, the composition might change. When it comes to new business, I mean, as I said, we have a very high focus on this. And this is now about sort of moving the organization from a very margin sort of focused type of effort to something that is much more forward leaning and thinking about new business. So, coming back to your question around the pipeline, a lot of this business -- a lot of those tenders will materialize in Q4. It doesn't mean that that will bring income from the 1st of January. It means that we will start ramping up the new contracts during 2026. And for bigger contracts, the ramp-up period can be as long as 6 to 12 months, especially if it's with the banking client where you do sort of gradual steps. So, I think that the SEK 1.8 billion should be just seen as a -- there's a big amount out there. We're trying to get the biggest share out of it as possible. But I wouldn't sort of -- I wouldn't expect that, that just means that we suddenly add all these revenues from the 1st of January on top of what we have today. It's a bit more complicated than that. Ermin Keric: Got it. That's helpful. Then, just one final question. On cost, how much more is left to be done there? And I suppose common costs looked very strong this quarter, down almost SEK 100 million quarter-on-quarter. Is that a sustainable level that we should think about going forward? And I suppose generally with cost, have you compromised the servicing quality to an extent? Or have you been able to add more technology usage already now? Masih Yazdi: Yes, I can start with that. I think there is a lot more to be done on the cost side when I'm talking about the mid-to-long-term, and that has to do with applying new tech and making the manual processes more automatic. So, I think this business over time should have a clearly lower cost base than it has at this point. How quickly that goes obviously depends on how quickly we apply best practice from different markets we work in but also use tech in a higher degree than we have today. In terms of the central costs, I think that most of the work there has been done, but I still think that there is some more to be done. I would also add that if you look at the impairments we've taken in the quarter, those will just in itself lead to about SEK 300 million less cost in 2026 than otherwise would have been the case. So, we are obviously moving into '26 with a positive momentum on the cost side given the FTEs we have today compared to a few quarters ago. And we think that this is a long game where the cost trend should be downwards in the mid-to-long term. Then the question is, to what extent do you use that to reinvest in your business and grow top line even more? And to what extent do you allow it to improve margins. And that's a balance we need to sort of try to strike in the future. Operator: The next question comes from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So, I had one -- starting with one technical question. The gains you're making on the debt that you -- that has been written down, it seems like there is an element of mark-to-market of the outstanding debt. Is that something new or -- because you did write it down by SEK 3.5 billion, right? Masih Yazdi: Yes. It is a mark-to-market, which happens when you do the recapitalization. So, you use the bid price basically that establishes just after the recapitalization and the difference between that nominal value of the debt and the bid price leads to a gain for us as the bid price was lower than nominal level. Johan Akerblom: Exactly. Exactly. So, it's like a fair value adjustment. Markus Sandgren: Okay. But that is not going to be fair value going forward from here? Johan Akerblom: No. Markus Sandgren: Okay. And then secondly, I was thinking about the aging back book in investments. What's your take on the collection performance over time when the portfolio gets older? Is it kind of constant or is it gradually degrading? Johan Akerblom: I mean if your question is, if we will continue to collect according to our forecast or better, I think we have taken in -- I mean, when you do the portfolio and you put out the forecast, you obviously take into account the decay. And we have an ambition to continue to collect above the index. But I mean, any portfolio -- well not any, but most portfolios, they have a higher collection rate in the beginning rather than the end. But that's also why I think we emphasize that our investment pace should continue to increase because we need to replenish. Markus Sandgren: Okay. And then lastly, regarding the market. Now we've been through a rate hike cycle and rates are coming down. What's your feeling on your markets that -- I mean, how much should we expect the market to grow when rates are much lower now in the coming years? Johan Akerblom: You're talking about the servicing business? Markus Sandgren: Yes, servicing, yes, right. Johan Akerblom: I mean, I think there's a -- I mean, there are a few trends in the servicing business. I mean one is obviously the macro has an impact on, especially banks, utilities, telcos. But there's also a lot of new kind of business verticals that has had an impact on the market as such. I'm thinking about Buy Now Pay Later, the steady state of increase of consumer lending, new entrants, all of that. And then you have -- in many parts of Europe, we also have some of the traditional business that we see in the North, it doesn't even exist. So, I think we will continue to see this market sort of growing but not growing massively. And then, as I said, I think in the previous interview, when we plan, we have to plan for a normal business cycle, which means that we cannot plan for another euro crisis, real estate crisis, financial crisis. That's when things sort of shift around. But we should be able to replenish and grow the servicing business, just basically capitalizing on the fact that we are in every country, we meet every different dynamics. And then, on top of that, we hope we can also figure out what's the next step when it comes to ancillary business because we are closely tied to many clients, and there are services that we don't provide today that we can probably provide tomorrow. Operator: The next question comes from Angeliki Bairaktari from JPMorgan. Angeliki Bairaktari: Just 4 questions from me as well. First of all, with regards to the servicing pipeline of SEK 1.8 billion that you mentioned, can you give us some color on where those clients -- those new clients could be coming from in terms of sort of industry? Are we talking mostly about banks or other type of clients? And secondly, with regards to the organic servicing revenue growth, can you break the 3% down into regions like Northern Europe, Middle Europe and Southern Europe, like you've done in the past? Johan Akerblom: So, yes, on the first one, I think some of the bigger clients or potential clients in the pipeline are bank related because that's usually when you have sort of bigger size. But it is a mix, but the bigger contracts are bank related. I think when it comes to the growth, I don't have the numbers in my head. I don't know if you remember, Masih, but I think we -- I have -- yes, we need to -- let us come back to that. We'll just get the numbers. Angeliki Bairaktari: And if I just may ask a couple of questions on the leverage ratio and the debt. So, first of all, you mentioned, I think, in your remarks that you have restated the debt and the leverage ratio to now take into account the market value of the debt. Can you give us some more details? Maybe I misunderstood that. And why are you doing that? Because I thought the typical definition of leverage ratio for every company is just the nominal value of the debt divided by the 12 months EBITDA. So, if you can just give us some more color with regards to the restated calculation? And then second question on the debt. How do you plan to refinance the 2027 maturities at the moment? I appreciate that this may change, but based on where we currently stand, what would be the plan? Johan Akerblom: Yes. We haven't used the market value when it comes to the leverage ratio. So, we are using nominal value. The market value was referring to the effect of the recapitalization and that net gain we had. So, when calculating the leverage ratio, we do it exactly the way you described it. We look at the nominal value and the 12-month running cash EBITDA. On the refinancing, the 2027, obviously, we have a few quarters to go before we need to deal with that. The whole purpose is to put the company in a better position so that refinancing goes well. So, it's about continuing to improve the business, generating more cash, improving the top line, continuing to reduce costs. So, we can only sort of focus on the company and how we're doing operationally to put ourselves in a good position before we need to deal with that maturity. Angeliki Bairaktari: If I just may come back to the leverage ratio... Johan Akerblom: On the growth, just to answer your question, most of the growth is from Middle Europe, but we also have some growth in selected markets in the South, in particular, Italy. And then the North is fairly sort of neutral. Angeliki Bairaktari: Sorry, just to come back to the leverage ratio because I think you mentioned in the beginning that you have obviously reported 4.7, consensus was looking for 4.5. And I think you mentioned that under the old definition, it would be 4.4. So, I'm not sure what you have changed. If you can just explain what you have restated, if there's something that has been restated in the calculation. Johan Akerblom: Yes. So, now we are looking at the nominal value of the debt, whereas with the old definition, it was the book value, and the nominal value is a higher number. And therefore, the new definition leads to a higher leverage ratio than would have been the case with the old definition. Angeliki Bairaktari: Right. And are you -- is that because in your covenants, you have to use the nominal value of the debt? Or what is the reason behind the change? Johan Akerblom: Well, it is more in line with the covenants. So, it's not a perfect, but it's a very, very close proxy to how the covenants are set up. And we also did change because if we would have done the old method, we would basically take benefit out of this accounting adjustment, and that's why we say with the old definition, it should have been 4.4, but we think it's more right to actually look at the nominal value and then talk about 4.7. Operator: The next question comes from Alexander Koefoed from Nordea. Alexander Koefoed: Can you hear me? Johan Akerblom: Yes. Alexander Koefoed: Just coming back again there to the leverage ratio. Sorry if you get tired of it. But this view that you can lever the company more on service as opposed to investing. I think that has -- some would challenge that view, although I agree and appreciate that lower risk, everything else equal, would be possible to finance. But again, yes, I think Ermin alluded to it as well, having investable assets on balance sheet would also be financeable. So that view, has any of that been cleared with creditor group out of curiosity? Or is that strictly your own view? That would be my first question. And then maybe secondly, if I can ask on your non-recurring items and I think SEK 2 billion in one-offs related to restructuring. Is there any of that actual payments, bills you need to pay from that, that -- how much of that is a hit? And when is those costs expected to be completely over and done with also in your cash flow statements? Johan Akerblom: Yes. If I start with the first question, as I said before, this analysis of looking at the leverage for the different parts of our business will not mean that we will set a leverage target in the future that is less ambitious than we otherwise would. We just think it's fair for ourselves to look at the riskiness of the business when we do set that target. So, I think we're just basically alluding to that we will probably look at having different leverage targets for the 2 types of business that we operate. What that lands in terms of aggregate leverage, whether that's going to be a target that's at the 3.5x that we have today or what it's going to be more ambitious than that and what the time frame of that will be, we'll come back with it in Q4, we just think for ourselves and how to operate the business, it's good to look at different targets for the different business lines that we operate and take into account how we think that those business lines will develop going forward a few years from now. On your second question, yes. Anne Eberhard: Yes. It's Anne here. On your second question regarding the costs that went through from cash in the third quarter, around SEK 550 million went through as cash. And then I think you also asked about the tail, if there's anything more to come through. It's very, very small. I don't think there's anything material. Johan Akerblom: Yes. I mean, I would say, as for Q3, the recap is closed. And yes, going forward, it's sort of business as usual. Alexander Koefoed: Okay. No fine. I was just curious on it. So, appreciate that. Maybe a third question, if I can. And so just it appears that my interpretation of what you're saying is that growth ahead might be a tad difficult for you, I mean, also on lower FTE base that for you to capture any growth, maybe underlying growth seen in Europe for you to really capture that, you need to sort of invest in automations, et cetera, to actually release capacity with your employee base to actually capture this top line. Otherwise, it will be more or less a lost opportunity for you because there's not too much capacity left with the current FTE base. Is that a fair way to say it like that? Johan Akerblom: No. I mean, I think what we're saying is we have room to grow with the current capacity. We think that if we can be even more efficient going forward, we will naturally win even more business. So, part of the -- sort of by being the more efficient you are, the more attractive value proposition you have. So, I think we have a different take on that. I mean, today, we can grow. We have capacity to grow in every market. But the more efficient we become; the higher likelihood is that we can grow even more. Alexander Koefoed: Yes. Okay. That's fair enough. Understood. I think there is some comments in the market that Buy Now Pay Later loans are perhaps seeing particular growth. Would you capture any of that? Or would this bank-related clients coming in, would that be more to your larger ticket items, maybe not to the same growth? Or would you comment on that? Johan Akerblom: I think Buy Now Pay Later is a very interesting segment, and we're already working with it, and we have been successful to actually onboard more Buy Now Pay Later volumes just in the last 2 quarters. And it's a segment that we will continue to target. And I think it's a segment that, in particular, fits with our digital collection platform. And yes -- so, yes, I don't see any -- it's a big opportunity. Operator: The next question comes from Rickard Hellman from Nordea. Rickard Hellman: Hi, can you hear me? Johan Akerblom: Yes. Rickard Hellman: So, to start with, yes, to be sure, looking at the cash flow, you have very high interest paid in Q3. And I assume this is related to accumulated interest from the capitalization. And you said that we're more or less done with all the cash flow now. Is that also [ for ] interest? So, we will not see any more tails out of this on the financial side? Johan Akerblom: Yes. All the accrued interest was paid in Q3. Rickard Hellman: Super. We talked a lot about the growth in frequency. Just a follow-up on that also. Have you seen any changes from your bank customers around handling non-performing loans in terms of volumes and signs of earlier collections or earlier divestments of portfolios? Johan Akerblom: No, nothing that is particular for the quarter. I mean this continues to evolve differently depending on market, depending on the situation. I mean, for now, now we have a situation in Germany where you see the Stage 2 is going up. So, it's very -- there's no sort of a coherent trend across Europe. Rickard Hellman: Okay. I see. And then, of course, also, I'm not sure if you would like to answer, but -- and it has been discussed a lot around this Page 12 about leverage. But if you would have a fully service business, I mean, without any investing vehicle at all, what would you say a total leverage would be for such business? Johan Akerblom: I think -- again, I think that's something we will leave for the future. I think the point we're trying to make is not that -- I think the point -- we're just trying to show that our business has fundamentally changed. And the 2 legs, they have a very different type of business profile. And we will have to come back to this when we come with our Q4 strategic review and explain more how we see the future. But all things equal, we definitely have an ambition to become a much more resilient company when it comes to leverage. But we don't have a number for you. Rickard Hellman: So, fully understand. But as you also understand, I mean, this -- all this kind of discussion around leverage probably we have a lot of attention among investors and analysts. Johan Akerblom: Of course. So, I think the message that we -- if we want to conclude one message, it's that the leverage has to go down. I think it has to continue to go down and it needs to be sustainable. And we will tell you more in Q4 how we will make it happen. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: Hello, can you hear me? Johan Akerblom: Yes. Unknown Analyst: I have 2 remaining really, only. One is regarding the SEK 2 billion target that you were mentioning earlier in the context of your investment division bottoming out. I'm not really sure what target you were referring to there. If you could just repeat that again, that would be fantastic. And then obviously, you've just restructured. And if you're looking across to your competitors, say, in the U.K., for instance, after the restructuring can be before the restructuring. And so, I guess if you're looking at your own balance sheet and given your restructuring has also just been a very light restructuring, despite the complexion perhaps, how would you rate your options today to manage liabilities perhaps a little further? Johan Akerblom: First one, I mean, we have -- I think we've mentioned before that we have an ambition to invest SEK 2 billion per year, so roughly or SEK 500 million per quarter. That's the SEK 2 billion I'm referring to. And then I think on your question on leverage, I think Masih did answer that before. I mean the way we see is that we need to continue to operate our business in an improving fashion. We need to continue to become more efficient. We need to continue to improve our servicing business and adding top line growth. And then on the investing side, we need to, at the first instance, reach the SEK 2 billion per year as replenishing. And then we'll see what the next step is in terms of investment volumes. And that's the organic path on how we can delever. Unknown Analyst: And so, you're not currently looking at anything -- we shouldn't be expecting anything inorganic, so to speak, over the next, say, year? Johan Akerblom: I mean when we do a strategic review, we will look at all options, and we will see which one creates the most value. But the base case is obviously always that we move on organic path. Operator: The next question comes from Ines Charfi from Napier Park. Unknown Analyst: Hi, can you hear me? Johan Akerblom: Yes. Unknown Analyst: Just going back to the one-off. So, can you talk about the impairments, the goodwill impairments and what kind of -- what does that mean basically for the future? Johan Akerblom: Yes. I mean there are a few different impairments. The big one is the goodwill impairment we have done for Spain. As I said previously, it's related to what we thought would happen with that business and the actual performance, and we could see that the actual performance had been worse in the short term. And therefore, we felt that it would be conservative to do a goodwill impairment there. The other impairments mainly relate to client contracts we've had on the balance sheet, where you do the same kind of assessment of what kind of revenues you think you're going to generate from those customers going forward. And again, we've taken a conservative approach and have a lower assessment on those revenues, and therefore, we've done impairments there. And the remaining impairments relate to software we've had on the balance sheet that we've written down. And as I said before, what this means is that D&A will be lower than otherwise would have been the case going forward. And for 2026, we're talking around SEK 300 million lower D&A expense. Unknown Analyst: Okay. But just to understand that a bit more, does that mean -- like, should we expect kind of less -- I was trying to understand the impact of the -- in terms of collections, et cetera, going forward. Like would the impact be for the short term as in like next quarters? Or like how should I think about that? Johan Akerblom: There is no impact on collections. It's just an impact on the cost line, which will be -- everything else equal will be lower in Q4 and also lower in 2026. But this is not related to how collections will perform going forward. Unknown Analyst: Okay. And then, just looking at the maturity profile, Page 14. So just to be clear, you still have outstanding in 2025? Johan Akerblom: That's a term loan that we're paying back to some extent, and it's been -- it has been extended. So, it's not a -- yes, so it's nothing you need to be concerned about. Unknown Analyst: So that has been extended? Anne Eberhard: We're currently in negotiations on that. Johan Akerblom: Well, it should be done fairly short -- fairly soon. And it's not fully being -- I mean, it's partly being paid, partly is extended, and it's just to give us a bit more flexibility going forward. Unknown Analyst: Okay. So, I guess it will be dealt with... Johan Akerblom: Before we -- when we announced Q4, it's fully dealt with. Unknown Analyst: So partly extended and partly paid down. Johan Akerblom: Correct. Unknown Analyst: And just looking at the RCF, so what's the drawn amount as of 3Q? Johan Akerblom: RCF. Anne Eberhard: Sorry, say that again? Unknown Analyst: What is the drawn amount of the RCF? Anne Eberhard: It's around 11 point…. Johan Akerblom: 10 point -- yes, I mean it's almost fully drawn. Operator: The next question comes from Wolfgang Felix from Sarria. Unknown Analyst: One follow-up question really quickly. Can you give us some guidance on your sort of speed of collection going forward? Are you going to maintain the same rate of collection? Do you think you're going to maybe slow it down a little bit? What should be sort of a stable case from here, all else equal? Johan Akerblom: When you talk about our collection rate, in what context? Are you thinking about our investing portfolios or...? Unknown Analyst: Yes. I'm sorry, only the investing portfolio. Johan Akerblom: I mean the investing portfolios, they will -- it's hard to predict, but we've -- historically, we've been collecting slightly more than our forecast. And I think that's the ambition going forward as well. And then obviously, the amount of collections depends on the size of the book and the profile. Unknown Analyst: Yes. So, if -- I'm trying to picture it like this. If you are maintaining as many people as you were before, but you have a smaller book, then you would be churning that book or turning it over a little bit more quickly. Is that the idea? Or is the idea to shrink your collection engine, if I can call it like that, to maintain the same speed of working out the smaller book? Johan Akerblom: I mean, we're always trying to collect as much as possible. And then at the same time, we're trying to be more efficient in every collection. So, I think your analogy is not really the way it works in reality. But of course, if you have lower volumes, you need less people. But I mean, out of our 7,000 people working in collections, serving our own portfolios is just one part of it. I mean we have a much bigger book with our clients where we operate. Unknown Analyst: Yes. No, that I understand. So -- but I think I understand your answer. Operator: There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments. Johan Akerblom: So, thank you for a lot of questions today. I hope we've been able to clarify what is a little bit of a difficult quarter to understand, given all the one-offs. But I think as we pointed out, we're happy with the underlying. We're making progress. We're deleveraging. Cost continues down. We see a bit of servicing income growth and the investing portfolios are collecting slightly better than planned. And the investing volumes are higher than before. And, obviously, we want to further improve going forward. And we hope to see you when we present the Q4 and talk more about the way forward. Thanks a lot and have a great day.
Operator: " Kristi Mussallem: " Jason Serrano: " Kristine Nario: " Nicholas Mah: " Bose George: " Keefe, Bruyette, & Woods, Inc., Research Division Jason Weaver: " JonesTrading Institutional Services, LLC, Research Division [":p id="A00"name="Unknown Analyst" type="A" />" Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Adamas Trust Third Quarter 2025 Results Conference Call. [Operator Instructions]. This conference is being recorded on Thursday, October 30, 2025. I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead. Kristi Mussallem: Good morning, and welcome to the Third Quarter 2025 Earnings Call for Adamas Trust. A press release and supplemental financial presentation with Adamas Trust's Third Quarter 2025 results was released yesterday. Both the press release and supplemental financial presentation are available on the company's website at www.adamasreit.com. Additionally, we are hosting a live webcast of today's call, which you can access in the Events and Presentations section of the company's website. At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Adamas Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission. Now at this time, I would like to introduce Jason Serrano, Chief Executive Officer. Jason, please go ahead. Jason Serrano: Good morning. Joining me today to describe our third quarter results are Nick Mah, President; and Kristine Nario, CFO. Christine will provide commentary on quarterly results, and Nick will follow with an update on the progress of our business plan. Before we begin, I want to thank you for being part of our first earnings call as Adamas Trust. our company rebranding reflects a broader strategic vision, moving beyond any geographic affiliation. The name Adamas, meaning firm, unbreakable and lasting, symbolizes a vision of strength and durability that guides our company's future. We fully embrace this theme as the third quarter marked a strategically significant period for Adamas. EDA rose to $0.24 per share for the quarter compared with $0.22 in Q2, marking our sixth consecutive quarterly increase. This consistent earnings growth supported a meaningful dividend increase to $0.23 per share, which highlights the strength of our capital rotation strategy into a period where the Fed restarted its easing cycle in September with a 25 basis points cut, its first rate reduction in 2025. As treasury yields declined in the quarter across the curve with a steepening bias as inflation moderated, -- we took a more aggressive path to increase exposure to the agency sector. In fact, the third quarter included the highest level of quarterly net investment activity in the company's history with an increase of $1.8 billion or 20%. The strong momentum led by disciplined and deliberate rotation of our capital from multifamily exposure into highly liquid Agency RMBS and other core residential credit strategies positioned our balance sheet for greater earnings durability and long-term shareholder value. We ended the quarter with Agency RMBS representing 57% of total capital, nearly tripling our capital allocation from a year earlier. This rotation was designed to enhance liquidity and drive higher earnings for distribution, attractive market spreads. We are pleased with the high-quality portfolio we have aggregated over the past 2 years. As announced on our previous earnings call, we also strengthened our position within the housing investment ecosystem in the third quarter by acquiring the remaining 50% interest in Constructive loans, a leading business purpose loan platform. With housing affordability near historical lows and supply constraints persisting, we expect the national homeownership rate to remain pressured, gradually reverting from the mid-60s percent range today towards the level last seen 3 decades ago. We view this dynamic as a long-term opportunity, creating a sustained tailwind for business purpose lending. Adamas is committed to realizing the constructive full potential and translating that growth into lasting value for our stockholders. We are encouraged by the strong results of the strategic pivot we made a couple of years ago to strengthen earnings stability, evident in the continued expansion of our Agency RMBS portfolio and the compelling growth trajectory of Constructive's origination business. We continue to believe Adamas equity represents a compelling value opportunity shares trade a meaningful discount of 30% of adjusted book value. And considering the adjusted book value of just Adamas' Agency RMBS position alone, our shares are still discounted by 17% to this holding. We believe this clearly highlights the depth and durability of value embedded within our platform. After a historically active quarter for Adamas, the momentum generated to further advance EAD in the fourth quarter is obtainable given a full quarter of interest income that we can generate. We look forward to further demonstrating Adamas' value with continued improvement to our recurring earnings. At this time, I'll pass the call over to Christine to provide our third quarter financial highlights. Kristine Nario: Thank you, Jason, and good morning, everyone. I'll cover the key factors behind our third quarter financial results. Overall, the third quarter marked another period of strong earnings growth and balance sheet expansion. As Jason noted, we increased our investment portfolio to $10.4 billion from $8.6 billion last quarter. This growth, along with continued rotation into interest-earning assets drove the 9% sequential increase in EAD per share. Adjusted net interest income per share rose 7% quarter-over-quarter and 47% year-over-year to $0.47, reflecting our continued investment in agency securities, partially offset by higher corporate debt interest expense from the senior unsecured notes issuance in July. Our net interest spread remained stable at 150 basis points, reflecting the offsetting impact of lower financing costs and a decline in asset yields. We improved our average financing cost by 15 basis points benefiting from lower base rates and more favorable securitization financing following the redemption of higher cost securitizations. Meanwhile, our yield on average interest-earning assets declined by 15 basis points, reflecting our continued emphasis on lower-yielding agency securities and BPL rental loans relative to shorter duration BPL bridge loans. During the quarter, we recorded $54.9 million in net unrealized gains, primarily driven by improved valuations in our Agency RMBS and residential loan portfolios. These gains were partially offset by $13 million of losses on derivative instruments, primarily interest rate swaps and $5.6 million of realized losses mainly related to conversions of residential loans into foreclosed properties that remain on our balance sheet as well as short payoffs on nonperforming BPL bridge loans. Importantly, the realized losses on the residential loans were fully offset by the reversal of previously recognized unrealized losses on the same assets, resulting in minimal total P&L impact. As Jason discussed earlier, we completed the acquisition of the remaining 50% interest in Constructive, giving us full ownership of this leading business purpose loan originator. For the quarter, Constructive generated $14.1 million in mortgage banking income related to origination and sale activity and incurred $3.8 million in direct loan origination costs and $8 million in direct G&A expenses, resulting in a $2.3 million return. On a consolidated basis, the Constructive segment reported a net loss of $3.8 million, reflecting the transitional integration costs and allocations that we expect to decline over time. As integration progresses and efficiencies are realized, we believe Constructive is positioned to become a meaningful driver of earnings growth. G&A expenses increased during the quarter from $23.3 million from $11.8 million, primarily due to the consolidation of Constructive and higher incentive compensation accrual. Portfolio operating expenses declined, reflecting lower servicing fees on our BPL bridge portfolio as balances continue to decline. We also incurred $7.9 million of nonrecurring costs related to the issuance of senior unsecured notes and 2 residential loan securitizations, which were fully expensed during the quarter due to our fair value election. GAAP and adjusted book value per share ended the quarter at $9.20 and $10.38, respectively, representing increases of 1% and 1.2% compared to June 30. Our recourse leverage ratio increased to 5x and portfolio recourse leverage to 4.7x. -- up from 3.8x and 3.6x, respectively, primarily reflecting financing activity to support Agency RMBS acquisitions, the consolidation of Constructive and the issuance of senior unsecured notes. Portfolio recourse leverage on our credit and other investments increased to 0.9x from 0.5x, driven by lower equity allocation. Overall, our strategic repositioning has strengthened our ability to generate consistent recurring income. With continued balance sheet growth and the integration of Constructive, we remain focused on delivering sustained earnings growth and stable returns for our stockholders. With that, I'll turn it over to Nick for a market and strategy update. Nicholas Mah: Thanks, Christine. This quarter, we achieved a record level of investment activity for the firm, surpassing the previous high reached in the first quarter. In total, we acquired $2.3 billion of residential investments, primarily concentrated in Agency RMBS and whole loans. Within our core strategies, we deployed $1.8 billion in Agency RMBS, $260 million in BPL Rental and $262 million in BPL Bridge. During the quarter, we had meaningful inflows of capital from multiple sources, which we channeled towards funding our elevated investment volume. Key sources of this capital include $115 million baby bond issuance in July, 2 securitizations executed at competitive advance rates and asset resolutions across both our core and noncore portfolios. Following the quarter's acquisitions, our overall investment portfolio has risen above $10 billion. Strong and sustained asset growth over the past few quarters have contributed to steadily increasing recurring earnings. This has culminated in a key milestone of raising our dividend. With a solid base of productive assets, our goal of continued portfolio expansion will power future earnings growth. Interest rate volatility has declined steadily since April, serving as a major tailwind for agency spreads. This was especially pronounced in the third quarter as current coupon agency spreads tightened by 20 basis points to 126 basis points. While agency spreads to treasuries have normalized over the quarter, agency spreads to swaps have tightened but still remain compelling by historical standards. After a record quarter of agency purchases, our agency portfolio currently stands at $6.7 billion. Despite the increased pace of investments, agency leverage has declined from 8.6x to 7.8x. In terms of portfolio construction, we have continued to target 5 and 5.5 coupon spec pools with lower pay-ups. Given the mix of current purchases, the average coupon of our agency portfolio declined slightly from 5.59% to 5.51% in the quarter. Going forward, we plan to target production coupons to maintain a modest carry and lower duration profile. In the third quarter, we surpassed our 50% target capital allocation to agencies. Since the first quarter of 2023, we strategically built and scaled our Agency RMBS portfolio, capitalizing on attractive spread levels while achieving broad diversification from our credit assets. Today, with spreads tighter and the portfolio more balanced between agencies and credit, we intend to take a more measured approach to agency allocation in the future. Our expectation is that while agency allocation will continue to grow in the near term, it will come at a more deliberate pace. Residential securitization markets were highly active in the third quarter with $57 billion worth of issuance. Strong investor appetite supported steady deal flow across the full spectrum of residential credit, tightening spreads and maintaining a well-functioning market throughout the quarter. Against this backdrop, Adamas successfully priced 2 securitizations. The first was a $370 million relevered securitization of reperforming and performing loans. And the second was a $275 million securitization of BPL rental loans. We achieved attractive pricing and structure for both deals. During the quarter, AAA spreads in BPL rental and in broader non-QM securitizations tightened by 10 to 20 basis points to around 130 basis points, providing a favorable environment of continued deal issuance for the rest of the year. This securitization market supports our expanding whole loan activity and strengthens the strategic fit of constructive to our business. BPL rental has grown to our largest concentration of residential credit exposure at $1.16 billion, reflecting a 24% quarter-over-quarter growth. This remains our core strategy with the greatest growth potential as Adamas sources the majority of its BPL rental loans from constructive. In aggregate, 98% of our BPL rental loans have prepayment penalties to help mitigate the negative convexity of the portfolio. We also prioritize acquiring loans with strong DSCR ratios, targeting property-related cash flow coverage as a buffer against credit deterioration. Our credit selection criteria remains restrictive on BPL rental loans with DSCRs less than 1, with only 1% of our BPL rental loan portfolio falling into that category. Overall, our BPL rental strategy continues to perform well with 60-plus days delinquencies hovering at 1.3%. We see the potential for this asset class to outperform across a range of economic outcomes. The BPL bridge market remains highly competitive. Robust securitization markets have enabled new market entrants and repeat issuers to access debt capital through revolving bond structures. This increased capital availability, coupled with increasing investor demand has intensified competition for assets within the BPL bridge market. This has, in turn, applied pressure to both purchase volumes and available pass-through rates. Maintaining our credit selection standards, we have intentionally reduced acquisition volumes ahead of our revolving securitizations exiting their reinvestment periods in 2026. In the quarter, the BPL bridge portfolio declined by 4% to $919 million. As the BPL bridge portfolio shrinks, we are actively working to reduce delinquent loan exposure while maintaining disciplined credit standards to exclude outlier risk profiles on our go-forward purchases. We expect that near-term BPL bridge allocations will continue to decline, and we will deploy recycled capital to Agency RMBS or BPL rental. We maintain flexibility to increase portfolio exposure if more favorable market conditions return. Within our multifamily segment, as Christine noted, we successfully completed the exit of our joint venture portfolio during the quarter. The full wind down of the JV equity book allows our multifamily team to focus exclusively on advancing the resolution of our mezzanine lending portfolio. Performance metrics remain strong with occupancy rates at 92% and only one asset in the portfolio that is nonperforming. The mezzanine portfolio generated a 32.4% payoff rate in the quarter, well above the historical average of 25.8%. We expect payoff activity to continue as the portfolio continues to season. Finally, we are pleased to announce the successful integration of Constructive into Adamas in the third quarter. The constructive business has not missed a step. Origination volumes remained strong through the transition, reaching $439 million in the third quarter, 9% higher than the prior quarter. Originations over the last 12 months were heavily weighted towards BPL rental loans, comprising 94% of total production with BPL Bridge accounting for the remaining share. Given the strength of the securitization market, competition for loans are more pronounced. Our near-term objectives are to continue prioritizing origination quality by enhancing underwriting standards and streamlining origination processes while maintaining a diversified distribution network. In the quarter, Adamas purchased less than half of Constructive's originations, demonstrating the continuation of Constructive's broad market access. We expect Constructive to play an increasingly important role in Adamas' profitability and strategic positioning in 2026 and beyond. I will now turn the call back to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from Doug Harter with UBS. [":p id="A00"name="Unknown Analyst" type="A" /> It's actually Melissa Lobo on for Doug today. I was hoping you could talk to us about how developments with the GSEs are impacting your thinking around capital allocation? And what are some of the regulatory factors that are impacting how you're positioned in the BPL space... Jason Serrano: Yes. Thank you for the question. So I think overall, there's been a lot of talk about GSE reform, what that could mean for the sector as a whole. I think every component of the mortgage sector, particularly in the non-QM space, has -- would create a massive tailwind for opportunities. However, I think that we're more balanced on what we think that opportunity would look like for the company, given that there's a lot needs to happen for a full removal of the guarantee and what that would do to credit availability to the mortgage sector and borrowers across the United States. We know the administration's goal is to reduce increase the housing affordability and reduce rates. And I think that will go in the opposite direction with a guarantee that has been removed. So I think overall, we're continuing to run our business without planning for that particular event to happen. However, we know if it does, there will be a tailwind, particularly in areas in the non-QM space. Constructive, we believe would be able to access many new channels in that situation. But again, that's not something that we see as being a primary opportunity for us at the moment. Color on... [":p id="A00"name="Unknown Analyst" type="A" /> And just if you could expand on the decision to buy the rest of the originate constructive and what that means for ongoing capital allocation. I think you mentioned a 50% target, right, to agency still. How does that -- how should we think about that going forward? Jason Serrano: Yes. So the opportunity for us was we first initially took the first 50% was to really understand the business. It was a slow approach to full acquisition, but we wanted to look at how the market was developing, and this was multiple years ago on the opportunity. So the advancement of the full acquisition of the company was a result of seeing some long-term tailwinds that would help constructive growth, particularly in homeownership rates and affordability, et cetera. The other side was to -- we really want to step in a position to control the outcomes of origination and product development. And so taking 100% of the business was a function of controlling some of the underwriting aspects as well as distribution. So in that end, we thought it would be necessary to take that. And also we saw a great opportunity in origination volume to increase, particularly with capitalizing the company through Adamas. So we think it's an excellent opportunity. We think there's lots of new development and products that could be offered through the company. We think we have an excellent management team, an experienced management team that's been looking at non-QM and BPL opportunities for over a decade. So we're excited to take the next step with Constructive. [":p id="A00"name="Unknown Analyst" type="A" /> Great. And if you could just provide an update for us on how book value is faring quarter-to-date? Jason Serrano: Sure. As of October 28, we see adjusted book value up somewhere between 2.5% to 3%. Operator: Our next question comes from Bose George with KBW. Bose George: Actually, just one follow-up on the book value question. Is the increase coming from both sides this quarter, the agencies and credit or more on one versus the other? Jason Serrano: It's coming from both sides. We have seen thus far as of October 28, that rates have come down generally. Spreads have -- on the agency side have come in. On the non-agency or whole loan side has come in, but not as much. But overall, positive trends on both sides. Bose George: Okay. Great. And then in terms of leverage, your leverage on the credit side remains low, but it went up to 0.9 from 0.5. What's an appropriate level of leverage for that piece? And then on the agency side, is the leverage kind of where the run rate there is kind of where it is this quarter? Jason Serrano: Yes. So the way we think about leverage is balancing it with the opportunity that we have. And as we mentioned, accessing the securitization market to us is important. So the leverage will ebb and flow based on the accessibility and our ramp with respect to our DSCR channels. And so you would see it bounce around a little bit due to the timing of those securitizations. We think below 1x is actually quite low for just a credit REIT in general. And we've looked to utilize securitization markets as a primary source of financing for our credit book over the long term. And you should expect us to continue doing -- utilizing that path. And so in that end, it's a pretty efficient model for us to finance and generate ROE on our home loan position. And what was the second part of your question? Bose George: On the agency side, the leverage should be expected to kind of remain roughly the same. Jason Serrano: Yes. The leverage on the agency side, we're looking to keep that around 8x. And so this is a comfortable level for us. Operator: The next question comes from Jason Weaver with Jones Trading. Jason Weaver: Given Nick's comments that capital allocated to agencies is above target and will be more measured ahead, what are you thinking as possible avenues for deployment for the capital coming back from the mezz and bridge investments? And would share repurchase become a bigger part of the strategy given the discount? Jason Serrano: Yes. So on the capital allocation side, we saw a tremendous opportunity in the quarter to advance our balance sheet with respect to the agency book. We were looking for certain events to happen for some spread tightening. We saw that there's still a death of supply in the Agency RMBS market against pretty robust demand in the market for the asset. So ROE still remained above 15%, which is accretive for many avenues of capital. And therefore, we took part of that story in the quarter with historic purchases for the company. Going forward, with agency spreads now below -- clearly below about 120 basis points, the opportunity is more balanced between what we see in the credit side and agency side. Again, we're looking to maximize ROE based on availability of the opportunity. We're not wedded to a certain ratio of agency versus credit on our balance sheet. It's very much opportunistic. To the extent that we see spreads continue to tighten in on the agency side, we will look to allocate more on the whole loan side of the equation. In particular, we're excited about the advancement of constructive and seeing higher origination volumes there, and we think there's avenues to increase it from here. So that's going to be a focal point for us as well. On the share repurchase side, in the last 2 quarters, we did access that and did look to take advantage of where our shares trade in the market at a discount. But I would say we think of it as an incremental investment strategy is like another avenue to allocate capital. We are very conscious about the equity shrinkage caused by the repurchase and not being able to produce long-term returns on that capital that's been used for repurchases. So we balance that with the opportunity. Again, last 2 quarters, first quarter and second quarter, we took advantage of that. In this quarter, third quarter, with our historic purchases in the market, we thought that the balance went to the asset portfolio. So it's something that's considered, but we do look at the long-term impact of taking our capital and removing it with the share repurchase versus the asset opportunity. Jason Weaver: Got it -- and then just to clarify, the size of the -- I think you said 32% paydown on the mezz and you expect that to remain elevated going forward. Is it a more muted pace? Or are we still looking at $25 or so million coming back every quarter? Jason Serrano: I think that the historical average is a good barometer. I think we may trend slightly higher as the seasoning of the portfolio starts to take hold and also the continued conversations that our team has with the various borrowers. But I think from a long term, I don't expect that the long-term average is going to be -- in the future, once everything is resolved, it's going to be too different. But for the next few quarters, it may be a little bit higher. Operator: I'm showing no further questions at this time. I'd like to turn it back to Jason Serrano for closing remarks. Jason Serrano: Yes. Thank you for joining us this morning. We look forward to discussing our fourth quarter results with you in February. Have a great day. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Operator: Greetings. Welcome to Shake Shack's Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Alison Sternberg, Head of Investor Relations. Thank you. You may begin. Alison Sternberg: Thank you, operator, and good morning, everyone. Joining me for Shake Shack's conference call is our CEO, Rob Lynch; and CFO, Katie Fogertey. During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release and the financial details section of our shareholder letter. Some of today's statements may be forward-looking, and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our annual report on Form 10-K filed on February 21, 2025, and our other SEC filings. Any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. By now, you should have access to our third quarter 2025 shareholder letter which can be found at investor.shakeshack.com in the Quarterly Results section, or as an exhibit to our 8-K for the quarter. I will now turn the call over to Rob. Robert Lynch: Thanks, Alison, and good morning, everyone. We are extremely proud of our third quarter results, which showcase the important foundational work we've been doing to position ourselves for growth in the achievement of our long-term goals. Despite the strength of the outstanding quarter, we will not be complacent. Our focus remains to build a resilient long-term business, one that's not defined by any single quarter. We are making the necessary strategic investments today that set us up for long-term success. This means continuing to prioritize initiatives that strengthen our foundation and support sustainable growth. We have been executing with purpose against the deliberate strategy inspired by our mission to deliver enlightened hospitality to our team members and guests. Collectively, our efforts have resulted in stronger team retention, better guest service, operational improvements and productivity, a steady cadence of culinary innovation and the foundation of a brand marketing model. The engine behind our success in the heart of our brand is our team. We have assembled an incredible group of talent who bring a wealth of experience from both inside and outside the company. Our external hires come from well-established multiunit organizations where they have learned how to implement best practices that can help us as we continue to scale. And we are equipping our managers with tools to develop high-performing teams from within that are building a culture of hospitality, productivity and excellence. It's no surprise to us that we are seeing a reduction in turnover, leading to more tenured, higher-skilled hourly team members, which, in turn, is having a direct impact on the productivity of our labor in our Shacks. We're also building a brand marketing model. We recently announced that we appointed Michael Fanuele as Chief Brand Officer. In this role, he will oversee advertising, paid media and insights and analytics, working in close collaboration with the broader team to advance our marketing strategy and steward our brand in the marketplace. Michael has been supporting our team as a consultant since earlier this year, where he played a pivotal role in helping to build our strategic brand positioning and in making the selection of our new creative agency partner. We're extremely excited to take this next step in evolving our marketing model, which we believe is a critical component for us to build an enduring and powerful comp engine for growth. Michael's creativity, experience and leadership will help us continue to build demand for our culinary innovation, optimize our media investments and strengthen the Shake Shack brand. Over the past year, we have made important strides in improving operations, and I want to spend some time walking everyone through what we are seeing. I'm incredibly thankful to our operations team and our support center for all the work that they have done to advance our business. This year has been an important year across our operations as we establish new practices that will help us scale our business with hospitality, efficiency and excellence. While we do not report this way, we recognize that many in the industry analyze our cost trends on a per operating week basis. We are aware of the fact that we are currently operating with fewer labor hours than we used to, and that our labor costs on an absolute dollar basis per operating week are down, however, still high relative to the fast casual industry. Our historical labor model and the execution of that model was not well positioned to achieve the operating excellence that we need to deliver on our aspirations. In fact, the reduction in hours necessary to operate our Shacks with excellence has improved our ability to serve our guests because we are using those hours in a more productive way. We will continue to optimize our operations and get even more efficient in areas where we're simply overstaffed, while at the same time focusing on and delivering on better hospitality. As we have discussed over the course of 2025, we implemented a new labor model that is an activity-based labor model moving off of the sales-based labor model. We also took a hard look at how we were deploying the hours that our Shacks were allocated and streamlined a lot in the service of the guest experience. We have built a disciplined approach and our Shack leaders are showing real accountability and using the tools and processes provided to attain our labor goals. I am pleased to share with you that nearly all of our Shacks met or beat labor targets in the third quarter. This is a meaningful improvement versus last year where approximately half of our Shacks met their labor targets. We are doing a better job of supporting our managers with strong above store leadership, data and analytics, and recruiting and training tools as they work to optimize the operations of their restaurants and deliver on their goals. But our work is not done. Team members are at the heart of everything we do and the lifeblood of our company. One of the things that I'm most proud of is how much longer we are seeing our team members stay with us. We believe this improvement reflects our ongoing focus on creating an environment where team members can grow and succeed. We have included retention as a key metric on our operator scorecard, and our leaders are focused on training and development to help build a more tenured team. We are seeing improved throughput across all dayparts, including peak, from our team members that have more experience and tenure. This is not surprising as we make many items fresh from scratch and there's a natural and longer learning curve to our process versus traditional fast food. Simply put, the more experience our team has the better they can execute against our operational model. Our top priority is guest satisfaction. We will continue to seek out ways to help our team members become more productive, that it won't come at the expense of guest and team member satisfaction. The evidence of that commitment can be found in our improvement in operating metrics, which we measure as a way to hold ourselves accountable for our North Star, our guests. At Shake Shack, we cook our food to order. That is a big part of why it tastes so good. I am proud that our speed of service has improved from approximately 7 minutes in 2023, to now approximately 5 minutes and 50 seconds. We are going to continue to get even better here. Our guest satisfaction scores across meal taste, cleanliness of our Shacks and likelihood to return has all improved. And finally, with our optimized deployment, we are seeing higher throughput in all dayparts versus last year. In addition to our work in operations, we're also driving improvements across our supply chain, and we are just starting to see the benefits from this. We have identified a long runway of opportunities ahead including, firstly, we are diversifying our supplier base, making sure that we have the right partners and enough partners to mitigate business risk and optimize costs. Second, we are diversifying our supplier footprint and optimizing logistics. Our supplier geography needs to grow as we grow. We're doing a lot of work to reduce time and miles from our suppliers to our distributors and to our Shacks. Lastly, we continue to invest in technologies that support our supply chain department in the critical functions as we scale. As we continue to improve our supply chain, we will also continue to prioritize product quality and innovation, as we have onboarded additional suppliers across several key categories we're making sure that we can continue to procure high-quality ingredients. The work we are doing today in our operations and supply chain is also critical to helping us address a volatile beef market as we expect to face mid-teens beef inflation in the second half of 2025. Going forward, planned savings in our supply chain and continued improvements in operations afford us the opportunity to offset a meaningful part of beef inflation without having to take outsized price and still expanding our restaurant margins. This hasn't been the case historically for Shake Shack. Another exciting part of our evolution is on the equipment side, where we are actively testing multiple solutions designed to make our Shacks easier to operate with an emphasis on improving product quality, consistency and speed. We plan to roll out the first of these solutions towards the end of the year, starting with new fry holding equipment that will allow us to serve crispier hotter fries every day. There is a lot more to come over the course of 2026 and beyond. We are also investing heavily in our technology infrastructure, particularly our kiosk and digital channels, which will continue to be critical parts of our comp sales growth. In our kiosks and our digital platforms, we are driving positive check growth from improved merchandising of our core menu. As I've stated in the past, we are focused on delivering enlightened hospitality to our guests. Big part of that long-term commitment will be a strong loyalty platform, which we are working to deliver in 2026. As we build this best-in-class loyalty platform, we are currently leveraging our app with value and frequency offers. We have seen success from these initiatives and are tracking of approximately 50% more app downloads this year than last. This is important to our long-term growth as our app guests have higher frequency and lifetime value than our nondigital guests. At the end of the day, we know what really excites our guests is our culinary innovation. Our made-to-order model affords us the ability to deliver food that other QSRs and even fast casual concepts cannot easily replicate. Culinary innovation has always been a part of our fine dining heritage and DNA, but the cadence of innovation in place now is unprecedented for us. Our Dubai Chocolate Shake was a powerful illustration. Dubai was highly incremental and drove a positive impact on all key brand measures with the largest brand perception gains on ingredient quality and innovation. Beverage is obviously an important and growing segment within our industry. We have always offered high-quality, innovative teas and lemonades alongside of our world-famous custard shakes. Our goal is to significantly grow our beverage business across soft drinks, teas and lemonades, and to simply own the shake innovation space. With inspiration drawn from global recipes, seasonal occasions, unique textural elements and flavor trends. Following on the success of our Dubai Shake, we've established a shake innovation pipeline with exciting crackable shake offerings as a plus up to our typical Shake LTO lineup. We're also continuing to fuel our pipeline of new sizes with fried pickles and onion rings and we are seeing strong attachment rate. But our crinkle cut fries continue to be the crown jewel of our sides platform. And alongside our new hot holding equipment, we are about to launch new procedures that will make them crispier, hotter and more consistently seasoned, making them the best we've ever served. We are also going to continue to innovate across burgers and sandwiches. This includes our summer barbecue menu, which we launched in mid-Q2, and our limited time French Onion Soup Burger that launched in September. We're pushing the envelope and currently have a French dip Angus steak sandwich and a baby back rib sandwich in test markets. These innovations are part of our ongoing strategy to balance premium sandwich offerings with value platform so that we can continue to drive traffic growth. Once again, our made-to-order model affords us the culinary flexibility to make things that no one else can deliver with the type of premium quality that our guests have come to expect from Shake Shack. While we're focused on developing traffic-driving LTO innovation, we're also continuing to invest in our core menu. These include fry improvements mentioned earlier, new chicken bites, which deliver a more consistent guest experience, and rolling out an improved cheese sauce for our fries that increases cheese coverage and has performed much better in test than our current offering. Our culinary innovation, as well as improvements to our core menu and operations are enabling us to serve our guests better and has prepared us to amplify our brand through new advertising and paid media. In the third quarter, we invested in paid media at scale for the first time. We shared with you last quarter that we were starting to make some investments in that capability, and I'm happy to report that we are delivering results while learning a lot. We invested media behind Dubai Chocolate Shake as well as our dollar soda and app-only promotion, and these investments are a reason why we are delivering the sales growth that we shared with you today. Our brand positioning work is now complete, and we will launch new advertising starting later this quarter. We are working with one of the most awarded creative agencies in the world to bring our brand story to life through advertising throughout 2026. Turning to development. We have significant white space to open new Shacks in the U.S. and around the world, and we are doing so at lower costs in spite of inflation. As part of our development work, we are also focused on new kitchen prototypes and equipment that could have a significant impact on improving our throughput and quality. This year, we are on track to open our largest class of company-operated Shacks. And next year, we expect to open at least 55 to 60 Shacks as we accelerate our rate of new Shack growth, and continue to build our strong pipeline of Shacks to come. Turning to our licensing business. With 23 new store openings as of Q3, we are well on our way to 35 to 40 openings this year, and we plan on opening 40 to 45 more in 2026. This business is healthy and growing. Our existing markets are performing better than expected despite global macro headwinds with strength coming from new openings in the U.S., Canada, Israel and Turkey. This year, we have announced 4 new license partnerships, most recently with Union Mak in Hawaii to bring the Shake Shack experience to the Aloha state. We are building great momentum in the license business, and there is much more to come. As we reflect on the most recent quarter and what is to come, Q3 was an example of our sales model at work. Multiple great LTOs in Dubai Chocolate Shake and summer barbecue and an in-app value message with support from advertising and media complemented by a healthy digital business that collectively drove strong traffic in a tough environment. Now going to October. Our sales trends, although positive, were not consistent with what we saw in the third quarter. Macro headwinds to the industry did intensify and we are lapping one of the most iconic LTOs in our history, Black Truffle. We continue to invest in advertising and media to support the business. However, our French Onion Burger LTO, while loved by the media, has not been as accretive to traffic or check as was the case for our LTOs in Q3. After 3 weeks of analyzing the data, we pivoted and shifted support to our in-app value platforms. Over the last week, our in-app traffic is up 85%, and our overall traffic has seen over a 400 basis point change. Looking ahead, we will need to deliver newsworthy LTOs complemented by a strong value platform and a healthy app and loyalty platform, as well as a strong delivery business. That is exactly what we expect from the balance of Q4 and our plan for 2026. We will also need to mitigate the continued traffic declines in the DC and New York Metro, which we believe to be macro in nature with outpaced growth in other regions. I am really proud of the progress the team has made on the plan that we laid out at the beginning of 2025. And the quarterly results show that we are focused on the right strategic priorities moving forward despite the macro challenges. We have a long way to go to realize our full potential, but the progress is certainly heartening, and will allow us the opportunity to continue to gain share against the challenging industry backdrop. And with that, I'll turn it to Katie for more details on the quarter. Katherine Fogertey: Thank you, Rob, and good morning, everyone. We are pleased with the results of our third quarter that marks the 19th consecutive quarter of positive same-Shack sales growth, along with strong restaurant level and adjusted EBITDA margins, and double-digit adjusted EBITDA growth. Considering the macro environment, we feel especially proud of our results that reflect solid momentum and execution across both our company-operated and licensed businesses. We grew total revenue by 15.9% year-over-year to $367.4 million, led by strong new Shack openings and growth in our comp Shack base. We grew licensing revenue by 21.1% year-over-year to approximately $14.6 million, and license sales by 15% to $218.7 million. As we opened 7 licensed Shacks in the quarter and saw broad-based strength across most of our regions. In our company-operated business, we grew Shack sales by 15.7% year-over-year to $352.8 million. We opened 13 new Shacks in the quarter, bringing the total as of the end of the third quarter to 30 openings, well on our way to opening our largest class on record, and we have plans to open 55 to 60 new Shacks in 2026. We grew average weekly sales by 2.6% year-over-year to $78,000. We delivered 4.9% positive same-Shack sales growth that represents a 390 basis point improvement from our first half 2025 run rate. This acceleration was led by improved traffic from initiatives that Rob described earlier in his remarks. We grew traffic by positive 1.3% in the quarter and all months saw positive traffic growth. We had positive comps in traffic in nearly all of our regions. However, we continue to see macro pressures in New York Metro and Washington, D.C. that are weighing on our overall results. New York Metro and D.C. represent over 1/4 of our sales, and we have been experiencing a higher degree of macro pressures in these regions than many industry peers given our footprint today. So a challenging macro backdrop here continues to have an outsized impact on our overall performance. But in spite of those pressures in a few of our markets, we still delivered nearly 5% in same-Shack sales growth with positive traffic. And that's really a testament to our strong success in other markets we're actively growing our footprint and scaling. In fact, we drove 7% to 8% comps in the South, West and the Midwest, with double-digit comps in San Francisco, Orlando, Dallas and Denver among a lot of other major metros. As our development pipeline has significant tilt away from growing in New York City and D.C., I am optimistic that over time, we can lessen the impact that 1 or 2 markets with specific pressures can have on our overall trends. And Shack menu price was up approximately 2% and blended across all channels up approximately 4%. We took approximately 2% in menu price in the quarter to help offset the cost pressures from the mid-teens percent price increase in the beef market, and rolled off last year's nearly 2% price increase in October. With this, we will exit the year with approximately 3% menu price. We drove 1.4% of positive mix, led by kiosk merchandising efforts. Items per Shack declined 1.6%, consistent with our trends last quarter. Turning to restaurant-level profitability. We generated $80.6 million of restaurant-level profit, reaching 22.8% of Shack sales, a 180 basis point improvement over last year. Overall, the strong performance by our operators and the advancement of our strategic initiatives underscores the momentum we've built and our commitment to sustainable margin expansion over time, all while delivering on better guest metrics that Rob outlined earlier. Food and paper costs were $103.5 million, or 29.3% of Shack sales, up 110 basis points versus last year. The increase was primarily driven by mid-teens inflation in premium beef, which remains the largest part of our commodity basket. Historic low supply and sustained demand are contributing to a volatility in this category, and we expect elevated beef costs to persist through year-end and into next year. In the third quarter, our blended food and paper inflation after factoring in our cost savings was in the mid-single digits range. As we shared in our shareholder letter, while we are planning for these costs to still be up mid-teens percent year-over-year in the fourth quarter, we anticipate only a low single-digit net impact on food and paper costs. This is an improvement from the levels we showed in the third quarter, and this is due to the positive impact from our ongoing supply chain strategies. We expect cost savings from our supply chain to grow and be even more impactful in 2026. Labor and related expenses were $88 million or 24.9% of Shack sales, down 310 basis points year-over-year, reflecting continued operational efficiencies, improved retention and gains in our throughput. Other operating expenses came in at $53.8 million, or 15.2% of Shack sales, up 30 basis points year-over-year. This increase was primarily driven by higher digital sales. Occupancy and related expenses were $27 million or 7.7% of Shack sales, flat year-over-year. G&A was $44.4 million, or 12.1% of total revenue, and up 24.3% year-over-year as we made incremental marketing and people investments to support our growth. Equity-based compensation was $4.4 million, up 6.4% year-over-year, with $3.9 million in G&A. Preopening costs were $4.6 million, up 26.3% year-over-year as we opened 13 new Shacks and prepare for a strong opening schedule in the fourth quarter and into next year. We have approximately 30 Shacks under construction today. We grew adjusted EBITDA by 18.2% year-over-year to $54.1 million, or 14.7% of total revenue, a 30 basis point improvement compared to last year. Depreciation and amortization expense was $27.1 million. Net income attributable to Shake Shack, Inc. was $12.5 million or $0.30 per diluted share. Adjusted pro forma net income was $15.9 million or $0.36 per fully exchanged and diluted share. Our GAAP tax rate was 35.2%, and our adjusted pro forma tax rate, excluding the tax impact of equity-based compensation, was 25.1%. Our balance sheet remains strong with $357.8 million in cash and cash equivalents at the end of the quarter. This is up approximately $47 million year-over-year, and $21 million sequentially. We grew operating cash flow by 50% year-over-year to $63 million. We invested $39 million in CapEx to support the strong opening calendar, and are on track to deliver another approximate 10% reduction in our build cost this year. I'm going to now provide our guidance for the fourth quarter and the implications for our fiscal 2025 guidance. Our outlook assumes no major changes to the macro or geopolitical environment. Additionally, our fiscal 2025 includes a 53rd week. Due to the calendar impact from the 53rd week, the Christmas holiday closure falls outside of our comp measurement period this year, resulting in an extra sales day in our fourth quarter and full year comps. Our fourth quarter 2025 guidance, we expect system-wide unit openings of 27 to 37, with 15 to 20 company-operated and 12 to 17 licensed. Total revenue of $406 million to $412 million with same-Shack sales up low single digits year-over-year, and license revenue of $15.4 million to $15.7 million. Restaurant level profit margin of 23.3% to 23.8%. For the full year 2025, we expect total revenue of approximately $1.45 billion, up approximately 16% year-over-year, with same-Shack sales up low single digits year-over-year and license revenue of $54.1 million to $54.5 million. Restaurant level profit margin of approximately 22.7% to 23%, G&A to be approximately 12.3% to 12.5% of total revenue, equity-based compensation expense of $20 million, preopening costs of $19 million, net income of $50 million to $60 million, and adjusted EBITDA of $210 million to $215 million, reflecting the impact from the macro headwinds and increased marketing investment. Please see our shareholder letter for the full details on our fiscal 2025 guidance. Additionally, as a housekeeping note, next year, we are moving to a guidance framework that better conforms with general industry practice, and we look forward to sharing this with you when we provide our fiscal 2026 outlook. Thank you for your time. And with that, I'll turn it back to Rob. Robert Lynch: Thank you, Katie. I want to thank our team again for their hard work and passion for Shake Shack, which is the engine behind our strong third quarter performance and our ability to achieve our long-term goals. Thank you to everyone on the call today and for your interest in our company. And with that, operator, please open up the call for questions. Operator: [Operator Instructions] Our first question is from Christine Cho with Goldman Sachs. Hyun Jin Cho: Congrats on the strong quarter, and I appreciate all the color. I'd like to better understand your supply chain initiatives as a key driver of the margin expansion going forward. So first, how do you size the opportunity in the midterm? And two, how do you really plan to track and respond to consumer feedback regarding some of these product modifications that may arise due to your supplier changes, and to ensure kind of consistent quality across regions and stores? Robert Lynch: Katie, maybe I'll answer the second question first and then you come back to the expectations. Christine, so there will not be any spec or product modifications. We are committed to delivering the same quality that we have delivered. And it has made Shake Shack's reputation for culinary excellence what it is. So when we're looking at bringing on new suppliers, we go through a very thorough testing and validation process to make sure they can deliver the specs that meet our standards and that the quality is consistent or better than what we have used in the past. And that's across every component of the supply chain, whether it's the beef that we're using, the buns that we're using, our custard that goes to our shakes, our fries, everything has to meet our standards or else we will not add that supply to our system. Katherine Fogertey: Christine. So how we would think about the savings potential here? We started to roll out some more material cost savings in the fourth quarter. We're expecting that to build into next year. We've talked about -- as you saw in the third quarter, we had a pretty big step up in our food and paper costs as a percentage of sales. That was largely led by the mid-teens inflation in the beef market. And what we're seeing now with being able to mitigate some of that cost pressure through negotiations with our current suppliers and some additional supply chain strategies is that next quarter we're anticipating that food and paper as a percentage of our sales will moderate to more normalized levels with this low single-digit inflation. This is really powerful for us, and we expect that these benefits will grow into next year, especially considering historically, when we've had big swings in the beef market, our main lever has been to pull price to help offset that and protect margins. Now we just have a much bigger aperture of tools that we can use to help navigate these waters. And part of it is for -- to help optimize our cost structure. But also, as Rob talked about, we need to add more suppliers. We need to have multiple sources of supply on our critical items. And we need to make sure that we're really pushing ourselves to make sure that we have the right suppliers. And so I believe all of that work is underway here. It's really exciting to see that also translate into an ability to help navigate what is likely to be a challenging market for the foreseeable future on beef and still have net overall pretty muted inflation in our business. Hyun Jin Cho: And I think we've heard about kind of that broad deceleration in the macro intra-quarter and also softening trends into October. Could you kind of provide us with some thoughts on how you think about that setup in the fourth quarter? I know you pointed to D.C., New York travel pressures. But have you seen any pressures on the spending of the younger consumers under age 35 et cetera, that you would call out? Robert Lynch: Yes. I mean I would just say that I think it's pretty broadly understood that there's definitely some pressure on the lower income consumers. And I think there's also been some commentary about the unemployment rates of younger populations as well, which obviously impacts our industry. But we have taken those challenges and incorporated them into our strategy. I called out in the commentary that we launched French Onion LTO at the beginning of October. And we weren't delivering the incremental growth that we had anticipated in what we were seeing in Q3. And so we did a lot of analytics to understand what was happening and what the challenges were. And everyone knows, and it's everyone's talking about it, there's obviously a push to value in this industry. And so we leverage something that worked really well for us in Q3. Over the last week, 1.5 weeks, we went back to our in-app value platform and shifted our media, and shifted our awareness building to that platform. And we have seen dramatic change in the trajectory of our business over that time. We've seen over 80% growth in our app traffic -- traffic sales. So it's been really transformational for us. And that's a big part of our plan moving forward. We need to have a balanced approach. We are the premium player in the burger market and we will continue to offer a great culinary innovation that plays in that premium space, but we need to have a balanced approach where we also have a value offering that can be very attractive to our guests, but also be accretive to us both on top and bottom line. And by leveraging our -- which represents a relatively small portion of our business, the traffic that we're driving and the check that we have to give up to drive that traffic is much less cannibalistic of our holistic business. So it's really driving the performance that we're seeing right now in Q4 and what we anticipate will help us deliver strong results again in Q4. Operator: Our next question is from Michael Tamas with Oppenheimer & Company. Michael Tamas: Actually, Rob, I wanted to follow up on that last point a little bit. You talked about how French Onion Burger didn't perform up to what you thought it was going to. So maybe what surprised you relative to what you thought was going to happen? And how does that change the way that maybe you're testing, or that innovation calendar? Because the message has been pretty clear that you're excited about the innovation calendar going forward. And so is there anything about what you're doing that might need to change to drive that innovation going forward? Robert Lynch: Yes. Great question. What I would say is that French Onion was another flavored burger. And it's not that there's not room for flavored burgers in our innovation calendar. But it's -- that is kind of our standard based form of innovation. Moving forward, including another big idea that we have coming this quarter, it's much more of innovation that we haven't done before. Ideas that bring a new story, not just a new flavor to the ticket. And so we're focused on trying to bring things we've never done before, complemented by some of our historic LTOs that have been our biggest winners. So Truffle was a huge success for us. You're going to see Truffle again. For the Korean menu, a huge success for us, you're going to see that again. And we'll continue to innovate on our burgers. But right now, we're really focused on -- if we're going to be advertising and marketing a premium price point, it needs to be something that can generate, earn media, be newsworthy outside of just the launch a couple of days, a couple of articles written about it. We want our guests talking about our premium innovation similar to Dubai Shake, things that really create virality around the ideas that we're bringing. So that's the premium part. The other innovation that we're delivering, I just mentioned, is on the -- in our digital platforms, particularly in our app. Like we have never seen the kind of growth that we're seeing right now in our app. We both in the form of downloads as well as actual sales. And it's driving traffic growth on our business. And so that is going to be a focal point for us. We're going to continue to double down there. We just launched our new platform, which is our 1, 3, 5 platform $1 drinks, $3 fries and $5 shakes. And I think that this is a transformational thing for Shake Shack. It shows -- and we really built this and we talked about it, is how we show empathy to our guests during some challenging times. And I think that's resonated and that's going to -- that balance is going to be the holistic innovative way we approach the marketplace. It's not just about the premium offerings. It's about having a balanced approach, particularly in this time where we need to make sure that we're delivering value to our guests. Michael Tamas: And it's sort of like you knew my next question was going to be about value. Do you think that the 1, 3, 5 on the drinks, the fries and the shakes, do you think that's powerful enough for the consumer to recognize the value while you're still running premium burgers and sandwiches? Or do you think you need to sort of pivot a little bit on more of those like center-of-the-plate entree items to really give the consumer a little bit more value? Robert Lynch: Well, I can tell you, I have 10 days of data that would suggest it's extremely impactful. So I'm really excited about what we think this can do for us through the balance of the quarter and heading into 2026. And I can't wait to share those results with you next year when we're reporting on Q4. Operator: Our next question is from Brian Vaccaro with Raymond James. Brian Vaccaro: I wanted to ask about operations and sort of the guest experience and really appreciate the color you provided on average ticket times now below 6 minutes. I was wondering if you could elaborate just on what you're seeing in terms of other guest satisfaction metrics? Obviously, speed is very important, but it does sound like you're seeing improvements in the experience, quality, maybe taste metrics, that sort of thing. Are there any other metrics worth highlighting? Robert Lynch: Brian, I had a call with Stephanie last night at like 9:00 after she wrapped up. She's in Atlanta with our entire senior operations leadership team. We built this Atlanta center to bring our teams from all over the United States and be able to collaborate and plan and train and develop our teams. And it's amazing everybody is using this space right out of the gate, our operators, our development teams. But she had our operations team there over the last couple of days, and they are doing their quarterly business planning. And they are building plans to close the year really strong and they're also building plans to make sure that we have a pipeline of talent to be able to open up 60 Shacks next year. So our operations have really never been at this level. And every time I think we can't get better, we get better. And it's as much about the mindset and the culture as it is about the specific components of the plan. We -- our team, our operators right now are not talking about the macros. They're not talking about the challenges. They're talking about how we can serve our guests better. They're talking about how we can get faster. They're talking about how we can get better at deploying our labor where it needs to be. They're talking about how now we can extend hours to better service our guests in the Shacks where it makes sense. So -- and they're doing that with excitement and pride. And winning begets winning. And these guys have knocked it out of the park for the last year and have gotten better every month. And we've had some turnover and brought in some external leaders that have really brought great perspective to kind of the middle to higher end of our operations team. But it's also the folks who have been here for a long time and have been a part of Shake Shack for a long time. Sometimes when you bring in change and you try to transform something in 12 months there's resistance. And my discussion with Stephanie last night is like, look, everybody is on board. Everybody is full go. They're not talking about how tough it is. They're talking about how great we're doing. And that gives me the confidence that we're going to be able to continue to improve on our speed, accuracy, particularly in the delivery channels is a big core focus for us. We want to make sure that we're getting those orders right because those guests aren't in our dining rooms. They're not able to bring up something if it's not right. So we're focused on accuracy. We're focused on speed. And something that Katie talked about, and I talked a little bit about in the comments, we are significantly increasing the tenure and retention of our team members. You would think as we hold our teams more accountable, that, that might create an environment where people don't want to be a part of it. It's just the opposite. They're seeing success. They're seeing opportunities for them to advance their careers and they're staying longer. And that tenure builds experience, which makes them more productive and makes us a better operating units. So all of those things are moving in the right direction. On the guest sat -- yes, I mean get satisfaction across restaurant cleanliness, friendliness, all of the things that you measure have all moved in the right direction despite less labor hours. So we're just getting better. We're not ripping out labor to just drive savings. We're building models that optimize our labor pool, and that's delivering better guest satisfaction. Brian Vaccaro: All right. That's very helpful. And just a follow-up, if I could. Just Katie, a question on the G&A guidance. I think if we did our math right, it implies maybe a $10 million increase in the quarterly spend versus what we saw in Q3. And I understand you've added a lot of new talent to the organization. But could you just elaborate on what's driving the uptick in the fourth quarter? Katherine Fogertey: Yes. Yes. So as Rob talked about, we are making some meaningful investments here in marketing and media to drive the business. We're really excited about the stuff that we have lined up. We started kind of marketing this 1, 3, 5 platform that you talked about on the value side and seeing extremely strong results on the back of it. And we also have some exciting steps planned for later this year. These investments that we're making are all really geared at driving traffic, driving sales which, in turn, we expect to drive profitability at the restaurant level and beyond. So we're really excited about that. For those who haven't followed us as closely last quarter, we did talk about kind of embarking on this new strategy, new for us, kind of common place for the industry. But new for us of investing into paid media to better expand and grow the awareness and our message, and our ability to drive traffic at our restaurants. The results that we showed in the third quarter with 130 basis points of positive traffic growth and some really strong comps, especially relative to a challenged industry give us the confidence that this is indeed the model that we should be doing, and we're excited to make these investments here today. Operator: Our next question is from Sharon Zackfia with William Blair. Sharon Zackfia: I wanted to delve in a little bit more on that improvement you've seen in speed. And 5 minutes and 50 seconds is obviously a big improvement, but I'm curious what that bell curve looks like when you look across the Shacks, and what you would view like an ideal speed over time for the company to get to? Robert Lynch: That's a great question. And I think when you think about speed of service, averages can be very -- even though that's what we shared. Averages can be a little bit vague. I mean, what we are focused on right now is mitigating the tickets over 7 minutes. We want to make sure that we are not executing in a way that frustrates our guests. People don't get real upset about 5 minutes and 30 seconds versus 5 minutes and 50 seconds. They get upset when it's 8 minutes to get their food. So our plan to continue to drive down the average ticket time is to minimize our exceedingly long tickets. And that usually happens in rush when we've got super busy Shacks. Obviously, we do high-volume hours. And so some of the ways we're going to mitigate that is through some of the equipment technology that we talked about. One of the things that holds us up is we're making fries to order. And that takes a lot of time. And it's not like we can't hold fries. It's what everybody does. It will make them hotter, and it will give us better access to those fries. And so like fry holding is a simple way for us to make sure that, that doesn't become a bottleneck while still delivering the same or better quality. So there's equipment solutions that we can impart. There's also labor deployment. We used to -- part of what we're doing and how we're driving labor savings is we used to have like standard deployment schedules where when we opened, we always had in every Shack 5 or 6 people show up. We don't need 5 or 6 people every minute of opening. We're staggering the approach. We're bringing people in when we need them. What that does is it frees up some labor for us to deploy during the peak hours. So as we move underutilized labor off the shoulders and into the peaks, we're going to be able to get faster and be better. So there's equipment solutions, there's labor deployment optimization that are all going to drive improvement. But I think if we're in that 5-minute zone, 5 to 6 minutes like we're making our customers happy. They know it takes longer. We're cooking to order but we can't have the 8 minutes to 10 minute orders. That's where -- that's the danger zone. Sharon Zackfia: I also wanted to ask a follow-up on the menu innovation. Clearly, I think a lot of it has been on the premium end, and it sounds like French dip and ribs might be there as well. Is the idea that you can keep kind of your base price at a very affordable kind of hurdle for the consumer and allow them to self-select into these kind of higher price points and drive check that way? I'm just curious how you're thinking about kind of balancing premium versus value? Robert Lynch: I mean, you absolutely nailed it. We have pricing power. I want to make it really clear that if there is some significant inflation, we could execute price increases to mitigate that inflation. We are approaching pricing in a very disciplined way and challenging ourselves to not take pricing, especially in this environment. So we will continue to utilize pricing in the most productive way. But we want to hold -- we want to keep our core menu prices as low as we can possibly keep them. And the way to do that, is to get more efficient in our supply chain, more efficient in our operations, and to bring this innovation that allows us to have people, like you said, self-select into more premium price points and drive check growth. But I will tell you, we're also being very judicious on how we price those premium innovations. We have a big innovations coming here in the next couple of weeks that we're really excited about. And we are being very aggressive on the price point for what we're offering. And we're doing that because right now in this environment is the time to take share. Right now, when there's a challenging environment, that's the time when great companies get better. And we are focused on taking share. We are focused on making investments. We're not -- excuses and results are negatively correlated. Like we are not blaming macros. They are out there. We'll acknowledge them. It'd be naive not to do so. But we're building plans to address them. And we are focused on delivering value at every price point, whether it's our premium innovation, our core menu or the value offerings that we're putting into our app. Operator: Our next question is from Jake Bartlett with Truist Securities. Jake Bartlett: My first is on COGS and the impact of, obviously, beef inflation. You expect it to go into -- continue into '26. My question is that you've had some nice offsets this year, even aside from the supply chain savings, but you've seen some lower costs on the other items. So I guess if you can kind of give us a base case or roughly what we should and what you're thinking about for overall inflation -- food cost inflation in '26, including the items outside of beef, that would be helpful? And I have a follow-up. Katherine Fogertey: Jake. So how we're thinking about next year, we have this long-term guidance that we're going to be able to continue to expand our restaurant margins that's consistent with our 3-year outlook. We've reiterated that today, calling for 50 basis points a year in restaurant margin expansion. How we get there, and as we've talked about, we're expecting a lot of that next year to come from supply chain and through kind of the natural leverage from growing the business. We are embarking on kind of an accelerating path of supply chain savings. And also, as you've called out, there are some items that are moving more favorable as well in the commodity basket. We are planning for beef prices to still be a pressure though, next year. And we are working with our suppliers to help navigate through that environment, still meeting our objectives and our guidance for continued margin expansion next year without having to lean on a significant amount of price to offset the beef markets. I will share all of the details on how 2026 will -- how we're expecting that to shape up when we give our annual guidance in January. Jake Bartlett: Great. And then I had another question about the labor savings that you've been realizing. You're going to be lapping some right about now the labor deployment and then in January that the new scorecard. So the question is how much more you have kind of in the tank for labor efficiency? I know the message is you're kind of switching much more to the supply chain to drive the margin expansion. But is there any opportunity still to drive efficiencies with labor into '26 and beyond? Robert Lynch: So one of the big opportunity, untapped opportunities is on equipment. So we have built essentially an equipment innovation center in Atlanta. And our teams are doing work that we've never done before at Shake Shack to bring a standardized kitchen model that leverages equipment, that is really all about making our teams more efficient through increasing the ease to execute our model and delivering higher-quality hotter items faster. And we just had our global team come into Atlanta last week, and we shared some of these ideas with them, and they were blown away. And their remark was all the kitchen innovation used to come from our licensees internationally because they were going out and doing things that Shake Shack wasn't necessarily exploring. And now we are bringing the ideas to our restaurants, but also bringing them to our license partners so that they can operate their kitchens more efficiently, drive higher margins and build more Shacks at a more rapid rate globally. So equipment is a big untapped opportunity for us to be able to continue to drive operational efficiency and increase our speed. Operator: Our next question is from Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Just wanted to build on the marketing discussion. I know you mentioned building a foundation of a brand marketing model. I'm just wondering what new do you think we'll see into '26? I mean it sounds like a ramping on the paid media, which just began and wondering how that will tie in with the new loyalty program being rolled out in '26? How you think the interplay on those will drive incremental traffic? And then I had one follow-up. Robert Lynch: Yes. I mean our product innovation supported -- our product innovation and our value platforms, supported by media are what we are focused on delivering new guests, creating awareness and traffic, right? Our loyalty platform should increase frequency. And right now, what we are doing with 1, 3, 5 and the amount of adoption and downloads. And the -- all of that increased application user base is going to transfer directly into our loyalty platform. So we will launch our loyalty with a built-in user base and we will be able to leverage that loyalty platform to drive frequency with our most valuable guests. So both of those work in a symbiotic way together. We're going to advertise and bring people in with exciting new innovation and value platforms. They come in into our -- over the next 6 to 9 months as we build out our loyalty platform. They transition into the loyalty platform, and we leverage that to drive frequency. And that's the model that we're going to employ next year and moving forward. Jeffrey Bernstein: Understood. It does seem like there's confidence around the comp trajectory and initiatives there. And obviously, the unit growth that is accelerating in terms of openings and the restaurant margin, Katie, you just mentioned, kind of margin expansion. I guess it's the G&A that's therefore getting a lot of the attention and hopefully, that gets a good return. But because of the significant uptick in the full year spend this year, I know you said paid media starting in the fourth quarter. Should we therefore assume that, that uptick is sustained in 2026, presumably more like the fourth quarter of '25? Is it a good run rate to assume for that? How should we think about the -- at least directionally, that G&A spend, which seems to be the only area that's maybe working counter to all the other things that have that positive trajectory? Robert Lynch: Yes. No, it's a great question. I mean, we will obviously be providing guidance on 2026 in January. So I'm not going to necessarily speak to what we're forecasting in sales. But what I can tell you is the G&A is the fuel that's going to drive the comps. And obviously, we are going to make investments that we believe we're going to get returns from. And so this, as I said earlier, this environment, where we're seeing a lot of competitors be challenged and lose traffic. This is our opportunity. This is our opportunity to take share. This is our opportunity to gain customers at a disproportionate rate. So we are all in. We are -- we believe ourselves to be a hyper growth company, right? And now we have the operations excellence to have 100% confidence that when we're sending new guests, or infrequent guests who may have had a bad experience in the past, back to our Shacks, they are going to have a balanced options in terms of value and premium. They're going to have the highest quality that we've ever delivered, and it's all going to be served fast and accurately. So that creates lifetime value. So yes, I mean, we're investing G&A because that's the fuel. And over time, we should be able to scale that investment. We should be able to grow our revenue faster than we grow the rate at which we invest marketing and G&A, and that's going to create margin expansion. So this is a first in time we've invested at scale on paid media. And so yes, right now, it isn't scaled. It isn't necessarily at the point where we're able to decrease our G&A as a function of revenue, but that's the plan. And so it's either that or we kind of batten down the hatches. And we're not prepared to like issue a dividend anytime soon. This is a growth company. We're going to invest in growth. We believe that we have the right model in place. Operator: Our next question is from Andy Barish with Jefferies. Andrew Barish: Rob, just a question kind of from your background in QSR and sort of taking a higher-level approach to what's been sort of an unrelenting discounting promotional environment, both below you guys as well as above. How do you kind of see that playing out in '26? And is that informing any of your decisions on driving the Shake Shack business? Or do you guys think you can do what you can do if you execute on the plans you've given us today? Robert Lynch: Yes. I mean we're in the thick of it right now. I mean, everybody is pushing value. You've got $5 meals. You've got $11 casual dining meals where you sit down and get waited on, like there's value of plenty. And we are executing our model in the thick of that and delivering, I think, outpaced results. We're not optimized yet. We are going to continue to learn. We're going to continue to get better. Some of our things we're doing have better results than other things we're doing. But we are very well prepared to deliver a balanced growth engine into 2026. And we -- like I said, are continuing to identify what works, what doesn't, what price points make sense, how to execute things, which target audiences to go after? All of that is feeding our plan moving forward. And I'll just tell you, it never feels good to get on a call and say, hey, we ran something for 3 weeks, and it didn't work, but -- as well as we wanted it to. But what I want everyone to take away from that is that we have an agile business model. We are going to evaluate everything in real time with data and analytics. And when we see an opportunity to improve our results, we can shift into something that we believe will give us higher returns and deliver better outcomes. So we have our plan already in place for 2026. We know what we're launching. We know when we're launching it, we know how we're doing it. We'll continue to assess the environment, the competitive environment as well as the results that we see and optimize on an ongoing basis. Operator: We have reached the end of our question-and-answer session. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good day, everyone, and thank you for joining this Farmland Partners Inc. Q3 2025 Earnings Call. My name is Jim, and I'll be your operator for today's session. [Operator Instructions] Also a reminder, today's session is being recorded. It is now my pleasure to turn the floor over to our host, President and CEO, Mr. Luca Fabbri. Please go ahead, sir. Luca Fabbri: Thank you, Jim. Good morning, and welcome to Farmland Partners third quarter 2025 earnings conference call and webcast. We truly appreciate you taking the time to join us for this call because we see them as a very important opportunity to share with you our thinking, our strategy in a format less formal and more interactive than public filings and press releases. I will now turn over the call to our General Counsel, Christine Garrison, for some customary preliminary remarks. Christine? Christine Garrison: Thank you, Luca, and thank you to everyone on the call. The press release announcing our third quarter earnings was distributed after market closed yesterday. The supplemental package has been posted to the Investor Relations section of our website under the sub-header Events and Presentations. For those who listen to the recording of this presentation, we remind you that the remarks made herein are as of today, October 30, 2025, and will not be updated subsequent to this call. During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions, impact of acquisitions, dispositions and financing activities, business development opportunities as well as comments on our outlook for our business fronts and the broader agricultural markets. We will also discuss certain non-GAAP financial measures, including net operating income, FFO, adjusted FFO, EBITDAre and adjusted EBITDAre. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing third quarter 2025 earnings, which is available on our website, farmlandpartners.com, and is furnished as an exhibit to our current report on Form 8-K dated October 29, 2025. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release distributed yesterday and in documents we have filed with or furnished to the SEC. I would now like to turn the call to our Executive Chairman, Paul Pittman. Paul? Paul Pittman: Thank you, Christine. Good morning, everyone. This is, again, a very strong quarter for us from the standpoint of AFFO performance. I'll let the rest of the team make some more specific comments about that. I want to make a couple of comments, though. As you all read overnight, appears to be some sort of a China trade deal involving agriculture commodities. I think that, that's obviously going to be beneficial for American farmers. It's a little unclear. It looks like maybe a 1-year deal and quite a bit of soybean sales. I tried to find this morning in the news more detail. There doesn't seem to be much. My sense is if you look back to the last time the Chinese were really aggressive in terms of soybean buying, which was, I think, the ’21 year -- the 2021 year. This will be a material bump in the exports of soybeans from the U.S. to China over the next few months. I don't think it's sort of earth-shattering in terms of positive for farmers. It's certainly good news. But since it's only a 1-year deal, it's hard to see whether it will have a real impact on long-term rents or land values. Land values continue to go up despite the fact it's been a somewhat tough farm economy for operating farmers this year. The other comment I would like to make about this year's AFFO, while we are thrilled with how strong it is, it is based on some very positive operating events that occurred during the year on some of these farms and also the expansion of our loan program with some sort of opportunistic lending. The caution I want to give everyone is while we're thrilled with this year, it's based on some onetime events. So frankly, I think next year, we'll start out next year with kind of the same place we started this year, which is a sort of more modest AFFO than what we're actually ending up with. We'll do our best to find the onetime events next year that bump that number, but you can't promise them since they are onetime events. With that, I'm going to turn it over to you, Luca, to go through things in more detail. Luca Fabbri: Thank you, Paul. I will, of course, echo Paul's both kind of celebration of a very strong financial performance for the quarter and for the year as well as a little bit of a caution note regarding performance next year as we always strive to do our best to build on top of a very strong bedrock of operating performance, good things every year, but you never know whether we can pull that off. A couple of things that I wanted to highlight for this quarter is number one, the sale of our brokerage and third-party farm management subsidiary, Murray Wise Associates. I think this is a very good outcome for our shareholders in terms of getting a good price for this subsidiary, for this business as well as simplifying significantly our operations. And this is very much in line with our strategy of simplification that we've been pursuing now for several years. This is also a very strong outcome for another set of very important stakeholders in the company, which is the employees. I think that this sale gives the team at MWA a very strong platform to continue their professional growth, while maintaining our access to their collective knowledge and experience and our relationship with them because we plan to continue using their services in the future. The second is a transaction I want to highlight is that we exchanged $31 million worth of our Series A preferred units for a set of properties in Illinois that were actually originally part of the transaction that kind of led to the issuance of the Series A preferred. And I want to highlight that the properties were sold at a much appreciated value compared to the value of 10 years ago, appreciated by about 56%. This, again, is a very tangible proof of the appreciation potential in this asset class that we continue to prove to the market that -- and to deliver -- our efforts to deliver that value to our shareholders. In that vein, we are also announcing that we are planning to issue a special dividend for this year, very much in line with what we did 2 years ago and last year. This year, we are targeting a range of between $0.18 and $0.22 per share to be issued in January 2026 alongside with the regular dividend. Again, this is very much in line with our commitment to deliver value to our shareholders. And with that, I will turn over the call to our CFO, Susan Landi, for her overview of the company's financial performance. Susan? Susan Landi: Thank you, Luca. I'm going to cover a few items today, which includes a summary of the 3 and 9 months ended September 30, 2025, a review of our capital structure, a comparison of year-to-date revenue and updated guidance for 2025. I'll be referring to the supplemental package, which is available in the Investor Relations section of our website under the subheader Events and Presentations. First, I will share a few financial metrics that appear on Page 2. For the 3 months ended September 30, 2025, net income was $0.5 million or $0 per share available to common shareholders, which was lower than the same period for 2024, largely due to the recognition of deferred gains from 2023 property dispositions of $2 million versus the current period dispositions resulting in a loss of $0.5 million. Note that the decrease in disposal gains is partially offset by interest savings associated with our lower average debt balance. AFFO was $2.9 million or $0.07 per weighted average share, which was higher than the same period for 2024. AFFO was positively impacted by significantly lower interest expense as a result of debt reductions, lower property operating costs and increased interest income due to a higher average balance on loans under the FPI loan program. For the 9 months ended September 30, 2025, net income was $10.4 million or $0.18 per share available to common shareholders, which was higher than the same period for 2024, largely due to net gains on dispositions of 35 properties that occurred in the current year, significant debt reductions resulting in interest savings, as well as increased interest income due to the higher balance under -- on loans under the FPI loan program. AFFO was $6.5 million or $0.14 per weighted average share, which was higher than the same period for 2024. AFFO was positively impacted by lower property taxes, lower general and administrative expenses and lower interest expense as a result of significant debt reductions. Next, we'll review some of the operating expenses and other items shown on Page 5. Gain on disposition of assets was higher during the 9 months ended September 30, 2025, than the same period in 2024 due to the dispositions of 35 properties in 2025 with aggregate consideration of $85.5 million, which resulted in a net gain on sale of $24.5 million compared to a gain of $1.9 million in 2024. The net loss on disposition of assets during the 3 months ended September 30, 2025, was due to the sale of a West Coast property. As a result of significant reductions in debt that have occurred since October of 2024, interest expense decreased $3.2 million for the 3 months ended September 30, 2025, and $8.4 million for the 9 months ended September 30, 2025. In addition, the dispositions resulted in lower property operating expenses and depreciation expense. General and administrative expenses decreased $0.4 million for the 3 months ended September 30, 2025, primarily due to the accelerated stock compensation that was recognized during the prior year period. General and administrative expenses decreased $1.7 million for the 9 months ended September 30, 2025, compared to the same period in the prior year due to a onetime severance expense of $1.4 million plus the accelerated stock-based compensation that was recorded in the prior year. Next, moving on to Page 12. There are a few capital structure items to point out. Having repaid our lines of credit in full with repayments totaling $23 million in July, we had full undrawn capacity on the lines of credit of approximately $159 million at the end of Q3 2025. We have no debt subject to interest rate resets in 2025 and as a result of our swap, no exposure to variable interest rates. Page 14 breaks down different revenue categories with comments at the bottom to describe the differences between periods. A few points that I'd like to highlight include fixed farm rent decreased as expected because of the dispositions in Q4 of 2024 and thus far in 2025. Solar, wind and recreation increased primarily due to proceeds from a solar revenue sharing arrangement with the tenant in the first quarter of 2025, but that was also partially offset by dispositions. Management fees and interest income increased primarily due to the increase in loan issuances under the FPI loan program. And finally, direct ops, which is a combination of crop sales, crop insurance and cost of goods sold. Crop sales did increase as a result of higher prices and yield on citrus and avocados as well as sales occurring earlier in 2025 than in 2024, while the cost of goods sold increased due to higher maintenance costs. This increase in cost of goods sold was partially offset by lower impairment on inventory. Page 15 has our updated outlook for 2025. You can find the assumptions listed at the bottom of the page. On the revenue side, changes from the July guidance include an increase in management fees and interest income as a result of the higher loan balance under the FPI loan program. Increases in variable payments, crop sales and crop insurance as a result of updated outlook on properties with variable rent and properties that we directly operate. The decrease in other items is primarily due to less auction and brokerage revenues as a result of the upcoming sale of Murray Wise & Associates. On the expense side, changes from the July guidance include an increase in impairment related to the current period, impairment expense for certain properties on the West Coast as a result of updated market information, and this was primarily offset by a decrease in property operating and depreciation expenses related to property dispositions. The forecasted range of AFFO is $14.5 million to $16.6 million or $0.32 to $0.36 per share, which is an increase from the prior quarter on both the high and low end of the range. This summarizes where we stand today. We will keep you updated as we progress through the year. This wraps up our comments this morning. Thank you all for participating. Operator, you can now begin the Q&A session. Operator: [Operator Instructions] We'll hear first from Rob Stevenson at Janney Montgomery Scott. Robert Stevenson: When does the '23 farm sale and the retirement of the preferred units close? Is that sometime sooner rather than later in the fourth quarter? Does that extend into early first quarter? How should we be thinking about timing there? Paul Pittman: Luca, why don't you handle that question, and I'll comment as necessary. Christine, I think you have the date. Christine Garrison: That transaction will close December 10. Paul Pittman: Yes. The important additional fact there is that we -- in that negotiation, we were able to agree with the party that we're making the exchange with that we will not have to pay the dividends on that preferred from, I believe it was from August 1, maybe September 1, but we got a little... Luca Fabbri: August 1. Paul Pittman: August 1. So we have a little benefit there in terms of not having to pay the dividend as well. Robert Stevenson: That's great. And then any additional sales that you guys are expecting to complete in the fourth quarter? Are you basically done with sales for this year with this 23 Farm disposition? Paul Pittman: We -- the 23 Farm disposition luckily did not count as our 1 of 7 under the tax law because we're limited to 7 transactions a year under most cases. So it didn't count because of the way it's done as an exchange. So we -- I think we've done maybe 5 or 6 transactions so far. We've got a few other small ones in the hopper. Hopefully, something else happens between now and the end of the year, but not likely to be on the scale of that 23 Farm deal. It will be single-digit million kind of transactions if something else happens. Robert Stevenson: And would that -- at this point, given that it's small, is that still within -- would be within the special dividend, the range that you guys gave in the... Paul Pittman: Yes, we're likely to stick with that range at this point without regard to what happens with one additional acquisition. I mean there is discussion on that. Robert Stevenson: And then what are you guys planning on doing with the MetLife Term Loan that matures in March? Paul Pittman: Luca, do you want to handle that? Luca Fabbri: Yes. We are planning to renew it probably with MetLife themselves or with one of our other lenders. Robert Stevenson: And where does pricing today look for you guys relative to the 555 that is currently costing you? Luca Fabbri: We're still -- kind of interest rates are kind of moving a little bit and that renewal is not in the cards for another couple of months at least. We are expecting spreads to stay fundamentally consistent. Robert Stevenson: Okay. That's helpful. And then you guys raised the guidance, but I think in the commentary, talked about the guidance decrease for the other items from the sale of Murray Wise. Is that running at somewhere close to $1 million a quarter? How should we be thinking about how we should be looking at that on a quarterly run rate going forward as we adjust our models removing Murray Wise from the expense and revenue lines? Paul Pittman: Luca, please handle that, and it may be more detailed than you can do on this call, and we could follow up later. But... Luca Fabbri: Yes, I'm looking at Susan. She is pulling up some numbers. Susan Landi: Yes. So Murray, so the revenues are somewhat lumpy. So there's not really a good answer for that. I mean it's the nature of auction and brokerage, right? It's not going to be a consistent thing. Usually, that's going to be more of a Q4, Q1 type of activity. So looking at -- so I don't know that it's going to have a significant impact on our bottom line overall with that removal. We haven't -- as far as like more specifics, I'm not sure that I... Luca Fabbri: Yes. And so let me add to that. In terms of the remainder of this year, it's going to be a little noisy, but truly de minimis given that this transaction is expected to close in November 15. As far as next year is concerned, the -- we were always very cautious in projecting the performance of that business. So with typically revenues only slightly ahead of costs. So overall, the impact of that transaction is going to be, relatively speaking, negligible in the context of the overall P&L in 2026. Robert Stevenson: Okay. And then last one for me. In the detailed assumptions on the outlook, you guys increased legal and accounting due to increased litigation spend. Is that more stuff off the short and distort stuff? Or is that something else that you guys are litigating at this point? How should we be thinking about that? Paul Pittman: Yes, we have -- we continue to have some legal costs related to the short and distort but they're frankly modest, certainly compared to where they used to be. And I think we're hopefully getting closer to winning, so to speak, in that regard. Then, we've also got an ongoing legal dispute in Louisiana on one of the farms that has -- it's local counsel, so it's not extremely high numbers, but it's a number we hadn't budgeted for that we're spending defending that situation. Just a small uptick, but a negative surprise, so it wasn't really budgeted for. Operator: [Operator Instructions] We'll hear next from the line of Craig Kucera at Lucid Capital Markets. Craig Kucera: I wanted to follow up and get a little more color on the Series A transaction. I know they can convert the remaining preferreds into common OP units in the first quarter. In their discussions with them, have they indicated they're looking to convert? I mean, I'm just trying to figure out from a share count and preferred dividends perspective from a model perspective next year. Paul Pittman: They -- it's not that they have the right to convert. It's that we have the right to pay them off or convert them. We will -- I won't say 100%, but I'll say 99% probability that we just pay that off and it does not get converted because I believe the stock price that would get converted at, is below intrinsic value. So that's on the upcoming conversion, Craig. As far as the transaction itself, this is a gentleman that we -- very successful in agriculture, but also other industries, a guy from Illinois that we bought these farms from, it’s been 10 years ago now, basically. And we've maintained a very good relationship with him. He was for a time, a decent sized common shareholder and then certainly has owned his preferred, and he's been a good long-term partner. He, for his own sort of family wealth planning, what he wanted to buy back were the farms closest to his traditional family home because 10 years later, I think he decided he could frankly afford to re-own them and pass them on to his children. And so he did that. And that's where the $31 million of farms came from. And as Luca said earlier, a great transaction for us. We got a 5% to 6% a year kind of appreciation during the hold period. And fundamentally, a lot of that transaction was financed with a 3% coupon preferred, which we're now trading him back for those farms. So a huge win for shareholder value in the transaction. Luca Fabbri: Just as a follow-up, Craig, of course, we've known that this was coming for a long, long time in terms of the expiration, if you will, of the Series A preferred. So we are very well prepared with our liquidity access to our lines of credit to pay down the -- to extinguish the Series A preferred in cash. Of course, that will have an impact on the P&L, at least for a while because we are trading at 3% preferred with the borrowing on lines of credit and now call it at a blended in the mid-5s, but we're prepared to manage that as well. Craig Kucera: Okay. I appreciate that color. That's helpful. Changing gears. There was a mention there, obviously, crop sales were significantly better than we were looking for. And then the footnote it references the sale of a walnut property, which accelerated some recognition of revenue and expenses. Can you give us some color on how much that impacted crop sales revenue and the cost of goods this quarter? Paul Pittman: Susan, do you want to handle that one? Susan Landi: Yes. Bear with me for a minute while I pull the figures. Paul Pittman: While she's pulling the figures, I'll make a general comment. Basically, when you sell off a farm like that, that has inventory on the tree, you do a transaction related to that inventory. And so it gets done more quickly than it would have been if it had actually waited around to pick the walnuts. I mean that's the big picture on the ground reason it was accelerated. Susan, you can make the financial comments as appropriate. Susan Landi: So we recognized about $0.2 million on the sale of the Blue Heron, our property in California, the walnut property. Craig Kucera: Okay. So not that material? Susan Landi: It's accelerated – it’s for the accelerated portion. Craig Kucera: Yes. Okay. That's helpful. And just one more for me. Looking at the guidance, one of the main increases in revenue was related to management fees and interest income. It doesn't look like you funded any loans on a net basis here in the third quarter. Does that imply you were seeing a pickup in the loan pipeline expected to close in the fourth quarter or maybe something that you thought was going to pay off, didn't pay off? Just some color there would be helpful. Paul Pittman: Yes. It's really the second thing that you said. Somebody came to us and said we'd like to continue to extend this loan subject to us having a strong security position and being comfortable with the loan. We're almost always willing to do that because we are a high-cost lender. And as long as we're comfortable with the security position, we're happy to keep making the money. So we extended somebody out, and that led to the move of the projections. Operator: [Operator Instructions] We'll move forward to John Massocca at B. Riley Securities. John Massocca: Maybe kind of continuing with the line of questions about the loan portfolio. Are you expecting or are there significant kind of maturities upcoming in kind of the loan receivables in 2026? Paul Pittman: Well, we -- as we have -- we've mentioned this in the prior conference calls, so I'll mention it again. We are gradually shrinking the portfolio because it's -- we're arbitraging private market value to -- against public market discount and through stock buybacks or special dividends, distributing that cash back to our shareholders or that profit back to our shareholders. So in that process, obviously, we're shrinking the revenue line of the company. And so we've focused on expanding this loan program a little bit because it's high current yield, right? You don't get the appreciation, but you get quite a bit of high current yield from doing that. And so we've done that intentionally, and we'll kind of continue to do it because as we shrink portfolio size, we still have to frankly cover the overheads. And that loan program helps us do that. So that's -- so we're pretty intentional about actually expanding that loan program gradually as time moves on. We don't want to take on too much risk, of course, but with loans with good assets underneath them, happy to do it. John Massocca: Okay. And maybe switching gears a little bit, like bigger picture, what's the exposure in the portfolio either by acreage or rent or however you want to measure it to soybean farms and farmers? Paul Pittman: Well, that -- so when you look in the corn belt, which is now with the exception of California the overwhelming majority of what we own, meaning Illinois, mostly, a little bit in Missouri. Those farms are, generally speaking, on an every other year rotation between corn and soybeans. So the quick answer would be approximately 50%. Now corn is -- for the farmer, corn is a consistently more profitable crop. And so it's really not 50-50. It's probably more like 60% corn in any given year, 40% soybeans because corn -- most of those row crops, corn, soybean farmers will occasionally do corn on corn to increase the percentage of corn acres they have. It just -- it's an overall revenue and profitability, a slightly more profitable crop in 9 out of 10 years. So if they can get away with it, they'll do corn 2 years in a row in some fields. So it shifts that -- it shifts it from the 50-50 to something slightly more weighted to corn. Luca Fabbri: John, I know you're very familiar with the concept I'm about to explain. So I'm saying this more for the benefit of other listeners. The -- I think the 100% of our row crop leases with farmers that would farm soybeans are fixed cash rents. So our exposure to soybean and especially trade wars and so on and so forth is very much indirect. It's not through crop shares and so on and so forth. It is through the overall financial health and strength of the farmers, which is, in any case, backed by crop insurance. John Massocca: Okay. But as we think about kind of maybe the exposure to any distress in that space or any kind of recovery in that space, it really touches on pretty much everything from a commodity crop basis in your row crop portfolio just because they are potentially rotating that planting in a given year... Paul Pittman: Yes, it's actually -- so what Luca said is an incredibly important point. We have no direct exposure to speak of to soybean prices. But we have significant indirect exposure to farmer profitability and soybean prices are a piece of that. So -- but it's not really a story about soybeans. It's a story about farmer profitability. And so, if the Chinese reenter the market and the Chinese are the world's largest consumer of soybeans, that will be good for U.S. farmers. Now it's not as good as you might think, however, and I've said this earlier in other conference calls. If the Chinese are buying all their soybeans from Brazil, somebody else used to be buying from Brazil that shifted to buying from the U.S. So the negative impacts of what China does vis-a-vis the U.S. share of our exports, it mutes it because other buyers come back into the market to replace the soybeans that got pushed out. And then the flip side is also true. If they start buying here, it will modestly elevate pricing. but it's going to shift to -- they're just not -- there's a kind of a defined universe of soybeans in the world, and you're really kind of moving the shelves around on the board, not fundamentally making massive changes in overall demand. On the margin, don't get me wrong. When the Chinese stop buying from the U.S., that is marginally bad. And when they start buying from the U.S., it is marginally good because there's such a power in the marketplace. But it's not massive dramatic shift. The other thing is, and that's why I said it's about profitability, not about soybeans per se. If soybeans become more profitable to farm, the corn market through the Chicago Board of Trade basically has to buy corn acres by increasing the profitability of corn farming. It's Econ 101. And so because it's -- those 2 crops are competing for the land base in the Midwest. And so soybean prices go up, it will move corn prices up. Corn prices go up and move soybean prices up. So again, this is all a good thing. But the story for us and our company is always this global food demand just keeps gradually increasing and global demand for the commodity, for the products made from corn and soybeans in particular, just keeps increasing, whether it's ethanol or food. And there is a scarce and gradually declining land base of the really high-quality soils, and we own a lot of it. And that's why you see back to the transaction we did with the preferred, that's why you see this kind of 5% to 6% per annum appreciation of those farms. And it kind of goes on no matter what because it's not connected to soybean prices. It's connected to long-term farmer profitability. And you cannot turn the world's bread basket to negative margin for very long. Don't believe everything you read in the press. There's not much farmer bankruptcy, by the way, as an example. There just isn't. John Massocca: Appreciate all the detail on that. Just one last one. Apologies if maybe I missed it earlier in the call. On the buyback, I understand it's not in the updated guidance, but any more runway for buyback in 4Q and maybe even heading into 2026 just off the back of kind of capital raise and dispositions done earlier in the year? Paul Pittman: Luke, I'll let you handle that. Luca Fabbri: Yes. So we -- our decisions on buybacks is something that we do on an ongoing basis, if you will. We still see the current stock price and the discount to NAV as being a very, very strong proposition for buybacks. It's our own stock as we unfortunately joke is the cheapest farmland we can buy. But with the expiration of the Series A preferred and rolling that into the lines of credit, we are increasing our interest expense. So that also comes into the equation. Fundamentally, our buyback activity going forward will be driven as usual by potential additional dispositions and therefore, proceeds from those dispositions. And if we -- we're knocking on wood. I mean we are working to increase our stock price, of course, but if we were to see the stock price dip, we would definitely jump in and probably and use our further access to lines of credit to harvest the opportunity. Paul Pittman: Yes. Let me just add one thing to that. I mean if you think about this as really distribution of cash to shareholders, I mean, that's what a buyback fundamentally is. And obviously, we try to manage it against low stock price versus higher stock price. With the idea that an upcoming special dividend coming, we're going to trade probably at a slightly elevated basis for the next few months. So, it sort of lessens the probability of buybacks and the flip -- and in addition to that, during this time of year, our methodology of getting money that's out to shareholders based on the profit that we've made from sales, the way to do that is a special dividend. When you get out in the rest of the year, the way to do that is the buyback. And so, at this particular time and for all the reasons Luca said, plus that sort of general view that we’re not likely to be doing a lot of buybacks right on top of the special dividend. I don't think there'll be a lot of that in the next quarter. But as Luca said, if you saw the stock price decline substantially, we'd probably step into the market. Operator: Our next question today will come from the line of Tousley Hyde at Raymond James. Tousley Hyde: Thanks for taking my question. I just got a quick one here. In the past, you mentioned that the long-term average rate increase is somewhere around 3% to 4%. I was just kind of curious, as you pare down the portfolio, how that average might skew going forward, if at all? Paul Pittman: It will stay consistent. These averages are largely -- the nationwide averages are largely dominated, frankly, by row crop Midwest. because that's the biggest piece of the farmland economy overall. California specialty crop and total economic impact to the nation is probably somewhat similar, but much lumpier because it's different crops and every crop has its own cycle. So the -- as our portfolio gets more and more weighted to the Midwest, it probably sticks closer to those kinds of averages rather than further apart. Tousley Hyde: And do you have any updates you can share on the renewable progress for this year? Paul Pittman: Yes. This is a year in which these renewals are largely done by now because you're prepping the soils in many cases for next year's crop already. So the renewals are kind of pretty much behind us or being finished as we speak. It looks to us like in the row crop region of the country where we have rollovers, it will be more or less flat with last year, which is the last few years, we've been getting great big rent increases. We won't get those this year. What we do, though, when we're in a cycle where you're negotiating those rents in a somewhat tough economic cycle for the farmers, we just -- we cut the negotiations of the new rent -- new lease to a 1-year extension. That way, what we're not doing is signing up in a difficult economic negotiating cycle for another 3-year lease. We just extended out 1 year. And then this China news, for example, probably is going to make the negotiation cycle that starts late next summer easier than it was this year, easier, meaning higher rents are possible. Operator: That was our final question in the queue today. Mr. Fabbri, I'm happy to turn it back to you, sir, for any additional or closing remarks. Luca Fabbri: Thank you, Jim. We appreciate your interest in our company and look forward to updating you on our activities and results in the coming quarters. Have a great rest of your day. Operator: This does conclude today's Farmland Partners Inc. conference call. We thank you all for your participation, and you may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the Lufthansa Group Q3 2025 Results Conference Call. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marc-Dominic Nettesheim, Head of Investor Relations. Please go ahead, sir. Marc-Dominic Nettesheim: Thank you, and welcome, ladies and gentlemen, from our side to the presentation of our third quarter results 2025. With me on the call today are our CEO, Carsten Spohr; and our CFO, Till Streichert, and both will present our results for this third quarter and discuss the commercial outlook for the remaining 3 months of the year. Afterwards, you will have the opportunity to ask questions. And as always please limit yourself to 2 questions so that everybody else has a chance to participate in Q&A. Thank you very much. And with that, Carsten, now over to you. Carsten Spohr: Yes. Thank you, Marc. And to all of you, a warm welcome also from my side. It's just a few weeks since we met many of you at our Capital Markets Day in September. And today, then following this, I'm pleased to share our third quarter figures with you together, of course, with Till Streichert on my right here. As you have read from the figures published this morning, we can report rather positive developments for the quarter with quite a few aspects and KPIs showing improvements. The most important one for sure, we are well on track in terms of regularity and punctuality of our flight operations, which serves in the end as the basis for all other improvements we'll be talking about later today. So let me nevertheless, start with a macro view of the whole industry. The global aviation sector continues to boom. And over the next 20 years, at least according to IATA forecast, the global passenger numbers will once again double. I think there are very few industries in the world, at least in the real economy that can count on such a reliable and long-term upward trend in demand. And in the current aviation landscape, strong demand growth meets limited supply very likely for many years to come. And this combination obviously generally works in our favor, even though, of course, there are downsides on the operational side with delayed aircraft. We'll also be touching on this in a minute. But overall, as by now the fourth largest airline group in the world and as #1 in Europe, our passenger airlines are globally well positioned to benefit from this global high demand, especially premium classes. We'll come to that as well. And on top of that, the supply constraints also provide enormous momentum for the MRO sector, worldwide aging fleets ultimately drive higher maintenance demand and that ensures stable and recurring revenues for Lufthansa Technik even though we had some setbacks this quarter due to tariffs, Till will elaborate on that. And this balanced portfolio provides stability in macroeconomic turbulence times. And on top of it, of course, we have Lufthansa Cargo, where we also own a business that can benefit from these current global uncertainties. Our industry has become more resilient and so have we in the Lufthansa Group. Through collective efforts and focus, we have regained network stability that sets the foundation for our future profitable growth. The core, as mentioned before, of our whole business model remains a stable flight operation. In this regard, the summer '25 clearly marked a turning point, especially if you compare it to the 3 summers before. And this came not for free. We had massively invested into stabilizing the system. We have, for example, extended scheduled flight times. We have brought up the share of aircraft reserves. We have increased connecting times in our hubs, but all this was well worth it. Stabilization came. And on top, of course, significant reduction in IRREG cost allowed us to also have a positive impact on our financial numbers. And now, of course, looking into the future, starting in '26, there will be efficiency enhancements that we will have on the top of our agenda. This fortunately goes hand-in-hand with the biggest fleet renewal of our company's history. Just 3 weeks ago, our first Dreamliner with a new Allegris Cabin on board took off to Toronto, and we will get further 787s almost by the week, actually more than by the week, we get 2 this week alone and will bring the number up to 34 total very soon. Until the end of the year, we will have received at least 8 brand-new Dreamliners, at least according to the updated information from Boeing. And on top of that, on behalf of Airbus, we were able to get and receive the first 350-900 for Swiss with a new product SWISS Senses on board also just 2 weeks ago. So now our premium long-haul product, Allegris is not only available in Munich, but also in Frankfurt and in Zurich. Ladies and gentlemen, let me take a look at the numbers. In Q3, we were able to further expand our capacities and that particularly on the North Atlantic. And despite the somewhat cautious booking situation in spring caused by the tariff announcement around Easter, we, in the end, experienced a well-booked summer. Globally, we have seen moderate capacity growth of 3.2% compared to the previous year. By that -- or partly by this, total revenue has increased by almost EUR 300 million to EUR 11.2 billion -- sorry, by EUR 500 million, reaching EUR 11.2 billion. Our adjusted EBIT for the third quarter remained stable at EUR 1.3 billion, more or less on par with last year. And year-to-date, though, we can report an improvement of already EUR 300 million versus '24, showing some nice progress on this promise of significantly improved results for the whole year. Key driver of our financial success, again, is and has been the stabilization of our flight operations. Regularity in Q3 was at 99%. Departure punctuality improved by more than 10 percentage points compared to last year. This brings me to our capacity allocation. Year-to-date, we have mainly grown on our European -- domestic European routes and on our North Atlantic routes. And while the third quarter indeed showed some but anticipated yield softness in these regions, the North Atlantic was still our most important profit pool. Of course, as you well know, supported by our successful joint venture with United and Air Canada. But it's worth to note that the yield softness is, of course, also partly currency driven. Excluding currency effects, our RASK actually remained stable versus the prior year. Looking ahead, we plan continued growth on the North Atlantic, in line with the market and also given that capacity-wise, we are still somewhat lagging behind our peers compared to pre-pandemic levels. Growth on the continental network, nevertheless, will be more limited, more or less stable, less than 2% with capacity discipline translating for sure into improved booking outlooks in terms of load factor and yields. In Asia, we remain cautious regarding growth given our unfortunately continued structural disadvantage due to the closure of the Russian airspace. However, increased demand to Japan, South Korea and India give us confidence. In the winter schedule this year, we offer 43 weekly flights to Japan and South Korea and even 64 weekly flights to India. As a matter of fact, Frankfurt, Tokyo has become our best-selling route in terms of revenue. Going forward, we are also optimistic again for the Middle East. Already now, we are seeing a significant recovery on our important route to Tel Aviv. We're also happy to reopen [ Tehran ] again, which is also contributing to our commercial success in this part of the world. But not only the Middle East services are picking up, bookings across all traffic regions reflect a positive trend not only for the coming months in '25, but also for the first visible weeks in '26. Up until January, the booked load factor is consistently above last year's level and balanced capacity growth is helping, as mentioned, to stabilize yields. Compared to the third quarter, yield decline clearly slows down in the months ahead despite ongoing headwinds from a weaker U.S. dollar. So combined with a favorable seat load factor development, that means our revenue -- revenue -- sorry, unit revenues are stabilizing also on the North Atlantic again. And we, like others and our American peers already communicated on this as well, we are benefiting in our industry from an extending and extending and extending summer season. I recall that a few years ago, I called it the endless summer, but even then, I didn't realize that one day summer will last until Christmas. That's more or less what we see right now, very nice bookings to leisure destinations all the way through the late fall. But even more important, especially for Lufthansa and our business model is the fact that premium bookings remain above last year's levels. And also finally, corporate sales are gaining some further traction. Summarizing, our booking outlook is robust, and we are well positioned to capture further upside as demand continues to recover more and more. And with that, I hand over to Till, who will now guide you through the detailed figures of the third quarter. Thank you. Till, over to you. Till Streichert: Yes. Thank you, Carsten, and a warm welcome also from my side. Thank you for joining us today to discuss our Q3 results and also the financial outlook for the rest of the year. So let me get started. In the third quarter, revenues increased by 4% compared to prior year, driven by a 3% capacity increase as well as robust growth in both our cargo and MRO division. This reflects the resilience of our core business, and you can see also the ongoing high demand for air travel, air cargo and MRO services. In the passenger airline business, notably, ancillary revenues rose by an impressive 13% compared to the previous year. And this growth is a strong proof point of the effectiveness of our evolving offering structure and you can see also the success of our digital initiatives across the airlines, which continue to drive new revenue potential on top of the classic ticket sales. On the cost side, we benefited from lower fuel costs with a positive impact of EUR 170 million in the third quarter compared to prior year. At the same time, we continue to observe rising costs in other line items, many of which affect the sector, the entire industry as a whole. Fees and charges increased by 9% year-over-year with ATC costs alone rising by 17%. Airport-related passenger charges and handling charges also saw double-digit increases, mainly in our home market in Germany. In the end, the anticipated head and tailwinds offset each other, and that resulted into a third quarter adjusted EBIT of EUR 1.3 billion, pretty much on par with last year. The adjusted EBIT margin is 11.9%, which is slightly 0.6 percentage points below the previous year's level. Now when looking at EBIT, the Q3 development included a substantial one-off effect on the tax side, where we recorded an increase by EUR 121 million net. This increase is largely driven by the so-called German tax booster announced earlier this year. And while the initiative to gradually reduce German corporate tax rates in the future will eventually have a positive impact, it initially led to a revaluation of our deferred tax assets, resulting in a higher tax burden in the quarter. At the same time, our financial result increased by around EUR 128 million compared to the previous year, and that's mainly due to currency translation and market valuation effects. And as a result, net income decreased by approximately EUR 130 million. Let's now take a closer look at the results of our Passenger Airline business. Revenues rose by 1% to EUR 8.9 billion in the third quarter, and the adjusted EBIT amounted to EUR 1.2 billion, which is in line with last year's result, which is a solid achievement given the market environment in the third quarter. We increased capacity by 3.2% compared to prior year with a strategic focus on our key markets. And as anticipated, unit revenues declined by 2.2% during the quarter and the positive revenue effect from higher seat load factors, increasing ancillary revenues and less IRREG events mitigated but did not fully compensate the negative effect from lower yields. There were 2 primary drivers behind the yield softness, a highly competitive environment in the [indiscernible] business and the anticipated temporary slowdown in North Atlantic demand, which was intensified by a weak U.S. dollar exchange rate. Adjusted for the currency effects, unit revenues were largely on par with previous year's level. While unit revenues in the third quarter showed the expected dip, we kept our unit cost position firmly under control. As a result, ex-fuel unit cost only increased by 0.5% despite the previously mentioned cost pressures. A flat ASK at Lufthansa Airlines contributed significantly. And that is, for me, a reflection of early proof points of our transformation success, resulting in an improved operating result for Lufthansa Airlines despite the challenging trading environment. And this underscores as well our unwavering focus on executing on the turnaround program, and that remains a crucial catalyst for driving as well profitability in the quarters and years to come. So let's have a closer look at the positive effects of the turnaround program on our 2025 results. And here, it is worth highlighting the progress that we've made. The program is delivering tangible and measurable results with a positive effect on adjusted EBIT of around EUR 500 million until year-end. So that's the full year figure. And that is also delivering on our target that we've set for ourselves. As mentioned before, this rapid progress already had a positive effect on our unit cost, resulting in year-to-date unit cost reduction of 1.4 percentage points at Lufthansa Airlines. For Q3, unit cost of Lufthansa Airlines increased by just 0.1%, so almost flat. This shows that the effect from the turnaround program materialized in the second half of the year as expected. Key drivers for the cost improvement revolve around reestablished operational stability, laying the foundation also for further -- for future optimization. And in addition, structural adjustments such as the successful renegotiation of several MRO contracts as well as our commitment to focus growth on more cost-efficient AOCs are starting to pay off. City Airlines has grown to 11 aircraft by the end of September, and we recently announced the allocation of 4 of our A350s to Discover. In addition to the cost benefits already realized, the program has also achieved meaningful progress on the revenue side. Measures include the realization of pricing uplifts through new tools and the continuous rollout of our new cabin product, Allegris, clearly one of the key drivers of the increase in ancillary revenues per passenger. And with many additional measures in implementation for the years to come, the effects of our turnaround will enable profitable growth for Lufthansa Airlines in the years to come. Let us now move to one of our other strong pillars, Lufthansa Cargo. And this year's positive trend remains unabated. The adjusted EBIT reached EUR 49 million in the third quarter, an increase of EUR 11 million compared to the previous year. With that, our year-to-date operating result stands at EUR 184 million, which is an impressive increase of EUR 132 million or 250% compared to last year. So a very strong first 9 months in comparison to last year. This result was primarily volume-driven with chargeable weight up by 11% in Q3 compared to the previous year, compensating for slightly softer base yields. And the volume increase was a result of -- or was also a result of higher capacity due to additional new 777 freighter and the marketing of IATA belly capacities, which started during summer this year. Our points of sale in Europe and the Asia Pacific region have shown particular strength. The Asian e-commerce business remains our most important growth driver here and frequent charter flights to and from China built at preset rates ensure regular revenue streams and provide also a degree of predictability in what is normally a business model that is known for its high short-term dynamics. Proactive cost management also shown positive results at Lufthansa Cargo. Ex-fuel unit cost decreased by 6% versus prior year, and that was driven by a reduction in mainly IT cost and also higher crew productivity. Looking ahead, the fourth quarter is expected to deliver this year's strongest result, in line with the usual seasonality of airfreight. And all in all, Lufthansa Cargo, there remains well on track to deliver a full year result significantly above last year's level. Let me now provide you with an update on our MRO segment's performance and outlook as well. Lufthansa Technik's positive top line outlook was once again confirmed by a growing market and a strong customer order book. Revenue grew by 10% in the third quarter, driven by a strong 28% growth of third-party business, which is particularly encouraging. At the same time, adjusted EBIT amounted to EUR 130 million, a decline of EUR 31 million compared to the previous year. This negative result and this margin development was driven by ramp-up efforts in new facilities such as Portugal and Calgary and substantial external headwinds, including supply chain disruptions, currency effects and mainly tariffs. At EUR 13 million, this impact of tariffs alone makes up more than 40% of the adjusted EBIT decline in the third quarter. So that is just for the third quarter. Lufthansa Technik has already started implementing countermeasures to limit the impact of tariffs on their results going forward, for example, through the redirection of production flows. And as an example, material from customer locations in Canada or South America is no longer shipped via our logistics hub in the U.S. And including these measures, we expect to limit the full year net effect of the tariffs to about EUR 50 million and to mitigate the impact in the upcoming years as well. Looking ahead, we expect a more positive development for Q4, particular, the output growth in the Engine segment is encouraging, which will be a key driver for future profitable growth. And please keep in mind here, despite the tariffs that we are facing this year, keep in mind that the MRO business is a marathon, not a sprint. And what matters is that the demand environment overall is healthy and intact and our Ambition 2030 strategy remains firmly on track. Let's now turn back to the group level, and let's have a look at our cash flow. In the first 9 months of the year, the operating cash flow amounted to EUR 3.9 billion, an increase of EUR 600 million compared to the previous year, and the improvement was primarily driven by a stronger operating result as well as tax repayments with each of these 2 items contributing roughly EUR 300 million. Moreover, net capital expenditure were EUR 200 million lower than last year. And one of the reasons was a decrease in gross CapEx of EUR 100 million due to the delays of our Dreamliner deliveries. All of these effects improved our adjusted free cash flow, which amounted to EUR 1.8 billion at the end of September. And until year-end, we still expect to take delivery of between 7 to 10 Dreamliners, some of which were delayed from previous quarters and resulted there was also in the shift of CapEx and some of it will come through -- this will come through, obviously, in the fourth quarter. For the full year 2025, we therewith stick to our guidance and expect adjusted free cash flow to be broadly stable versus 2024. Our balance sheet strengthened further. Our strong liquidity position currently at EUR 11.9 billion ensures that we are well positioned for the upcoming aircraft deliveries and debt maturities as well. And at the end of September, net debt amounted to EUR 5.1 billion, which represents a decline of EUR 600 million compared to prior year, and this improvement is mainly attributable to the strong cash flow generation. The key highlight in September was the successful issuance of a new EUR 600 million convertible bond at an annual 0% coupon rate. And at the same time, as you know, we took the opportunity to buy back half of our existing convertible bond. And these actions further optimized our capital structure and also demonstrate our proactive approach to financial management. Net pension obligations decreased by roughly EUR 500 million to EUR 2.1 billion, primarily driven by an increase in the discount rate. And our leverage ratio at the end of the third quarter was 1.6x, reflecting a continuous downward trend since the end of last year. Now moving over to fuel cost. Since the start of this year, our fuel costs have developed in a highly favorable way, and I'm pleased to confirm that this positive trend persists. And our Q3 fuel bill of EUR 1.7 billion was in line with our expectations, and there was also substantially below prior year. And for the full year 2025, we expect fuel cost to amount to about EUR 7.3 billion, roughly in line with our previous guidance. And thereof EUR 7.1 billion relate to fossil fuel only representing a reduction of EUR 700 million compared to last year, and the remaining EUR 200 million relate to additional cost for sustainable aviation fuel. Given the favorable fuel price during the first half of October, we also decided to execute additional hedges for the remainder of 2025, even going beyond our regular target hedge ratio of 85%. For 2026, we have already hedged our Passenger Airlines business at a rate of 71%, ensuring continued protection against fuel price volatility next year. Let me now close by commenting on our financial outlook. Taking into consideration our year-to-date result improvement of EUR 300 million and our positive outlook for the rest of the year, we again confirm our 2025 adjusted EBIT guidance for the group achieving a result significantly above prior year's level. Let me give you some more details on our outlook for Q4 to underline our positive expectations for the rest of the year. On capacity, we will continue our focused and disciplined growth path with an envisaged ASK growth of about 4%. On unit revenues, we see a more positive demand environment in Q4 than the one we experienced in Q3, and we do expect RASK to be flat compared to last year's level. On unit cost, I mentioned before that the Lufthansa Airlines turnaround program is proving successful. And for the first 9 months of this year, we've seen a unit cost increase across the group of 2.5%. So that's for the entire passenger airlines. And for the last quarter, we expect the CASK increase to be below this figure, so to be below what we had year-to-date incurred. For Lufthansa Technik, we expect a stable Q4 adjusted EBIT compared to last year. And given the negative external factors, mainly tariffs and currency movements, this means that Lufthansa Technik will most likely not be able to achieve a clear increase in profits this year. And as described before, we've taken action to mitigate those effects going forward, and we stick to our midterm outlook of EUR 1 billion adjusted EBIT in 2030. As every year, we will provide you with guidance on 2026 alongside our full year 2025 communication in March next year. However, I can already provide you with a direction of what we plan for next year. Regarding capacity growth, we will focus on long haul as described during our Capital Markets Day. And next year, we are planning long-haul growth in the mid- to high single-digit region, while we expect almost no short-haul growth. And in total, we want to continue this year's disciplined growth with about a 4% year-over-year increase in ASK. Also, I expect to see progress in the modernization of our fleet. We expect that this will lead to a reduction of reserve aircraft on the ground, which will improve aircraft productivity, our clear goal of asset utilization -- improved asset utilization and hence, also our profitability next year. This will be enabled by new aircraft delivery, which Carsten will comment on in more detail in a few minutes. However, I can already tell you that we expect the delivery of twice as much long-haul aircraft in 2026 and this year. And finally, let me reiterate that for 2026, we continue to believe that the Lufthansa Airlines turnaround program will achieve a gross EBIT impact of EUR 1.5 billion, and we will achieve an adjusted free cash flow. This is now for the group of broadly on the same level as 2025. To summarize, we keep delivering with a confirmed and a refined full year guidance for this year. And we deliver -- we have delivered there with tangible proof points also on the main value levers mentioned at our Capital Markets Day. And for the upcoming months, we do see a more positive demand environment, which already today gives us reason to also believe in a good start into 2026. And with that, let me hand back to Carsten, who will provide you with some more thoughts on the strategic outlook, including insights on fleet and customer development. Carsten Spohr: Yes, Till, thank you very much. And indeed, part of the optimism we are portraying here today and one of the facts why we are convinced to be in a good path today is driven by our comprehensive fleet modernization and harmonization. After years of waiting was added on by COVID, we have finally reached a point where we take delivery of a new aircraft more or less every week. Out of the total 230 next-generation aircraft in our order book, we anticipate more than 50 deliveries until the end of next year. And obviously, all these aircraft freighters aside are equipped with our premium products, which delights customers, which also excites our flight crews and obviously will also add to the excitement of our shareholders when it turns into additional profits. Flights with the premium cabin, Allegris and SWISS Senses, now, as mentioned before, in my opening takeoff from our biggest hubs, Munich, Frankfurt and Zurich. And on the high-yield routes or the highest yield routes, these include selling our exclusive new first-class suites. When you talk about business class, we don't only receive outstanding passenger feedback, but we also see above expectations, I must say, a high willingness to pay extra for the first-time individualized seating options we offer. Our most profitable compartment continues to be premium economy. This will grow by 50% by the end of the decade. And as you also know, we will also equip existing Lufthansa and Swiss subfleets, including our flagship 748, 747-8 and the 777 at SWISS with the new products. In total, the new product will already be available on 1/3 of the wide-body fleet by the end of the coming year. By '27, this applies to roughly 70%. And then by the end of the decade, every long-haul aircraft of Lufthansa and Swiss will fly with our new premium products. On the Capital Markets Day, we presented how we enhance and harmonize our offers and products. And our aim is, as expressed there, to further integrate all activities across our group and realize even more synergies. For example, our increasingly popular airline app, which already serves all group airlines or at least group hub airlines and is hosted to one single group-wide -- by one single group-wide IT platform. To further enhance the physical travel experience, we have invested EUR 70 million in onboard improvements just at our core brand, Lufthansa alone. For our loyal Miles & More customers, we are offering new opportunities to earn and redeem. And together, for example, with the Marriott Group or also in partnership with Deutsche Bank, where we're just launching a new credit card. If you put all these initiatives together, they contribute to significantly improved customer satisfaction, which has increased by an unheard of 8 percentage points in the third quarter compared to the year before, but not only on customer satisfaction, but in all dimensions, we want to continue, obviously, our successful development. So looking ahead, we want and must make our group, especially our core airline, also more profitable again. The fundamentals of our business for this have never been stronger. We are also, as mentioned in the opening, operating in a favorable market environment characterized by resilient and rising travel demand on the one hand and supply constraints persisting on the other hand. This supports a continuing capacity discipline across the industry and therefore, supports strong yields across all our markets. Over the past decades, we have transformed from a national flag carrier of Germany into Europe's leading multi-hub airline network. And this group, as you know, is built on 4 strong strategic pillars, integrated network airlines with now 6 hubs, complemented by a strong point-to-point carrier, world-leading MRO business and very flexible cargo operations, each of them contributing to our resilience and value creation. We're, therefore, confident to achieve a full year '25 result significantly above prior year's levels, the targets which we are reaffirming today. Also midterm, we will significantly further increase our profitability level, targeting an adjusted EBIT margin of 8% to 10% between '28 and 2030. We're proud to say that we deliver on our promises, and we look forward to providing you with further and tangible proof points soon. For now, though, we're looking forward to your questions. Thank you. Operator: [Operator Instructions] And the first question comes from Jaime Rowbotham from Deutsche Bank. Jaime Rowbotham: Two areas I wanted to explore. The first is on the Q4 unit revenue comment. Perhaps you clarify if the flat RASK guide for Q4 includes what you currently see on currency, i.e., we should compare it to the 2.2% decline in Q3 as opposed to the 0.4% decline, which excluded FX. And in terms of the stabilization of the intra-European trend coming from growing ASKs at less than 1% compared to 5.5% in Q3. I can understand how this helps the yields, but it must hamper a bit the narrow-body aircraft utilization, which we saw at the CMD was running low. So just keen to understand how you balance that. Second area was cargo. Till, you mentioned visibility is low in cargo given the short-cycle nature of the business. I just wondered if you'd be willing to say what might be a sensible range of profit outcomes for Q4 relative to the circa EUR 200 million of operating profit delivered last year. I'm just conscious that, that figure could half and you'd still have about 30% year-on-year growth, so significant growth in full year EBIT. Till Streichert: Jamie, let me start with the second question first, just on cargo. So you're quite right. We had last year an exceptionally strong year where actually out of the EUR 250 million profit, we made EUR 200 million just in the last quarter. So we don't even need that in this quarter to already achieve comfortably our target of significantly above. Look, can I be more specific in terms of what I do expect for cargo? Difficult to say without now kind of specifying really our guidance, which we stayed away from. But just leave -- I'd like to leave it with that. We have seen, obviously, year-to-date very good performance. And you can see also in the third quarter, the strong volume demand, which we are quite positive about even after airfreight traffic streams or air freight streams have kind of reorganized a bit globally post the so-called Liberation Day, and we are participating in that. And drivers of this volume is really the belly capacity, the added ETA commercialization of belly capacity and the freighter added capacity. So this makes me positive. But of course, we now need to see how the last 2 months we're going to come out. But all in all, clear and I would say, optimistic confirmation of our significantly above 4 cargo. RASK guidance, your first question in terms of FX. So you're quite right. The comment in terms of improving RASK guidance and stabilization there in terms of year-over-year is basically a like-for-like. So there's no FX assumption that changes that changes in there. And let me remind you as well that we have seen already during the third quarter between July, August and into September, September was already a month that was notably better in terms of RASK evolution. Operator: And the next question would come from James Hollins from BNP Paribas. James Hollins: First of all, probably for Carsten. Just on that corporate strength, it's not something we've seen for a while. It's certainly something the U.S. names were flagging. I was wondering if you could sort of run us through if that's sort of a big acceleration as we've come into the autumn, where it's particularly strong? Is it U.S. inbound to Europe? Is it maybe in Germany, first time in a long time, maybe signs of this fiscal stimulus working. So just run us through on the corporate side there. And then secondly, I hate to be that person in the room, but maybe get your view on the likelihood of a strike sort of take us behind the scenes of weather. Obviously, the media have got their views on what's going on, but just get your views on likelihood of strike, would be great. Carsten Spohr: Yes. James, I think we've missed one question from before utilization of our [indiscernible] fleet, if it would go down further, it's the opposite, we are probably looking at 2% growth on [indiscernible] with the same fleet size. So take that as a thumb rules, you see an increase in productivity by at least 2% more production of the same fleet. James, proper strength, indeed, the U.S. carriers and also our people, of course, leaving the shutdown aside. Don't forget our largest customer is the U.S. government. So recent weeks put aside, we see some development from the U.S. Also, Germany is at least not aggressively growing, but somewhat growing on volumes. Tech industry is strong. For example, consulting is strong. Finance industry is strong. So it's not crazy the growth, but compared to what we have seen now for quite a few years, it was worth mentioning it. Likelihood of the strike by the pilots in the end, the union has to answer. But as we already said before, we have done our yearly staff survey and the biggest improvement in satisfaction comes from the pilots. And the pilots also expressed not worries about their pensions, which are already quite high, but rather expressed worries about their future and future growth and future careers. As we always allocate strike cost is personnel cost, of course, any strike would increase the cost disadvantage of the mainline and decrease perspectives and careers even further. So putting all that together, I think there's room as our Head of HR offered to talk about future perspectives rather than additional pensions. We just cannot afford and not willing to raise further also in terms of fairness to the pilots in the other airlines. I think that's about what I can say about that today. James Hollins: Can I just come back on the U.S. government shutdown? Maybe just give us your thoughts on what you're seeing very near term? I assume U.S. inbound corporate, given that your largest customer has taken a hit and maybe whether you sense there's a feeling that there's a bit of reticence from some Europeans going to the U.S. because there might be delays or whatever. Just it would be great. Carsten Spohr: Well, I think there was a very special event -- not event, effect, sorry, from my language. Coming out of the Easter tariff announcement, the so-called Liberation Day Till referred to, that was the time around Easter when German booked their late summer holidays. And surely, we saw some softness out of Europe, especially Germany, Austria, Switzerland and Denmark [ flying off ] to the U.S. We never saw that coming out of the U.S. There, of course, the yield was impacted by the currency. So I think that what people have been seeing a little bit in Q3, and we forecasted that in Q1 and Q2, if you recall, is already softening and/or the effect is softening. So we will see a more positive outlook on Q4 and also in the first weeks of '26. The shutdown in general is, of course, affecting U.S. carriers a lot more than it affects us because the main travel from the U.S. government is domestic U.S., but also us with our joint venture partner, United, enjoying some nice business from the U.S. government, which, of course, is slow now. But I don't think the shutdown will eventually last too much longer either. Operator: And the next question comes from Harry Gowers from JPMorgan. Harry Gowers: First question, can I just ask on your -- you've got this slide, I think, Slide 6, which kind of shows the bookings outlook and kind of the RASK development into Q4. So first question, I think October is missing from that chart. So could you give any commentary on what you've seen in the bookings for October? And then is your flat RASK guide for Q4, is that just what you see in the books at the moment? Or have you made any further assumptions on how bookings and pricing will actually evolve over November and December? And then Till, maybe one for you. Could you just clarify or kind of narrow down the range a little bit on ex-fuel CASK for Q4? Because I think you said the guidance would be below the 2.5% you've seen year-to-date. But are you going to see an ex-fuel CASK, which is higher than the 0.5% that you saw in Q3? And what exactly would be driving that? Till Streichert: Thanks, Harry. I'll start with the second question, and then we'll work backwards to the first one. On CASK, so as I said, we've got year-to-date 2.5% CASK growth. Remember, the quarterly trajectory was basically we had 3% and 4% CASK growth in the first and second quarter, now 3.5%. Pretty pleased with that. And for the fourth quarter, I expect something which is below the 2.5%. Now being even more specific, look, hard to say what's the driver of the movement from the 0.5% in the third quarter up to something which is below the 2.5%. It's -- I expect that MRO will going to be one of the drivers, which goes up in the last quarter a bit. And then we've got the usual drivers as well on additional cost evolution from ATC, from fees and charges, et cetera, et cetera. But again, with that for me, what we said at the -- throughout the year, this half 1 versus half 2 is starting to materialize where CASK is coming down. And that for me, if you just say I look at half 1 and half 2, clearly an effect of the materialization of the Lufthansa Airlines turnaround and look in the same way also for the other airlines that are all running their efficiency drives. So that's on CASK. On RASK, so what we've shown there is basically Page 6 is really what we've got on the books. So there are no -- that's what we see in terms of seats sold at the seat load factor that we've got right now. Your question, October, October was with -- I mean, we've almost closed, it was good. And there was for the third quarter, what we said is clearly better trading environment and resulting into this positive evolution from the third quarter where we obviously saw that as a dip. And here again, the comment that throughout the quarter, September was already notably better than July and August. Operator: And the next question comes from Jarrod from UBS. Jarrod Castle: You're still talking about a material increase in adjusted EBIT. Consensus is EUR 1.9 billion, give or take, versus the EUR 1.6 billion, give or take, last year. From where you stand today, do you see risk on the upside or the downside? Or are you comfortable with kind of where consensus is? Just any broad color. I know you've still got 2 months left of the year. And then secondly, the balance sheet continues to degear. So just thinking about the dividend payout ratio. Are you or the Board thinking more towards the top end of the 20% to 40% of net income guidance for this year? Or again, is it a little bit too soon? Till Streichert: Look, in terms of -- let me not comment specifically on the consensus. We've given a bit of color, of course, on the fourth quarter with RASK, CASK, also a bit of explanation on what I expect to happen on Lufthansa Technik and Cargo. So I don't want to be specific on that. We've given the elements. I think you get to a good picture with that. And I would probably leave it more or less with that element or with that answer. But if you would see us uncomfortable, obviously, then we would have said something. Let me put it like that. And finally, on the dividend policy, which we did reconfirm at the Capital Markets Day of 20% to 40% in place, this is a healthy dividend and the exact payout ratio within that range. We will obviously detail further down the line when we've got the full year results. But you can imagine, and that is what I also highlighted at the CMD. Of course, I want that our dividend per share continues to grow, driven by the improving operating performance as a key driver of it, okay? And the strength of the balance sheet as a backdrop and the lower leverage is helpful. I'm very happy with that. But also here, let me just highlight the fourth quarter, I do expect still to have aircraft deliveries and CapEx outflow. And with that, I did reconfirm that I expect free cash flow to be broadly stable versus prior year. And with that, you've got the key elements put together. Operator: Then the next question comes from Muneeba Kayani from Bank of America. Muneeba Kayani: Just going back to Slide 6, and thank you for that. It's very helpful. The bookings number, just to clarify the dark blue in there, is that kind of comparing to bookings at the same time last year in terms of the year-on-year increase? And then just kind of when you're seeing that yield improvement, is there any specific region that is driving that? Or is it across the board? You point out premium yields above previous year for every month. What are you seeing on the main cabin, please? And then on the unit cost side, so in your 2026 guidance, you're talking about fleet productivity. Till, you've talked about unit costs getting -- trends getting better in the second half of the year. I know you're not giving guidance specifically on next year. But broadly, how are you thinking about unit costs on a passenger airline in '26? Till Streichert: So that was 3 questions. So the first one, just quickly, yes, you are right. That's a year-over-year comparison. So nothing else, the dark blue bookings number on Slide 6. The second question on yield evolution. So we have, in fact, seen an improvement in all traffic regions, albeit I would actually also highlight that intercont is probably -- is improving more. I expect it to improve more than cont. And in terms of cabin class, premium, so this is the same theme that we've seen also before. Premium continues to be doing better than basically economy class. And your third question in terms of CASK evolution, I'll answer it from 2 angles. One is what I said also at the CMD, longer term, I do expect that our CASK growth, we are able to clearly beat inflation on CASK. And when we now talk about 2026 specifically, please bear in mind that we will be giving guidance and further details closer to the time beginning of March. But for now, all of the drivers that you highlighted, asset utilization, productivity gains, turnaround improvement playing into it, you can almost roll forward a bit also from what we've started to do and seen in 2025 as proof points. So -- and again, the flat CASK at Lufthansa Airlines in the third quarter, and again, bear with me, I'm not saying that this will be now flat for the next quarters to come. There will always be a bit of volatility, but a 0.1% CASK increase at Lufthansa Airlines only in Q3 is a big success. Operator: And the next question comes from Conor Dwyer from Citi. Conor Dwyer: The first was on basically your comments around next year on long haul. You talked about mid- to high single-digit capacity growth. And I said that obviously, that will have good implications on the unit cost side. But how are you thinking about the risks there from a unit revenue perspective that a lot of that just gets eaten up by some of the pricing pressure that, that may bring? And then secondly is on Technik. So as you said, very strong revenue growth with third parties, but quite a bit of a pullback on the internal revenue side. So I'm just wondering what exactly is that reflecting? Is that basically the need to fly planes because you're tied on capacity slow deliveries or anything else that might not have thought of? Till Streichert: Conor, it was a little hard to really understand. I'll start and you please just repeat where we don't answer your question fully, okay? I'll go with Technik first because there, I think I got it. So to repeat, 10% revenue growth, that was good. Indeed, the third-party business over-indexed, 28% growth, which for me is actually extremely good because there [indiscernible] obviously take it from the market. In terms of internal business, I think you were questioning, is that a problem that we are scaling back there? I'm not aware. I mean, obviously, mathematically, there's a little bit of a shift. But again, what matters is the external revenue because that's where you are usually in long-term contracts -- going into long-term contracts and building basically business. I hope that answers the Technik question. Conor Dwyer: I was really just wondering, basically, is that weaker internal revenue reflecting basically the need to fly the planes and that some maintenance actually internally is going to be coming more so through the winter in that regard. Till Streichert: Sorry, I struggled. Can you just repeat it again? Conor Dwyer: Yes. So the question was more so around with the internal revenue being a bit, let's say, less in the peak summer, is that reflecting the need to fly the planes currently and do the work through the winter because you're kind of tight on capacity at the moment? Till Streichert: The need to fly... Conor Dwyer: So you're basically charging less internal revenue on the maintenance business. Is that basically reflecting the fact that at the moment, you basically need the planes flying and more work is to come, i.e., on the internal revenue side through winter? Till Streichert: Look, this is math -- I would actually think this is more mathematical what's happening here. I wouldn't read too much into the internal revenue generation or whether there are shifts in terms of business. I mean, obviously, this is also driven by just what's happened in terms of MRO that we use internally with Lufthansa Technik. Conor Dwyer: That's fine. Then the other question was simply basically around the risk of medium to high capacity digit capacity growth into next year in long haul. What the risks are basically around unit revenue there, even though there is obviously some unit cost benefits from doing that? Carsten Spohr: Well, I think the major effect on long-haul growth next year is North Atlantic. And there, we are still lagging behind our peers compared to pre-COVID. So if you draw a line from 2019 to where we are in North Atlantic capacity, we have a little catch-up to do, and '26 is going to be another catch-up year. So we don't see a risk on the yield side because we're basically catching up to demand overhead. They can also get new airplanes. Don't forget the new airplanes we'll be using to a large degree on the North Atlantic as well. Operator: And the next question comes from Antoine Madre from Bernstein. Antoine Madre: Two questions, please. First is that the free cash flow guide for 2026 more on the safe side with the current turnaround and the current fuel price level. So maybe you could give some color on the '26 CapEx? And second, we saw that the 777X is now expected for 2027. Does that further delay fleet simplification initiative? Till Streichert: Antoine, let me start with the free cash flow guide. Look, I mean, we'll technically speak about that when we speak in March next year. But let me say -- let me reiterate what I also guided at the Capital Markets Day. I do expect that 2026 free cash flow should be broadly on the same level as 2025 and there was also 2024. And as a reminder, I do expect progression in terms of earnings improvement. This will improve as well operating cash flow. But we do have, and we've given you also the schedule on the fleet renewal. The next 2 to 3 years will be the years where we've got elevated fleet renewal and there was also elevated gross CapEx. And there with -- in combination with utilizing also more sale and leasebacks, we have arrived at the conclusion of a broad free cash flow target -- broadly stable free cash flow target for 2026, but further details to come when we speak in March. Carsten Spohr: Yes. On the delays or additional delays on the 777X, we never expected the airplane to be in operation commercially in '26. So we are scheduling the aircraft earliest summer '27. So there's no need yet to make any changes to our plans so far, and we'll see where it goes from here. Operator: Then the next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I just carry on from the 777 question and go to the 78 question. I think there have been stuff in the press about how the approval of the seats might be challenged by the U.S. government slowdown. So how confident are you on the timing of the approval of the Allegris seats other than the front row in the 787? And does that impact your willingness or enthusiasm to take delivery of the 7 or 8 aircraft to come in the balance of Q4? And then my second question would come down to the RASK because obviously, we've been dancing between the flat RASK, excluding FX and the 2% negative RASK, which I think is your headline number. But in your regional RASK, down in the appendix, which I think is just the pure airline tickets, that number is negative 5% for Q3. So could you perhaps explain to us a little bit about the difference between the regional RASK number and the headline RASK number? And how should we think about that -- the differences and how those differences evolve in terms of irregularity or ancillaries or whatever? Carsten Spohr: Andrew, I'll start with the first one. So far, the shutdown has an impact on some delays by days of the deliveries of the aircraft. I'll come to the certification in a minute. So therefore, we don't expect 10 aircraft anymore this year, but rather probably around 8; 6, we have scheduled to fly. That's a minimum which we would need to achieve to not have any changes in our published schedules, and we're pretty optimistic to be above 6. As I said, 8 probably the most likely shot as of today. We do not yet see delays due to the shutdown in the certification part. This is basically all paperwork, which has to be done. So we're still confident to get that done by the end of the year. But we all have learned there's always question marks when it comes to the triangle between Boeing, Collins and the FAA. So I can only say what we know as of today. And again, that the confidence of my team on the ground in the U.S. still tells us end of the year is feasible. And then maybe even the last aircraft would already arrive with unblocked seats, but also quickly afterwards, we can unblock the seats of the aircraft, which are already across the pond in Europe. Till Streichert: Andrew, I'll take the question on RASK. So the figure of minus 2% that we are referring to here for the third quarter in terms of RASK evolution includes ancillaries, cargo revenues and also the revenue benefit from less Iraq events. And what you are referring to in terms of the regional RASK in the appendix is excluding exactly those 3 line items. So there's no ancillaries in, no cargo belly, no benefit from irregularities. And therewith, in terms of dynamics going forward, look, I still do expect that we will going to improve further on [indiscernible]. So you should see that basically helping. I do expect that on the cargo belly over time, also contribution continues to evolve positively. And ancillaries, as you can see right now, is growing strongly. And with Allegris, rolling -- with Allegris rollout taking pace, gaining pace, you should see actually even on that one, a stronger contribution. It's just important to distinguish between what we show as a regional RASK, which is RASK 1A and the one that is basically RASK 3, including everything. Andrew Lobbenberg: So when we think of the numbers in compute and do our modeling, is there some double count of your RASK with the belly compared to what's in the cargo business? Till Streichert: No, there's no double counting. So this you see -- this is strictly or this is kind of mutually exclusive and collectively exhaustive allocated in the reporting. Operator: And the next question comes from Stephen Furlong from Davy. Stephen Furlong: You talked about Boeing. Can you just ask about Airbus? They announced a slowdown in the production rate of the A220. Is that something that worries you or not? I think it's gone from 14 to 12. And then the other question, I just want to ask about cargo, which is performing very well. In general, it tends to be, I guess, a division or product that is very -- even more volatile, let's say, than the passenger business. But maybe you could just talk about some of the structural things that are happening that maybe would suggest that the cargo business and profitability be more enduring than perhaps the volatility in the past, not just with Lufthansa, but the industry. Carsten Spohr: Stephen, no, so far on the 220, we don't expect any delays. Actually, we just met with the Airbus management last week. So we're still confident that our 40 220s we have ordered for Lufthansa City Airlines will be starting to be delivered end of next year and will come on time. On cargo, 2 thoughts. First of all, it's still a volatile business. But one wave seems to more or less compensate the other. So there are so many trends now in the industry compared to the old days when there was only 1 or 2 mega trends that I think you see one wave on top of the other. And like I know if you're a sailer, that happens in the harbor in the end, then there is kind of... Stephen Furlong: I [ know ]... Carsten Spohr: Then you know, it's kind of zeroing out. That's one element. But I think more important is another one. As you well know, Stephen, we talked about this before, cargo has 2 elements. There's the so-called planned air cargo, Think about pharmaceuticals, think about valuables, think about consumer e-commerce. And then there is an unplanned cargo, which is mainly B2B spare parts to keep factories around the world going and so on. And you see clearly a shift at least in Lufthansa cargo, which tends to be more high-end cargo, we see more and more shift towards the valuables, pharmaceuticals and especially to e-commerce. And e-commerce is always what you call planned air cargo. You always send your fashion products from China by cargo and not only when something goes wrong in the supply chain, which happens on the more B2B-driven cargo providing factory. So I think that could be a reason why things become a little bit less volatile. But I would still call cargo volatile, but it just, as I said before, has worked in our favor over the last years because the predictability of supply chains has come down. And therefore, even the unpredictable high volatile cargo has helped us to support our profitability. So that's -- I wouldn't want to be a forecaster here on this, but this is where how we look at things, and that's why the optimism for cargo is going on. And an argument which is not new, but which proves to be right even more, remember, I always -- when I see you in London, I say, I wish I had a home base of London, how nice must it be to run an airline in Heathrow. But that's true for passengers. When it comes to cargo, Frankfurt is, I think, for cargo, what London is for passengers. Amazon has just announced to shift additional cargo streams via Frankfurt. So here, surely, our biggest hub is a major advantage why on the passenger side, things probably look more fun in Paris or London. Operator: Then the next question comes from Antonio Duarte from Goodbody. Antonio Duarte: As you have seen the reallocation of assets to more efficient routes talking about summer next year and into the future, could you give us some colors on which airlines you're planning to expand the most considering different EBIT margins between these? And following on this topic as well, we have seen a year-on-year improvement in your Lufthansa Airlines EBIT margin this quarter. Could you also talk us a bit about any targets you have going into Q4 and maybe into next year? Carsten Spohr: Antonio, I hope I got your first question right. But since some time, and I would definitely say since coming out of COVID, beyond operational requirements, we really allocate aircraft and growth according to ROCE principle. So where do we return investments highest? And that means currently, those airlines which have a favorable cost position, think about Discover, think about Edelweiss, think about Lufthansa City Airlines, but also ITA, we're looking at additional growth due to their cost position and due to their market opportunities to somewhat underserved home market roam. So that's what we do. That ROCE principle also internally clearly communicated to unions, to our staff, I think will help us to make sure that the right airlines grow. And I think on Lufthansa Airlines, I want to repeat what I said. First, we had to stabilize operations. We did. Now customer satisfaction had to be stabilized. It is going on while we speak. Allegris plays a role, also [indiscernible] plays a role, also the EUR 70 million of improvements we invested on board. And therefore, I think as Till pointed out, we are optimistic to perform on track with our Lufthansa Airlines turnaround program. Operator: Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Marc-Dominic Nettesheim for any closing remarks. Marc-Dominic Nettesheim: Thanks to all of you. Thanks to you, Carsten and Till, for your answers, and thanks to all of the interested participants for your questions. We're looking forward from the Investor Relations team to continue our dialogue. And for now, we wish you a great afternoon. Talk to you soon. Bye-bye from Frankfurt. 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 line. Goodbye.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded, October 30, 2025. And now, I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer. Please go ahead, sir. Ira Fils: Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter 2025 earnings release, which can be found at www.elpolloloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, expectations regarding kiosk rollouts, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans and our 2025 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K for the year ended December 25, 2024, as well as our Form 10-Q for the third quarter to be filed, for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-Q for the third quarter of 2025 tomorrow and would encourage you to review that document at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. And reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website. With respect to the restaurant contribution margin outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis. Now, I would like to turn it over to our CEO, Liz Williams. Elizabeth Williams: Thank you, Ira, and good afternoon, everyone. I am excited about the momentum in our business and very proud of our team and franchise partners as I share third quarter results that clearly reinforce the strength of our strategy. Our third quarter results delivered across 3 of our core financial priorities, including positive traffic growth, accelerating unit growth and margin expansion at both the restaurant and corporate level. From menu innovations to improvements in operational excellence to our robust development pipeline, our team is executing across many strategic fronts as we continue to deliver sustainable, profitable growth. We are particularly pleased with our positive system-wide traffic growth during the third quarter as we implemented targeted innovation and value offerings, beginning with our $9.99 quesadilla combos, which have a good balance of innovation and value. Throughout the quarter, we also increased our app-only promotions, our targeted couponing and our third-party delivery promotions. Together, these actions successfully drove traffic, while also enhancing brand equity and importantly, without jeopardizing our margins. At the same time, our ongoing focus on operational excellence and efficiency optimization delivered year-over-year profitability improvement, both on a dollar and margin basis. These results only reinforce my confidence in the strategy that we've put in place. We remain laser-focused on executing against our 5 strategic pillars: brand that wins through marketing and menu innovation; hospitality mindset through operational excellence; our digital-first approach; our winning unit economics; and driving new unit growth. Now, let me provide more details on how these strategic pillars are driving our results, starting with our brand that wins pillar. Our marketing and menu innovation strategy continues to be anchored by what we believe makes El Pollo Loco truly differentiated, quality chicken served fast and easy. Chicken is our signature protein and the foundation that enables us to innovate across multiple platforms, while staying true to our brand promise. To capitalize on our positioning, we are accelerating our menu innovation strategy to address the evolving needs of today's consumers and expand our accessible customer [ size ]. We believe we have a unique opportunity to offer portable, flavorful, affordable and quality chicken that is in the bullseye of consumer demand. Building on the success of our Fresca wraps and salads from the second quarter, in late June, we launched our premium Creamy Chipotle and Salsa Verde quesadillas. Featuring our citrus-marinated all-white meat fire-grilled chicken with 100% Jack cheese and our signature sauces, they were served with handmade guacamole at no extra cost. Notably, these quesadillas continued to mix well within our menu even after the incremental media and marketing support has ended, as they have filled the gap and earned a spot on our permanent menu. We expect the category to continue to build over time. This sustained demand demonstrates that our menu innovation genuinely resonates with our customers, and it validates our strategic approach to creating products that deliver both value and quality. To build upon this momentum, we recently introduced our new Double Chicken Street Corn and Queso Crunch burrito bowls, both featuring a double portion of our citrus-marinated fire-grilled chopped chicken, layered with slow-simmered, seasoned rice, Jack cheese and freshly made guacamole and salsa. These hearty bowls are strategically priced below comparable offerings from our fast casual competitors, delivering superior value for a high-quality, big eat. They are also yet another example of how we're expanding our portable offerings, while maintaining the bold flavors and premium ingredients that differentiate El Pollo Loco. Looking ahead to 2026, we have an exciting pipeline of innovation and value that will further strengthen our competitive positioning. We will begin 2026 with a focus on our Double Pollo salads, including 2 new options, Mexican Caesar and Bacon Ranch, alongside the fan favorite, Street Corn. These salads feature double portions of our premium fire-grilled chicken, fresh super greens and are bursting with delicious flavor. These are salads that you will actually look forward to eating. In addition to these new salads, we have several flavor innovations planned across our signature tostadas, bowls, quesadillas that all leverage sauces and toppings to deliver unique flavor in 2026. We are also excited to bring more portable options through new forms of chicken to our menu in 2026. We are currently testing Loco Tenders, which are all-white meat, boldly-seasoned tenders with 2 new signature dipping sauces, Baja Ranch and Pollo sauce, as well as testing a new fire-fried chicken sandwich. This sandwich has all of the delicious crunch and flavor of a fried sandwich, but it is grilled, not fried. Both the Loco Tenders and the fire-fried chicken sandwich bring unique and differentiated twists to these growing categories. We look forward to sharing more in future calls. Beyond these innovative products, we are also supporting our core chicken on the bone. After popular demand, we are bringing back Mango Habanero just in time for the Big Game in February. And in the summer of 2026, we will launch our version of barbecue chicken to our family chicken lineup. Beyond chicken, we also look to capture additional sales occasions with our comprehensive beverages platform in 2026. We believe beverages represent a significant opportunity for El Pollo Loco as an add-on to increased check average and also to fulfill multiple daypart needs for our customers and drive relevance. We have several drinks in tests and look forward to sharing more in upcoming calls. In summary, we are excited about our menu and our innovation pipeline. We are using our core differentiator of quality chicken to expand into new consumer occasions and address specific market opportunities. Most importantly, as we execute this road map, we will remain focused on operational excellence to ensure consistent execution across our system. Turning to our brand transformation. It continues to gain momentum as we execute against our Let's Get Loco brand campaign that we launched in May. What began as an advertising campaign has fully evolved into a complete brand experience, both inside and outside our restaurants. As I've said in the past, at the core of our brand identity is our passion for quality, and this passion is at the center of the Let's Get Loco campaign. For us, passion is our commitment to quality, marinated and grilled in-house over an open flame. Beyond this emotional connection to passion, the Let's Get Loco message also acts as a functional call to action, which we believe is critical in driving sales overnight, while we build our brand over time. And the great news is that this framework, which guides our brand expression, is resonating with our customers. One example of this is our recent social media campaign, the AI Chicken Challenge. The AI Chicken Challenge invited fans to show us their Loco passion for chicken by submitting chicken-inspired AI-generated videos for a chance to win free chicken for life. This campaign created a tremendous buzz and engagement across social media, further amplified by social influencers, including Fluffie the Pom, an AI influencer, who has worked with major brands like FedEx and Sephora, as well as garnered recognition from [ Ad Age ], which named El Pollo Loco as one of the 8 marketing campaigns to watch. We have coupled our Let's Get Loco campaign with our iconic restaurant design, which is being executed on our new-builds and remodels. With our signature vibrant colors and our beloved logo, together with some modern updates, consumers are noticing the glow up of El Pollo Loco. Legacy brands have to strike a balance to honor the generation who put them on the map, while evolving to be relevant for the next one. I believe our approach has put us on the right track, and I'm excited for our future and look forward to sharing more on upcoming calls. Moving to operations. Our hospitality mindset pillar remains central to our transformation effort. Our goal is to have quality of service match that of our food quality at all times, which ultimately will allow us to build lasting customer loyalty. With this, we have several initiatives underway. These include reinforcing standards and accountability, deploying tools, systems and training to simplify operations for our team members, leveraging data to better listen and respond to customer feedback, and improving customer experience with our Loco Love service model. Our focus on standards and accountability over the past several quarters is beginning to pay off. This is demonstrated by our improved customer engagement metrics. Our customer complaints are at the lowest point in 3 years, and our overall satisfaction scores continue to rise. We are now utilizing an industry-leading customer feedback system with clear benchmarks, together with an AI tool that provides instant feedback from common review sites. We believe this data-driven approach, together with our Loco Love service recovery model, will be instrumental in identifying specific opportunities and providing actionable insights for our team members. While we acknowledge that our service consistency still has room to improve to reach the top tier, we are proud of the substantial progress we have made in the last few years. As we look forward, we have a talented team in place to help accelerate our next phase of operational improvement, and I look forward to working more closely with this team as we elevate our focus over the upcoming months. In terms of our digital-first pillar, I am thrilled with the continued momentum during the third quarter across our app, web, kiosk and loyalty. Loyalty transactions are up 28% year-over-year with frequency of this customer up 15%. For the quarter, our digital business, including kiosks, grew to 27% of system sales compared to 20% in the same period last year, which further validates our focus on meeting our customers where they are and how they want to engage with our brand. We've made meaningful improvements to our app and kiosk experiences, making it easier for Loco Rewards members to add points to their orders, to customize their meals and easily find add-ons that enhance check averages, all while providing more frequent and personalized offers to our most loyal guests. Our app remains the #1 place to find the best deals for El Pollo Loco, and the digital growth we're seeing validates our strategy. Beyond our owned digital channels, our third-party delivery business also continues to grow with all app, web and marketplace sales representing 15.1% of our business compared to 13.8% last year, or a 9% year-over-year increase. We believe that the third-party marketplace channel gives us the ability to reach new customers who aren't familiar with El Pollo Loco, and we aim to further drive this behavior through targeted offers for net new customers within the delivery platforms. We view marketplace delivery as a guest acquisition tool for our business, and we continue to test new offers within the various delivery platforms to further drive customer adoption. In addition, we have completed the kiosk rollout for company-owned restaurants. And together with our franchise partners, roughly 50% of our system have kiosks installed. All in all, we believe our robust digital infrastructure, growing loyalty base and innovative customer engagement creates a powerful foundation for sustainable growth. Turning to our winning unit economics pillar. We are pleased to have delivered 160 basis point growth year-over-year in restaurant-level operating profit margins to 18.3% during the third quarter. From our methodical approach to cost savings in our supply chain to our enhanced labor productivity through better use of technology and kitchen equipment, our team members are putting more into customer service, while also delivering cost efficiencies. We are proud to have delivered this expansion even as we offer more deals and value for our customers. For the full year 2025, we expect restaurant-level contribution margins of 17.5% to 17.75%. In the long term, we continue to expect that the brand will return to the 18% to 20% range over time. Lastly, as we continue to build momentum in our unit growth pillar, I'm excited to announce that we successfully opened our 500th El Pollo Loco restaurant in Colorado Springs earlier this month, a remarkable achievement that speaks to the strength and the enduring appeal of our brand and a testament to the hard work and dedication of our franchise partners and team members. After the end of the third quarter, we opened a new restaurant in El Paso, Texas, yet another new market for us, showing the expansion beyond our California roots. Roughly 3/4 of our new openings in 2025 will be outside of California. Importantly, we're not just opening new restaurants, we're opening successful ones. Our increased focus on standards, training and systems is making a difference from growth efforts in the past. Both our Colorado Springs and El Paso locations are off to extremely strong starts within the first few weeks. Volumes are well above the system average. In fact, all new restaurants we opened in 2024 and 2025 are averaging $2 million on an annualized basis. These successes have been driven by our strong franchise partners and our new restaurant training teams who bring our refined brand positioning to life for our customers every single day. In addition, approximately half of our recent openings are utilizing second-generation sites, allowing us and our franchise partners to achieve substantially lower investment costs and deliver an outsized return relative to a new ground-up build. We expect the second-generation sites will continue to be a significant part of our unit development going forward, aided by our flexible unit design. Together with the cost reduction we have achieved with our ground-up new builds, we believe that our formula for winning economics only gets stronger. For the remainder of the year, we plan to open 1 new restaurant in November with multiple openings in December to end the year with at least 10 new restaurants in 2025, all of which are already under construction. While we remain confident in achieving this milestone, the nature of construction projects means that permitting and other external factors could shift one of these openings into early 2026. Nevertheless, this continues to represent the largest system-wide unit growth since 2022. More importantly, we are positioned to almost double our development pace in 2026 with a strong pipeline that builds every week, reflecting both the strength of our franchise partnerships and the robust demand we're seeing for the El Pollo Loco brand in new markets. In addition to the investment from franchise partners, we will also be leveraging company capital to increase development in 2026 in the California, the Las Vegas markets where we currently operate, and also in the Dallas and Denver markets, alongside our franchise partners. Following the work we've completed over the past year on build costs, margin improvements and top line sales drivers, we are confident this is an efficient use of company capital. We believe these investments will allow us to accelerate brand awareness in these markets, creating a platform for system-wide unit growth and further cementing the brand's long-term opportunity. To complement our new unit growth, we continue to make progress in modernizing our existing restaurants through our remodeling program. Through the end of the third quarter, we've completed 34 system-wide remodels with a plan to complete at least 55 remodels for the full year. Looking ahead to 2026, we anticipate remodeling approximately 35 company-operated restaurants, putting us on track to meet our goal of updating approximately half of our total system over 4 years. The remodeled restaurants look fresh and modern, and our team has done a tremendous job balancing our nostalgia, our history and charm with an updated look and feel. The customer feedback we are getting on the remodels remains very positive with a mid-single-digit sales lift from these remodels on average. With significant demand for the remodels, the only constraint is team member bandwidth and being thoughtful about sequencing when the remodels are completed. There's a healthy battle internally with our company operators who are all jockeying to get to the front of the line for a remodel. Before I wrap up, I want to mention one other highlight from the quarter that embodies the progress we are making in transforming El Pollo Loco and our unique culture. In September, we held our franchise conference with the theme for this year, No Limits, Just Loco. In this meeting, we talked about the opportunities for growth ahead with our franchise partners and suppliers. And we also celebrated our 50th anniversary year, paying tribute to many employees that have had significant tenure with El Pollo Loco. Alongside our founder, we honored 36 employees that are still serving El Pollo Loco after 35-plus years. It was a true testament to the thousands of men and women in our restaurants that deliver for our customers every single day. It was also a reminder of why we have some of the lowest turnover in the industry. Our culture is special and something I have never seen in this industry. We have a passion that you can feel. It is this culture that is fueling results. In closing, our third quarter results demonstrate the progress we are making across all aspects of our business. We are innovating on food, innovating on our brand and our restaurants. We look forward to a strong finish in 2025 and furthering our position as the nation's favorite fire-grilled chicken restaurant. With that, let me turn the call over to Ira for a more detailed discussion of our third quarter financial results. Ira Fils: Thank you, Liz, and good afternoon, everyone. For the third quarter ended September 24, 2025, total revenue was $121.5 million compared to $120.4 million in the third quarter of 2024. Company-operated restaurant revenue decreased 0.5% to $100.7 million from $101.2 million in the same period last year. The $0.5 million decrease in company-operated restaurant sales was driven by a 1.1% decrease in company-operated comparable restaurant sales, partially offset by additional sales from the opening of 2 restaurants during or subsequent to the third quarter of 2024. The decrease in comparable restaurant sales included a 1.3% decrease in average check size, partially offset by a 0.1% increase in transactions. During the third quarter, our effective price increase versus 2024 was about 2.8%. Franchise revenue increased 13.5% to $12.9 million during the third quarter, driven by a $900,000 in IT pass-through revenue related to the franchisee rollout of our new point-of-sale system, which is offset by a corresponding increase in franchise expenses, combined with an increased revenue, driven by the opening of 5 new franchise-operated restaurants subsequent to the third quarter of 2024 and a true-up of royalty rates. The increase in franchise revenue was partially offset by comparable restaurant sales decrease of 0.6%. Nonetheless, we are very encouraged to see franchise traffic growth continue to accelerate with traffic up 2.5% in the third quarter for our franchise system, which drove the positive system-wide traffic of 1.6% that Liz alluded to earlier. We are extremely pleased with how the fourth quarter has started with sales turning positive on continued strength in transactions. System-wide comparable store sales for the fourth quarter to date through October 22, 2025 increased 2.2%, consisting of a 1.5% increase in company-operated restaurants and a 2.5% increase in franchise restaurants. While we are mindful that we are rolling over softer results in October of 2024 and the macro consumer environment remains challenged, we are pleased with the sales momentum that we are seeing in our business to start the fourth quarter of 2025 and our return to positive comparable sales growth. Turning to expenses. Food and paper costs as a percentage of company restaurant sales decreased 40 basis points year-over-year to 24.7% due to higher menu pricing and approximately 100 basis points of commodity deflation during the third quarter, which was partially offset by higher discounting. We expect commodity inflation to be flat for the full year 2025. As a reminder, our commodity base is largely domestic with chicken being the largest component. Internationally, our largest exposures include avocados, tomatoes and packaging. Labor and related expenses as a percentage of company restaurant sales decreased about 200 basis points year-over-year to 30.4% as we continue to benefit from improvements in operating efficiencies, primarily driven through enhancements in labor deployment and scheduling, combined with the continued use of technology and equipment to simplify team member roles, along with menu price increases and lower workers' compensation expense. Wage inflation for the third quarter was 0.6% for all our company-owned locations. For the full year 2025, we expect wage inflation of between 3% and 3.5% for all our company-owned locations. Occupancy and other operating expenses as a percentage of company restaurant sales increased 70 basis points year-over-year to 26.5%, primarily due to higher third-party delivery-related expenses, software maintenance fees related to our kiosk and new POS rollouts and higher rent and CAM, partially offset by lower repairs and maintenance expense. Our restaurant contribution margin for the third quarter improved to 18.3% compared to 16.7% in the year-ago period. As we continue our path of margin improvement, for the fourth quarter, we expect our restaurant-level margin to be in the 16.75% to 17.25% range as compared to 16.7% in the fourth quarter of 2024, which would bring our margin for the full year 2025 to between 17.5% to 17.75%. General and administrative expenses increased to $12.3 million compared to $11.4 million in the prior year. The increase was primarily due to an increase of $0.3 million in stock compensation expense, $0.2 million in legal and professional fees related to shareholder activism and related matters, and $0.2 million in restructuring and executive transition costs, as well as $0.2 million in expenses related to the implementation of a new ERP system and our corporate office relocation. As a percentage of sales, G&A increased to 10.2% or 70 basis points. During the third quarter, we recorded a provision for income taxes of $3 million for an effective tax rate of 28.8%. This compares to a provision for income taxes of $2.4 million and an effective tax rate of 28.1% in the prior year period. We reported GAAP net income of $7.4 million or $0.25 per diluted share in the third quarter compared to GAAP net income of $6.2 million or $0.21 per diluted share in the same prior year period. Adjusted income for the quarter was $7.8 million or $0.27 per diluted share compared to adjusted net income of $6.3 million or $0.21 per diluted share in the third quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures. In regard to our remodeling effort, during the third quarter, we completed 11 franchise restaurant remodels and 3 company remodels, bringing our total completed remodels for 2025 to 34 through the end of September. For the full year, we expect to remodel at least 55 restaurants, of which approximately 1/3 will be company-operated locations. As Liz mentioned earlier, we remain pleased with the results of our new iconic remodel image, and we continue to see, on average, a mid-single-digit uplift in sales, which is in line with our expectations. In terms of liquidity, as of September 24, 2025, we had $61 million of debt outstanding and $10.9 million in cash and cash equivalents. Subsequent to the end of the third quarter, we paid down an additional $6 million on our revolver, resulting in our debt outstanding of $55 million as of October 30, 2025. Finally, based on our results to date, we would like to provide you with the following guidance for 2025: the opening of at least 10 system-wide restaurants; capital spending of between $28 million to $30 million; G&A expenses of $47.5 million to $49.5 million, excluding onetime charges; and an estimated effective income tax rate of 29% to 29.25% before discrete items. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions. Operator: [Operator Instructions] The first question comes from Jake Bartlett with Truist Securities. Jake Bartlett: My first was about your performance relative to peers. And in terms of -- we can see what your same-store sales were in the quarter. My impression or I think it's been kind of known for a couple of quarters now that California, the markets that you're exposed to the most have been the weakest. So I imagine actually, with your results, you might be actually gaining some share, maybe outperforming peers. If you can give us any sense for that, that would be helpful. Elizabeth Williams: Thanks for the question. Yes. So when we do look at ourselves in the California market versus peers, we are pleased to see that we are indeed outperforming on both sales and transactions. So, that would indicate that we are taking some share, which I think is -- we can attribute to getting positioned right on value, on innovation and the brand positioning really starting to resonate. So nice to see. Also, I would add is operational, all of the enhancements we're making operationally. I think, consumers are seeing that better service. Jake Bartlett: Got it. And then, I think related to that question, your quarter-to-date nicely positive. And I think on a 2-year basis, it roughly holds the line at roughly about 2%. But we've heard from others in this earnings season so far, a real deceleration in October. So maybe the government shutdown impacts, or it's, I think, somewhat uncertain, but a pretty significant deceleration and you haven't seen it. So I think maybe building on that, what were your tactics near term to offset incremental pressure? Are you seeing those market share gains accelerate near term, and I guess, the level of confidence you have that, that will continue? Elizabeth Williams: Yes. So, as we look over the past year, we saw a lot of the customer softness. Really it was last year this time that we started to see that. We saw the customer pulling back and the consumer, for all the reasons, having some trepidation in terms of spending. And we made a lot of adjustments, and we've made them really throughout the year in terms of bringing more value to the menu, our positioning, getting our operations improved so that when they did come in, they had a really great experience. And so, as we sit here today, I would say that the consumer isn't any worse than they've been really all year. I think we're figuring out how to maneuver and how to just give a great experience, given that they are just so stretched. So, as Ira mentioned, as we have seen in October, it is an easier lap. So we will acknowledge that. But even on a 2-year basis, we're proud of what we're accomplishing. Jake Bartlett: Great. And then, the last question, you've had some -- your margins have been solid, especially relative to your same-store sales in '25. And you talked about the initiatives you've had in place and the efficiencies you're driving. My question is, how much you have left in the tank on those efficiencies? Should we expect incremental cost saves efficiencies in '26 as we kind of look forward? Ira Fils: Yes. Great question. We believe we're not done yet. We still have a lot of opportunity as we continue to gain efficiencies on the labor side. And we have multiple projects that we're working from an input side from COGS where we believe that these things will put us on our path as we move forward to that 18% to 20% target that we always mentioned. Operator: The next question comes from Andy Barish with Jefferies. Andrew Barish: It is nice to hear about some decent October numbers for a change. Can you sort of level set on sort of these more mainstream menu items that you're in test on with tenders and sandwiches? Sort of where -- what's the goal? Where in the testing process are you? Kind of how does that find its place on to the menu board as we look out to next year? Elizabeth Williams: Yes. So we have a lot in the pipeline. The culinary innovation team has been really busy and working together with operations, getting these in front of customers and in test. And this comes from -- a couple of years ago, we made the realization that as the consumer is gravitating to handheld, portable, also a lower ticket, so as much as consumers love our family chicken and chicken on the bone, they want to be able to take a burrito or a bowl. And so, we've migrated to making sure we have that. So these new products that we're excited about, things like the Loco Tenders and a sandwich, as an example, both of those now are in operations testing in the local markets here, and they're about to go into broader market testing so that they could be ready for next year. So, one, probably we're looking at where we would slot them in on the calendar, but could be as early as Q2 and then, of course, into Q3 and Q4. We also -- even though we are doing so much innovation around the more portable single customer, great delicious eats, we're also -- we love our chicken on the bone, and we are bringing new flavors there. I talked about the barbecue chicken that we're really excited about. That will be something -- there's no better season than summertime for barbecue chicken. So we're thinking that's probably a summer addition. And then, the most requested item that I hear about from consumers are our black beans. Years ago, we had black beans, and it does make sense to have barbecue chicken and black beans with our coleslaw, so again, something that we're about to test with so that we have it ready for the summer. Andrew Barish: Got it. And then just, Ira, over on the cost side, where are you on kind of chicken contracting for next year? Are you in pretty good shape? And is there anything sort of unusual we should be aware of in that market? Ira Fils: No. So we're in good shape. We are in the process actually this week of awarding our contracts for next year. And we're pleased with how it's come out. We -- there's a little pressure in the dark meat chicken, but we've been able to offset that in other areas of our chicken buy. So we are very -- we feel very good about our chicken buy for next year. Andrew Barish: Yes. And then, just finally, anything new sort of on supply chain with like pre-marinade as something you guys have looked at or anything we should be aware of like as next steps on the equipment side for '26 to continue to help the labor efficiencies? Elizabeth Williams: Yes. So we're testing on many different ideas. We love the cost improvement, but even more so, we love the consistency and the quality improvements that some of the work with our suppliers, our chicken partners have brought to us, so things like how we marinate our chicken so that it is the most juicy chicken in every single experience and really consistent. And we're seeing great results, and we'll have some of that as early as Q1. So in terms of supply chain and doing innovation, not only on bringing new things to the menu, also making the product better, the food better, the quality better and also realizing some cost savings. And really, like you said, the cost savings comes primarily with labor, just making the preparation in our restaurants easier so that our team members really can focus on the cooking that happens over our grill versus some of the activities that just aren't as necessary. Operator: [Operator Instructions] Our next question comes from Jeremy Hamblin with Craig-Hallum. Jeremy Hamblin: Congrats on good execution here in a pretty tough backdrop. I wanted to start with just kind of the margin outlook here in Q4. And just to get a sense, there is a little bit of pressure on food costs. But just in terms of -- I think what you indicated was a midpoint of about a 17% restaurant-level margin in Q4 versus the 18.3% in Q3. And I wanted to just see if you could kind of walk us through where you expect a little bit of that pressure in the fourth quarter. Ira Fils: Yes, a couple of things. I think when you look, first of all, quarter-to-quarter sequentially from Q3 to Q4, a lot of the variance there is driven by the sales volumes. Q2 is actually our highest sales volume quarter, but Q3 is the next highest sales volume and Q4 is the lowest. So just the sales volume difference puts a little pressure on the store-level margins. I think if you look back to where we finished Q4 of last year, our guidance shows us that we will be growing margins year-over-year in the fourth quarter. Jeremy Hamblin: Got it. And then, I just want to come back to your marketing efforts here. And in terms of how you feel like the new tagline is playing out, again, it's -- my peers have noted, it's been a bit of a tough couple of months here in the restaurant industry. You are holding in pretty nicely. But I wanted to get a sense for how you feel like that messaging is resonating in a predominantly value environment. And if you can give us a sense for how you're thinking about some of these new menu items to come here in '26 from a kind of a price point perspective of whether or not they're going to be adding to your average check or potentially lowering your average check? Elizabeth Williams: Yes. So we can see in our credit card data that the things we're doing are resonating and bringing in new and lapsed consumers. And I attribute that to not one thing, but many things. And starting with the repositioning with the Let's Get Loco campaign, that certainly has driven awareness and is reaching new consumers, coupled with even better when they can drive by and see a remodeled restaurant. And then, as we shift to the menu and just having things on our -- food on our menu that has a much wider aperture for all consumers, that's helping as well. When we look at the different price points, doing something like quesadilla this summer, that was an entry-level price point that we haven't seen in years. So $7.49 a la carte, $9.99 as a combo, and that combo and even a la carte had a side of guacamole with it. So, so many of our competitors, they charge extra, a couple of dollars for guacamole. So it was a great value. And we saw that in terms of growing transactions. It brought new consumers in that had a very limited price point. And what I love about that product, we've been able to find a way to keep it on our menu. So consumers that have found that can still enjoy it. But as we brought in the burrito bowl, the burrito bowl is at a higher price point. So we're $10 -- upper $10 in some restaurants, $11. And what that's doing, like you pointed out, it's really helping protect check. So what we saw in Q3 was, we drove a lot of transactions, but we did see a check decline. And it was one of those moments where we had to realize this check decline is not going to be forever. We're driving transactions, and it's healthy transactions. We also did do some discounting, which in this environment, we had to do, which also put pressure on check. But when we are able to combine it with something like the burrito bowls a couple of weeks later and still keep that quesadilla under it, together, it's a really powerful combination, and I think it's helping us. So, as we go into next year, we're looking for ways to balance both the value but also the check protection, which -- I'm excited about our beverages. That's a great check protector. Desserts: we launched flan earlier just in the last couple of months. We had so much innovation. We didn't even talk about flan, but we launched flan. It's a great check protector as well. And it reminds us we need to have additional desserts. Churros do well for us. There's a lot we can do to protect check all over the place. Jeremy Hamblin: And as a follow-up, just on the quesadilla, you noted it's now on the regular menu. How is it mixing today, let's say, over the last 3 or 4 weeks versus when you introduced it, in terms of percent of sales? Elizabeth Williams: Yes. So it's dropped down a couple of percentage points, which is typical, given that it was featured so prominently on the menu. So any time we have the main product of the marketing module, it gets the promotional panel, and that promotional panel always drives a lot of mix. And so quesadilla was right in line a little bit -- some weeks, a little bit over what a promotional panel would drive. And then, as we've taken it off, it drops, but it's still -- I'm pleased with how it's mixing. It is still an incremental product on our menu. And like I mentioned earlier, it's solving an entry-level price point that I think is so critical in this economic environment. Jeremy Hamblin: Got it. Last one for me real quick. You've probably had a bit of an outsized impact on kind of a hot button topic here in restaurant land of immigration policies. In particular, Southern California saw a bit of a bigger presence. I wanted to just get a sense from what you're seeing with traffic. Is that issue still a fairly significant obstacle for the business? Do you feel like it's settled down a little bit? Any color you might be able to share on that would be great. Elizabeth Williams: Yes. I think it still persists. We see it a little bit more in lunch than dinner. It still persists. Hard to quantify, but it's still there. Operator: Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to Liz Williams for closing remarks. Elizabeth Williams: Yes. Thank you again, everyone, for your interest in El Pollo Loco. We look forward to talking to you again next quarter. Have a wonderful evening. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Operator: Greetings, and welcome to the Edwards Lifesciences' Third Quarter 2025 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mark Wilterding, Senior Vice President, Global Finance. Thank you. You may begin. Mark Wilterding: Thank you, Diego, and thank you, everyone, for joining us this afternoon. With me on today's call is our CEO, Bernard Zovighian; and our CFO, Scott Ullem. Also joining us for the Q&A portion of the call will be Dan Lippis, our global leader of TAVR and Daveen Chopra, who has global responsibility for TMTT and Surgical. Just after the close of regular trading, Edwards Lifesciences released third quarter 2025 financial results. During this call, management will discuss the results included in the press release and accompanying financial schedules and then use the remaining time for Q&A. Please note that management will be making forward-looking statements that are based on estimates, assumptions and projections. These statements speak only as of the date of which they were made, and Edwards does not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially. Information concerning factors that could cause these differences can be found in today's press release and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Unless otherwise noted, our commentary on sales growth refers to constant currency sales growth which is defined in the quarterly press release issued earlier today. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are also included in today's press release. Quarterly and full year growth rates refer to continuing operations. With that, I'd like to turn the call over to Bernard for his comments. Bernard Zovighian: Thank you, Mark and welcome everyone. Thank you for joining us today. We are pleased with the year-to-date performance of the company, including the most recent third quarter, our focus on structural heart has positioned us to execute our growth strategy with agility this year and also give us confidence in 2026 and beyond. This strong Q3 results represent another quarter of double-digit sales growth. Sales in the quarter grew 12.6% to $1.55 billion driven by our comprehensive portfolio across multiple therapeutic areas, aortic, pulmonic, mitral and tricuspid as well and -- as well as an established presence in countries around the world. We were pleased with the better-than-expected results reflecting the performance of our talented employees. Based on our strong performance in Q3, we are raising full year sales growth guidance to the high end of a previous 9% to 10% range and are also raising our EPS guidance range to between $2.56 and $2.62. As we look ahead to '26 and beyond, the company is in a good position with multiple growth drivers to deliver sustainable top line growth. While the composition and contribution from product lines and region could vary, you could expect Edwards to grow sales and profitability in line with our commitment from last year. We look forward to talking more about this at the upcoming investor conference in December. This week was an important week for Edwards. And this quarterly call comes on the heels of TCT, where I was pleased to see many of you at the conference, physicians feature a significant amount of compelling data on Edwards' groundbreaking transcatheter therapies, including SAPIEN, EVOQUE and SAPIEN M3. Our unique leadership commitment to high-quality evidence was once again showcased by the multiple late-breaking clinical trials as well as concurrent publication in the New England Journal of Medicine and Lancet. On Monday, at TCT, physicians presented 7-year data for the PARTNER III pivotal trial, which represents the most extensive clinical follow-up to date for low-risk TAVR and surgical patients. The results confirm that rates of all-cause mortality for TAVR remain low and comparable to the surgical control arm. Additionally, SAPIEN performance and durability indicators were excellent and comparable to SAVR. Also, during the TCT conference 10 years a follow-up on multiple generation of SAPIEN was featured. Long-term data from the PARTNER IIa and the PARTNER II S3i studies demonstrated sustainable performance, excellent durability and consistent clinical outcomes of Edwards' TAVR matching the performance of SAVR. So overall, when taken together, the SAPIEN platform has been the most steadied valve with more than 15 years of world-class clinical trials involving over 10,000 patients, 10 New England Journal of Medicine publication and 1.2 million patients treated around the world. It is clear, but in addition to offering an early clinical benefit with superiority at 1 year for low-risk patients. The excellent performance of TAVR with SAPIEN 3 is now proven at 7 years. This impressive durability is further supported by the 10-year results of the PARTNER II trials. At the end of the day, this groundbreaking evidence sets a new global benchmark, one that is exceptionally reassuring for both patients and physicians, and sets the stage for continued long-term adoption of SAPIEN to treat patients suffering from aortic stenosis. TCT also featured multiple important studies focus on Edwards' portfolio of mitral and tricuspid replacement therapies, including the largest real-world registry data on EVOQUE and the 1-year result of the first ever pivotal trial for any transfemoral mitral replacement therapy via ENCIRCLE trial for SAPIEN M3. Just over 2 years ago, TRISCEND II 6-month data was presented at TCT 2023. To date, more than 5,000 patients have benefited from this novel therapy solving the large unmet patient needs. And the 1,000-plus patients, the real-world data presented at this year TCT demonstrates that the clinical community is embracing this technology broadly across many centers and is excelling at caring for these patient with consistent procedure times and high-quality results for both safety and efficacy. The TVT data on 30 days shows consistent TR elimination in 19% of patients, a very low major life-threatening bleeding rate of 1.3%, a new pacemaker rate of 15%. To put this EVOQUE pacemaker rate into perspective. It is now competitive to the pacemaker rate seen today in self-expanding TAVR valves available in major regions. It is inspiring to see the practice of medicine progressing for improved patient care. Turning to mitral replacement. We know that there are many patients who cannot be treated with by today's existing technology, including TEER and at TCT the ENCIRCLE study demonstrated meaningful early benefits for these patients, on all important measures like mortality, quality of life and reinforce the growth potential of this therapy in the years ahead. The introduction of SAPIEN M3 marks the beginning of increased physician awareness and referrals to the heart team to support treatment for this many patients in need. Over the past decade, we built a comprehensive portfolio of TMTT technologies. These ensure physicians have an opportunity to select the optimal treatment for their mitral and tricuspid patients, whether replacement or TEER, this is creating compounding value across the care continuum for all stakeholders, especially patients. And in terms of the impact to Edwards, while the contribution to growth from our portfolio of repair and replacement therapy could vary by quarter or year, we know PASCAL, EVOQUE and M3 will be key contributors as TMTT grows to an estimated $2 billion by 2030. I am proud of the Edwards team and our physician partners for advancing each of these important clinical trials. Edwards is the world's only company to provide physicians with a complete portfolio of therapies addressing aortic, mitral, pulmonic and tricuspid valve diseases, built on the foundation of our unique strategy and an unprecedented body of evidence. Leveraging our 65 years of deep expertise, we are also extending into heart failure and aortic regurgitation which are next-generation contributors to patient impact and growth. We have aligned our internal resources to support growth across these multiple therapeutic areas. This focus on structural heart has positioned the company for agile execution of our strategy and provide a foundation for sustainable multiyear growth. When I reflect on all of this, I am proud of our impact when Edwards leads, everyone benefits, physicians, providers, payers and most importantly, patients who can enjoy restored quality of life and live longer. Now I'd like to provide an overview of the third quarter sales performance by product group. In TAVR, our third quarter global sales of $1.15 billion increase 10.6% over the prior year. TAVR growth in the quarter was better than expected as clinicians demonstrated a renewed focus on prioritizing treatment for patients suffering from aortic stenosis. During the quarter, sales growth increased in multiple regions. Supported by new evidence, guideline updates and expanded education. Growth was comparable in the U.S. and OUS. On a global basis, Edwards' pricing and competitive position remain largely stable. We are pleased that aortic stenosis management is experiencing significant transformation. Supported by the combination of evidence of superiority in low-risk patients in 1 year, unprecedented data and long-term value performance and durability, expanded asymptomatic indication, and updated ESC/EACTS guidelines, combined with the global expert consensus publication. These guidelines for valvular heart disease establish a simplified care pathway for severe AS patients and enable a proactive approach to disease management. They underscore that timely intervention should be considered for all severe aortic stenosis patients regardless of symptoms and heart function, which is a meaningful step forward from the prior practice of watchful waiting. In the U.S., strong third quarter procedure growth was driven by a continued focus within the clinical community on the importance of timely intervention and streamlining the management of patients with severe AS. We were encouraged by the release of the updated American Society of Echocardiography guidelines which categorize severe AS, as a critical finding that should be communicated with urgency and encourage echocardiologists to actively participate in patient management. The evolution of policy and guideline changes together with the potential of a new U.S. NCD will provide important catalysts, resulting in a multiyear growth opportunity for U.S. TAVR. Outside of the U.S., we continue to focus on increasing therapy adoption. Especially in areas where many patients go without care. In Europe, Edwards sales growth was driven by the broad-based adoption of our SAPIEN platform in addition to the exit of a competitor, which resulted in a rebalancing of the market and a modest contribution to our sales. In Japan, TAVR sales growth continued to improve, reflecting a gradual recovery in market growth. Rest of the World, growth remains strong. In summary, due to our strong Q3 results, we are raising our full year TAVR guidance to 7% to 8% from our previous 6% to 7% range. Longer term, we continue to expect mid- to high single-digit growth in TAVR, supported by proven long-term evidence, new indication, further guideline and policy changes and finally, the potential to serve patients with moderate AS. Now let's turn to our TMTT product group. Our differentiated PASCAL mitral and tricuspid repair system and our unique replacement portfolio of EVOQUE and SAPIEN M3 delivered another strong quarter of growth. Third quarter sales of $144 million increased 53% year-over-year, fueled by the strong performance of both PASCAL and EVOQUE. Globally, we observed a continued trajectory of double-digit global procedure growth for mitral and significantly higher growth for tricuspid. The new ESC/EACTS guidelines released in the third quarter also included updates related to the management of patients with mitral and tricuspid diseases which further supports increased global use of transcatheter therapies for these patients. Continued global adoption of PASCAL and EVOQUE in new and existing centers fueled additional substantial growth. We've upsell physician excitement and support of a differentiation of PASCAL and the strong predictable outcome of EVOQUE, including consistent tricuspid regurgitation elimination. Over the last quarter, we released several new groundbreaking clinical evidence updates presented at the ESC Congress pricing to outcomes now show a hard endpoint benefit of EVOQUE versus optimal medical therapy. The data show that the most severe TR patients experienced a combined reduction in mortality and heart failure hospitalization, which is a meaningful advancement. In addition, as previously mentioned, at TCT, we were pleased to share the largest real-world data set of EVOQUE early commercial experience from the STS, ACC, TVT Registry. The data showed excellent outcome with consistent elimination of TR and a positive safety profile. We also presented additional TRISCEND I and TRISCEND II sub analysis TCT. And the totality of this new evidence strengthen confidence in tricuspid replacement therapy with EVOQUE and the impact it can have on this greatly underserved patient population. Moving to SAPIEN 3, M3, our early introduction in Europe is off to a great start, providing exceptional clinical outcome to patient in need and supported by our dedicated field team. The 1-year results from the ENCIRCLE pivotal trial, studying SAPIEN M3 showed excellent outcome for this first approved transseptal mitral valves. The data showed that in critically sick group of patients who were unsuitable for TEER and surgery now had an option to eliminate their MR, while drastically improving their quality of life with a high survival rate. We now expect U.S. approval by early 2026. In closing with PASCAL, EVOQUE and our SAPIEN M3, we are advancing our vision to meet the complex needs of underserved patients with mitral and tricuspid disease, with a differentiated portfolio comprised of repair and replacement technology. We are pleased with our year-to-date performance in TMTT and remain on track to achieve our full year sales guidance of $530 million to $550 million. In our Surgical product group, third quarter global sales of $258 million increased 5.6% over the prior year. Growth was driven by continued adoption of our RESILIA therapy in addition to positive procedure growth for the many patients best treated surgically. Our RESILIA portfolio achieved double-digit growth with contribution from INSPIRIS, KONECT and MITRIS therapies. We continue to generate dividends on the RESILIA portfolio and expand access globally. We see market approval for KONECT in Europe, at the end of the second quarter, we have been able to expand this therapy to patients across European countries during the third quarter. I think it is also important to highlight the strong Edwards surgical valve performance in the recent PARTNER III 7-year data. The majority of patients in the control arm were treated with Edwards' surgical virus and the results were comparable to TAVR at 7 years. This performance reflects over 65 years of valve leadership and innovation. In summary, we continue to expect that our full year 2025 surgical global sales will be in the mid-single digits, driven by RESILIA portfolio adoption across our key markets and growth in heart valve procedures for patients best treated surgically. And now Scott will cover the details of the company financial performance. Scott Ullem: Thanks a lot, Bernard. As Bernard mentioned, we are encouraged with our stronger-than-expected third quarter performance and the progress we made during the quarter, advancing our strategic initiatives. Our double-digit sales growth drove adjusted earnings per share of $0.67, well above our expectations, driven by both stronger-than-expected top line performance and certain spending delayed to Q4. Our GAAP earnings per share for the quarter was $0.50. A full reconciliation between our GAAP and adjusted EPS for this and other items is included with today's release. I'll now cover additional details of our P&L. For the third quarter, our adjusted gross profit margin was 77.9%, in line with our expectations compared to 80.7% in the same period last year. This year-over-year change was primarily driven by foreign exchange and operational expenses. We continue to expect our full year 2025 adjusted gross profit margin to be within our original guidance range of 78% and 79%. Our guidance continues to assume some pressure from the weakening dollar. Selling, general and administrative expense in the third quarter was $515 million or 33.1% of sales compared to $420 million -- $421 million in the prior year. We continue to expect increased SG&A spending this period due to deferral of certain first half spending and investments expected in the fourth quarter to advance our strategy. R&D expense was $281 million in the third quarter or 18.1% of sales compared to $253 million or 18.7% of sales in the same period last year. This increase in spending and decrease in R&D as a percentage of sales reflects our intentional strategic prioritization of investments in our expanding structural heart portfolio. Third quarter adjusted operating profit margin of 27.5% benefited from our better-than-expected sales performance and the deferral of certain spending to the fourth quarter. As mentioned on our Q1 and Q2 earnings calls, we continue to expect lower second half operating margin levels compared to the first half driven by the timing of key investments. We continue to anticipate full year 2025 operating margin of 27% to 28%, implying a Q4 operating margin in the mid-20s, consistent with prior guidance. We remain committed to annual constant currency operating profit margin expansion over the full year 2025 level in 2026 and beyond consistent with our guidance at last year's investor conference. Turning to taxes. Our reported tax rate this quarter was 16.1% or 16.9%, excluding the impact of special items, in line with our expectations for the quarter. We continue to expect our 2025 tax rate, excluding special items, to be between 15% and 18%. Turning to the balance sheet. We continue to maintain a strong and flexible balance sheet with approximately $3 billion in cash and cash equivalents as of the end of the quarter. The Board of Directors has increased the company's repurchase authorization, resulting in approximately $2 billion remaining under the current authorization. Average diluted shares outstanding during the quarter were 586 million. Based on year-to-date share repurchases of over $800 million, including the previously announced accelerated share repurchase of $500 million, we now expect lower full year shares outstanding to be between 585 million to 590 million versus original guidance of 585 million to 595 million. Foreign exchange rates increased third quarter reported sales growth by 210 basis points or $24 million compared to the prior year. FX rates negatively impacted our third quarter gross profit margin by 110 basis points compared to the prior year. As a reminder, our program is designed to mitigate the foreign exchange impact on earnings per share compared to our initial guidance for the year. At current rates, we continue to expect FX to have an approximately $30 million upside to full year 2025 sales compared to the prior year. I'll finish with comments related to sales and earnings per share guidance. As Bernard mentioned, we are increasing our underlying growth rate guidance for TAVR to 7% to 8%, with sales of $4.4 billion to $4.5 billion and our total company sales growth guidance to now be at the high end of 9% to 10%. For the fourth quarter, we're projecting total company sales of $1.51 billion to $1.59 billion and adjusted earnings per share of $0.58 to $0.64, bridging to our full year earnings per share range of $2.56 and to $2.62. We're looking forward to providing more forward-looking commentary at our investor conference on December 4. We remain confident in delivering the long-term financial goals for the company and each business unit that we provided at last year's investor conference. And I do have 1 additional piece of personal news. After 12 years at Edwards, I'm going to be transitioning out of the CFO role by mid-2026. The company has initiated a process to select a successor. We have considered this transition and a CFO succession plan carefully, and I'm confident we'll have a smooth transition. I look forward to serving as a strategic adviser to Edwards after a new CFO is in place. And now is a good time to pass the baton. The company is in a strong strategic and financial position, and I have confidence that Edwards will continue to perform at a high level in the years ahead. I care deeply about Edwards and know what a special company it is, and it has been an honor and a privilege to serve as CFO for almost half of the company's history as a publicly traded company, and I'm committed to a smooth transition next year. So with that, back to you, Bernard. Bernard Zovighian: Thank you, Scott. You have been a valued and key partner to me for over 10 years. first, as colleagues on the executive leadership team through the CEO transition 2 years ago. And now in this last 2.5 years since I became CEO. We have worked closely to find the right time for you personally and also for Edwards for the CFO transition and why we will be saving you in your current role, I am pleased that you will continue in the CFO role until the transition occurs by mid-2026, and remain at Edwards as a strategic adviser beyond the transition period. So I am confident that we will have a smooth hand off during this transition, and we are initiating a process to identify the successor. In closing, after more than 20 years of innovation that has benefited more than 1 million patient lives. And this week's 7-year PARTNER III results. Edwards TAVR is positioned for strong sustainable growth as many patients remain undiagnosed and untreated. Moreover, we are achieving many significant milestone in TMTT that give us confidence about treating the many mitral and tricuspid patients in need. And surgical is positioned for durable long-term growth, driven by a portfolio of differentiated technology. In addition, we are leveraging our structural heart expertise and extending into heart failure and AR, which are next generation contributors to patient impact. Altogether, we are convinced of a tremendous opportunity to drive success in the future through our patient focus, breakthrough technologies and leadership. With that, back to you, Mark. Mark Wilterding: Thank you very much, Bernard. Before we open it up for questions, I'd like to remind you about our 2025 investor conference on Thursday, December 4 at our headquarters here in Irvine. This event will include updates on our latest technologies, views on the longer-term market potential, as well as our outlook for 2026. More information and a registration form are available on our website. With that, we're ready to take your questions. [Operator Instructions] Diego, over to you. Operator: [Operator Instructions] Our first question comes from Travis Steed with Bank of America. Travis Steed: Congrats on a good quarter. Maybe to start with the TAVR growth in this quarter, the 10.6%. It sounded like just a modest contribution from the Boston exit. So if you can just maybe talk about some of your underlying trends and what was the strength this quarter? And is this kind of full year TAVR 7% to 8%, and if you exclude the Boston exit, is that kind of the right way to think about sustainable TAVR growth kind of longer term? Bernard Zovighian: No. Thanks, Travis. Yes, we are very pleased about the quarter. We had a strong quarter, better than expected. There are a number of things that contributed to this great performance in Q3. The first one is we didn't have so much evidence, so much news on TAVR and SAPIEN for a long time. Remember, the early TAVR, then you know the ESC guidelines on asymptomatic patients, the global consensus document and then all of them at each congresses, physicians, we are talking about it presenting a sub-analysis. So this created a halo where TAVR now is at the center of a conversation for most of the heart team in the U.S., but also outside of the U.S. So that's clearly a big catalyst. Also, what we didn't experience that usually we experienced during Q3 the summer usually the summer seasonality usually is very pronounced. And this year, we didn't experience it. So we had a higher Q3 and we have a lower impact from the summer seasonality. So all of that together basically contributed to the great quarter. We -- if you ask us about Q4 and the rest, we will talk about next year maybe late year. But for Q4 -- we expect a good Q4, better than we originally thought, but I will not take the Q3 results as the new normal for TAVR. Travis Steed: Great. That's helpful. And then since we were just at TCT a couple of days ago and you had a 7-year and 10-year data there, maybe just talk about now that you've had a few days to talk to doctors kind of what you're hearing from customers and the physician community and kind of the importance of that data and how it could or might not change practice. Bernard Zovighian: Yes. So maybe I ask, Dan, our new leader of the TAVR franchise, he was at TCT. He talked to so many customers. He was the architect behind all of the symposium that you attended. So maybe I asked Dan to comment on that. Daniel Lippis: Yes, Travis. Thanks for the question. Obviously, important meeting for us and more importantly, very, very important data that was presented there answering probably the last of the unanswered questions on TAVR, which is what are these TAVR valves look like at the critical window of vulnerability, which is this 5- to 7-year period. And it's nice, it's reassuring to be able to now answer that definitively, at least with the SAPIEN 3 platform. And as you can imagine, physicians were very, very positive. Obviously, the conversations kind of sort of stand with like it's a shame that a lot of people were maybe betting against, it was no surprise to me. Congratulations. And I think overall, everyone is super positive. I think it gives physicians and patients just again, reassurance to treat earlier in the disease progression pathway and maybe younger, and that's the direction of TAVR that we see. Also, with the guideline evolution, et cetera, that's the way that it's going. We now see clinical benefit for treating earlier in the disease pathway. But also new evidence that's come out, Bernard mentioned so much new data coming out just consistently over the last 12 months, but a lot of new evidence to suggest that there's economic consequence if you treat later in the process. And all this is driving just a renewed focus both domestically and internationally on TAVR programs. So that's probably the best way to sum up TCT. Travis Steed: Congrats on a good quarter. Operator: Your next question comes from Larry Biegelsen with Wells Fargo. Larry Biegelsen: And Scott, congratulations on all the success at Edwards, I know you'll be around for a couple more quarters, but I enjoyed working with you and we'll miss working with you when you leave. So for my question, Bernard, it sounds like you're comfortable with the 10% plus organic growth and 50 to 100 basis points margin expansion next year. What's giving you the confidence this early and Scott, as of today, would FX positively or negatively impact margins next year? And I had 1 follow-up. Bernard Zovighian: Yes, no, thanks, Larry. To be fair, when I look back, we always -- that I always had confidence. And let me give you a context on why I am seeing that. We have been studying this platform, SAPIEN for 20 years. We have been iterating this platform for 20 years. We know what this platform is delivering for patients, more than 1 million patients receive in this platform. So when we gave you the guidance last year about TAVR for the foreseeable future, basically mid- to high single digit. And the company, on average, 10% with leverage EPS, we knew that. And when I say that, we knew that because all what we do is rational, is science-based, you don't have surprises. So it's like the 7 years maybe was a surprise to some, but for us, it was a confirmation about what we knew here. So no change to the guidance we gave you last year in December, Larry. Scott Ullem: Yes, Larry, I'll just add to that. First of all, thanks for nice comments, appreciate it. Just to reiterate what Bernard said, last year, we said on average, 10% over the year's constant currency. And we think that 10% growth on the top line for Edwards in 2026, will be within the range that we provided at the investor conference. But remember, now with the third quarter results and the momentum that we see in the business going into the end of the year, we now have a higher bar that we'd need to clear when we're calculating that year-over-year growth rate. As it relates to your question on FX, I thought you might ask the question, we're just going to have to hold off for 5 weeks until we get to December 4. We're still running all the numbers, and we'll take you through when we take you through our guidance, we'll take you through the impact of FX on guidance. Larry Biegelsen: All right. Fair enough. And just for my follow-up, Bernard, as you approach the scheduled trial for the JenaValve deal, what's your level of confidence you could overturn the FTC block? And just remind us of where SAPIEN X4 stands and when we'll see the pivotal data. Bernard Zovighian: These are important questions. So let me take the first one and maybe Dan take the second one. We continue to pursue this regulatory approval for JenaValve for a very simple reason. You know us. We have identified these large unmet needs. These patients have no solutions. And we know that when we come into a space. We bring our leadership, our innovation power, our commitment. We make a big difference, patient benefits. So we believe here we have great facts. At the same time, we will know in Q1. So before Q1, I can tell you, Larry. But I really hope that we are going -- we will have a favorable ruling at the end because, again, these patients are waiting. Daniel Lippis: Just regarding X4. First of all, very excited about our pipeline. X4 has the real potential to be a game changer in TAVR. And that trial, the ALLIANCE trial completed at the end of 2024. Right now, the patients are in follow-up phase, right? And so until that the patients have gone through that period and the trial is complete and the data is analyzed, we don't have a whole lot more to say about X4. Operator: Your next question comes from David Roman with Goldman Sachs. David Roman: And Scott, I'll add my congratulations on moving on. I finally remember your first analyst meeting in 2013, I think Edwards was a small-cap growth stock at $4 billion. So I think you're certainly leaving the company in a good position, although we'll miss working with you. Two questions for me. One, just starting on the TAVR side. When you look at the PREVUE-VALVE study that was presented at TCT and think about the early TAVR study in context, can you maybe just help us look forward and I know we're all focused on like indication expansion and asymptomatic patients. But to what extent is there an opportunity here to see broader diagnostic rates for AS increase that would not only trickle through to your TAVR business, but also be a tailwind to the surgical valve business as well? Bernard Zovighian: That's a good question. And we have not talked about it when we were at TCT together. So this study was an investigator-initiated study. And if you look at it in a big picture, it validates our assumption on the size of AS market potential, the number of patients, but also it is validating basically the incidence and prevalence of all valvular heart disease. So at the high level, it's positive. There is more to learn from, but we look at this one as a positive one for the next years to look at. Dan, do you want to add anything to that? Daniel Lippis: Yes. David, I think a very, very important study and one that I anticipate is going to be referenced a lot, right? And it looks at the prevalence from a unique lens, right? Typically, when we try to establish incidence prevalence and market opportunity, it's coming starting from the basis point of who's actually got an echo. And what this study was trying to do is to take a look at the prevalence, if you like, of the disease from a out of system population or nondiagnosed population. And so it kind of brings a completely different lens and a very novel way of doing it to help our understanding of the disease. As Bernard said, when you look at the data that we've had available from an aortic stenosis perspective, it kind of validates kind of some of the assumptions that we had maybe even suggesting that the disease is larger than what we thought. But it's pretty much in that ballpark. What I would say about what is the opportunity here. As you see, whether it's this evidence, whether it's early TAVR, whether it's the sub-analyses of early TAVR, whether it's the PARTNER III and the new standard now we have for TAVR with long-term durability, all of this is going to get disseminated. It's going to be part of an education process. It's going to be democratized in the community and it's going to lead to greater awareness and greater referral and greater adoption. And I think that that's part of our strategy, part of the plan, why we are investing so heavily. And so confident about the impact, but it all helps. So thanks for the question. David Roman: And maybe on the TMTT side, I think you said M3 approval coming in early 2026. Can you maybe help us think through how to compare and contrast the M3 launch with EVOQUE? And I think Dr. Sharma at your analyst meeting on Monday kind of describe tricuspid valves as they once forgotten valve, that's starting to gain attention from the clinical community with the now treatment solutions that are out there. But I think mitral valve procedure volumes are low, is a much more mainstream and well-understood disease states. So help us think about how -- what are the factors influencing the M3 launch and whether using the EVOQUE launch is a good template or not? Daveen Chopra: No. Thanks so much for the question, Dave. It's Daveen here. Yes, we did say that we expect U.S. approval in early 2026. And if you look at the SAPIEN M3 launch, we now have a couple of months of the launch in Europe. And in Europe, what we're seeing is that we have a kind of continuing limited control launch. And we're really focusing on the high-value model. We've got really important physician training, Edwards' people really working very closely with physicians to make sure we've got great outcomes in every case. And what we're seeing from physicians is that they're actually pretty excited about this technology. As you said, they treat mitral patients today, and the SAPIEN M3 product is specifically focused on patients who are unsuitable for both TEER as well as surgery. So for them, I think that we do see patients in the system who are unsuitable and so their excitement is getting to see great results for these patients with M2. However, to your point about comparison to the EVOQUE thing, I think I wouldn't get ahead of ourself in saying that with us, it's kind of this control launch, high training and making sure that we go one center at a time, to kind of ensure that we get the best possible outcomes and results. Operator: And your next question comes from Vijay Kumar with Evercore ISI. Vijay Kumar: Congrats on nice sprint here, Scott. Congratulations to you as well, and wishing you the best of your transition. Maybe my first question on this TAVR performance in 3Q, why isn't this performance a reflection of asymptomatic approval? I'm curious why you think the strength wouldn't sustain? Bernard Zovighian: Yes. Maybe, Dan, you want to take. Daniel Lippis: Yes. Vijay, I think your question is, is the Q3 performance a reflection of asymptomatic approval. And I'm not sure if you specifically mean adoption or treatment of asymptomatic patients. But certainly, it is the asymptomatic approval, the indication, the evidence is reflected in what we're seeing here as along with -- I mean, I really can't recall over my 15 years, a period of 12 months where the scientific and academic podiums have just been so focused on TAVR with so much new evidence, so much new discussion, subanalyses, et cetera. So for sure, the asymptomatic evidence and indication is playing a part here. But as we've also seen in other indication approvals where a new indication shines the light on a previous indication and you see a renewed focus on that. And we're seeing that here, for sure, because there's also new data. There's also new data to say that timely and urgent intervention brings both clinical and economic benefit for symptomatic severe aortic stenosis, which is part of the analysis of that data. Regarding is asymptomatic patients entering into the treatment pathway in Q3, and is that driving the current performance, we don't see any specific evidence of that. It has to be caveated by the fact that there isn't coverage for the asymptomatic indication, right, at the moment. So it's hard to see that encoded CMS data. But we do have ways of looking at upstream patient populations to see what's coming through the funnel. And right now, we don't see any significant evidence that the growth is being driven by referral and treatment of asymptomatic patients. So I think that, that's an opportunity to come. Bernard Zovighian: And this is probably what is most exciting, Vijay, that we have seen this momentum in Q3 just by having a renewed focus, given all of this data, all this positive data. Also, we benefited from the seasonality of the summer. But it is -- so the big catalysts are still in front of us. And this is what we have been saying. We are very confident about this multiyear opportunity for TAVR. This is what made us confident again that this is just in my mind, when I say always to the team, it is just the beginning. Vijay Kumar: Understood. That's helpful. And Scott, maybe 1 quick 1 for you. there was a litigation charge. And it was non-GAAP, could you just remind us on what the charge was? Scott Ullem: Yes. Thanks for the question, Vijay. There's a lot that happens behind the scenes with just ins and outs of running our business. As you know, in medical technology, there is -- it's not uncommon to have litigation activities underway. And so we take reserves periodically based upon what we think that exposure looks like and you'll see that reflected in today's GAAP P&L. Operator: Your next question comes from Matt Taylor with Jefferies. Matthew Taylor: I wanted to circle back on TCT. You had a really nice showing kind of across the board. And I think maybe stuff the most to us was how positive the real-world tricuspid data was. And you talked about having a toolbox there, and you'll have that in mitral next year. So my question is really, after this tricuspid data and having the toolbox there. Do you expect some acceleration in the tricuspid adoption could we also see that in mitral next year? Maybe you could just talk about that in general and the pace of acceleration we might see. Daveen Chopra: Yes. Thanks, Matt, for the question. Obviously, we were very excited to see the EVOQUE data coming from TCT. And I think what we saw from EVOQUE is that we see this continued trend of a great real-world outcome. First, starting at ESC a couple of months ago where we saw these hard endpoints for the most severe TR patients, and now we see with the TCT data, the improved safety, both in bleeding and conduction versus what we saw in the randomized trial. And I think what we're seeing is that we're seeing how the elimination of TR is leading to just change in patient's life. And I think what we're also seeing from Europe where we have both repair and replacement for tricuspid is that you really need both technologies to really get -- treat the maximum number of patients with the best possible outcomes. And so I think with that, as we get to your point, is having the full portfolio even on tricuspid and now then coming with mitral, you start seeing this compounding effect where when you have multiple treatment options each patient is getting the best possible outcome, you could treat the maximum possible number of patients. And with that, you see this continued strength and growth. And so in the words of seeing you were asking about specific of the acceleration of TR, I think what we're seeing is very, very strong growth in TR. I mean, this year, you see overall that our overall business is growing at over 50%. And so I think we're going to see this continued growth in TR and these provide nice tailwinds. Nice real-time examples to help continuously support the strong growth in TR to really treat an awesome number of patients in the years to come. Operator: Your next question comes from Robbie Marcus with JPMorgan. Robert Marcus: Great. Congrats on a good quarter. And Scott, wish you all the best, we'll miss working with you. Two quick ones for me. First one, I know you've been working a lot in the past couple of years to try and improve efficiency in the cath lab, and you have some AI initiatives and educational initiatives and just wondering how that's going, what you're doing exactly and how much efficiency and extra capacity you've been able to help drive such good TAVR volumes? Daniel Lippis: Yes. Thanks, Robbie. Maybe I'll take that question for you. Like, we've got a number of programs in flight, if you like, whether it be at an early pilot stage or various stages of ramp. Specifically, as it relates to capacity building or efficiencies, one of the big programs that we have is Benchmark. And that has been in development and being -- and all about improving efficiencies for better patient outcomes in the hospitals. It couldn't be a better time to be applying that right now with the renewed focus on TAVR as the timely treatment and more urgent treatment of these patients is in the spotlight. But at a high level, we've got programs that we execute on the ground, right, with our field team. We are in just about every single case. And these are either targeted towards improving the efficiencies in the cath labs or in the program itself or with referral activity and education of evidence and guidelines and new data, et cetera. We have also partnerships with tech companies and AI-based companies that look at echo screening and upstream identification of patients and workflow solutions so that, that can be done economically. And so we're working on that. We have very sophisticated marketing programs, looking at targeting direct-to-patient activity through social media, et cetera. And then just the partnerships that we have with societies and others with GCs, with patients, et cetera, around dissemination and education and clinical evidence. So all of this comes together and kind of helps us sort of run the process of moving the needle of patient activation. And I hope that gives you some idea of what we're doing on the ground with our physician and hospital partners. Bernard Zovighian: And so Dan, you gave here a full picture on all of what we do on the TAVR side. Maybe Daveen, a couple of things on TMTT? Daveen Chopra: Yes, a couple of quick things. If you think about, right Dan, for a more established procedure like TAVR went through a lot of great examples there. On TMTT, when you're creating a brand-new therapy, right, you can imagine there's so many things to quickly help improve their time in the cath lab, their time to go home, their time for pre-having a patient before you even have a procedure. So what we see is actually with things like replacement technology, both mitral tricuspid and even to some extent with TEER as we establish and grow these new therapies, we are constantly improving efficiencies across the board in almost all aspects. So I think for us, that just comes with the therapy development that happens, it helps really line you up for long-term success. Bernard Zovighian: Thanks. So we do a lot here, and I'm glad we were able to share some of what we do, but we do much more than that. Robert Marcus: Maybe if I could just ask a quick follow-up for Scott on -- we had really good margin expansion. I think you've committed to 50 to 100 basis points, and I don't want to steal any thunder from the Analyst Day, but you're one of the biggest spenders in R&D at $1.1 billion, and it's clearly given you a great product pipeline and portfolio with a lot of big trials wrapping up, how do you think about R&D and what's the right level of spend over the forward horizon? How are you thinking about that? Scott Ullem: Thanks for the question. Look, we think about R&D as an investment in the top line. And the most important thing that we do here is innovate to drive sustainable organic top line sales growth. We've also said though, at last year's investor conference, and you'll hear it again at this year's investor conference that top line growth will outpace R&D spending growth. And you saw it in the third quarter, where we went from nearly 19% R&D as a percentage of sales last third quarter to 18.1% of sales this quarter. And so that gives you a sense of how R&D as a percentage of sales is going to trend. Again, it's still the most important driver of our strategy, of our innovation strategy and of our sustainable top line growth expectations. But it's also something we're going to be pretty disciplined about prioritizing where we're investing those R&D dollars. Operator: And ladies and gentlemen, that's all the time we have for questions today. So I'll now turn it back to Bernard Zovighian for closing remarks. Bernard Zovighian: Okay, everyone. Thanks for your continued interest in Edwards. Scott, Mark and I welcome any additional questions by telephone. And I wish you a great day. Thank you, everyone. Operator: Thank you. And with that, we conclude today's call. All parties may disconnect. Have a good day.